India Re dives to lifetime low of 52.73

Oil Cos Stack Up Dollar, RBI & Govt Indicate Inability To Prop Up Rupee

New Delhi/Mumbai: The rupee continued its free fall and touched a nadir of 52.73 against the dollar, before recovering a little to close at 52.32, amid indications from RBI and the government that there was little that authorities could do to prop up the currency. 
    The Indian currency closed 16 paise lower compared to Tuesday's close which was a record low. The steep fall on Monday morning trade was due to heavy dollar demand from oil companies. Expectations of a further decline are also prompting importers to buy dollars, dealers said. There are clear indications from the market that the falling trend is going to last for a while. In the offshore market, three-month forward contracts traded at 53.46 to the dollar, compared with 53.05 on Monday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars. 
    Even in the futures market, which is used by companies tohedge their currency risks against a steep appreciation or depreciation, traders were betting on the rupee trading at 52.80 in late January. The rupee is among the most depreciated currencies this year, having lost close to 15% in 2011, and is the worst performer among the 10 most-traded currencies in Asia. 
    "The present situation is worse than the 2008 crisis which was essentially a problem faced by corporates. This time it is countries that are at risk which is a more serious problem. There is complete negativity on all fronts and it is not possible to forecast how low it can fall," said K N Dey, director at Basix Forex. Although RBI described the continuous slide as "disruptive", it indicated that there waslittle it could do. "We expect that a reverse adjustment (in the rupee) will take place when the European situation resolves itself," governor D Subbarao told reporters in Hyderabad. 
    Finance minister Pranab Mukherjee was blunt, and said, "RBI intervention may not help." RBI typically steps in through public sector banks such as SBI to either sell or buydollars and check extreme volatility in the currency. Typically, in a situation like this, the central bank would sell dollars. But fearing that its actions could suck out Indian currency from the system and put further pressure on interest rates, the central bank has been selling the greenback in small lots. But that has not helped. "Our policy is that if the macro-economic situation is impacted due to the exchange rate fluctuation or undue volatility, we will have to
intervene. We are yet to decide whether to intervene or not at the moment," Subbarao said. 
    The fall in the currency has sparked fresh pessimism in the market and even Mukherjee recognized that inflation management efforts would be hit. "As a result (of depreciation) whatever little benefit could have been derived from the softening of international commodity prices, has been wiped out," the FM said. 
WHAT POLICYMAKERS SAY RBI reserves firepower for the worst Subbarao Says Rupee Will Firm Only After Europe Resolves Its Problems 
Mumbai: One aspect of the rupee's sharp fall last week that has surprised markets is the Reserve Bank of India's muted response during the week. Dealers feel that the central bank is reserving its firepower as the global situation could worsen. 
    On Tuesday, RBI governor D Subbarao told newspersons in Bangalore that the rupee would firm only after Europe resolves its problems. "We expect the reverse adjustment will take place when the European situation resolves itself. Until then, obviously, I can't comment whether RBI is intervening or not but we are watching the market," he said. 
    Dealers feel that although the central bank is sitting on forex reserves of over $300 billlon they are not free reserves as they represents liability towards portfolio investors. "Last time when the rupee had crossed 50 the sensex had dropped below 8,500. This time the sensex is at 16,000, if the central bank were to support the rupee at this level it may encourage portfolio investors to further book profits," said a dealer. 
    According to Subbarao, the central bank will intervene when it is consistent with RBI's policy. "Our policy remains the same, which is to manage volatility in exchange rate and to ensure that exchange-rate volatility does not impair macroeconomic stability." 
    Subbarao's stance was reiterated by deputy governor Subir Gokaran in Mumbai. Speaking to reporters, Gokarn said that RBI did not have any target for the rupee but any action by the central bank must factor medium-term risks. He added that RBI was weighing possible actions on the rupee. 
    Subbarao said the proposed legislation on food security may result in pushing up prices. The governor also said that higher income was driving an increase in protein consumption adding to demand pressures. 
    Delivering a speech at the Indian Society of Agricultural Marketing in Hyderabad, Subbarao said: "The National Food Security Bill, 2011 is another potential source of pressure on inflation, and its inflationary impact will depend on the extent to which it will raise demand for food grains relative to the normal increase in supply." The proposed bill targets two categories of households—priority households and general households—which covers 75% of rural population and 50% of the urban population. The price restrictions are quite exacting and failure by the government to meet the obligations entails payment of a food security allowance to the beneficiary. "Estimates suggest that 68% of the country's 1.2 billion population will get a legal entitlement for food grains after the bill is enacted, significantly raising the annual grain procurement demand even as the available marketed surplus would not increase correspondingly.

RBI is monitoring the situation closely and will take the required action in light of the international developments as situation unfolds. However, RBI intervention (in the forex market) will not help Pranab Mukherjee | FINANCE MINISTER

Our policy is that if the 
macro-economic situation 
is impacted due to the 
exchange rate fluctuation or undue volatility, we will have to intervene. We are yet to decide whether to intervene or not at the moment. The intervention in the forex market will be in accordance with the RBI's policy. But in real terms I cannot tell (when the central bank will intervene) 
D Subbarao | RBI GOVERNOR

We should not overreact to movements in the exchange rate. But, also understand that there are good reasons for what is happening. 
Expectations of economic events in certain parts of the developed world together with asset preferences are driving investors into taking decisions, which affect not only exchange rates but the prices of commodities 
Rahul Khullar | COMMERCE SECRETARY

Rupeeat all-time low of 52.15, to impact everyday life

Imports Cost More; Overseas Travel, Edu Hurt

Mumbai/New Delhi: The rupee hit a low of 52.15 against the US dollar on Monday, making imports, overseas travel and studies at foreign universities more expensive but cheered exporters and families that depend on remittances. 
    Based on Monday's closing price, the rupee has never been cheaper 
against the dollar, although it had flirted with the 52.20 mark in March 2009 following the global financial crisis. But unlike then, when the slide halted as global markets recovered, this time round, foreign exchange dealers are betting on a further fall. 
    There are projections of the currency falling to 55 against the greenback as economic fundamentals stay weak. If the doomsayers get it right, life isn't going to be easy. The sharp fall evoked an almost immediate response from edible oil company Adani Wilmar, which raised prices, while those selling palm and other oils that are mainly imported are expected to follow suit. White goods and phone makers are mulling a 2-10% hike. 
SOME GAIN, LOTS OF PAIN 
WINNERS 
Families of those working overseas will get more rupees for dollars remitted by them Exporters get more rupees for the same price in dollars Tourism may get small boost as foreigners will have to pay fewer dollars for vacationing in India Companies that manufacture export substitutes will get protection through cheap imports 
LOSERS 
Students will have to pay higher fee and living charges in rupee terms. Medicare to also get more expensive 
Overseas travel to get more expensive as you will have to shell out more rupees for the same amount of dollars 
Imports to get costlier, hit oil and commodities. Adani Wilmar hikes edible oil prices 
Hampers govt's efforts to use imports to tame inflation 
Companies will have to pay more for repaying foreign debt. They also stand to lose if they had not hedged properly—the likely scenario since few would have foreseen the rupee hitting 52/$ 
Higher oil import bill could put greater strain on govt finances, given clamour for higher subsidies 
WHY DID IT HAPPEN? 
Investors rushing to US dollar in flight for safety. Other currencies, including rupee, have plummeted as demand for dollar has soared FIIs exiting Indian stocks to put money in US T-bills 
HOW FAR WILL IT FALL? 
Expected to decline to around 52.50 against dollar. Traders say it may hit 55 next year, given the weak fundamentals of the economy Hike in short-term rates may not helpAweakening rupee is also eating into the gains 
of falling international commodity prices with markets staying edgy due to fresh talk of recession and the inability of US lawmakers to push through a $1.2 trillion spending cut. 
    Reflecting the nervousness, the BSE sensex slumped 425 points and fell below the 16,000 mark to close at 15,946. The last time the sensex closed below 16,000 was on October 5, 2011 after Moody's downgraded SBI's credit rating. 
    With the global economic forecast remaining bleak, foreign investors are pulling out of risky and emerging market assets and embracing safe haven options such as the dollar and US treasury bonds. 
    Following Monday's fall, the rupee has declined more than seven rupees against the dollar since August 1. A weaker rupee adds to inflation by pushing up cost of imports, particularly crude. Every weakening rupee adds Rs 8,000 crore to the crude bill. 
    The slide adds to the government's policy worries given the high inflation level, a slowing economy and rising trade deficit. 
    It's just not oil and other imports, you will have to shell out more Indian currency for foreign travel, overseas education and medical treatment abroad. For companies, the increase in dollar value pushes up the cost of imports and of dollar funding. Exporters who have hedged by selling dollars in the forward market will take a mark-to-market hit as their dollars will fetch less than what they have promised to sell it at. 
    Monday's trigger for the currency market turmoil was pessimism over a senate deal to cut the US deficit. Bankers are anticipating a shortage in dollar funding and are hoardingcash by parking them in shortterm US treasuries which are the most liquid of all investments. Compared to the 8.5% returns that banks receive in Indian markets, lenders receive almost zero interest on three-year treasuries. 
    Dealers say that because of the risk aversion, a hike in short-term rates—RBI's traditional tool for stabilizing the rupee—may not work. 
    "RBI can address this problem in the short term by opening up the capital account. But a long-term solution will require structural reforms that will lead to a positive current account and trade balance," said Ashish Vaidya, head of fixed income currency and commodities at UBS India. 
    He added that since most international financial institutions were shrinking their balance sheets it was unlikely that even capital account easing would bring in more dollars.

Civic devpt plans to go online

Will Lead To Transparency, Cut Down On Red Tape: Officials

Mumbai: The state government will upload development plans (DPs) of all municipal corporations and councils online. 

    The urban development department (UDD) on Wednesday issued an order to 347 corporations and councils, which are charging Rs 250 or more for each remark on a plot size of DP sheet, to immediately take steps in this direction. The plans, since attached to the revenue side of government functioning, are not available even under the Right to Information (RTI) Act. 
    State officials hope this will create greater transparency in the working of local bodies and cut down on redtape at the lowest levels of bureaucracy. 
    "It is a step in the right direction and will give power to citizens to check if they are being duped by phony real estate agents while purchasing a house or if a playground in their neighborhood is being misused. This also means a handful of people will now apply for a manual copy of the DP sheet, cutting down on the workload of municipal workers," an official of civic development plan department said. 
    The government has scanned all the DP sheets and will upload them by March 25, 2012, UDD officials said. "The exercise will be carried out systematically to ensure even minor details of a DP are included," an official said. 
    The DP defines land use patterns in the city and details floor space index (FSI) norms for various areas. The plan also contains terms for schools, colleges, and open spaces for a populace, among other reservations. The need for a DP is felt in large cities and urban areas that are growing rapidly and becoming dense. This makes it necessary to divide them into zones, with statutory provisions controlling an area's growth systematically. The DP laws prohibit dangerous and 'obnoxious' use of construction in these zones: residential, commercial, industrial and agricultural. 
    "When uploaded, the plans will facilitate systematic planning, ensuring benefits to the community at large," a civic official said. 
    The civic body is planning its third DP, which may be completed by 2016. However, the official deadline is still 2014. The current plan got published in 1983 and public suggestions were invited. The plan was approved by the state government in 1991. The first DP for Mumbai was prepared in 1964. 
WHAT'S A DEVELOPMENT PLAN As per Section of 22 of the Maharashtra Regional and Town Planning (MRTP) Act, 1966, a DP includes 
    Use of land, such as for residential, industrial, commercial, agricultural and recreational purposes 
    Reservation of land for public purposes: Schools, colleges, medical, public health, markets, social welfare, open spaces, gardens, theatres, museums, religious and other government buildings 
    Reservation of land for transport and communications: Roads, waterways, airports 
    Provisions for permission related to open spaces to be left around structures, character and size of building, density of population, sub-division of plots, parking spaces, among other building matters 
    Plan also controls tenement density per acre, FSI use for a locality for 'general welfare' of a zone

Rupee dips to new 32-month low

Mumbai: The sensex slid for the fifth consecutive session on Wednesday, closing 107 points lower at 16,776, its four-week closing low as weak global cues and slowing domestic earnings weighed on investor sentiments.      The weak stock market combined with the strength of the US dollar against other major currencies led the rupee to dip close to the 51 to a dollar mark — a fresh 32-month low level — but settled at 50.74, weaker by 7 paise from Tuesday's close. For both, the stock market and the rupee, market players are taking a bearish stance since they feel there is no positive trigger that can act as an agent for the current trend to reverse.  Gold crosses . 29k mark  Mumbai: Bouyant wedding seasonal demand amidst higher investors offtake pushed the yellow metal to cross the Rs 29,000 mark at the domestic bullion market here on Wednesday. AGENCIES