Current account deficit to narrow to 0.5% of GDP

Money

India’s current account deficit may narrow to 0.5 per cent of GDP in 2016 from 0.7 per cent in 2015 owing to lower commodity prices, particularly oil, says a report.

“Given lower oil prices, we expect the current account deficit to narrow to 0.5 per cent of GDP in 2016 from 0.7 per cent in 2015, despite weak exports and strengthening domestic demand,” the report by financial services major Nomura said.

The current account deficit, which occurs when the value of imports and investments is larger than value of exports, is expected to narrow to 0.5 per cent of GDP in 2016 largely owing to lower commodity prices, particularly oil.

The report noted that export volumes are likely to remain sluggish on account of weak global demand, while import volumes would rise mainly due to strong domestic demand and real effective exchange rate appreciation.

According to official figures, exports contracted for the 13th month in a row in December 2015, as outward shipments shrank 14.75 per cent to $22.2 billion amid a global demand slowdown.

Imports also plunged 3.88 per cent to $33.9 billion in December over the same month previous year.

However, gold imports shot up which increased the trade deficit to a 4-month high of $11.66 billion as against $9.17 billion recorded in December 2014.

Commenting on the trade data, Nomura said that these mirror the diverging growth trends between domestic demand and external demand.

“We expect export volumes to remain sluggish (weak global demand) but import volumes to rise (stronger domestic demand and real effective exchange rate appreciation),” the report added.

The current account deficit in the July-September quarter of current fiscal rose to $8.2 billion or 1.6 per cent of the GDP from 1.2 per cent or $6.1 billion in the April-June quarter.

MF Investment in Equities Hits Rs 70,000 Crore in 2015

MF Investment in Equities Hits Rs 70,000 Crore in 2015New Delhi: Mutual fund houses continued to be bullish on the equity markets in 2015 and purchased shares worth a staggering more than Rs 70,000 crore, primarily on account of strong participation from retail investors.

This is on top of Rs 23,843 crore already being infused in the entire 2014.

In comparison, foreign portfolio investors (FPIs) made a net investment of just Rs 16,674 crore during the period.

However, in the last three years, foreign funds have made an average investment of $20 billion (around Rs 1 lakh crore) each in the Indian stock markets.

Domestic mutual fund (MF) managers have invested a net Rs 70,173 crore in the equity markets in 2015.

The inflows could be much higher for this year as four trading sessions are still left.

“As domestic investors continued to invest in equities through MFs, 2015 turned out to be a stellar year for the industry with impressive inflow in the segment,” UTI Mutual Fund EVP and fund manager V Srivatsa said.

Equity MFs, including equity-linked saving schemes, have seen a net inflow of nearly Rs 87,000 crore till November this year.

The surge in inflows into equity schemes has prompted fund houses to pump money in the share markets.

In addition, robust inflows from retail investors in the equity segment have also helped.

According to industry body AMFI, 4-7 lakh retail folios are being added to the industry every month.

“Despite equities market not doing well throughout 2015, we have seen the inflows happening in the equity segment and through the retail segment”, Quantum AMC managing director and chief information officer I V Subramaniam said.

“Domestic mutual funds have been bullish on the stock market ever since the Narendra Modi-led BJP government came to power at the Centre,’ he added.

Till April last year, holdings were facing liquidation due to redemption from investors and the money started pouring in from May 2014 and the momentum continued till this month.

They have made intensive buying especially in August and September 2015, when the domestic market crashed due to rout in Chinese equities. During that time, overseas investors pulled out from the Indian stock markets.

The sell-off by overseas investors in the Indian equity markets has given an opportunity to mutual fund managers.

Mutual funds are investment vehicles that pool funds collected from investors to invest in securities such as stocks, bonds and money market instruments.