Business
Indian Stock Market Set to Climb in 2014
MUMBAI — Indian stocks reached record highs in 2013, but most international investors still lost money here as the rupee’s weakness erased returns.
This year could be better, analysts and investors said, depending on whether pro-business politicians get more power in forthcoming national elections.
While the Indian benchmark, S&P BSE Sensex Index rose around 9% in 2013, touching an all-time high in early December, the MSCI India index, a widely followed measure of Indian stocks bought by global investors, lost close to 6% in dollar terms because of the rupee’s collapse.
Among major Asian stock markets, India was one of the worst performers last year in dollar terms, behind MSCI Thailand Index’s 17% loss and MSCI Indonesia’s 25% loss. The U.S.’s benchmark S&P 500 index gained close to 30%.
Indian equities have had “a massive relative underperformance in dollars,” said Tim Love, London-based head of emerging-market equity at asset-management firm GAM, which manages $62 billion. “It is more about the currency than it is about the stock market.”
The Indian rupee plunged more than 20% between May and August to an all-time low against the dollar due to fear that India would struggle when the U.S. rolled back its easy-money policies. It has regained some ground, but was trading 11% weaker on the last day of 2013 than at the end of 2012.
India-dedicated mutual funds available to U.S. investors lost close to 12% on average in 2013, according to research firm Morningstar Inc. The HSBC Global Investment Funds Indian Equity fund, one of the largest India-dedicated offshore funds with $2.5 billion in assets, lost around 15%.
Despite the dollar losses, foreign funds have been buying in recent months. Some are optimistic India will get a pro-business government in federal elections due before the end of May. Foreign institutional investors have poured a net $8.5 billion into Indian equities since the beginning of September. This reversed a net outflow of $3.8 billion between June and August.
Any further stock-market gains, however, will be tempered next year as decision makers focus on elections and put off dealing with the many problems that have cut India’s gross domestic product growth in half in recent quarters. The Indian economy is expected to record decade-low annual growth of less than 5% in the year ending March 31.
Inflation has been rising and the central bank has been raising interest rates to curb it. Higher rates and delays in government approvals of new projects have persuaded many companies to put off expansion.
“The stress in the economy isn’t reflected in the equity” prices yet, said Anoop Bhaskar, head of equity at UTI Asset Management Co., a Mumbai firm that manages around $11.3 billion.
Many investors blame the Congress-led government for stalling the economy and delaying an economic overhaul. While they hope this will change if Narendra Modi—chief minister of the affluent state of Gujarat and the prime ministerial candidate of the Bharatiya Janata Party, India’s main opposition group—comes to power in the national elections, it wouldn’t be until late in the year that new, growth-boosting policies could be put in place.
There is also a possibility that India could get a coalition government too divided to pass unpopular changes. Some investors want more political certainty before they invest in India.
“I’d wait and see what they’d actually do,” said Khaled Louhichi, emerging-market analyst at Swiss bank Union Bancaire Privée, which manages $85 billion.
– WALLSTREET JOURNAL
The World Bank has uncovered $32 million in unaccounted funds linked to a water infrastructure project in Nigeria, raising concerns about financial mismanagement in donor-funded initiatives.
The discovery was highlighted in the bank’s recently published FY2024 Sanctions System Annual Report, which revealed significant discrepancies in the project’s financial records.
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The missing funds were earmarked to bolster Nigeria’s water infrastructure, but irregularities in accounting prompted an investigation by the World Bank’s Integrity Vice Presidency (INT).
“INT followed up on risks identified regarding a project in Nigeria’s water sector and flagged to operations the risk, which was associated with $32 million of unaccounted funds,” the report noted.
In response, the World Bank engaged with key stakeholders, including the project’s task team leader, operations manager, and financial management specialist, to recover the funds and safeguard the project’s integrity.
As part of the resolution, the Central Bank of Nigeria has been requested to reimburse $22 million. Meanwhile, $6 million remains in the project’s account to cover ongoing operational costs.
The findings underscore the importance of transparency and robust financial oversight in large-scale infrastructure projects, particularly those funded by international institutions.
The Central Bank of Nigeria (CBN) has issued a stern warning to Deposit Money Banks (DMBs) over the illegal sale of mint Naira notes to currency hawkers.
The apex bank, in a circular signed by the Acting Director of Currency Operations, Mr. Solaja Olayemi, on Friday, emphasized that erring banks would face stringent penalties.
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As part of its efforts to curb the abuse of the national currency, the CBN announced plans to conduct nationwide checks to seize mint notes sold by hawkers.
Banks found to have released such notes will be required to pay a fine of 10% of the value of the affected cash withdrawn from the CBN on the date in question.
Subsequent violations will attract an additional penalty incrementally increased by 5%.
The CBN also reiterated its commitment to enforcing the Clean Notes Policy, warning that banks involved in hoarding, diversion, or any actions that disrupt efficient cash distribution would face appropriate sanctions.
With the festive season fast approaching, the apex bank urged DMBs to enhance internal controls to ensure transparent cash distribution.
It highlighted the need for proper utilization of Automated Teller Machines (ATMs) to ensure easy access to new notes by the public.
Furthermore, the CBN disclosed plans to intensify its mystery shopping and spot checks, working closely with law enforcement agencies to clamp down on any practices that undermine the integrity of the Naira.
Nigeria’s inflation rate surged to 33.88% in October 2024, up from 32.7% in September, according to the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS) on Friday.
The month-on-month increase of 1.18 percentage points marks yet another strain on the nation’s economy, with transportation and food costs cited as the main drivers of inflation.
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Steep Year-on-Year Increase
Compared to October 2023, when the inflation rate stood at 27.33%, the October 2024 figure reflects a significant rise of 6.55 percentage points. This sustained upward trend highlights the worsening cost-of-living crisis for Nigerians.
Month-on-Month Breakdown
Inflation on a month-on-month basis also showed an uptick, rising to 2.64% in October 2024 from 2.52% in September. The faster rate of price increases further underscores the growing economic pressure on households.
Food Inflation Soars to 39.16%
Food inflation, a major component of the headline rate, reached 39.16% in October 2024, up from 31.52% in the same month last year.
The increase was driven by higher prices of staple items, including: Cereals and Tubers: Guinea Corn, Rice, Maize Grains, Yam, Water Yam, and Coco Yam. Oils and Fats: Palm Oil and Vegetable Oil. Beverages: Milo, Lipton, and Bourvita.
On a month-on-month basis, food inflation rose by 0.30 percentage points to 2.94% in October, up from 2.64% in September.
Price hikes in Palm Oil, Vegetable Oil, Fish, Meat, and Bread categories were major contributors.
Annual Food Inflation Hits 38.12%
The average annual food inflation rate over the past 12 months climbed to 38.12%, a sharp increase of 11.79 percentage points from the 26.33% recorded in October 2023.
The consistent rise in inflation, particularly food and transportation costs, continues to erode the purchasing power of Nigerians.
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