Rupee gains 11 paise vs dollar in early trade

MUMBAI: The rupee on Thursday appreciated by 11 paise to 52.43 against the US dollar in early trade on the Interbank Foreign Exchange market, as the American currency fell against other currencies overseas.

Besides gains in euro and other currencies against the American currency, a higher opening in the equity market and dollar selling by exporters and some banks supported the rupee, dealers said.

The rupee strengthened by 14 paise to close at 52.54/55 yesterday against the US currency on fresh dollar selling by banks and exporters.
see more : http://timesofindia.indiatimes.com/business/india-business/Rupee-gains-11-paise-vs-dollar-in-early-trade/articleshow/12876606.cms

Read more »

India Inc’s funding costs to soar after S&P's negative outlook

MUMBAI: Indian corporates could see their overseas borrowing costs shoot up should Standard & Poor's negative outlook result in an actual downgrade. A downgrade would hit overall funding and would inevitably end up being a self-fulfilling prophecy by hurting the economy rather than merely providing an opinion on its creditworthiness .

"A downgrade would have huge implications for the economy. India is at the lowest rung of the investment grade and a downgrade would result in the country falling to the junk category. This will result in certain allocation for India going away and a rise in the funding costs of corporates. This will also have implications for funding of the country's growing balance sheet/ funding requirements," said Ashish Vaidya, head fixed income currency and commodities at UBS India.

Besides revising its outlook on the sovereign, S&P has also put on its negative list three IT companies-Infosys , TCS and Wipro. Similarly three public sector entities NTPC, NHPC and Steel Authority of India have had their outlook revised to negative . Bankers say that international investors mandated to put their money in only investment grade paper will be wary of investing in bonds issued by PSUs because of the downgrade possibility.
For corporates a significant portion of funding comes from the external route. The global plans of Indian companies also depend on the availability of international finance. All the bigticket acquisitions by large business houses have been on the back of financing from multinational banks. "We expect spreads to be under pressure in the near term with an overhang of a potential downgrade should there be no improvement in the macroeconomic conditions or growth prospects, but issuances from strong Indian companies and institutions will continue to see investor interest ," said Sunil Agarwal, head, institutional clients group, Deutsche Bank, India.

According to Gautam, Triveri, MD & head-equities , Religare Capital Markets, the outlook revision is incrementally negative for the rupee and capital flows (portfolio and direct ). "We believe the rating remaining at investment grade contains the damage. Had a rating downgrade (to non-investment grade-Junk ) happened , it would be far more negative, since it would escalate funding costs for Indian firms abroad, and preclude some FIIs to access local debt and equity markets."

But several bankers see the downgrade as a clear and present danger. "I think that there are chances of a downgrade if there is no improvement in the current account or there is no reform and fiscal consolidation ," said Vaidya. S&P has indicated that it will wait a few months to see if there is any improvement in the fiscal position or the direction of reforms . However, the rating agency has made it clear that it could take a downgrade decision at any time if there is deterioration in any of the macroeconomic parameters.

According to Deutsche Bank, a key risk to India's ratings outlook in the coming year or two is that the fiscal adjustment envisaged in the budget is not accomplished due to unfavorable macro developments like a further slowdown in growth and policy slippages such as a rise in subsidies. "More crucially, if the slippage also reflects no medium term movement toward expanding the tax base and expenditure restraint, the ratings outlook would invariably worsen," the bank said in a research report.

Corporates and banks will also find it tough to raise funds through international bond issues. A large number of funds that invest in these securities are mandated to put money only in investment grade paper while there are risk taking investors who buy "junk" bonds they demand a high rate of interest.

"The negative outlooks on the 11 financial institutions reflect the outlook on the sovereign credit rating on India. We could lower the ratings on these financial institutions if we lower the sovereign rating or the stand-alone credit profiles of these financial institutions deteriorate sharply or we believe that such deterioration is unlikely in most cases. We could revise the outlook to stable if we take a similar action on the sovereign rating," S&P said in a statement.
See More: http://timesofindia.indiatimes.com/business/india-business/India-Incs-funding-costs-to-soar-after-SPs-negative-outlook/articleshow/12875087.cms

Read more »

SBI targets 25% deposit growth in 2012-13

HYDERABAD: The country's largest lender State Bank of India today said it is targetting a growth of 25 per cent in deposits and 22 per cent in advances in the current fiscal.

A Krishna Kumar, Managing Director and Group Executive (National Banking), SBI, said mid corporate and retail sectors, which did not fare well in the last fiscal, are expected to contribute to the growth in advances.

"The preliminary figures (of SBI) indicated that as on March 12, we have roughly grown about 18 per cent in deposits and 15-16 per cent in credit.

In the current year 2012-13, we are targetting a growth of 25 per cent in deposits and 20 to 22 per cent growth in credit," Krishna Kumar told reporters.

"We have more than 14,000 branches right now and we expect to open may be another 1,000 branches in the current year.

A mixture of opening new branches and schemes for depositors and advances oriented schemes and the fact that the economy would look to be on the upswing help achieve this target," he added.

He was speaking to reporters after the inauguration of the second SMECCC -- a centralised credit processing centre for SME accounts -- in the city.

Replying to a query, he said the SME sector in the country is under stress due to economic factors but is expected to perform better in the current fiscal.

"There was lot of sluggish growth in the mid corporate sector and also in the retail banking side.

A little more focus on the mid corporate and retail segment will see this (22 per cent growth in advances) through," he said.

On interest rates, he said reduction in the interest rates will not affect the bank's Net Interest Margin (NIM) as there will be adjustments on deposits side as well.

Read more »