India's benchmark Sensex poised to hit new high

New Delhi, Oct 27 (IANS) The Sensex, a benchmark index of Indian equities markets, is poised to hit new highs in the next few weeks on hopes of revival in economic growth helped by good monsoon and positive global cues, especially delayed tapering of stimulus by US Federal Reserve, analysts say.

The 30-scrip S&P Sensex of the Bombay Stock Exchange (BSE) last week soared past the 21,000-point-mark for the first time in three years.

The benchmark index's record high is 21,206.77 points, hit in January 2008. The 30-scrip barometer hit a high of 21,039.42 points last week, for the first time since Nov 8, 2010.

Analysts said investors' pessimism is receding in the Indian markets on hopes that the economy had bottomed out and growth would revive in the coming quarter on the back of a good monsoon.

Chief economist of HDFC Bank Abheek Barua said a strong buying interest by foreign investors has boosted sentiments in the markets in the past one month.

"If it touches a new high, it will happen after five years. It will, of course, have some positive psychological impact," Barua told IANS.

"I don't see any major downside in the market till December. The Sensex should remain range-bound between 20,000 and 21,000 points," he said.

Foreign funds have invested nearly $3.6 billion in the Indian equity markets since the US Federal Reserve said in mid-September that it would continue with its $85 billion monthly bond-buying programme.

This foreign equity inflow has come in the Indian markets after nearly an equal amount of $3.7 billion outflow in the previous three months on speculation that the Fed would taper its buying programme known as Quantitative Easing (QE).

"Equity markets have been witnessing buoyant FII inflows not merely on the back of continued global liquidity as the Fed appears to have postponed withdrawal of its monetary stimulus for now but also on account of our receding external risks," said Bhupali Gursale, an economist at Angel Broking.

"The latter can be mainly attributed to the anticipated moderation in our current account deficit as well as policy measures taken to attract capital in order to finance the deficit," Gursale said.

Senior economist at Dun & Bradstreet India Arun Singh said the Reserve Bank of India's action on key policy rates and political developments would have a big impact on the markets in the coming months.

"I am expecting volatility in the markets at least till March," Singh told IANS.

The Reserve Bank of India (RBI) is scheduled to announce its monetary policy review Oct 29. RBI governor Raghuram Rajan is widely expected to hike key interest rate to control inflation in his second policy action since taking charge at Mint Street in Mumbai early September.

According to Deutsche Bank, the benchmark Sensex is expected to hit the 22,000-point-mark by December.

The German bank's optimism is based on some positive developments in the Indian economy like good monsoon, currency stabilisation and recovery in rural demands. Expectation of synchronised global growth recovery and the US central bank's action are some important external factors on which Deutsche Bank has based its optimism about the Indian stock markets.

Vaibhav Agrawal, a vice president at Angel Broking said the Sensex is likely to touch 22,600 points in the coming few months.

"The markets in our view are finally poised to make new highs. This is likely to be aided by the frontline IT and Pharma stocks, as export sectors are expected to continue to do well in the coming months," Agrawal said.

(Gyanendra Kumar Keshri can be reached at gyanendra.k@ians.in)

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Bangladesh poised to hike garment wages, but may not end strikes

By Shyamantha Asokan

DHAKA (Reuters) - Bangladesh's garment factory owners are pencilling in a minimum wage increase of about 50 to 80 percent and will ask retailers to pay more to defray the cost, as the government tries to end a wave of strikes that hit nearly a fifth of workshops last month.

The world's second largest clothing exporter hopes to announce a new minimum wage early next month, bowing to international pressure after a string of fatal factory accidents that thrust poor working conditions and pay into the spotlight.

Workers want the minimum wage, which was last raised in 2010, to go up to 8,000 taka a month - 2-1/2 times the current rate.

Factory bosses have formally offered 3,600 taka. Several, however, told Reuters they anticipated that Bangladesh's official wage board would set rates in the 4,500 to 5,500 taka range, and they intended to seek between 5 and 15 percent in price hikes from retailers.

The wage board was due to meet on Monday before submitting a draft proposal to the government.

"These workers' rights are being discussed all over the world now and the government is nervous," said Amirul Haque Amin, the head of the National Garment Workers Federation, an umbrella group representing 37 unions.

"There is this pressure now," Amin said in an interview in his ramshackle office, decorated with satirical posters of harangued factory workers and fat tycoons. "This has given us the opportunity to raise our voices."

The wage negotiations must somehow strike a balance between Western fashion giants, politically-connected factory owners and protesting staff.

The government did not respond to strikes over wages last year, but since then accidents including the collapse of the Rana Plaza factory complex near Dhaka, which killed more than 1,100 garment workers, have put the authorities on the back foot.

GRAPHIC-Garment worker wages: http://link.reuters.com/haw83v

ROCK BOTTOM WAGES

Rock bottom wages and trade deals with Western countries have propelled Bangladesh's garments sector to a $22 billion industry accounting for four-fifths of the poor country's exports, with retailers such as Wal-Mart Stores Inc, JC Penney Co Inc and H&M Hennes & Mauritz AB buying clothes from its factories.

Wal-Mart spokesman Kevin Gardner said the retailer "continues to work with other stakeholders in encouraging the Bangladesh government to review minimum wages for workers in the garment industry to ensure worker needs are met."

H&M said it had urged Bangladesh to raise the minimum wage and revise it annually.

"Wages are one of the issues that are at the top of our agenda to drive improvement in the textile industry," Helena Helmersson, H&M's head of sustainability, said in an emailed response to Reuters.

JC Penney did not immediately respond to a request for comment.

The minimum monthly wage for garment workers is 3,000 taka, around half of what those in rival Asian exporters Vietnam and Cambodia earn and just over a quarter of the rate in top exporter China, according to International Labour Organisation data from August.

Most Bangladeshi workers take home at least $54 a month because of overtime pay, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Smaller factories will be hardest hit by the expected hike, factory bosses said. Muzaffar Siddique, whose mid-sized factory in Dhaka employs 650 people, said he would have to charge retailers 30 percent more if wages went up to 4,500 taka.

IMAGE PROBLEM

The government is revising the minimum wage as part of efforts to address the industry's "image problem" and hopes to announce the new rate during the first week of November, said Mikail Shipar, the top official at the Labour and Employment Ministry.

Sirajul Islam Rony, a member of the six-person independent wage board, also told Reuters that it was due to announce a figure by next month. It must then be approved by the law and labour ministries.

Export growth is forecast to slow to 7 percent during the fiscal year that started in July, down from almost 11 percent last year, as Western retailers grow nervous about doing business in Bangladesh, according to an Asian Development Bank report.

Garment factory staff went on strike over wages for six days in September, affecting production at almost 20 percent of the country's 3,200 factories, according to the BGMEA. The strikes followed similar protests over the summer.

Workers also held a factory owner captive in his office for more than 18 hours earlier this month until he paid bonuses owed to them for the Muslim festival of Eid al-Adha.

Wages have not kept up with inflation, which is running at a nearly 9 percent annual average since the last hike in July 2010. They would need to hit 3,877 taka just to keep pace with inflation, which is more than factory owners have offered.

Factory bosses counter that they would like to pay workers more but can only cover this cost by charging Western retailers more, which could jeopardise Bangladesh's sole appeal - its bargain basement rates.

"It's a very simple equation - wherever they get a cheap price, they will go there," BGMEA president Mohammad Atiqul Islam said of the retailers. "It's not like they're here because like the Bangladeshi food or the Bangladeshi man."

Retailers have this year cut rates by 3 percent on average, Islam said.

Some factories are already struggling with higher costs due to retailers demanding stricter safety standards after the accidents, said Kutubuddin Ahmed, the chairman of the Envoy Group, which exports $200 million worth of garments a year to high-street brands including JC Penney and Inditex SA's Zara.

A factory fire 40 km (25 miles) from Dhaka on October 8, in which seven people died and 50 were injured, has raised concerns that standards have not changed significantly since the April building collapse.

"This is an issue for the small factories. They need money to become compliant," Ahmed said, defining small factories as those that employed up to 500 people, which accounted for a third of the sector.

MORE STRIKES?

Many workers say they will go on strike again if their demands for a pay hike are not met, which would be a blow for the ruling Awami League ahead of an election due by January.

While some staff would accept an offer below the 8,000 taka their unions are demanding, anything under 6,000 is likely to spark widespread protests, said Kalpona Akter, the executive director of the Bangladesh Centre for Workers Solidarity, an NGO that helps workers form unions.

Garment factory workers need around 6,450 taka a month just for their basic living costs, according to a survey by the Centre for Policy Dialogue, a Dhaka think-tank, published in September, with many relying on small loans.

"If it's less than 8,000 taka, we have to press the government or the factory owners to increase," said Mosammat Jhumur, a 24-year-old factory worker who shares one bed in a Dhaka slum with two other women and went on strike in September. "If we need to go on the road to demonstrate, then we will do that."

(Additional reporting by Serajul Quadir in Dhaka, Jessica Wohl in Chicago, Phil Wahba in New York, Sven Nordenstam in Stockholm, Emma Thomasson in Paris, and Neil Maidment in London; Editing by Emily Kaiser and Alex Richardson)

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