The Reserve Bank of India said on Tuesday fixed-rate loans of up to three years offered by lenders will have to be set based on their marginal cost of funding, although loans above that tenor would be exempt.

Previously all fixed-rate loans had been exempted from being set based on their marginal cost of funding.

The tweak will apply to new rules the RBI will implement starting on April 1, which force lenders to base most of their lending rates on their marginal cost of funds and not the average cost of funds currently in use.

In volatile trading, equities fell for a second straight day on Tuesday as heavy losses in healthcare stocks countered advances in auto and banking sectors amid caution ahead of derivatives expiry and investors waiting for a speech by the US Federal Reserve Chair Janet Yellen.

In a see-saw trading, the benchmark BSE Sensex edged lower by 66 points to end at about two-week low of 24,900.46 while NSE Nifty fell by 18 points to slip below the 7,600-mark.

Pharma stocks took a heavy beating after some companies from the sector received observations from the US health regulator.

Lupin, which plummeted by more than 6 per cent and was the worst performer from the Sensex pack, said it received a total of three observations relating to violation of production norms at manufacturing facilities at Mandideep, Madhya Pradesh from the US Food and Drug Administration.

Besides, Cipla plunged close to 4 per cent and Dr Reddy's slipped nearly 3 per cent to drag the overall BSE healthcare index by 2.52 per cent. Natco Pharma had also received observations from the FDA after inspection of two facilities.

Caution also ruled as participants were seen offloading bets in futures and options segment before the March series expiry on Thursday.

"Trading ranges were constrained again, with weak F&O rollovers so far pointing towards a subdued derivatives expiry this Thursday. Cues from global markets also pointed towards caution," said Anand James, Chief Market Strategist, Geojit BNP Paribas.

Sensex stayed in the negative zone for most part of the day and hit a low of 24,835.56. However, it rebounded on better opening in Europe and recovered temporarily to a high of 25,079.35 before settling 65.94 points or 0.26 per cent down at 24,900.46. The index tanked 371.16 points on Monday.

The broader NSE Nifty closed 18.10 points or 0.24 per cent lower at 7,597.

Tata Motors emerged as the top gainer by surging 2.63 per cent to Rs 372.80 followed by Maruti Suzuki by 2.61 per cent to Rs 3,733.25 on hopes of encouraging monthly sale numbers.

Thanks to gains in Axis Bank, SBI and HDFC Bank, BSE baking index also firmed up by 0.42 per cent on of hopes of 25 to 50 basis points rate by Reserve Bank in first bi-monthly monetary policy for 2016-17 on April 5.

Overseas, Asian markets ended mixed ahead of speech by Yellen on the US economy and monetary policy, while Europe was also higher in early deals. .

Back home, in broader markets, mid-cap declined 0.21 per cent while small-cap index ended lower by 0.27 per cent.

Of the 30-share Sensex pack, 18 scrips ended lower while 12 gained.

Major losers were Lupin (6.27 pc), Cipla (3.83 pc), Dr Reddy's (2.98 pc), GAIL (2.88 pc), Sun Pharma (2.10 pc), BHEL (1.81 pc), NTPC (1.58 pc), HDFC (1.33 pc), L&T (1.05 pc), M&M (0.84 pc), ICICI Bank (0.84 pc), ITC (0.64 pc), ONGC (0.61 pc) and Infosys (0.48 pc).

However, Tata Motors rose by 2.63 per cent followed by Maruti 2.55 pct, Axis Bank 1.55 per cent, RIL (1.46 pc), Tata Steel (1.28 pc) and Bharti Airtel (1.27 pc).

Among BSE sectoral and industry indices healthcare fell by 2.59 per cent, capital goods (0.99 pc), power (0.83 pc), utilities (0.76 pc), IT (0.41 pc) and FMGC (0.39 pc) while telecom rose by 1.59 per cent followed by auto by 0.89 per cent, metal by 0.40 and bankex 0.39 per cent.

The market breadth remained negative as 1,699 shares ended lower, 947 closed higher while 163 ruled steady. The total turnover rose to Rs 3,595.61 crore from Rs 2,741.47 crore on Monday.

Insurance of vehicle, including cars and bikes, will become costlier from April 1 as insurance regulator Irdai has decided to increase premiums by up to 40 per cent from the next fiscal.

Third party motor insurance premium for small cars (up to 1,000 cc) will now be up 39.9 per cent to Rs 2,055 from Rs 1,468 being currently charged. The hike in mid-segment cars (1,000 - 1,500 cc) too is about 40 per cent.

Premium hike in case of bigger cars and SUVs (above 1,500 cc) is 25 per cent. It will now cost Rs 6,164 from April as against the current Rs 4,931.

"It is observed that the cost inflation index (CII) has increased by 5.57 per cent over the previous year, i.e. from 1024 in FY 2014-15 to 1081 in FY 2015-16," Insurance Regulatory and Development Authority of India (Irdai) said while notifying the rates of third party insurance premium from April 1, 2016.

Similarly, premiums have gone up in case of bikes and scooters. The new premium rate for two-wheelers up to 75 cc is Rs 569 as against Rs 519. Two-wheelers falling in the category of 75 cc - 150 cc is up 15 per cent to Rs 619 while there is increase of 25 per cent for bikes in the category of 150 cc - 350 cc. However, premium has been reduced in case of motor-bikes which are about 350 cc to Rs 884.

Basic third party (TP) premium for three-wheelers too has been increased. A new category 'e-rickshaw' (capacity of up to 6 passengers) has been introduced and the basic TP premium has been fixed at Rs 1,125.

The premium increase in case of public carriers is in the range of 15-30 per cent. However, there is no change in case of goods carrying vehicles having capacity up to 12 tonnes.

Motor third party insurance is mandatory for vehicles.

Irdai has asked insurers to ensure that motor third party insurance is made available at their underwriting offices and through all available channels of distribution.

Earlier, the regulator had published an exposure draft which included number of policies, number of claims paid and amount of claims outstanding as on March 2015 for each underwriting year and for each class of vehicle.

The Supreme Court has asked the Securities and Exchange Board of India (SEBI) to start the process of selling some of embattled conglomerate Sahara's real estate assets in the country to refund millions of investors, lawyers said on Tuesday.

Sahara , a household name in India as the former main sponsor of the national cricket team, has major hotels overseas including the Plaza in New York and the Grosvenor House in London, besides vast real estate assets in India.

Its founder Subrata Roy was arrested in March 2014 after the company failed to comply with a court order to refund money raised from millions of small investors by selling them bonds later ruled to be illegal.

The country's top court in June last year said the group needed to repay the entire Rs 360 billion ($5.4 billion) the court says it owes investors in illegal bonds.

The government has extended a 25 per cent import tax on wheat by three months to June 30, a government order said on Tuesday.

The move is aimed at shielding domestic farmers from cheap imports particularly as wheat from the new-season harvest will become available by the end of this month, government sources said.

India, the world's biggest wheat producer after China, raised the import tax to 25 per cent from 10 per cent in October.

Total investor wealth declined by over Rs 1.24 lakh crore on Monday as the benchmark BSE Sensex plummeted by over 371 points due to profit booking in recent out-performers ahead of derivatives settlement on Thursday.

Tracking the weakness, the market capitalisation of BSE-listed companies slumped by Rs 1,24,967 crore to Rs 93,04,375 crore at close on Monday.

The index plunged by 371.16 points or 1.46 per cent to end at 24,966.40, registering its biggest fall in five weeks.

The gauge fell below the psychological 25,000-level to touch a low of 24,895.49 due to widespread profit-booking.

"Markets started the week on a weak note. The weakness persisted during the day, ahead of the expiry on Thursday and followed a strong performance of the markets over the past four weeks," said Dipen Shah, Senior Vice-President & Head of Private Client Group Research, Kotak Securities.

Stock exchanges were closed on Thursday and Friday for 'Holi' and 'Good Friday', respectively.

The index had risen 660.19 points in the past four sessions.

Of the 30-share Sensex pack, 27 lost while NTPC, GAIL and Bajaj Auto finished higher.

Sectorwise, the BSE realty index fell 4.35 per cent, followed by metal 3.92 per cent and consumer durables 3.48 per cent.

At the BSE, 1,998 stocks declined, while 699 advanced.

152 stocks remained unchanged.

Prime Minister Narendra Modi will on April 5 inaugurate Stand Up India initiative which is aimed at creating jobs and promoting entreprenuers among SC, ST and women by extending loans at cheaper rates.

The programme will be launched by Modi at a function to be held at Noida.

The Cabinet, headed by Modi, had in January approved 'Stand up India' scheme for providing credit to SC, ST and women entrepreneurs at lower rates.

Under the scheme, which will be implemented through 1.25 lakh bank branches, banks will give loans at the "least applicable rate" of interest.

Also every bank branch, including private sector, will give loans between Rs 10 lakh and 1 crore to at least one SC/ST and one woman entrepreneur under the scheme.

Government will meet its target of doubling coal production by 2020 without the help of private miners, coal and power minister said, ruling out new measures to entice cash-strapped companies to begin mining the commodity.

Govt wants to produce 1.5 billion tonnes of coal by 2020 to power its economy and reduce imports. State-owned Coal India Ltd, the world's largest coal miner, has raised production in line with reaching a target of 1 billion tonnes a year within four years and the government wants private miners to produce much of the remainder.

But only a few companies that won the right to mine coal for their power plants last year have started production as they struggle to recover their costs, while the ministry this month delayed plans to open up commercial mining to private firms because of weak demand and depressed coal prices.

Piyush Goyal, power and coal minister, told Reuters that state-owned companies including power producer NTPC Ltd, Steel Authority of India Ltd and National Aluminium Co Ltd would instead pick up the slack by expanding their own mining operations.

"That target I will meet even if (private companies) don't come in," he said in a interview on March 23. "In the days to come I'll be auctioning out more mines. I've already got my plans in place."

NTPC is on course to produce 300 million tonnes alone by 2020, said Goyal, a former investment banker.

India's success in boosting its coal output after years of missed production targets has been central to Prime Minister Narendra Modi's energy policy.

Despite environmental worries, India plans to continue to depend on burning coal to provide power for its 1.3 billion people, some 300 million of whom still lack access to electricity.

The government last year auctioned off captive mines, sites already near end-users such as power plants, to private firms such as Hindalco Industries Ltd and Adani Power Ltd.

But most companies have not begun mining and have warned that rules prohibiting them from passing on rising costs to end-users make it tough to recover their costs after aggressive bidding during the auctions.

Goyal, however, said he would stick with the current system.

"These coal mines were given out by a system where the price benefit would go out to the people of India. It was a transparent bid by independent people without any compulsion to bid any price," he said. "They bid and they got it."

While Indian demand for coal has been lower-than-expected, Goyal said a major reform of indebted electricity distributors would soon free these utilities to start buying more power, boosting demand for coal.

Total investment into India's energy sector reached around $50 billion this financial year, he said, with roughly the same level expected next year as the government tenders new wind and solar projects and upgrades transmission lines.

There should be guidelines for responsible monetary policy behaviour globally as aggressive actions by one nation can lead to significant adverse cross-border spillovers on others, RBI Governor Raghuram Rajan has suggested.

"Aggressive monetary policy actions by one country can lead to significant adverse cross-border spillovers on others, especially as countries contend with the zero lower bound. If countries do not internalize these spillovers, they may undertake policies that are collectively suboptimal. Perhaps instead, countries could agree to guidelines for responsible behavior that would improve collective outcomes," Rajan said in a working paper posted on the website of RBI.

He has written working paper titled 'Rules of Monetary Policy' with Prachi Mishra.

Rajan said monetary policy could be broadly characterised and rated based on analytical inputs and discussion.

"Policies that generally have positive or domestic effects could be rated green, policies that should be used temporarily and with care could be rated orange, and policies that should be avoided at all times could be rated red," he said.

Rajan, who was chief economist at IMF, said if a policy has positive effects on both home and foreign countries, and therefore on global welfare, it would definitely be rated green.

The US Federal Reserve has also developed a multi country dynamic general equilibrium model called SIGMA, which has also been used for analysis of spillovers.

Noting that economic analysis of the issues is at an early stage, Rajan said it is unlikely "we will get strong policy prescriptions soon, let alone international agreement on them, especially given that a number of country authorities like central banks have explicit domestic mandates".

He added: "Such a discussion need not take place in an environment of finger pointing and defensiveness, but as an attempt to understand what can be reasonable, and not overly intrusive, rules of conduct."

Rajan said as consensus builds on the rules of conduct, "we can contemplate the next step of whether to codify them through international agreement, see how the Articles of multilateral watchdogs like the IMF will have to be altered, and how country authorities will interpret or alter domestic mandates to incorporate international responsibilities".

Asserting that unconventional monetary policy used by industrialised nations has impact globally, Rajan had said earlier this month that there was a need to discuss the issue and analyse its spillover effect.

Rajan, who was Chief Economist at IMF, has also stated in the paper that the temptation to shift costs can create inefficiencies when countries set their policies unilaterally.

"If countries agree on a set of new rules or principles, which describe the limits of acceptable behavior, it can reduce the inefficiencies and lead to higher welfare in all the countries," he said.

Rajan noted however that this does not mean countries have to coordinate policies, only that they have to become better global citizens "provided we can find clear and mutually acceptable rules".

Cut to the current financial year. While BFL's industrial business fell by 36 per cent in the first nine months of 2015/16 over the corresponding period of 2014/15, its passenger vehicle segment sector grew 112 per cent due to a ramp up in new orders during the same period, limiting the erosion in its overall revenues. Amit B. Kalyani, Executive Director, BFL, says the industrial business, which accounts for almost 35 per cent to its revenues, will remain soft in the near-term. "Weakness continues unabated, largely driven by the (fall in) commodity prices," he adds.

BFL had shipped 7 per cent less tonnage between September and December 2015 compared to the preceding three months. Its standalone earnings for the third quarter were Rs 1,052 crore, lower than the Rs 1,197crore during the preceding quarter. In fact, the crash in commodity prices, fall in demand in metals and commodities from key countries, including China, a glut in oil supply and the resultant record low oil prices have taken a toll on the entire oil, metal and mineral ecosystem. "The whole commodity cycle has finally taken a hit," says Kalyani.

Similarly, India's export earnings from engineering products, too, fell to $4.57 billion in February - down 11.2 per cent from the $5.15 billion registered in February 2015. For BFL, the earnings decline was primarily led by lacklustre demand for products from the global oil and mining industries.

When the Going Gets Tough

Engineering products constitute the biggest chunk of India's merchandise exports followed by gems and jewellery, and petroleum. Revenues from petroleum products fell to $1.83 billion in February 2016, down 28 per cent from $2.56 billion a year ago. Engineering and petroleum products together account for a quarter of India's total merchandise export earnings.

Bharat Forge was, however, lucky. It had the automotive sector to back its revenue stream. But there were several hundreds of small and medium scale engineering units across the country that are finding it extremely difficult to tide over the turbulent times. "Forging units that cater to the oil sector and companies that manufacture pipes for crude oil lines are the worst hit," says S.C. Ralhan, President, Federation of Indian Exporters Organisation (FIEO). Despite the fact that several of these units based out of engineering product hubs, such as Ludhiana and Coimbatore, are working on two shifts instead of the usual three, the sector is facing increasing idle capacities and job losses.

Indian merchandise exports have also been facing the brunt of global economic uncertainties for more than a year now, and export earnings have been falling steadily for the past 15 months in a row. The commerce ministry, which releases trade data on a monthly basis, indicates that November 2015 was the worst month for Indian exports in recent years at $20 billion, down almost 25 per cent compared to November 2014.

December was not great either. Among the petroleum and commodity sectors, oil meals fell 82.93 per cent and iron ore exports dropped 69.54 per cent year-on-year. Petroleum products, in general, fell 47.69 per cent. Exports of leather and leather products, yarn and fabrics, rice, oil seeds and cashew were also in the negative growth trajectory. The only solace was that, in terms of overall percentage of decline, December, with a 14.75 per cent fall, was better than November, which witnessed 24.43 per cent fall. The position, in terms of month-on-month percentage decline improved further at 13.6 per cent in January 2016, and 5.66 per cent in February.

Indian merchandise exports were at $310.3 billion in 2014/15, compared to $314.4 billion in 2013/14 and $300.4 billion in 2012/13. The cumulative value of exports for April-February 2015/16 was $238.42 billion, down 16.73 per cent compared to the $286.31 billion recorded in the corresponding period, last year. Experts say the year-on-year decline in merchandise exports will be sharpest in the current fiscal since the economic liberalisation two decades ago at $260 billion. This, despite an appreciation of 6-7 per cent in the US dollar.

Gloom, Not Doom

The severity of the gloom, however, is not across the board, says Nirmala Sitharaman, Minister of State (Independent Charge) for the Ministry of Commerce and Industry, and the Minister of State for Finance and Corporate Affairs. "There are sectors that are doing well, some are plateauing and others are doing badly," she says. The minister's optimism stems from the fact that the non-oil and non-commodity sectors are not faring as badly as the oil and commodity-linked exports. Also services, which is almost half the size of India's merchandise exports, have not seen a sharp fall. Of the top 30 commodities in the merchandise exports list, 14 showed positive month-on-month growth in February 2016, including drugs and pharmaceuticals that grew by 8.77 per cent, and gems and jewellery, which reversed the negative trend to grow 11.19 per cent.

Two, the ministry believes that non-commodity and non-oil sectors have marginally been impacted by the crisis. While jute-based product exports grew 35.4 per cent during April-November over the previous year, handicraft exports saw 16.9 per cent growth and pharma grew 10 per cent. Net services exports during April-December 2015 were estimated at $54.86 billion, down 3 per cent from the corresponding period of 2014.

Finally, the fall in exports, in rupee terms, has also not been as bad as it was in dollar terms. "The fall is more in terms of money realisation because of currency fluctuation and low commodity prices. It is not as if your products are not wanted, or your competence level has come down. This gloom is not across the board," says Sitharaman. However, despite downplaying the crisis, the government is taking a string of export-friendly measures.

Assistance Helps...

On January 8, Sitharaman invited representatives and trade ministers of all state governments to seek their assistance in the Centre's export-promotion efforts and become members of the Council for Trade Development and Promotion. "After all, all the action is happening in the states. Whether it is land, electricity or local tax structure, most concerns raised by the exporters are related to states and state government policies," says Rita Teaotia, the Commerce Secretary.

The ministry had also called all 34 export promotion councils representing various sectors to suggest ways to improve the situation. Council representatives lobbied for the withdrawal of minimum alternate tax and dividend distribution tax on export-oriented units (EOUs) and special economic zones (SEZs), and argued that these levies were eroding the competitiveness of such zones.

The government had also announced two major initiatives to support exports some time ago. One, it had suggested a 3 per cent interest equalisation (subvention) scheme on pre- and post-shipment rupee export credit to help exporters reduce their interest burden. Two, it had announced an expansion of the scope of Merchandise Exports from India Scheme (MEIS) by bringing in more products and geographies within its ambit. And three, the Centre was trying to speed up bilateral and multilateral agreements by providing a zero-tariff, low-barrier entry for Indian products into partner-country markets.

"We have introduced the interest subvention scheme and revised MEIS in October. It will take some time to see its impact. At the same time, we are also negotiating the RCEP (Regional Comprehensive Economic Partnership) between the 10 ASEAN members and their FTA partners. We are also resuming talks with the EU and are trying to have agreements with Australia and Canada," adds Sitharaman.

...But Also Hurts?

Incidentally, some of the measures intended to promote one sector, are hurting others. For instance, any move to make import of natural rubber costly to protect the interest of rubber growers will directly affect the competitiveness of the Rs 34,000 crore non-tyre rubber industry, which is primarily small and medium scale.

Similarly, the government's recent decision to make steel imports costlier to protect the interests of domestic steel manufacturers is hurting the engineering equipment exporters. "The biggest problem being faced by the engineering industry is the rising cost of raw material, that is, steel. The government is discouraging imports of cheap steel through safeguard duties, minimum import prices, etc.," says Bhaskar Sarkar, Executive Director, Engineering Export Promotion Council (EEPC). According to Sarkar, buying steel at a higher price and selling to the world where overall cost of steel has come down has become a challenge. "If input costs go up, we will just be pushed out of the market," he says.

The Indian pharmaceutical industry, one of the few sectors that has continued to witness growth in the midst of the overall gloom, and the milk and dairy sector have their own concerns when it comes to the free trade agreement proposals the ministry has been negotiating with partner countries to promote exports.

D.G. Shah, Secretary General of Indian Pharmaceutical Alliance, says even the multilateral agreements that India is not part of can harm the interests of the generic drug industry. Referring to the US-led, 12-country Trans-Pacific Partnership, Shah says though India is not a signatory to the treaty, the arrangement would deal a big blow to Indian pharma exports. "An industry that has flourished by export-led growth will have to slow down its investments in manufacturing because it may no longer be able to supply new generics to many countries, " he says.

Even though most measures are industry-friendly, problems persist at the implementation level, too. FIEO's Ralhan, while applauding the efforts, says: "The problem of transfer of shipping bill, verification of MEIS and the delay in release of duty drawback and interest subsidy, have seriously affected the liquidity of exporters." He goes on to add that the government should ensure the benefits announced through policy measures reach the exporters.

Deficit Concerns Remain

All said and done, there is no quick solution to India's export woes as the country can do little to generate external demand. The commerce ministry says that the trend of falling exports is not India-specific. World Trade Organization (WTO) statistics indicate that growth in exports have also fallen for the US (10.51 per cent), European Union (9.48 per cent) and China (7.01 per cent) in November 2015.

However, the overall gloom that impacted both exports and imports proved to be a boon as far as trade deficit was concerned. If we consider merchandise and services, the overall trade deficit of India for April-February 2015/16 was $54.09 billion - 15.79 per cent lower than the $64.24 billion in the corresponding period of last year.

A slowdown in traditional channels can also be leveraged to one's own advantage - to become more competitive, to grow up the value chain and explore newer pastures. Sitharaman cites the examples of the Indian automotive component manufacturers and textiles manufacturers, including readymade garments makers, who have set global standards and an export market by virtue of their core competencies. Now, it is time the others follow such examples.

And, even if there is a slowdown in international markets, domestic demand should make up for that. The export slowdown, at least in revenue terms, is unlikely to get over soon as most factors that have led to the current problems, all external, continue.

Therefore, Make in India for the domestic market is certainly an option.