06th Aug’14 FII’s & DII’s Activity

Updated : 09.02pm / 06th Aug’14

India’s mfg, services growth outpaced China in July: HSBC

Manufacturing and services sectors in India expanded at a faster pace than China in July, even as emerging market output registered a slower pace of growth, HSBC said today.

The HSBC Emerging Markets Index (EMI), a monthly indicator derived from Purchasing Managers’ Index surveys, stood at 51.7 in July, down from 52.3 in June, indicating slower output growth across global emerging markets. “Emerging market economic growth remains disappointingly feeble, especially when compared to the impressive upturn currently being seen in the developed world,” Markit Chief Economist Chris Williamson said. The pace of economic growth in the developed world accelerated in July to its fastest since May 2007.

During July, the HSBC composite index for India, which maps both manufacturing and services, stood at 53.0, whereas for China it was 51.6, Brazil (49.3) and Russia (51.3). An index measure of above 50 indicates expansion. Going forward, the pace of growth in emerging market economies is likely to remain week, the report added.

“With global uncertainty and risk aversion being heightened by the Argentine default, the fighting in Gaza and worries about the possibility of an escalating situation in Ukraine, emerging market economic growth looks more likely to deteriorate than improve in coming months,” Williamson said.

The outlook for global emerging markets weakened in July, and the HSBC Emerging Markets Future Output Index, which tracks firm’s expectations for activity in the next 12 months time, witnessed a significant fall.

Infosys gets Rs 11200cr share buyback demand from ex-CFOs

Former  Infosys  top executives T V Mohandas Pai, V Balakrishnan and D N Prahlad have asked the country’s second largest software services firm to buy back shares worth Rs 11,200 crore, saying it will help check the “asymmetry of information” between management and investors. In a letter to Infosys Board, the three former executives said there is a need “to announce a large and consistent buyback programme to show confidence in the management and the business model”.

While both Pai and Balakrishnan have served as Chief Financial Officers at Infosys in the past, Prahlad was a Senior Vice President at the Bangalore-based firm. It could not be immediately ascertained whether the three former executives continue to hold stakes in Infosys.

“Infosys should immediately buy back its shares to the tune of Rs 11,200 crore (which is roughly 40 percent of the existing cash and cash equivalents),” the letter said. When contacted Balakrishnan confirmed writing the letter, but refused to disclose the contents. Pai declined to comment while Prahlad could not be contacted. The trio want the buyback at the 52-week high price of Rs 3,850 per share.

They also want Infosys announcing an ongoing buyback programme to the extent of 40 per cent of the previous year’s net profits on a consistent basis. Infosys shares on Tuesday gained 1.20 percent to close the day at Rs 3,504.25 compared to its previous closing.

When contacted, an Infosys spokesperson said: “The Infosys board and management receive requests on a variety of subjects from shareholders and investors on an on-going basis. “These are addressed by the board and the management in due course. In this particular case, we have received this request only from three retail investors.”

RBI doesn’t rely on forex market to manage liquidity: Rajan

A day after the Reserve Bank of India left rates unchanged, it assured that interest rate moves will be guided more by domestic factors than external ones. Speaking to analysts and researchers through a teleconference on Wednesday, RBI Governor Raghuram Rajan said the central bank does not manage liquidity through foreign exchange markets.

It is not a long term tool that RBI relies on, but is viewed as an opportunity tool that sometimes RBI uses. Rajan is open to increasing the foreign debt limits, should the existing limits fill up. He emphasized that the RBI is not looking to scrap foreign investment limits in government bonds as it would be premature  to do that before the global unwinding of stimulus measures and the start of a rate hike cycle.

When asked how will Fed’s tightening impact India, the central bank governor termed it a hypothetical situation but insisted that RBI’s attempt at getting inflation credibility is a possible solution that will prevent Indian market from suffering a knee-jerk reaction to Fed moves.

The RBI kept its key policy repo rate unchanged on Tuesday, and voiced a commitment to bringing down inflation that convinced many analysts that markets will have to wait until next year for the next cut in rates.

RBI initiates inspection of Syndicate Bank

The Reserve Bank today said it has initiated inspection of the book of accounts of Syndicate Bank , whose CMD SK Jain was recently arrested by the CBI for allegedly taking a bribe of Rs 50 lakh.

Admitting that there are governance issues in the public sector banks, RBI Governor Raghuram Rajan underlined the need for improving transparency in sanction of loans. “There is an inspection underway of Syndicate Bank but I think one has to be very careful about extrapolating this issue to entire banking system without thinking further through.

It (Syndicate Bank episode) does raise the troubling issue,” Rajan said after unveiling third bi-monthly monetary policy review.

CBI arrested Syndicate Bank Chairman and Managing Director SK Jain on August 2 for allegedly accepting bribe of Rs 50 lakh to enhance the credit limit of some companies. “It is important for an enforcement agency to ensure full investigation is done.

I think they are doing that…all the problem in the banking system is because of criminality rather than because of other factors,” he said. “I think balance has to be maintained and we have to be also careful. While we do thorough investigation and culprit are brought to book, it does not become a witch-hunt which then stalls the entire credit process,” he added. Rajan emphasised that there is need to overcome deficiency in the public sector banking system. “We need to again look at the governance of the public sector bank and understand the deficiency there and try and improve it,” he said.

Acknowledging that there are lots of highly qualified, highly reputable people working in the public sector bank, he said “they should not be tarred with same brush”. Asked about improving transparency in pricing of loans, Rajan said: “The whole point about banking is taking risk and using of discretion in taking those risks. Somebody you would be trusted more. There is some chemistry that works. So, for outsider to dictate this is the price that you are going to charge puts banker out of the equation.”

Thoughts for a Day