Fretting over Britain's separation from the EU? Don't, as the 'rockstar' of Dalal Street, RBI governor Raghuram Rajan himself said, "sun has not fallen from the sky".
Even though, Britain's exit (Brexit) from EU may spell disaster for the economy of the UK and EU, those in India shouldn't panic. "Fundamentally, India has nothing to do with Brexit. The country is relatively immune, considering very less dependence on UK as a foreign investor," said brokerage IIFL in a research note. The experts have advised the investors against believing anybody who says 'sell everything' in the market, because if everybody sells in the market, the equity values would become zero. Such scenarios do not happen even during war times. Following are five reasons why India stands immune to Brexit: 1) Ours is a domestic consumption story Ajay Bodke, CEO & Chief Portfolio Manager - PMS, Prabhudas Lilladher said investors should realize that nearly 65-70 per cent of Indian GDP is domestic consumption. India is primarily a domestic-focused and domestic demand-led economy. 2) India's FII exposure to Europe not significant Entire Europe accounts for just about 8 per cent of India's total FDI inflows, and Europe's share in India's FII inflows is also in single digit, said Equinomics Research and Advisory. "Export to entire Europe is less than 15 per cent of total exports. On such a low base of India's exports, even if there is an absolute fall of 10 per cent in exports to Europe, it wouldn't impact much our overall exports," added Equinomics. 3) Oil slump to aid trade deficit & CAD Oil prices slumped by more than 6 per cent after Brexit. The fall in the oil prices would lead to large savings in import bill because every $1 drop in crude prices leads to roughly $1 billion savings in India's oil import bill. This would reduce India's trade & current account deficit (CAD) and counter any negative impact due to foreign capital outflow that may happen as part of movement towards safe haven assets. 4) Strong forex reserves to cushion India's external economy With record foreign exchange reserves of $340 billion and expected forex outflows in September 2016 on the FCNR (B) front already covered, RBI is likely to intervene to stamp out any unusual volatility in the currency markets. 5) Imported inflation to fall Lower commodity prices would dampen 'imported' inflation and help the RBI in pursuance of its stance of monetary accommodation.
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The forced merger of Financial Technologies (India) Ltd (FTIL) case and NSEL seems nothing more than an irrational and naïve decision on the part of the Ministry of Corporate Affairs (MCA) in its attempt to abide by the suggestion of Forward Markets Commission’s (FMC) to merge both the companies.
Merger is clearly not the solution in the case as it is apparent that vested interests and mala fide intensions are misleading MCA. It is undoubtedly an inept decision which involves levying of ill-proportioned and unfair punishment of merging the promoter, FTIL and its subsidiary, NSEL. The application of the ministry to the Bombay high court seeking six weeks’ time to respond to Financial Technologies’ challenge of final merger order issued in February this year shows that it is dragging its feet on its own order in this case. Despite having over a year to prepare, MCA has been continuously seeking extension of time in filling of affidavit to defend its own case. It is high time now that the concerned authorities should not turn a blind eye towards the adverse consequences of this obtuse decision as it will open out an easy escape route for the real defaulters to get off. The Multi Commodity Exchange (MCX) is preparing the ground to launch derivatives trading in currency and has asked four technology service providers to submit request for proposals (RFP).
RFP is a process of collecting written information about the capabilities of various suppliers for comparative purposes. Mrugank Paranjape, Managing Director, MCX, on the sidelines of an interaction here, said the exchange expects SEBI to allow options trading in commodities in nine months and then consider launching derivatives trading in currency on the platform after getting the regulator’s approval. “While options can be launched using the current technology, we are exploring the possibility of engaging a new service provider for currency and have called for RFP,” he said in his first interaction with the media after assuming office at the country’s largest commodities exchange. The agreement with the current technology service provider Financial Technology (India) (FTIL), the erstwhile promoter of the exchange, expires in 2022. Following the Rs 5,600-crore settlement default at the National Spot Exchange in 2013, the then market regulator Forward Markets Commission had declared Financial Technologies, its promoter Jignesh Shah and certain other officials as not ‘fit and proper’ to operate a commodity exchange. “We have tested the technology (provided by FTIL) to the best of our ability to handle the high volumes expected to be generated when the regulator allows trading in options and we found it absolutely safe to use,” he said here on Thursday. Asked whether the exchange would consider buying the software from FTIL if SEBI objects to using services of an entity that has been declared not ‘fit and proper’, Paranjape said the exchange keeps evaluating various options. In a bid to boost trading volumes, the exchange has filed papers with SEBI to launch futures trading in five agriculture commodities. “We are planning to strengthen our agriculture portfolio with four-five new contracts which are at various stages of approval. These agriculture contracts are currently not traded on any exchange,” said Paranjape. Asked whether MCX would consider launching trading in equities as the NSE and BSE have shown keen interest in commodity trading, he said it makes sense to play to one’s strengths and that is exactly why MCX would consider to launch launching trading in currency first as it has correlation with gold in which “we are the market leader”. |