i Develop Stocks Advisory

Opportunities ahead.... At a time when managing capital flows is becoming a challenge for the authorities, the government on Wednesday said it expects to add $100 billion to the forex reserves in the current financial year. "We added $47 billion last fiscal. In 2007-08, we expect to add $100 billion," Finance Minister P Chidambaram said here at a lecture on 'Law - an Instrument for Economic Growth.' Overall, India's forex reserves stands at $284.8 billion for the week ended January 19. Yesterday, Chidambaram had said he would discuss with RBI Governor Y V Reddy shortly, measures to manage the flow of capital. While agreeing that RBI's status quo on interest rates and US Federal Reserve's move to cut interest rates would increase the gap between the rates in the two countries, he had said there was no certainty that this would increase capital flows. Capital can also flow out due to payment obligations abroad, he had said. Moreover the Government on Wednesday liberalised the foreign direct investment policy, opening new areas like commodity exchanges, credit information and aircraft maintenance for overseas investors while enhancing the ceiling in public sector oil refineries. While putting a number of areas on automatic route, particularly in the civil aviation sector, the amended policy allows 100 per cent FDI in maintenance, repair and overhauling (MRO) facilities for aircraft as also aviation training units, Information and Broadcasting Minister Priya Ranjan Dasmunsi said at a briefing on decisions taken by the Cabinet. FDI up to 100 per cent has been permitted in the mining of titanium bearing minerals and foreign investment up to 49 per cent has been allowed in credit information companies. The permission of the Reserve Bank of India will be required for FDI in credit information firms. The new policy has done away with compulsory divestment of 26 per cent equity in fuel and gas trading ventures, a move that could provide relief to companies like British Gas. Hitherto, 100 per cent FDI was allowed through the automatic route on the condition that 26 per cent equity in such ventures be divested in favour of an Indian partner within five years. The government raised FDI in public sector refineries to 49 per cent from the current 26 per cent. A few months back, the government had made a one-time exception to allow steel baron Lakshmi Mittal to pick a 49 per cent stake in HPCL's Bhatinda refinery. Just imagine that when last year 47bn$ flowed in the markets went all the way up to 21k now just imagine what would 100bn$ do to the market......