Sensex closed at 19091, losing 296 points

• Indian shares provisionally closed 1.5 percent lower on Monday led by losses in Infosys  and financial stocks, as worries over quarterly earnings and further interest rate increases dampened investor sentiment.
•  Selling pressure in the afternoon took its toll on the markets and forced both the benchmark indices to lose about 1.5% in a single trading session. IT along with interest rate sensitive sectors like realty, banking and capital goods remained the worst performers and auto and a few FMCG counters were only a few stocks that performed a bit better. Selling pressure primarily came from hedge funds and FIIs. The Sensex closed at 19091, down 296 points from its previous close, and Nifty shut shop at 5729, down 95 points. The CNX Midcap index was down 1.5% and the BSE smallcap  index was down 0.8%. The market breadth was negative with advances at 335 against declines of 965 on the NSE. The top Nifty gainers were HUL,Hero Honda, Bajaj Auto and ONGC and prime losers included DLF,HCL tech, Sesa goa and TCS.
•  The Indian rupee erased early gains to trade weaker on Monday afternoon as local shares turned negative and the euro fell sharply.At 2:39 p.m., the partially convertible rupee was at 44.3350/3400 per dollar, almost steady from Friday’s close of 44.3250/3350, but down from Monday’s high of 44.2550.
• World finance leaders must find a way to bring down debt while creating jobs and watching over their shoulders for the threat of inflation, the head of the Organisation for Economic Cooperation and Development said on Saturday.
•  China’s banking regulator will launch a thorough examination this year of loans extended over the past few years, and will tighten the issuance of banking licenses in response to global easing of liquidity, the Shanghai Securities News reported on Monday.
• China still has room to further tighten monetary policy, the official China Securities Journal said in a front-page editorial on Monday.
•  China and India reported higher-than-expected inflation readings on Friday, giving fresh ammunition to central bankers and investors alike who are worried about mounting price pressures in the global economy.
•  India’s food price index rose 8.28 percent and the fuel price index climbed 12.97 percent in the year to April 2, government data on Friday showed.
• The euro sank on Monday and European stocks fell into the red for the year as the rise of a euro-skeptic party in Finland and growing unease about Greek debt battered investor sentiment in the single currency zone.
• Brent crude oil fell $1 a barrel on Monday to below $123 after a cut in output from the world’s top exporter Saudi Arabia raised concern that high prices were hurting demand.
• Spot gold hit a record high and silver rose to a 31-year high on Monday, fueled by concerns of rising inflation globally, while a lingering euro zone sovereign debt crisis continued to boost safe-haven demand in precious metals.
• The euro extended its losses on Monday after repeated attempts to break above a resistance level failed yet again and on renewed worries about euro zone debt problems, giving the dollar a much needed reprieve after the recent sell-off.
• Europe’s debt crisis weighed on financial stocks on Monday, dragging Britain’s top share index lower, while analysts said short-term macro pressures present an attractive longer-term buying opportunities on the FTSE.
• General Motors Co plans to team up with its partners to introduce light commercial vehicles to India, the head of its international operations said on Monday.
• High oil prices represent a potentially major burden for importers with global economic recovery still fragile, leading OPEC ministers said on Monday.

what an ideal banking system should look like?

• Many countries have largely settled the question of what an ideal banking system should look like. Big diversified firms, tightly regulated, with a lot more capital and less borrowing than before, are, they reckon, the ticket. Britain’s financial intelligentsia, however, has been gripped by a riot of free-thinking. A thousand flowers have bloomed: banks should be broken into lots of bits, sliced in half, nationalised, removed from any state involvement, or even abolished altogether.
• A body set up by the British government to review(independent commission on banking) headed by Sir  John Vickers, in the wake of the financial crisis, how banking in Britain should be organised, including whether banks should be broken up. Active since last September, it has now largely finished gathering evidence and will produce a draft report to the government in April and final one in September.
• Sir John noted that both retail and investment banking were inherently risky. “The popular utility–casino distinction between types of banking activity seems more catchy than helpful,” he said.Those who hoped for a Jacobin tone will be disappointed.  Sir John also said that the cost for banks of raising capital was more expensive than raising debt. That may challenge some theoreticians at the Bank of England, who have argued that banks could carry much higher capital without having to make commensurately higher profits—a view regarded as bananas by Britain’s bank chiefs.
• The observations of  Sir John Vickers , more or less ruled out some of the more Utopian proposals that have done the rounds, including the idea of “narrow banking”, in which all deposits are invested only in government bonds—presumably leaving the job of lending to households and companies to someone other than banks (although who is never really specified). Sir John hinted strongly, although did not say explicitly, that the commission would not recommend that big banks be broken up into retail and investment-banking operations.
• Instead he focused on two priorities. First, the loss-bearing capacity of banks will have to increase above the level required by the new international “Basel 3″ capital rules, either through making them have more capital or by creating mechanisms to impose losses on banks’ creditors. This is as close to a truism in international banking circles as it is possible to get, and a variety of proposals are in the works to this end.
• Second, banks will have to ringfence their retail-banking operations legally, to protect them from problems at their investment banks and to prevent the investment bank from benefiting from the implicit government guarantee that the retail bank would enjoy. It’s not clear, however, whether this would make it easier for banks to amputate bits of themselves during a crisis. Some American firms, such as Citigroup, had separate broker-dealer operations that were separately capitalised and regulated—but did not dare let them go bust in the crisis. Most banks do not legally guarantee their foreign subsidiaries, but many, including HSBC, have supported to them, often at the behest of regulators desperate to avert chaos.
• The banks will protest that ringfencing is insanely costly and impossible to implement. This is doubtful too, except perhaps for those banks with big subsidiaries in foreign countries. There, regulators may object to a big, British-owned, local operation being reorganised in a way they think is inappropriate for their locally owned firms. On the same day as Sir John’s speech, the Financial Times reported Peter Sands, the chief executive of Standard Chartered, a London-based but largely Asia-focused outfit, arguing that forced restructuring of the banks could be “very damaging“ for the British economy. Sir John hinted how he might persuade reluctant banks: the more they ringfence themselves, the less capital it may be necessary for them to carry.
• Most of Sir John’s ideas are pragmatic and in the mainstream of thinking in international banking and regulatory circles. Still, it may suit him and the politicians to pretend to the wider public that Britain is now edging towards a revolutionary solution to too-big-to-fail banks. That isn’t the case, but if the banks are smart they will breathe their sighs of relief in private, while crossing their fingers that over the next few months Sir John does not change his mind.