EBI is an important story in India's search for Ssound public administration and it was and remains a unique independent regulator, featuring design elements which were not done before or after. It played a key role in a big achievement of economic reform in India – the equity market.

Formed by the Government of India in 1988, under the leadership of Mr. S.A. Dave, then Executive Director, IDBI, the Securities and Exchange Board of India (SEBI) got statutory powers after the SEBI Act was passed by Parliament in 1992. It was the year in which Rs. 5,000 crore Harshad Mehta securities scam hit Indian stock markets and this fixed income and stock market scandal finally prodded the Parliament to enact the SEBI Act.

SEBI was the first time in India that a of a regulatory body took place.

This required numerous amendments to the SEBI Act and to the Securities Contracts Act. SEBI issues regulations which have the status of law. It investigates offences (an executive function), and writes orders (a judicial function). Appeals against SEBI orders go to SAT, which shaped up as a high quality tribunal. This forced SEBI to start writing reasoned orders – which is much more work, but forces better analysis.

REGULATION

In the pre-SEBI days, capital market regulation under the Securities Contracts Regulation Act vested loosely with the Controller of Capital Issues, functioning directly under the Ministry of Finance.

Until the SEBI and the Insurance Regulatory and Development Authority (IRDA) came into being, regulation in those areas was slack, and the RBI, because of its sheer stature, was presumed to have the final say in all matters, even those not directly connected to its of banking and monetary policy.

But since inception, the regulator has played a major role in cleaning up India's equity cash market, established a modern equity derivatives market, and transformed the primary market through better processes and making the large shift from merit-based approvals to disclosure-based regulations. Besides, it has put in place clear and effective rules (well, mostly) for the segments it regulates. As a result, for instance, participation from foreign institutional investors has grown steadily over time, the takeover process is streamlined, and instead of having one large, malfunctioning mutual fund in the pre-SEBI days, India now has a well-regulated mutual fund industry.

In short, the securities market has gone through a sea change in the 25 years of SEBI's

meaningful establishment

core areas

existence. It has had seven chairmen so far excluding the incumbent U. K. Sinha.

EVALUATION

Twenty-five years are a relatively short period to evaluate a financial sector regulatory institution. The SEBI is considerably junior in age to the

, which has, for a long time (78 years almost), been identified with the financial sector regulation in this country.

Most regulators have a typical life cycle—in the first few years, they are incompetent and clueless. They then get their act together through hard work and creative thinking, leading to some malpractices getting stooped and processes falling into place. As regulators mature, there's nothing much original left to do, resulting in a highly conservative and bureaucratic organization. SEBI has largely followed this life cycle and has now reached a mature phase where it is left mainly with the extremely painful and thankless job of enforcing regulation.

SEBI ought to be evaluated on different yardsticks — as the circumstances under which it came into being, early handicaps it had to overcome in regulating well-entrenched entities like brokers, some of them, when SEBI came into being, were already more than 100 years old.

Stories of the erstwhile BSE are simply alien to us today. There was a tremendous battle of interests. The old BSE members stood to enjoy rents from perpetuating the old ways, but that arrangement was not good for the people of India.

SEBI pioneered the transformation through experimenting new institutions successfully – NSE and NSDL. Regulatory and

for dealing with unruly private financial firms were setup – which have to be quite different when compared with the cozy dealings between government and PSU firms.

As a new regulator, SEBI had to start from scratch; there was nothing comparable to it before. One of the important handicaps the institution faced — and in many ways continues

Reserve Bank of India (RBI)

supervisory strategies

In this issueRetrospecting 25 yearsof SEBI P.1-P.3Financial Jargon’s P.3Knowledge bank-Depositories & Investors P.4-P.5Key Economic Events P.5Market Overview (May 2013) P.6

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Retrospecting 25 Years of SEBI

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would now only voluntarily pay the distributor for advisory services. Another initiative was relaxing 'Know Your Customer' (KYC) norms for small investors and widening the distribution network in rural India by roping in postal agents.

Foreign Institutional Investors: The Indian equity markets were opened to FIIs, in 1993 and they are now the key driving force behind stock movements. FIIs investment ceiling was raised to 49% in March 2001 while the dual approval process for FII registration, by the RBI and SEBI, was scrapped in 2003, when they came under the remit of the capital market regulator. Since 2004, SEBI has been consistently revising the FIIs investment limit in both corporate as well as government debt.

While the chunk of foreign money came in through offshore derivative instruments such as participatory notes (P-notes) where the identity of the end beneficiary is not traceable, SEBI has been consistently pushing to encourage holders of such securities to enter the market as registered FIIs.

MAJOR CONTROVERSIES

ULIPs: In 2010, SEBI issued show-cause notices to a dozen life insurers and asked them to stop introducing unit-linked insurance plans, or ULIPs, without its permission as these hybrid insurance products mimicked mutual fund schemes that are regulated under SEBI's collective investment scheme, or CIS, norms. The order gave rise to a battle between the capital markets regulator and the insurance regulator—Insurance Regulatory and Development Authority, or IRDA. The President of India had to pass an ordinance amending the CIS norms and keeping ULIPs under IRDA. Subsequently, IRDA went on an overdrive for a complete makeover of ULIP regulations.

Mutual Funds: In August 2009, soon after the panel headed by Dhirendra Swarup recommended abolishing agent commission for distribution of financial products, SEBI ordered scrapping of entry fees in mutual funds. The move was criticized by the industry and legal experts and the order forced thousands of mutual fund advisers to sell other products that offered better incentives, resulting in stagnation of assets under management.

Participatory-Notes: In October 2007, in the wake of an appreciating rupee, SEBI proposed to curb issuance of participatory notes (P-notes), a favourite investment route used by FIIs. SEBI was concerned about the quality of money flowing into India through P-notes but many say it was an attempt to curb excessive dollar flows. The BSE's benchmark Sensex crashed 1,700 points the very day after the announcement

and it led to suspension of trading for an hour. The crash forced the finance minister to clarify that the government was not against FIIs and there would be no immediate ban on P-notes.

Sahara Case: In November 2010, SEBI barred two Sahara group firms from raising money from the public in any manner, citing violations of capital-raising norms. Another directive followed in June 2011, asking Sahara firms to return money to investors with 15% interest. This marked the beginning of a legal battle between the regulator and the company as the latter argued that since unlisted entities were raising funds, SEBI has no jurisdiction over them. The case was heard in the Securities and Appellate Tribunal and later went up to the Supreme Court, which directed Sahara to refund the money.

MCX-SX: In a bid to ensure compliance of exchanges with market infrastructure regulations, SEBI got into a bitter legal spat with India's newest stock exchange MCX-SX in 2009. The regulator fought a three-year long battle with the promoters of the exchange, alleging the latter violated norms by attaching put options in its share purchase agreement with investors and not following permissible routes for capital reduction. Later, MCX-SX was given a licence to start equity trading and given three years to reduce promoter holding in the exchange.

KEY CHALLENGES

Enforcement Processes: Despite statutory powers on par with a civil court, SEBI hasn't made much headway when it comes to enforcement. The regulator needs to engender greater confidence among investors and display greater consistency when it comes to enforcement of laws.

Some violations are ignored or go unnoticed due to the regulator's limited access, insufficient resources or government intervention. SEBI should shed the image that big fish are spared and only small fish are caught. This is the worst allegation against SEBI. This does not mean catch big fish without any case and ultimately lose in SAT (Securities Appellate Tribunal).

In recent months, the regulator has been seeking to strengthen insider trading norms, expand its presence through branch offices, work with police and local enforcement agencies, improve corporate governance norms and boost control over deposit-taking firms.

SEBI should focus on clarity. Regulations on investment advisors and collective investment schemes are very vague even in their fundamental scope and coverage.

to face — is in recruiting and training qualified manpower. While its heads, drawn from the highest echelons of the government and public financial institutions, were people of high calibre, it is at the middle levels that the new regulator has faced major problems.

The tumultuous experiences from SEBI – both positive and negative – have generated our learning of financial policy. Here is a look at SEBI's top achievements, major controversies and key challenges.

TOP ACHIEVEMENTS

Dematerialization of Shares: The market regulator introduced holding of shares and securities after the Depositories Act was passed in 1996, which did away with physical certificates that were prone to postal delays, theft and forgery, apart from making the settlement process slow and cumbersome. This also prevented the issue of fake share certificates floating in the market. It enabled electronic trading, with investors and traders even able to work from home.

Faster Settlement Process: SEBI is credited with quickly moving from a T+5 settlement cycle in 2001 to T+2 in 2003. Demat, T+2 settlement and the development of electronic markets are major achievements and we were ahead of several markets in all these fronts. With T+2, we are still ahead of the Western markets. The regulator is currently looking at reducing the settlement cycle to T+1, enabling investors and traders to take positions faster.

Stronger and Clearer Regulations, Orders: In the early years, powerful brokers' lobbies controlled share price movements and could afford to ignore SEBI. SEBI has created fear and respect in the market, both among domestic and international market intermediaries. The quality of orders has improved materially over the past 25 years.

Recent instances of this include the orders against two Sahara group entities that were upheld in the Securities Appellate Tribunal and the Supreme Court and the case of front running by HDFC mutual fund.

Fostering Mutual Fund Industry: While the Indian mutual fund industry has grown manifold from being a monopoly until the early 1990s—when Unit Trust of India, set up in 1964, was the only game in town—their reach remains low outside India's top 20 cities. SEBI has taken several steps to increase the popularity of mutual fund products and prevent mis-selling of products by distributors.

One of those steps is banning entry loads for mutual fund schemes in 2009, as investors

dematerialized

An independent SRO that creates and enforces routine regulations gives the regulator time to ocus on bigger issues. SEBI has started moving in this direction and recently notified regulations to set up an SRO for the mutual fund industry. It needs to extend this to other products and services.

CONCLUDING THOUGHTS

The market regulator continues to face challenges in enforcing rules, some markets such as corporate bonds and interest rate derivatives are yet to take off, and while the exchange-traded markets seem liquid, many of them lack depth.

But this doesn't at all suggest that what SEBI has achieved isn't praiseworthy.

A rich ecosystem has developed: with participation by individuals and securities firms from all over India, and mutual funds with free entry, and foreign firms present in both the securities industry and mutual funds. The achievements in financial reform here dwarf the rest of Indian finance. With the success of the equity market, India looks like a good financial system among emerging markets.

And just as how the regulator has in the past been energetic and creative in setting right the equity cash and derivatives markets; it must pursue the formation of other markets, similarly, tackling the issue of market depth means getting the critically important government-run pension funds to invest in equity markets. Besides, doing away with the distortive securities transaction tax and regulating collective investment schemes effectively will first require clear regulations from the government.

It can find motivation from its own history—as an example, replacing the badla market with a modern equity derivatives market involved battles against powerful and entrenched market participants and steering changes in law through the parliamentary process.

Of course, the list of “to-dos” mentioned is not exhaustive. For instance, there's a lot to do in the area of investor education; depth in most markets needs to improve. In sum, however, both SEBI and policymakers must reject the premise that all is well the Indian securities market. While SEBI has done well, thus far, there's more left to be done.

In summary, over the last 25 years, SEBI was at the crucible of progress in Indian finance. When it started, there was no sensible finance in India; SEBI and the equity markets are the laboratory where India learned how to do finance.

Overall SEBI has done a decent job with some hits and misses and some failures, but what we need is a complete relook at financial sector legislation. Indian policy makers, learning from SEBI's strengths and weaknesses, have guided the Indian Financial Code, and when it is enacted, who knows what will be the fate of SEBI and SEBI Act

Abenomics

Demat Account

Portfolio diversification

Compounding

Asset Allocation

Debt Instrument

Abenomics refers to the economic policies advocated by Shinzo Abe, the current Prime Minister of Japan. It is meant to resolve Japan's macroeconomic problems. It consists of monetary policy, fiscal policy and economic growth strategies to encourage private investment.

In a 'Demat account', shares and securities are held electronically instead of the investor taking physical possession of certificates. A demat account is opened by the investor while registering with an investment broker (or sub-broker).

Investing in different asset classes and in securities of many issuers in an attempt to reduce overall investment risk and to avoid damaging a portfolio's performance by the poor performance of a single security.

The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.

An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon

It is a contractual or written assurance that enables the borrower to raise funds by promising to repay the lender in accordance with terms of a contract. Types of debt instruments include bonds, certificates, debentures, commercialpapers, etc.

Financial Jargon’s

Deepening Capital Markets: SEBI needs to deepen the capital market. It has taken several measures to widen the scope of investment for all categories of investors—retail, corporate, foreign institutional investors and high-networth individuals in capital markets. The number of retail investors and the share of household savings flowing into the capital market haven't risen by much. In real terms, the amount of resources raised through public issues is less nowadays than it used to be in the 1990s.

To create an equity culture, SEBI has simplified mutual fund investment norms; abolished mutual fund entry loads; eased investment norms for initial public offerings (IPOs) and other public issues; unified Know-Your-Client (KYC) norms; simplified disclosures by companies to help investors take informed decisions and most recently issued a discussion paper to introduce a mandatory safety net for retail investors in IPOs.

SEBI should work on deeper participation in equity by pension, superannuation and gratuity funds, developing a vibrant retail debt segment and reducing the cost of transactions drastically to improve investment markets in India.

SEBI needs to indemnify the fraudulent loss of investors. An investor, losing any money for whatever reason, except for market loss or his own negligence, and not compensated by the negligent or defrauding party or from the investor protection funds, must be indemnified.

Corporate Debt and Securitization: Despite numerous work ing commi t tees and liberalization of listing and trading norms for debt securities, this remains unfinished business. Perhaps the most significant development on the corporate bond market was the migration from physical certificates to dematerialized holdings in 2000. This improved debt market volumes to an extent then but failed to attract sufficient liquidity in the following years.

Even after allowing the trading of interest rate derivatives on exchanges and the listing of securitized debt papers recently, the regulator has not been able to do much to create a liquid and efficient corporate debt market and these largely has remained part of the over-the-counter, or OTC, market.

Matching up to Global Standards: With the capital markets growing rapidly, regulators need to keep abreast of global standards. Key areas to focus on are establishing self-regulatory organizations (SROs), a better and transparent consent order mechanism, and rules over market intermediaries.

SEBI is just too small to regulate such large industries as distributors, investment advisors and sub-brokers, not to mention Ponzi schemes. An SRO like the Financial Industry Regulatory Authority of the US, overseen by the SEC, creates and enforces rules for members based on the federal securities law.

Knowledge Bank

Depositories &

Investors

Depository

depository can be compared to a bank and Aholds securities (like shares, debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities.

It is a facility for holding securities electronically in which securities transactions are processed by book entry. In addition to the core services of electronic custody and trade settlement services, depositories provide special services like pledge, hypothecation of securities, automatic delivery of securities to clearing corporations, distribution of cash and non-cash corporate benefits (Bonus, Rights, IPOs etc.), stock lending, demat of NSC/KVP, demat of warehouse receipts and various other services.

Depository interfaces with the investors through its agents called Depository Participants (DPs). If an investor wants to avail the services offered by the depository, the investor has to open an account (demat a/c) with a DP. This is similar to opening an account with any branch of a bank in order to utilize the bank's services.

Investor in a Demat Environment

Any investor eligible to acquire and hold securities in his/her name can open a demat account with any of the depositories through a registered Depository Participant (DP) of his/her choice. While choosing DP the individual should take into consideration the same factors as service standards, charges and convenience of location etc. as in case of opening a bank account.

Beneficiary owner: The original investor whose securities are held in electronic form by depository is called as 'Beneficial Owner (BO)' since all the benefits as a result of the holding the securities are given to the original holder and the demat account opened by the beneficial owner is called as Beneficiary account.

Registered Owner: When securities of a company are held in physical form by an investor, name of the investor is recorded in the books of the company as a 'Registered Owner' of the Securities. Each certificate is identified by Folio number, certificate number and distinctive range numbers. But when physical securities are converted in to electronic form, the depository becomes 'Registered Owner” in the books of the company and investors name is removed from books of the company. Since depository is holding such shares as a custodian or a guardian it cannot claim any benefit or it is not liable for any loss as a result of the holdings.

Some important facts you should know about demat accounts:1. Minimum Account Balance: There is no

requirement of holding minimum-security

balance in a demat account; you can maintain zero balance in your account. Ready availability of account enhances your transaction making ability.

2. Number of Accounts: Though there is no restriction on number of demat accounts that can be opened by an investor, DPs exercise due diligence before opening such accounts.

3. Credit Confirmation: In order to receive all the credits coming to demat account

automatically, a one-time standing instruction can be given to the DP at the time of opening your account. Otherwise, a receipt instruction has to be given to the DP

every time credit is expected in the demat account.

4. Change of Address: For any change of address, if any, communication to your DP in writing is sufficient. The DP will ensure that the change is incorporated for all securities held in your demat account. You need not write to all the companies separately and this saves money, time and effort for the investor.

5. Bank Account Details: SEBI has made it mandatory for companies to print details of bank account of the BO on dividend/interest warrants etc. to prevent possibilities of misuse of the warrants. BOs request in writing to the DP if they wish to record/change their bank account details. If the BO opts for ECS facility and such facility is available with the BO's bank, the dividend/interest gets credited directly to his/her bank account.

Services offered by the Depositories:

The Depository Participant (DP) is the link between the investors, the company (issuer of securities) and the depositories (NSDL/CDSL) and provides the following services:

1. Account Opening: To utilize the services offered by a depository, any person having investment in any security or intending to invest in securities needs to have a demat account with a DP. The holder of such demat account is called as "Beneficial Owner (BO)".

The investor can approach any DP/s of his/her choice to open a demat account.

2. Dematerialization: Dematerialization is the process by which physical certificates (of shares/debentures/other securities) are converted into electronic balances. A BO has to submit the request for dematerialization by submitting the demat request form (DRF) duly completed along with the concerned physical certificates, to his/her DP.

3. Delivery & Receipt Instructions: To settle trades done on a stock exchange (on-market trades) and trades which are directly settled between two BOs (off-market trades), BOs submit duly completed delivery instructions in the prescribed form to DP.

For receipt of securities into his/her account, a BO can give one time "standing instruction" to DP. Once such a standing instruction is given to the DP, there is no need to submit separate instructions for receipt every time the investor buys securities.

4. Account Statement: Generally a DP sends to the BO, a statement of his account, monthly, if there is any transaction in the account or every quarter if the account is not operated during that period.

5. Rematerialization: Rematerialization is the process by which the electronic balances held in the demat account can be converted back into physical certificates.

6. Pledging: If the BO decides to pledge any securities in his BO account, he can do so by submitting the pledge creation form duly completed, to his DP.

7. Transmission of securities: Depositories facilitate transmission of balances held in BO account/s (to other BO account/s) if so required due to death, lunacy, bankruptcy, insolvency or required due to operation of any law. The process of transmission through the depository is simple and quick as the successor has to only with his DP.

8. Nomination: Individual BOs have a facility for nomination in favour of an individual. If the sole or all the joint holders are deceased, the shares of different companies held in the demat account will be transmitted easily to the demat account of the nominee on submission of the death certificate and transmission form. It may be noted that in the event of the death of one of the joint holders, the securities will be transmitted in the demat account of the surviving holders.

9. Freeze Facility: A demat a/c holder (beneficiary owner) may freeze securities lying in the account for as long as the account holder wants it. By freezing the account, account holder can prevent unexpected debits or credits or both, creeping into its account.

interact

The following types of freeze facility may be availed of by submitting freeze instruction to the DP in the prescribed form:

· Freeze for debits only;

· Freeze for debits as well as credits;

· Freeze a particular ISIN in the account;

· Freeze a specific number of securities held under an ISIN in an account.

10. Other miscellaneous services: Apart from these above , an investor enjoys many other facilities provided by depositories, such as - facil i tating repurchase/ redemption of units of mutual f u n d s ; p l e d g i n g /h y p o th e c a t i o n o f dematerialized securities against loan; holding debt instruments in the same account, availing stock lending/borrowing facility, etc.

Benefits of participating in demat environment:

In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. As an investor you enjoy many benefits if you open a demat account and maintain securities in electronic form. Some of the benefits are:

Ÿ Elimination of bad deliveries: In the depository environment, once holdings of an investor are dematerialized, the question of bad delivery does not arise i.e. they cannot be held "under objection". In the physical environment, buyer was required to take the risk of transfer and face uncertainty of the quality of assets purchased. In a depository environment good money certainly begets good quality of assets.

Ÿ Elimination of risks associated with physical certificates: Dealing in physical securities have associated security risks of theft of stocks, mutilation of certificates, and loss of certificates during movements through and from the registrars, thus exposing the investor to the cost of obtaining duplicate certificates etc. This problem does not arise in the depository environment.

Ÿ No stamp duty: Transfer of any kind of securities in the depository environment is free from stamp duty and this waiver extends to equity shares, debt instruments and units of mutual funds.

Ÿ Immediate transfer and registration of securities: In the depository environment, once the securities are credited to the investors account on pay out, he becomes the legal owner of the securities. There is no further need to send it to the company's registrar for registration.

ŸHaving purchased securities in the physical environment, the investor has to send it to the company's registrar so that the change of

mentioned services

ownership can be registered. This process usually takes around 3 to 4 months and is rarely completed within the statutory framework of 2 months thus exposing the investor to opportunity cost of delay in transfer and to risk of loss in transit.

Ÿ Faster settlement cycle: The settlement cycle follow rolling settlement on T+2 basis i.e. the settlement of trades will be on the 2nd working day from the trade day. This enabled faster turnover of stock and more liquidity with the investor.

Ÿ Faster disbursement of non-cash corporate benefits: Depositories provide for direct credit of non-cash corporate entitlements (right issue shares, bonus shares etc.) to an investors account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit.

Ÿ Reduction in brokerage: Brokers provide this benefit to investors as dealing in demat securities reduces their back office cost of handling paperwork involved in transfer of securities.

Ÿ Periodic holding report: Periodic status reports to investors on their holdings and transactions, leading to better controls.

Ÿ Elimination of problems related to selling securities on behalf of a minor: A natural guardian is not required to take court approval for selling demat securities on behalf of a minor.

Ÿ Ease in portfolio monitoring: Since statement of account gives a consolidated position of investments in all instruments, it's easy to monitor and strategize entire portfolio.

Safety measures in Demat Environment:

There are various checks and measures in the depository system to ensure safety of the investor's holdings. These include:

Ÿ A DP can be operational only after registration with SEBI, which is based on their independent evaluation and the from any one of the depository. SEBI has prescribed criteria for becoming a DP in the regulations.

Ÿ DPs are allowed to effect any debit and credit to an account only on the basis of valid instruction from the client.

Ÿ There are periodic inspections into the activities of both DP and R&T agent.

Ÿ All investors have a right to receive their a/c statement periodically from the DP.

Ÿ In the demat environment, depository holds the investor accounts on trust. Therefore, if the DP goes bankrupt the creditors of the DP will have no access to the holdings in the name of the clients of the DP. These investors can transfer their holdings to an account held with another DP.

recommendation

Key Economics Events

Monetary Policy Review

Gross Domestic Product

Industrial Production

RBI on 3 May 2013 lowers the repo rate by 25 basis points from 7.5% to 7.25%. Consequently the reverse repo rate gets calibrated to 6.25%, considering continuously and steeply deceleration on economic growth and eased headline inflation index WPI in March 2013. RBI governor on monetary policy review said that the major risk to the economy stems from CAD which last year was historically high at 6.7% much above sustainable level of 2.5%.

On 31 May 2013, GOI reported India's Gross Domestic Product (GDP) grew at 4.8% in the fourth quarter of FY13. This is a marginal improvement over the Q3 GDP growth rate of 4.7%. The GDP for the entire FY13 grew at 5%, which is a decade low number. The manufacturing sector of the economy grew at 2.6%, Electricity, gas and water supply increased 2.8%, Agriculture, forestry and fishing were up 1.4% and Mining and quarrying declined 3.1%. The government has forecasted a growth of 6.1%-6.7% for the year 2013-14, whilst the RBI expects the same to be at 5.7%.

On 10 May 2013, Ministry of Statistics and Programme Implementation reported Index of Industrial Production (IIP) grew 2.5 per cent in March, the third straight month of increase after shrinking in eight months last year, indicating a moderate recovery in Indian factories. March IIP was partly boosted by an improvement in exports and investments. India's exports rose for the third straight month in March. While the manufacturing and electricity sectors grew by 3.2 per cent and 3.5 per cent, respectively, output in the mining sector contracted to -2.9 per cent. Capital goods output grew by 6.9 per cent.

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Market Overview May 2013

Equity market roundup

Forex market roundup

Bullion market roundup

In the month of May Indian equity market indices witnessed the tremendous selling pressure towards the end of the month. Earlier in the month RBI cuts its key rates by 25 basis points on its monetary policy review as slow growth and reduction in headline inflation. To attract foreign investors government reduces tax lived on interest earned in bonds to 5% from 20%. India's industrial production growth rate bounced back to 2.5% in March on better performance of manufacturing and power sectors coupled with higher output of capital goods. India's annual consumer price inflation slowed for the second straight month in April to 9.39%. The HSBC Purchasing Managers' Index (PMI) for services sector grew at its slowest pace in one and half years at 50.7 in April compared to 51.4 in March. Government of India projected to grow 6% in the current fiscal year higher than the RBI projection of 5.7%. Nifty ended the month at 5985.95 up by 0.95% while Sensex surged 1.31% and closed at 19760.30.

In the month of May INR depreciated against USD and hits its lower level since September 2012 as the US currency rallied at the prospect that the Federal Reserve might scale back its stimulus programme this year. Increased demand for dollars from banks, gold and oil importers put pressure on the rupee. USDINR pair ended the month at 56.35 up by 4.0% to the previous month close of 54.16.

In the month of May Gold prices witnessed the losing streak for the second consecutive month as stronger dollar curbed the demand of metal as an alternative investment in the international market. Gold prices fell to their lowest in more than two years on signs of economic improvement in main markets and fears that central banks around the world could start to curtail their bullion-friendly policy measures. The World Gold Council (WGC) expects Indian gold imports to reach 350-400 tonnes in the second quarter (April to June), 200% higher than a year earlier and almost half of last year's total imports. This also compares to imports of 256 tonnes in the first quarter of 2013. Gold ended the month at $1393 down by -5.37% while MCX gold of June expiry closed at Rs. 26874 down by 0.15%.

InteliGen Issue 13: June 2013

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