The  BoJ  maintained  short-term interest rates at  -0.1%  and kept yield curve control parameters  unchanged after  a two-day meeting, according to  a  statement  released on  Tuesday.  

 The Bank of Japan kept  monetary policy  steady and adjusted  economic  forecasts without providing  clear  guidance on a timetable  for  ending  negative interest  rates, pushing  the yen  lower.  

 The  BoJ  maintained  short-term interest rates at  -0.1%  and kept yield curve control parameters  unchanged after  a two-day meeting, according to  a  statement  released on  Tuesday. 

 The bank  lowered  its inflation forecast for the  April  fiscal year  to 2.4% from 2.8% in  its  quarterly outlook report.  This  implies  that  price  increases  will continue to exceed  the  2% target for some time, as has been the case since April 2022.  This political  decision was unanimously expected by  BoJ observers when interviewed  by Bloomberg. A major earthquake on New  Year’s  Day and a deepening  financial  scandal  within  Prime Minister Fumio  Kishida’s  ruling party made this  the wrong  time for  Japan’s  first  interest  rate hike since  then. since  2007.  The  Reserve and European Central Bank  hinted  at  cutting interest rates  later this year.  

 The yen weakened against the dollar immediately after the announcement, briefly  reaching  148.55 per  dollar,  as market  participants expected  the  rate to remain  negative  for some time.  

 The  decision  to hold  is unlikely to change the  widespread  view among economists that the  BoJ  will raise  interest  rates at some point this year. The BOJ said the  level of  certainty  in achieving the interest rate  target  continues  to  increase gradually, showing  that the bank is  increasingly  confident  in  achieving  the target  and is still on track  to raise interest rates.  

  Economists surveyed  see April as the most  favorable time to  end  negative  interest rates,  as  this would give  the central bank  time  to  evaluate  the results of annual  wage  negotiations. Higher  increases  are seen as  key  in ensuring  a positive cycle of  price  and  wage growth drives  economic growth. 

  Ahead of Tuesday’s meeting,  people familiar with the matter said  BoJ  officials  believed  their price  forecast – of about  2% or  more – was  high enough to justify ending  negative  interest rates  and  now  they are focusing  on whether  certainty  about  the outlook  has increased. enough.  

  Gov.  Kazuo Ueda will speak to reporters in the afternoon,  possibly starting at  3:30 p.m. 

 The recent  weakness in  the yen will  likely cause  Ueda to avoid  appearing  too dovish. The yen around 150  is keeping  import costs high and  adding  to  inflationary pressures, raising the risk of another blow to already  weak  consumer spending. 

 Households  facing  rising  living  costs  are  growing impatient with  widespread and  prolonged  monetary easing as  the  key price  gauge remains  above the  BOJ’s  2% target. 

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 In contrast, Venezuelan crude can be bought with effective discounts of around $8-10 per barrel after the US eased sanctions against the country mid-October, people aware of the matter said.  

 Cheaper Venezuelan crude oil may start flowing to India from next month after three years as domestic refiners are moving away from Russia to more economical energy imports after sanction-hit Moscow drastically reduced discounts to around $2 a barrel, three people aware of the development said.  

 In contrast, Venezuelan crude can be bought with effective discounts of around $8-10 per barrel after the US eased sanctions against the country mid-October, they said, requesting anonymity. Discounts are generally with reference to the benchmark Brent crude, which fell about 1% to $78.56 a barrel on Friday. The downward trend continued on Monday as Brent fell by 0.22% at $78.39 in morning trade. 

 To meet India’s  growing energy needs, New Delhi  is  not only  diversifying  its crude oil imports but  is  also  making  efforts to  continue importing  from old suppliers such as Venezuela,  a company  manager said. .  India, the  world’s third-largest  crude oil consumer, imports more than 87% of its  needs. He added that they are ready  to  establish  supply  links  with any  manufacturer  at economical  prices.  

  “Refineries  have  only  purely commercial considerations  when  importing  crude oil. Long  before  US sanctions  hit India in 2020, Venezuela was  one of  the  main  crude oil suppliers. It  became India’s third-largest  crude oil  supplier  in  2012,  with new refineries as  the main supplier, set  to process cheap but low-quality waxy Venezuelan  crude, ”  said the second person, a government official. Reliance  Industries’  Jamnagar  and Essar (now Nayara)  plants  were the two main buyers of Venezuelan crude at  the time,  and  several state-run refineries  later  signed  long-term crude supply contracts with  Venezuela.  PDVSA,Venezuela’s  state oil company. 

  According  to data  presented to  Lok Sabha on July 31,  2017, India’s  imports  from Venezuela increased  to  USD 11,729.89  billion in  2014-15, mainly due to crude oil purchases. sharp decline.  global crude oil prices.  

The average  price of the  country’s crude oil imports (Indian oil  basket), which was $86.14  per  barrel in 2014-15,  fell by over 46%  to $46.17 in  2015-16.  

 Due to the US sanctions, imports from Venezuela (over 90% of crude supplies) saw a sharp fall from $6.05 billion 2019-20 to $714 million in 2020-21. It plunged further to $334 million and $178 million in 2021-22 and 2022-23, respectively. Other than crude oil, India imported dye intermediates, iron, copper and lead from the Latin American country. 

  Both public and private sector refiners have started negotiating long-term, large volume contracts with PDVSA. Some have also contracted immediate supplies and they are on the way, the third person said.  

 “With Venezuelan crude available in the market and some Indian refiners expressing interest in purchasing discounted Venezuelan crude to diversify their imports and capitalize on refining margins at the expense of some sour Middle Eastern grades, India’s crude import strategy is at a crucial and intriguing phase,” said Sumit Ritolia, refinery economics analyst at S&P Global Commodity Insights, an information provider. 

Due to heavy discounts, refiners will prefer Venezuelan crude compared to Russian crude, which once rose to one-third of the Indian basket from about 0.2% in 2022-23, the people said. Russia contributed over 35% of India’s total crude imports in 2023, amounting to 1.7 million barrels per day, according to S&P Global. 

In December, Indian imports of Russian crude oil averaged 1.43 million barrels per day, reflecting a decrease of 150,000 barrels per day compared with November, and a significant drop of 620,000 barrels per day from the peak in May, which marked India’s highest monthly imports from Russia. 

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 The RoDTEP scheme, announced in January 2021, refunds  general taxes  and  duties,  such as VAT on fuel used in  transport,  mandi tax and  electricity tax.

  It  replaces  the  WTO-inconsistent  Merchandise Exports from India Scheme  (MEIS),  which had faced several challenges from WTO members. 

  The  Union  government  has no plans  to  review the Duty Free  on Exported Products (RoDTEP) scheme after the United States  and the European Union (EU)  imposed anti-subsidy duties  last year  on four  products.  Indian  products,  citing  violations  of  global trade rules. A  government official said.  

 The US and EU  imposed countervailing duties  (CVD)  on paper  records,  common  aluminum  alloy  plates  and forged steel  following  an anti-subsidy investigation.  Countervailing duties  are  customs duties  on imported  products  that are imposed to  compensate for  subsidies  provided  by the exporting  country’s government to protect  the domestic industry.  “When US investigators  visit  manufacturing plants,  exporters  must demonstrate that they are receiving discounts, not incentives. They must  be able to  prove  that they  pay their  electricity  bill  and  value added  tax (VAT). But there are  document retention issues on  the  part of  our  exporters.  We are working on a process to  help  exporters  get acquainted  with the entire documentation process,” the official said. 

  “There is no need to  modify  the  project.  It is WTO compliant.  Very  few exporters  cannot present documents. Some  people mentioned  that  it  was  an incentive because there  had been an incentive before. Therefore,  our exporters will have to adapt to the documentation mechanism and the government will  help them  in the process,” the official added.  

 The RoDTEP scheme, announced in January 2021, refunds  general taxes  and  duties,  such as VAT on fuel used in  transport,  mandi tax and  electricity tax. 

 It  replaces  the  WTO-inconsistent  Merchandise Exports from India Scheme  (MEIS),  which had faced several challenges from WTO members.  The RoDTEP  program  operates  within  a budgetary framework and  in  FY 23-24, Rs 15,070 crore  has been  allocated to  promote  exports of  products  such as pharmaceuticals, organic and inorganic  chemicals,  iron  commodities steel,  among other  products.  

 “If our partner country  cannot explain  our  policy  then  that  is a problem. The  responsibility belongs to  us. Because we are looking  to reach the market.  For  example,  if partner countries  impose  standards, we  must comply with them.  So we need market access and so we will have to resolve these issues,” Biswajit Dhar, Professor, Centre for Economic Studies and Planning, Jawaharlal Nehru University, said.  

 Dhar added that implementation of the scheme assumes significance as other countries are more likely to scrutinize the scheme after the US and EU have imposed countervailing duties on Indian products. He added that RoDTEP is WTO compatible but WTO is about transparency and predictability and the government has to ensure that. 

  “Another thing is how we are implementing it. There is a problem of oversight. The industry  has rightly argued  that  this rate is  too low.  Whatever the  policy, it  needs  to be  continuously  reviewed and  monitored  to  ensure proper compliance.  

Because  because of a single  black sheep,  we cannot  let the  entire project  be called into question. The government  needs  to be  cautious in its  implementation because  as  our exports  decline,  we need to count  every penny.  Because we  might  lose,” Dhar added.  

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 The Indian  stock market  surpassed  Hong  Kong  for the first  time to rank fourth in the world,  Bloomberg reported. 

 According to data compiled by Bloomberg, the aggregate  value of  stocks  listed on Indian exchanges reached $4.33 trillion as of  Monday’s  close,  compared with Hong Kong’s  $4.29  trillion. 

  India’s  market capitalization  crossed $4 trillion for the first time on December 5. The  Indian stock  market’s recovery has come  on the back of a rapidly growing retail investor base,  Foreign  institutional  investor (FII) capital is maintained, corporate profits are  strong  and  earnings  are high. national  macroeconomic  foundation.  

  Additionally,  India has positioned itself as an alternative to China, attracting  new  capital from  investors and  businesses around the world,  thanks to its stable  politics  and  consumption-driven  economy. ,  remains  one of  the fastest-growing  major  countries,  Bloomberg reported.  By contrast, markets collapsed in  Hong  Kong,  where some of  China’s  most  innovative and  influential  companies are listed. The  combined  market value of Chinese and Hong Kong stocks has  fallen  by more than $6 trillion since their  2021 peak.  

  Bloomberg’s report adds that Beijing’s tough Covid-19 restrictions, strict management measures  on  businesses,  crisis  in the real estate sector  and geopolitical tensions with the  West, all  have  eroded China’s  appeal as  a global  growth  engine.  

 The Asian financial hub is losing its status as one of the  world’s  busiest  initial public  offering  (IPO)  locations  as new listings  dry  up in Hong Kong. 

  Foreign  funds  invested  more than $21 billion  in  Indian  stocks  in 2023, helping the  country’s  benchmark S&P BSE Sensex  index post  an eighth  straight  year of gains. 

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 India’s IPO market has seen more companies  launch in  the past year than China and Japan combined, but  historically,  most have  been  unprofitable.  

 India is one of the  most vibrant  markets  in the world  for  IPOs. In  the past  year, more businesses were established  than China and  Japan  combined. But if history is  to be believed,  in the long run, most of them will turn out to be  failures. However,  the  appeal  of  “pop” – a significant profit on  the  listing day – means  this fever  will not subside.  

 Something is  seriously  broken. YK2 Partners, a  firm  specializing  in  investing exclusively in the  Indian public markets, has  been counting on over  two decades of  raising  initial  capital  by  domestic companies.  Analysts at  YK2, based in Mumbai  and  London, have reviewed  all  300+ motherboard issues  since January 2004  over  a 10-year trading history.  According to their calculations, the  average IPO in this  group  returned -3.5%  per  year,  turning  an investment of 100 rupees  ($1.2)  into 70 rupees a decade later.  It  doesn’t  matter  if  they  were registered  in 2004 or  2013  or any year in between. Indian IPOs have failed miserably  to generate incremental  returns for investors  compared to  what they  could  have earned passively  simply by holding  a  common  benchmark.  Some  77% have underperformed the NSE500  index  over  the  10-year period, with  an  average underperformance of more than 14%  per year.  In other words,  100 rupees  uninvested for a beginner can become 280 rupees  with very little  effort.  

 “We  are characterizing  the IPO process as a scheme orchestrated by  management,” YK2 co-founders Arun Agarwal and Vinod Nair wrote in a note accompanying their research.  private equity investors, anchor investors, investment bankers, media,  etc.”. “This may  make sense for investors looking for an  IPO,  but not for  long-term  investors like  us.”  

  The regulator’s responsibility is  to ensure that companies with  relatively strong  prospects  enter the  public markets and offer  shares  at  prices  that  create  long-term  wealth. The  Securities and Exchange Board of India has  long  been aware  that the domestic IPO market falls short of this ideal. However,  some of the  measures  attempted or  considered by SEBI have been controversial.  

 One of them  is the IPO rating  (similar to  a bond  credit  rating).  Made mandatory  since  2007,  the classification  became optional in 2014 amid intense lobbying. Another idea  is  to  allow  retail investors  to  return  shares  to  major  shareholders at the issue price after three months of  underperformance. This safety net was considered for  many  years and then  abandoned.  

  However, there is  still  room  to improve the quality of the primary capital market. Clearly, the current  disclosure-based  pricing regime  does  not  meet this  challenge. Just a  few  months ago,  SEBI Chairman  Madhabi Puri  Buch  said that  the excuse companies  often  give to justify  high IPO valuations  is  “nothing but  a few  meaningless English  words”.  

 There may be a simple reason why verbiage can so easily  be disguised  as value:  the  average IPO  generates  an average  listing-day  gain of 25%,  and  India’s  rich have  lots of savings.  Ben Bernanke, the former  chairman of the  Federal  Reserve,  has  previously maintained that  a “global savings  glut” –  a  capital  outflow from  China and oil-producing  countries – is the cause of interest gains.  low  yield.  In  India’s  case,  it is  capital controls that  place limits  on how much the  wealthy  can invest  abroad.  Any excess  local savings  will eventually push  domestic  assets out,  from real estate to IPOs. 

  Real estate  transactions have  a certain  inertia  but  IPO prices reverse  very  quickly. This  explains the average oversubscription  rate  of 44 times in recent years. So how  do you  throw  sand  in  the wheel? The SEBI chief said  on  Friday that the regulator is  probing  investment banks that artificially  inflated requests for shares  to create a false impression of demand.  

 Cleaning up the market is a good first  step  but  not  enough.  YK2’s  Agarwal  suggested  that  SEBI should consider a mandatory  one-year  lock-in period  for all IPO investors so that  subscriptions are  driven by fundamentals and not  pop appeal.  More  revelations would  just  mean  more words. They  cannot  break  the link between abnormal  demand and opportunistic supply. Only more  skins  in the game  are possible.  

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