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Major Business decisions of 2015

Bank of Baroda’s Rs 6,000 crore forex scam

Bank of Baroda

Bank of Baroda courted controversy after being accused of having irregularities in outward foreign remittances to the tune of about Rs. 6,000 crore from its branch.

It is alleged that Rs. 6,172 crore black money was remitted from Bank of Baroda to Hong Kong camouflaged as payments for non-existent imports like cashew, pulses and rice.

Satyam case: Ramalinga Raju sentenced to 7 years in jail

Ramalinga Raju

Six years after the biggest accounting fraud shook the corporate world in India, Satyam chief B Ramalinga Raju and nine others were in April found guilty by a special court on charges of criminal conspiracy and cheating in the Rs 7000-crore scam.

A special court trying the multi-crore accounting fraud found Raju guilty in the case and sentenced him to seven years in Jail. Raju and his brother B Rama Raju have also been fined Rs five crore each while the eight others accused have been fined varying amounts up to Rs 25 lakh by the special court.

Mahindra saves Pininfarina from bankruptcy

Pininfarina

Pininfarina, the legendary 85-year old Italian design house, which is responsible for some of the best designs from manufacturers like Ferrari and Maserati, had fallen on hard times. Mahindra, which is getting into the habit of rescuing bankrupt companies, swooped in to the rescue and saved a landmark institution. Mahindra intends to allow it to operate as an independent company with Paolo Pininfarina remaining chairman of the board.

Volkswagen caught cheating

Volkswagen

Volkswagen, one of the largest auto makers of them all, was found guilty of using a device to manipulate emissions test results. Close to 11 million cars were affected leading to great embarrassment, huge, costly recalls and a series of senior staff being fired. VW India issued a recall for roughly 3.3 lakh vehicles.

Pfizer and Allergan

Pfizer and Allergan

The deal would create the world’s largest drug company, bringing Pfizer’s erectile dysfunction drug Viagra and Allergan’s wrinkle treatment Botox under one company.

Value: $148.6 billion

Announced: November

Status: Pending

Payment Banks and Small Finance Banks

Reserve Bank of India

With financial inclusion in focus, the Reserve Bank of India (RBI) in September this year granted in-principle approval to 10 applicants to set up small finance banks. The move aims to bring the weaker sections of the society under formal banking.

In August, the RBI granted approval to 11 entities, including Reliance Industries, Aditya Birla Nuvo, Airtel, Vodafone M-pesa and India Post among others, for launching payments banks.

While small banks can perform all activities similar to commercial lenders, though on a restricted scale, payments banks cannot undertake lending operations.

Besides, IDFC and Bandhan have been given full-fledged banking licences.

The applicants selected for setting up small finance banks include Au Financiers Ltd, Capital Local Area Bank, Disha Microfin, Equitas Holdings, Ujjivan Financial Services, Utkarsh Micro Finance, ESAF Microfinance and Investments, Janalakshmi Financial Services, RGVN Microfinance and Suryoday Micro Finance.

Dalal Street

Dalal Street

India’s stock market ran out of steam in calendar 2015 after rallying about 30 percent in the previous calendar, weighed down by both global as well as local factors.

The BSE Sensex has declined 5.02 percent so far this year and yielded a negative return for the first time since 2011 when the 30-share gauge fell more than 24 percent. In 2012, the Sensex returned 25.7 percent, followed by 9 percent in 2013 and a stunning 30 percent in 2014.

A combination of local factors such as a delay in pushing key reforms such as GST and land reforms along with a slowdown in corporate earnings growth weighed on markets. Year 2014 saw PE expansion on Modi euphoria, but as earnings failed to catch up, it resulted in a correction in 2015.

On the global front, China jitters, concerns over US Federal Reserve rate hike, a slowdown in the global economy, falling commodity prices and a rising dollar weighed on markets across the globe, including India.

Overseas investors have pulled more than USD 1.5 billion from the Indian market in November, due to lacklustre quarterly earnings and concerns over a possible rate hike by the US Fed.

Currency Market (Indian Rupee)

Currency Market

The rupee has been one of the better performing emerging market (EM) currencies in 2015. Most EM currencies saw significant depreciation this year: Brazilian real (45 percent), Turkish lira (24 percent) and Russian rouble (10 percent), whereas the rupee fell only 5.6 percent.

The rupee’s outperformance reflects India’s better macroeconomic prospects vis-à-vis other EM economies.

The decline in commodity prices, which has affected most EMs negatively, has been one of the key factors in positively transforming India’s trade and current account and also in improving its inflation and fiscal situation.

In summary, the improved confidence in domestic economy, a manageable CAD and the FII debt limit hikes should support the currency in the medium term. However, in the near term, rupee is likely to be guided by the Fed’s actions and could move towards 67-67.50  range.

Bullion Market (Gold)

Gold

It seems another weak calendar year for gold and third in a row as the prices of the yellow metal fell 5 percent in 2015 till December 2. Gold prices plunged 9.3 percent and 4.5 percent in 2014 and 2013, respectively. The metal gained 12 percent in 2012.

In the ongoing calendar year, gold prices in the spot market fell from Rs 26,539 per 10 grams on January 2, 2015 to Rs 25,235 per 10 grams on December 1. During the year, it touched a high of Rs 28,168 per 10 grams on January 21 and low of Rs 24,562 per 10 grams on August 6.

In the international markets, gold slumped to a near-six-year low on Thursday after comments from Federal Reserve chair Janet Yellen virtually cemented the case for a US rate hike this month, while the strength in the dollar also pressured the metal. Spot gold fell 0.2 per cent to USD 1,051.26 an ounce.

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