By Luke Burgess

Due to a sharp decrease in foreign exchange reserves following the Indo-China War in 1962, the government of India enacted the Gold Control Act.

Strong economic performance in developing countries will not only benefit the 5.6 billion people who reside there, but will also impact the likelihood of a double-dip recession in advanced countries.

As GDP growth in advanced countries slows sharply, emerging economies are set to help sustain the global recovery. Though growth in emerging markets has moderated from torrid post-crisis rates, it remains high. In addition, it has grown more reliant on domestic demand, and is broadening across sectors. This high rate of growth can help mitigate a sharp slowdown of domestic demand in advanced countries, but cannot compensate fully for it.

Yesterday, we had written about the controversy over GDP numbers. What has happened since is even more bizarre. Now the government has issue new numbers. All within some 24 hours. The government has revised consumption numbers quite dramatically, claiming the earlier low numbers were simply a result of a calculation error.

The size of revision is dramatic. The consumption size GDP growth estimate is now 10%, compared to 3.7% earlier. Pvt consumption growth is now 3.7% compared to 0.3%, while the government expenditure growth is now 14.2% compared to -0.6% earlier.

Although in the positive, the Indian indices moved closer to the dotted line in the final hours and settled marginally higher today. Profit booking in index heavyweights led the indices to shed most of the early gains. While the BSE Sensex closed higher by around 32 points (up 0.2%), the NSE Nifty gained around 14 points (up 0.3%). The BSE Midcap and the BSE Smallcap indices managed to do well to notch gains of 0.8% and 1.1% respectively. Profit booking was largely seen in software, realty and oil & gas stocks.

As regards global markets, barring Indonesia most Asian indices closed in the positive today. However, European markets have also opened on a cautious note. The rupee was trading at Rs 46.78 to the dollar at the time of writing.

GDP data for Q1, reported today, came in at a strong 8.8%. However, the data was widely questioned for the discrepancy between supply side and consumption side estimates.

For example, The Economic Times, in a front page flier wrote:

Although in the positive, the Indian indices remained range bound for the larger part of the trading session today. However, buying activity intensified in the final hours and helped the indices to close well above the dotted line. While the BSE Sensex closed higher by around 235 points (up 1.3%), the NSE Nifty gained around 69 points (up 1.3%). The BSE Midcap and the BSE Smallcap also did well to notch gains of 2% each. Gains were largely seen in metals, IT and oil & gas stocks.

As regards global markets, barring China most Asian indices closed in the positive today while European indices have also opened in the green. The rupee was trading at Rs 46.82 to the dollar at the time of writing.

Despite reports of higher GDP growth, the benchmark indices failed to elicit investor interest and languished in the red till the closing hours. Selling activity was largely seen in realty, telecom and metal stocks. BSE Sensex edged lower by around 61 points (down 0.3%) whereas NSE Nifty edged lower by around 13 points (down 0.3%). BSE Midcap and Small cap indices were not spared either as they closed lower in the vicinity of 1% each. While Asian across the board closed lower today, European stocks have opened mostly on a negative note. The rupee was perched at Rs 47.01 to the dollar at the time of writing.

As per the latest release, Indian economy grew at its fastest clip in nearly three years in the quarter ended June 2010. The GDP growth of 8.8% was largely due to strong manufacturing growth of 12% YoY and improved farm output. Financing, insurance and real estate grew 8% as against 11.8% in the corresponding quarter of FY09. The higher GDP numbers may make it easier for the central bank to raise interest rates going forward.

If investors weren’t already aware of the tremendous “growth gap” between the developed and emerging markets of the world, a report Tuesday out of New Delhi served as a nice reminder. India’s gross domestic product grew by 8.8% in the quarter ended June 30, roughly in line with analyst estimates for expansion in the world’s largest democracy. That marks the fastest GDP growth in more than two years, outpacing the 8.6% clip from India’s fiscal first quarter ended in March. Coming just days after the U.S. revised its GDP growth estimate for the same period downward to 1.6%, India’s pace of expansion is truly remarkable.

Reaction to the latest GDP figures was primarily positive. “The data underscore the strong recovery in India’s economy, Asia’s third-largest and among the earliest to emerge from the global economic crisis,” writes Anant Vijay Kala. The impressive figures give Indian policymakers enhanced flexibility in their efforts to combat inflation, which has recently shown signs of accelerating.

By Nicholas Deleon

Only a few hours after RIM managed to avoid the Indian ban hammer, it now looks like Google (GOOG) and Skype could be the next target. India’s Home Ministry, the country’s interior ministry (think police force and other domestic policy matters), has told the BBC that “any company with a telecoms network should be accessible” to the country’s security services. India says it needs to be able to be able to tap into such communications in order to thwart potential terrorism threats.

In Part I, I alerted readers to the problem with using Western labels and Western analysis to analyze the gold markets of other nations – especially the two titans of the gold market: China and India. More specifically, I pointed out that breaking-down demand into the categories of “retail investment” and “jewelry” demand was both arbitrary and inaccurate.

In fact, much of the gold/silver acquired under both of those categories simply represents “savings”, rather than “investment” or the mere purchase of a luxury good (i.e. jewelry). Because of this inaccurate analysis, I suggested that (Western) analysts will likely consistently underestimate long-term demand, while overestimating the amount of “scrap” bullion which would/will return to the market.

By Elliot Turner

Although the Indian indices began the day's proceedings on a strong note, subsequent bouts of profit booking pared some gains. While the latter part of the afternoon session saw the indices struggling to stay afloat, renewed buying in the final hour helped the indices to close in the positive. While the BSE Sensex closed higher by around 34 points (up 0.2%), the NSE Nifty gained around 7 points (up 0.1%). While the BSE Midcap closed marginally in the positive, the BSE Smallcap closed in the red. While metals and auto stocks found favour, IT and FMCG stocks were at the receiving end.

As regards global markets, most Asian indices closed in the positive today while European indices have opened on a mixed note. The rupee was trading at Rs 46.88 to the dollar at the time of writing.

The telecommunications market in India has tremendous potential, and there is no communications equipment maker in the world which is not increasing its presence there at this time, ahead of the era of 3G cellular communications. That technology is still not available for hundreds of millions of customers there.

It must be understood that this is a country where wired broadband, such as ADSL, is almost non-existent, because of a lack of appropriate infrastructure. So surfing over cellular communications seems to be the only solution for hundreds of millions who thirst for online information.

By fairval

Sucheta Dalal is creating some much needed debate about just how well the Indian stock market runs. Since NSE is the dominant player now, much of her criticism is directed against NSE. And very predictably, NSE reacted with intense vehemence.

All tier-one offshore IT service providers, including Cognizant (CTSH), Infosys (INFY), Wipro (WIT) and Tata Consultancy Services, recently announced their quarterly results, which indicate that growth momentum is gradually picking up for offshore IT outsourcing. Though the economy remains uncertain, there appears to be no pullback in IT spending. Instead, all leading indicators point to a healthy uptick in spending by companies worldwide. While service buyers continue to keep their eye on cost-reduction projects that deliver a quick return on their investments, recent booking trends indicate that companies aren't averse to increasing their budgets for discretionary and longer-term transformational projects. This upward demand trajectory will more likely lead to revenue expansion for offshore service providers in the near-term. However, we believe that, with a multitude of factors in play, increased top-line growth may not translate to improved margin levels. Overall, we expect fiscal 2011 to yield mixed results for offshore IT service providers.

Expect Growth to be Broad Based, Driven by Higher Volumes

China is now the world’s second-largest economy, surpassing Japan. But while China sets its sights on the number one position, it might want to look behind itself, too: India is formidable competition. With one ETF, you can play both.

China’s ascendancy to the top position isn’t a foregone conclusion. Just two decades ago, Japan was seen as the main rival to the United States. But India’s growth is on track to outpace China’s growth in less than three years.

By Cathy Carlson

As emerging markets have raced ahead of their developed counterparts in the last two years, investors around the globe have begun to tilt portfolios more heavily towards securities that many have historically perceived to be excessively risky. The inflows into equity ETFs serve as one piece of evidence of this trend; through the first seven months of the year domestic equity funds took in about $3.3 billion, while international equity ETFs saw inflows of nearly $14 billion. Now, with the U.S. economy showing signs of weakness, investors have become particularly interested in emerging markets that have the potential to “decouple” from their developed counterparts, potentially shielding themselves from weakness elsewhere in the world and using internal resources to continue plowing ahead.

Van Eck announced on Wednesday the latest addition to its ETF product lineup, rolling out the Market Vectors Small Cap India ETF (SCIF). The new ETF will seek to replicate the performance of the Market Vectors India Small-Cap Index, a benchmark that includes about 120 constituents with an average market capitalization of approximately $450 million.

SCIF joins two existing Market Vectors ETFs offering exposure to small cap equities in emerging markets, including the Brazil Small Cap ETF (BRF) and Latin America Small Cap ETF (LATM). ETFs from other issuers offer exposure to small cap stocks in China (HAO) and Japan (SCJ, JSC). Funds targeting small cap stocks in international market have become popular with investors in recent years because they generally maintain unique risk/return profiles relative to the “first generation” of international equity ETFs that are dominated by large caps. Small cap stocks tend to depend more heavily on the local economy, while mega caps are often multi-national firms that generate revenues in countries around the globe and thus are not necessarily the best representation of their respective local economies. Moreover, small cap equities tend to be more representative of sectors that aren’t adequately represented by mega caps, including consumer products and services.

Yesterday (8/25/10), Van Eck launched Market Vectors India Small-Cap Index ETF (SCIF), the second ETF to target India Small-Caps in as many months. Foreign single-country small cap funds are a relatively new growth area for the ETF industry. This marks the first time ETF investors will have a choice in this segment.

The Van Eck press release says Indian small-cap stocks are supported by one of the world’s largest and fastest-growing domestic consumer markets, with a demographic profile skewed toward the young. India’s rapidly growing middle class is projected to triple in size over the next 15 years, making it twice the size of the entire U.S. population. “It continues to be our strong belief that small-cap stocks are an excellent way to gain direct exposure to a country’s domestic economy,” said Jan van Eck, Principal at Van Eck Global. “India, in particular, has exhibited demographic and economic factors that support strong continued domestic growth for years to come.”

The Indian markets threatened to close below the breakeven point during the closing hours. However, they recovered just in the nick of time and thus, enabled the indices to close the day with some sort of gains. The BSE Sensex logged in gains of around 50 points (up 0.3%), whereas NSE Nifty closed higher by around 15 points (up 0.3%). BSE Midcap and small cap indices witnessed contrasting trends with the former edging marginally higher and the latter ending marginally lower. Nearly 2 stocks gained for every 1 that declined on the Sensex today. It were the financial institutions like HDFC and SBI that contributed in a big way to the gains on the Sensex.

Most Asian indices also closed in the positive today whereas Europe too has opened on a strong note. The rupee was perched at Rs 46.8 to the dollar at the time of writing.