India Forex - Forex Trading in India

India Wednesday 3 February 2010 - A man was arrested here after he allegedly threatened a forex firm owner with a knife and took some money from the cash bag following an argument, police said.

The incident took place in Traveler India, a forex firm in Paharganj.

The firm owner Bhavnesh Gupta had an argument with one Jagtar Singh, after which the latter accused him of not giving him some receipts.

Singh is a regular traveler to Malaysia and had previous dealings with Gupta.

When Gupta denied the charges, Singh allegedly brandished a knife and took the money. However, there is another version that Gupta give him the money voluntarily, police said.

The CCTV installed in the firm had captured the fight, they said, adding it also purportedly shows Singh holding the knife and the money.

India Thursday 21 January 2010 - India earned a lower rate of return of 4.16 per cent on its foreign currency assets and gold during the year ended June 2009 compared to 4.82 per cent a year ago.

“The rate of earnings on foreign currency assets and gold, after accounting for depreciation, decreased from 4.82 per cent in July 2007-June 2008 to 4.16 per cent in July 2008 - June 2009,” the Reserve Bank of India (RBI) said in its report on management of forex reserves.

India’s foreign currency assets stood at around US$264 billion as on September 30, 2009 against about US$241 billion as on March 31, 2009.

Of these assets, about US$148 billion is invested in securities, US$111 billion is deposited with Bank for International Settlements (BIS) and International Monetary Fund (IMF), the RBI said.

Only, around US$5 billion are deposited with foreign commercial banks and parked with funds placed with external asset managers (EAMs).

“A small portion of the reserves has been assigned to the EAMs with the main objective of gaining access to and deriving benefits from their expertise and market research,” RBI said.

The apex bank said while safety and liquidity constitute the twin objectives of reserve management in India, return optimisation becomes an embedded strategy within this framework.

The Orissa High Court on Thursday ordered a CBI probe into the alleged Rs 25 lakh-crore derivative scam in the foreign exchange market of the country.

“In view of national interest involving irregularities of such huge amount due to faulty derivative contracts, we direct the CBI to make a thorough probe into the whole affair after registering a case”, a bench of the HC comprising acting chief justice I.M.Quddusi and justice Kumari Sanju Panda observed, while disposing of a Public Interest Litigation filed by a Cuttack-based businessman Prabanjan Patra in this regard.

The CBI in its preliminary investigation report filed to the HC last month said that there were prima facie evidences of violation of Foreign Exchange Management Act (FEMA) by several banks in India, which sold derivative contracts to gullible companies, exporters and importers, resulting in huge losses. The national investigating agency, however, did not name the erring banks in the report.

The Indian business houses including exporters and importers entered into derivative agreements with the banks to avoid the risk of high fluctuations of foreign exchange values. As per the contract, the banks arrange foreign exchanges to the companies at a rate agreed between them for a fixed period irrespective of the increase or decrease in the foreign currencies.

India Monday 21 December 2009 - The Indian rupee weakened on Monday but was holding above last week’s lows, with a choppy sharemarket offering little direction as trade thinned out ahead of the end of the year.

At 10:25 am (0455 GMT) the partially convertible rupee was at 46.81/82 per dollar, weaker than its close of 46.72/73 on Friday.

The unit had hit 46.97 during trade on Thursday, its lowest since November 27. “Nothing major happening in the market. Trading is very thin, there is not much of month-end dollar demand, so the rupee should be rangebound between 46.70-46.85,” said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

Most Asian units were slightly weaker compared to the dollar. However, the index of the dollar against six major currencies was down 0.2 per cent. Domestic shares were choppy in initial trade, turning negative after initially trying to strengthen.

Foreign fund flows into stocks are a key determinant of the rupee’s fortunes. Until early December, foreigners were buyers of a net $16 billion worth of Indian equities, after having sold more than a net $13 billion last year.

These inflows have helped the rupee bounce back from its record low of 52.2 touched in early March. Last year, the rupee had shed a fifth of its value, partly due to the outflows.

One-month offshore non-deliverable forward contracts were quoting at 46.83/93, little weaker than the onshore spot rate.

In the currency futures market, the most traded near-month contracts on the National Stock Exchange and MCX-SX were both quoting at 46.8475 respectively, with the total traded volume on the two exchanges at about $485 million.

India Friday 18 December 2009 - A survey by the London-based independent think-tank Legatum Institute says that India will take over the developed countries and emerge as a global economic superpower by 2030.

About 53% of the respondents of the survey opined that Indian economy is on its growth path that could overtake superpowers like the United States, Japan, Germany and fast-emerging China in the next twenty years, media reports said quoting the survey.

The survey quizzed about 2,400 Indian senior managers, entrepreneurs and aspiring entrepreneurs who saw high confidence in the economy’s wealth creators and 90% of them view India in a stronger economic position in five years. However, 20% of them did admit that the business in India was impacted due to the global economic crisis.

Two-thirds of the respondents gave credit to Indian entrepreneurship as they seem capable compared to entrepreneurs of other countries and 84% agreed that the economy is going forward in the right direction.

Apart from business, Indian entrepreneurs are highly motivated by the broader social impact of their work. Over 54% believe that the social effects of their business improve the quality of life in their communities.

According to the World Bank, India is already moving up the economic league tables as the 12th largest economy across the globe. Also, it ranks in 45th position in the internationally respected 2009 Legatum Prosperity Index that holds social and political data to provide a wider measure of national success.

On the other hand, 50% respondents pointed out that corruption is a serious problem and 40% say they were pressurized to pay bribe. Indian economy’s growth is also affected by the lack of access to finance and unpunctual government bureaucracy.

India Friday 18 December 2009 - India’s annual rate of inflation for the week ended December 5 this year for primary articles rose to 14.98% from 13.90% in the preceding week due to higher prices of food items such as potatoes, pulses and vegetables. It was 11.50% for the same week in the previous year. The 52-week average inflation for the week ended December 5 was 8.10%, data released by the Ministry of Commerce and Industry showed.

The annual rate of inflation for commodities in the broad group, “Fuel, Power, Light and Lubricants,” for the week ended December 5 was 3.95%, up from 0.06% for the previous week and 0.48% during the corresponding week a year ago. The 52-week average inflation for the week ended December 5 was minus 5.93%

The data indicate the index for this group, having a weightage of 22.02%, rose by 0.4% from the preceding week.

Among the sub-groups, the index for the “Food Articles” category rose by 0.3% due to the higher prices of urad and condiments & spices (3% each), milk (2%) and maize, barley, pork, masur and wheat(1% each). However, the prices of poultry chicken (10%), fish-inland (7%) and tea (2%) declined.

The index for the ‘Non-Food Articles’ group rose by 0.5%, due to the higher prices of raw jute (11%), rape & mustard seed (4%) and castor seed and copra (1% each), whereas that of niger seed (3%) and raw silk (2%) dropped.

On an year-on-year basis, the rate of inflation for the ‘Food Articles” group increased to 19.95% from 10.28% last year on the back of alarming increase in the prices of potatoes, pulses and vegetables in the past one year. The 52-week average inflation for the week ended December 5 was 11.65%, the data said.

The rate of inflation during the year for the ‘Non-Food Articles” category was down significantly to 5.70% from 9.92% a year ago. The 52-week average inflation for the week ended December 5 was 0.87%.

Fuel, Power, Light & Lubricants

The index for this major group, with a weightage of 14.23%, for the week under review declined marginally to 344.9 from 345.0 due to lower prices of aviation turbine fuel (1%).

Prime Minister’s Economic Adviser C. Rangarajan said Reserve Bank of India or RBI might review the situation and take action by this month-end, depending on how the prices would behave. He added that the apex bank might tighten monetary policy as inflation could rise to near 7% in March.

Economists expect the apex bank to take measures to tighten liquidity, such as increasing banks’ reserve requirements, before raising interest rates.

RBI is likely to raise its key policy rates by 25 basis points in January, earlier than expected to check rising inflation, said Standard Chartered.

Finance Minister Pranab Mukherjee said: “This is a matter of concern. There is an inflationary pressure, particularly in food items.”

India Monday 14 December 2009: Foreign exchange derivatives contracts, which a large number of Indian companies entered into in 2007 and 2008, have taken a heavy toll on India Inc’s financials during 2008-09. However, the impact went unnoticed because of some crucial changes in accounting norms last year allowing these losses to be kept off the profit & loss statement.

A report by Edelweiss Capital calculated that in BSE 100 companies — which comprise the 100 most valued firms in India — the total foreign exchange-related loss for the year was a whopping Rs 43,000 crore.

Of this number, mark-to-market (MTM) losses, which mainly relates to forex derivatives contracts, aggregated Rs 24,300 crore. The numbers were arrived at from individual disclosures by these companies in their annual reports, Edelweiss analysts said. These losses could be in multiples if one considers all the listed and unlisted companies in India which had bought forex exchange derivatives from a clutch of banks during 2007 and 2008.

The main reason for such huge losses was depreciation of the Indian rupee against US dollar during 2008-09. Edelweiss now expects that the appreciating rupee will lead to paring of these MTM losses for India companies.

For every 10% appreciation of the rupee, aggregate MTM gains during the current financial year (FY10), for the BSE 100 companies, will be about Rs 12,200 crore, it said. So far in FY10, the rupee has appreciated about 8% against the greenback.

Lately, however, there is widespread expectation that based on the recovery in the US, the dollar is going to appreciate against most currencies, including the rupee. In case the dollar does appreciate against the rupee, these Indian companies could again stare at further MTM losses rather than gains as expected by the broking house, market players said.

The reported outstanding forex derivatives contracts only for these 100 companies was about Rs 9,900 crore, the report noted.

Goa, India: While holidaying in Goa, British tourist Daniel Clemente discovered a simple way to avoid interminable queues and paperwork while exchanging currency. He familiarized himself with unauthorized dealers — from jewellers to taxi drivers, shack employees to tour guides.

Clemente claims that by trading in this manner, he not only earned more, but also saved about Rs 25, which is charged as taxes by recognized forex dealers.

Illegal exchange of foreign currency in Goa is a fact. The directorate of revenue intelligence (DRI) in a report to the state government in 2008 emphasized on the “emerging/thriving hawala racket in the state” and said that those involved also had a hand in counterfeit Indian currency, “the quantum of which, though may be diminutive at present but if not impeded, may soon assume gigantic proportions”.

The report suggested that unscrupulous individuals involved in accumulating foreign currency from various sources to funnel the hawala system had surfaced in North Goa and claimed to be working for “D” company. Reports from the US suggest that ‘hawala’ money in India is directly linked to financing terrorists.

Explaining how the illegal trade functions, a forex analyst said, “The foreigners get 50 paise to Re 1 more than the market value on every pound or dollar exchanged, while the unauthorized dealer earns up to Rs 3, depending on the market situation. The foreign currency is collected daily by small time agents in the state and routed out.”

Though intelligence sources reveal that the magnitude of the problem is huge and the illegal trade continues largely unchallenged in the state, former DGP B S Brar said, “Such activities have not come to our notice.”

However, police records reveal that between January 2007 and December 2008, the number of cases of duplication or counterfeiting of currency reported was 32. Of these, only five were detected and chargesheets filed. Police claim that a majority of such cases were based on complaints by banks discovering fake notes in their treasury.

Police sources said probes into counterfeit notes revealed a Bangladeshi link but investigations reached a “dead end” as those arrested for possession of fake notes were poor labourers sent to the state to act as couriers.
Police sources also said that investigations found that counterfeit money was sent through couriers to Goa to be handed over to a contractor, who would contact them. But the police are clueless as to where this money goes from the contractor’s hands.

SP (public relations) Atmaram Deshpande said, “Though investigations continue, the trail has gone cold as the real persons involved in the trade are not traceable. The persons arrested are mere couriers or end beneficiaries.”

India Tuesday 8 December 2009: The rupee extended its fall in afternoon trade on Tuesday on dollar demand from a UK bank for an offshore deal, dealers said.
At 2:05 pm, the partially convertible rupee was at 46.66/67 per dollar, off a low of 46.76, its weakest in the last two weeks and below Monday’s close of 46.56/57.

A UK bank bought $500 million, which was responsible for the rupee’s fall, dealers said.

The dollar index, a gauge of the US unit’s performance against six majors, was almost unchanged.

Dealers also said they were monitoring the sharemarket for cues on fund flows.

India Tuesday 8 December 2009: Government bonds ended marginally higher for the first time in three days on speculation that high yields attracted some fresh investors.
Ten-year bond yields earlier reached their highest since November 2008, as Reserve Bank of India (RBI) deputy governor Subir Gokarn signalled that the central bank may need to raise borrowing costs to damp inflation.

The yield on the 6.9% note ended at 7.47%, according to CCIL. Bonds fell earlier on Monday after Mr Gokarn said over the weekend that policymakers can’t ignore the link between rising food costs and inflation.

The rupee weakened on Monday, in line with broadly lower Asian units, while traders awaited the domestic stock market to open for further cues on the direction of foreign fund flows. The rupee ended at 46.56 against the dollar, weaker than its Friday’s close of 46.29. The dollar index, a gauge of the US unit’s performance against six majors, was up 0.35 by late evening. The dollar earlier slipped against the yen on Monday, as traders booked profits when a surprisingly low number of US job losses boosted hopes for an economic recovery. Traders sell the dollar when risk appetite increases.

However, traders said the dollar is likely to stay buoyant after employment data led traders to speculate that the Federal Reserve may consider raising interest rates from record lows sooner than previously thought. The dollar posted its best performance against a basket of currencies in nearly a year on Friday. It soared 2.6% versus the yen, which has been under pressure as the Bank of Japan eased monetary policy last week to tackle deflation.