India to push for more inclusivity in global financial system

This can provide better global oversight: Chidambaram.

 
Washington bound: The Finance Minister, Mr P. Chidambaram, interacting with the mediapersons aboard Air India One.

N. Ram

Frankfurt Three points will be highlighted by the Prime Minister, Dr Manmohan Singh, at the Summit on Financial Markets and the World Economy, which is being held in Washington on November 14 and 15.

The first point is the need for greater inclusivity in the international financial system. The second is the need to ensure that developing country growth prospects do not suffer. The third is the need to avoid protectionist tendencies.

These points are indicated in Dr Singh's departure statement of November 13 and the Finance Minister, Mr P. Chidambaram, elaborated on them in an interaction with journalists on board Air India One.

"The key point," Mr Chidambaram noted, "is we must agree to a new order of global oversight. And this can come only by, as Prime Minister said, greater inclusivity in the international financial system. In many ways, the IMF is unable to be an early warning system. The G7 is too narrow and too small. A more inclusive system, we believe, can provide better global oversight and serve as an early warning mechanism."

Elaborating on the second point, Mr Chidambaram observed that "as the world grapples with the crisis and the countries most hit by the crisis find their growth prospects hampered, we must not forget that there are only a handful of economies that are driving world economic growth." Among these countries were China, India, and a few others . There were also some countries that have "the ability to become drivers of economic growth."

So it was vital that the few countries able to drive economic growth and other countries that have "got on to the bandwagon of development" should not suffer in "the period in which we grapple with the economic crisis." This meant resources should be made available to these countries, including India, "so that they can continue to grow and drive world economic growth."

Thirdly, the Finance Minister commented, "the crisis should not be an excuse to go into a protectionist cocoon. That would be the worst way to resolve the crisis…Without the free flow of goods and services and capital, there is no way in which the world will recover and get back to the growth path."

Mr Chidambaram asserted that the resolution of the crisis was going to take quite a while, well beyond India's 15th general election.

Asked about the implications of the Summit being held by the Bush administration, which was "as lame-duck as any lame duck can be," and about election-oriented imperatives in the Indian Government's response to the financial crisis, the Finance Minister responded: "The resolution of this crisis will take us to a point of time well beyond January 20, 2009. Likewise, it will take us to a point of time well beyond May 22, 2009. So I don't think we are going to take an election-constricted point of view. We're going to take a medium- to long-term point of view."

He added that he believed the US would also take that view. "President Bush and President-elect Obama are reported to have talked about these issues at great length only two days ago. So I think the Obama input will be there in whatever Mr Bush presents. So we'll have to take a view that takes us well beyond these election deadlines. That's the stance, I think, that India will adopt."

 

Source: HBL

Sharekhan Post-Market Report dated November 14, 2008

 

Sharekhan's daily newsletter   November 14, 2008   Index Performance Index Sensex Nifty Open 9,799.25 2,848.00 High 9,836.11 2,938.80 Low 9,267.49 2,778.80 Today's Cls 9,385.42 2,810.35 Prev Cls 9,536.33 2,848.45 Change -150.91 -38.10 % Change -1.58 -1.34   Market Indicators Top Movers (Group A) Company Price  (Rs) % chg Gainers Tata Teleservices 20.19 12.23 HDIL 117.40 8.10 CESC 227.90 4.76 Financial Technologies 689.20 3.58 HPCL 218.50 3.14 Losers Jai Corp 107.45 -19.21 IVRCL 115.10 -12.20 Lanco Infra 145.30 -11.94 GVK Power 16.07 -10.82 Crompton Greaves 140.90 -9.18 Market Statistics - BSE NSE Advances 924 366 Declines 1,594 845 Unchanged 74 44 Volume(Nos) 28.78cr 62.91cr  Market Commentary  Panic selling halts resurgence The market gyrated 569 points and ended with a sharp dip of over 1% on hefty selling in consumer goods and auto stocks. Panic selling in noon trades triggered a major correction after the market had witnessed gains of more than 300 points in the first half.     Continuing with the buoyancy, the Sensex resumed the day with a positive gap of 264 points at 9,799. Fast moving consumer goods' stocks buying fuelled a major rally in early trades and the index zoomed above the 9,830 mark to touch a new intra-day high of 9,836. While the market stood firm thereafter, a sudden spurt in selling activities, particularly in banking, consumer goods, auto and metal stocks dragged the index just above 9,300 level to the day's low of 9,267. The Sensex finally wrapped the session with losses of 1.58% or 151 points at 9,385, while Nifty dropped 38 points to close at 2,810.  As the market fell sharply, the market breadth was negative. Of the 2,591 stocks traded on BSE, 1,582 stocks declined, whereas 937 stocks advanced. Seventy two stocks ended unchanged. Of the 13 sectoral indices trading on BSE, 12 indices ended in the red while BSE FMCG was the only gaining sectoral index for the day ending 0.07% higher at 1,907.  Dragging the Sensex, ACC lost 8.95% at Rs418.60, Tata Motors dropped 8.49% at Rs136.95, Tata Steel fell 6.40% at Rs173.25, HDFC declined 4.86% at Rs1,558.20 and Jaiprakash Associates tumbled 4.67% at Rs73.50. Reliance Infrastructure, Larsen & Toubro, Bharat Heavy Electricals Ltd, Sterlite Industries, Maruti, Mahindra & Mahindra, Infosys Technologies, ONGC, Grasim Industries and Wipro were down by nearly 2-4% each. However, Bharti Airtel advanced 2.99% at Rs650.15, Tata Power scaled up 2.02% at Rs746.40, Reliance Communications added 1.88% at Rs219.75, HDFC Bank gained 0.37% at Rs1,011.60, Hindustan Unilever, ITC and Hindalco Industries closed with marginal gains. Consumer goods stocks declined sharply. Everest Kanto Cylinder crashed 10.97% at Rs170.90, Crompton Greaves dropped 9.18% at Rs140.90, Praj Industries lost 7.34% at Rs70.10 and Reliance Industries shed 5.62% at Rs354.45.Thermax, Punj Llyod, Suzlon Energy, Alstom Projects India slipped marginally. Over 2.10 crore shares of GVK Power and Infrastructure changed hands on the BSE followed by Suzlon Energy (1.66 crore shares), Tata Teleservices (1.65 crore shares), Cals Refineries (95 lakh shares) and Reliance Natural Resources (79 lakh shares). European Indices at 16:15 IST on 14-11-2008 Index Level Change (pts) Change (%) FTSE 100 Index 4,284.76 115.55 2.77 CAC 40 Index 3,330.10 60.64 1.85 DAX Index 4773.52 124.00 2.67 Asian Indices at close on 14-11-2008 Index Level Change (pts) Change (%) Nikkei 225 8,462.39 223.75 2.72 Hang Seng Index 13,542.66 321.31 2.43 Kospi Index 1088.26 -0.18 -0.02 Straits Times Index 1759.14 3.67 0.21 Jakarta Composite Index 1264.37 4.66 0.37

 

 

.

__,_._,___

No cut in petrol, diesel prices for now: PM

Ruling out an immediate reduction in petrol and diesel prices, Prime Minister Manmohan Singh has said the government will wait till public sector oil companies break-even on fuel sales before considering such a move.

International crude oil prices have slid from an all-time high of USD 147 to USD 60 a barrel, but public sector oil companies continue to make losses on sale of diesel, domestic LPG and kerosene.

"When we see that the Indian oil companies are able to sustain a reduction that will be the right (time for such a) decision," he told reporters on way back from his three-day maiden visit to the energy-rich Gulf region.

Though Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum have started making profit on sale of petrol, they lose about Rs 155 crore per day on sale of other three products.

"Oil companies have to bear a very heavy burden (and) there are limits to which government can go on subsidising," he said.

Government compensates half of the revenue loss on fuel sales through oil bonds and one-third of the losses are borne by cash-rich firms like ONGC.

Yet, IOC posted its largest-ever net loss of Rs 7,047.13 crore in July-September quarter. BPCL posted a net loss of Rs 2,625.17 crore in the second quarter on top of Rs 1,066.70 crore in April-June, while HPCL reported a loss of Rs 888.12 crore in Q1 and another Rs 3,218.92 crore in Q2.

"If prices keep on going down, we can explore these possibilities (of reducing prices)," the Prime Minister said.

Oil firms make a profit of Rs 4.12 a litre on petrol but lose Rs 0.96 on every litre of diesel, Rs 22.40 per litre on kerosene and Rs 343.49 per LPG cylinder.

 

Source: FE

Mutual funds see outflow of Rs 47,000 crore in October

Mutual fund investors pulled out as much as Rs 47,000 crore in October -- the highest redemption from MF schemes in a month so far this fiscal -- triggered by the meltdown in equity markets.

At the end of October, investors redeemed funds worth Rs 46,793 crore, with maximum of withdrawals coming in in fixed income plans, a monthly report by Association of Mutual Funds of India (AMFI) said.

The redemptions in mutual fund schemes have been on an increase in the current fiscal, and in September they had witnessed withdrawals to the tune of Rs 45,655 crore.

Fixed income plans, with assured returns annually, saw a maximum pullout of Rs 52,820 crore as on October, followed by equity funds investing in stocks worth Rs 706 crore.

Analysts said fixed maturity plans have witnessed panic redemption in October on concerns about the credit quality of debt papers held by these schemes.

However, liquid or money market schemes, with higher liquidity and short maturity period was the flavour with investors as the scheme witnessed repurchases worth Rs 3,256 crore.

In contrast, last month the liquid scheme witnessed a redemption of Rs 19,675 crore, following fixed income plans, which had witnessed redemption pressure of Rs 26,665 crore in September.

Analysts said the plunge in the stock market and huge redemptions in liquid schemes by corporates and banks has led to the sharp decline in assets of fund houses.

The combined assets under management of the mutual fund industry saw an 18 per cent fall in October, dipping below the Rs five-trillion mark for the first time this year.

"The sharp fall of about 25 per cent in valuations of stocks in the secondary market and redemptions in equity as well as liquid schemes, and lack of any fresh inflows have led to the decline in the assets under management in the past month," Taurus Mutual Fund Director R K Gupta said.

Also, Gilt funds, which invest in government securities, and Gold Exchange Traded Fund saw inflows of Rs 3,725 and Rs 140 crore, respectively.

Gilt funds are mutual fund schemes floated by asset management companies with exclusive investments in government securities.

According to data on the Securities and Exchange Board of India website, mutual funds have been net buyers to the tune of Rs 1,432 crore in equities in October.

The combined average assets under management (AUM) of the 35 fund houses in the country saw an erosion of over Rs 97,000 crore and dropped to Rs 4,31,901.42 crore at the end of October.

 

 

Source: ET

Tata tells group CEOs to gear up for fin crisis

Tata Group Chairman Ratan Tata has asked CEOs and Managing Directors of 98 group companies to tighten belts, which could include putting off acquisitions and slowing capacity expansions, in view of the current financial crisis across the globe.

When contacted a Tata Sons spokesperson said: "The senior managements of the Tata Group companies have been advised to be sensitive and conscious of the difficult financial circumstances existing today and have been requested to be proactive to focus on cash flows and conserve expenditure wherever prudently possible."

The Tatas are gearing themselves up to face the situation. They are being proactive in managing their companies and not letting the circumstances lead them, the spokesperson added.

In a letter to the CEOs and MDs, Ratan Tata, who is also Chairman of India's Investment Commission and a member of the Prime Minister's Council on Trade and Industry, asked his top managers to review business strategies outlining a six-point action plan keeping in mind the worsening credit crisis.

The leader of the over 62 billion dollar group has asked his top honchos to focus on conserving cash and put off expansion through the inorganic route unless the acquisitions were strategic in nature.

Tata also advised the CEOs and MDs to go slow on capacity expansions, cut costs, and improve operational efficiencies, while increasing efforts to tap into all available credit lines.

The global financial turmoil has affected some of the plans of the group companies, such as Tata Motors failing to get full subscription of its twin rights issue to mop up Rs 4,150 crore to part fund the $2.3-billion acquisition of Jaguar Land Rover.

Asking group companies to go slow in acquisitions is also contrary to the group's previous strategy of expanding through the inorganic route, which has seen it pulling off some of the biggest global acquisitions that Indian industry has seen, such as the $12.1-billion takeover of Anglo-Dutch steel maker Corus in early 2007 by Tata Steel.

 

Source: FE

Rail freight traffic slumps

Surabhi, Vikas Dhoot

Industrial production growth in September recovered to a "more encouraging"—as finance minister P Chidambaram described it on Wednesday—4.8% from the abysmally low 1.3% recorded in August 2008. But even as the Manmohan Singh administration works overtime to prevent the liquidity squeeze from affecting growth in the real economy, the short-term outlook remains cloudy as key economic indicators point to a gloomier October and November.

Total freight carried by Indian Railways—a significant indicator of domestic economic activity—in the month of October fell more than 5% short of its budgeted target to 66.08 million tonne. Importantly, freight traffic was 0.14% lower this October than a year earlier. Indian Railways is the largest carrier of iron ore, cement, steel, fertiliser and foodgrain in India. So, a slowdown in rail transportation levels indicates a corresponding weakening of overall economic activity.

Official economic data released this week already indicates that October will also be bleak, with exports dipping by 15% and indirect tax collections (including excise and customs duties) shrinking by 5%. The trends will impact the country's GDP growth rate for this fiscal, which the Reserve Bank of India has projected at 7.5%. Saumitra Chaudhuri, member of the Prime Minister's Economic Advisory Council, expects the bad news to spill over into November.

"With credit being a problem, October was quite a disaster. Economic activities ground to a halt because of the funds crunch. The problem seems to be continuing in November and it doesn't seem likely to improve before December. The government needs to ensure that money flows into NBFCs and mutual funds so that they can restart financing," Chaudhuri told FE.

For several industries across sectors, the slowdown is already here. Cement sales grew in October, but by a mere 4%. The auto sector saw October sales for commercial vehicles fall by almost 35%, two-wheeler sales shrink by 10%, and overall domestic sales fall by 15%. While automakers are responding by curbing production and shutting manufacturing plants, analysts expect a further impact on production levels in the metals and mining space, as prices of key inputs like iron ore have been on a slide. The one sector that bucked the trend was telecom, with GSM operators adding a record 8 million subscribers in October.

"It is very clear that industrial growth is weakening. The underlying trend is one of decline," surmises DK Joshi, principal economist at rating agency Crisil. Most economists expect economic growth, which was 7.8-7.9% in the first six months of 2008-09, to slow to 5.0-5.5% in October. But if the situation in October continues, growth for the entire year would come down further from the 6.5-7% levels expected currently, they warn.

Source: FE

DoCoMo's entry to set off race for mobile applications

'Osaifu-Keitai', 'Imadoco' may become Indian cell-phone user's rage.

Thomas K. Thomas

New Delhi, Nov 12 Mobile applications such as 'Imadoco' and 'Osaifu-Keitai' could become Indian rage soon.

The first one is a service that allows you to know the exact location of your friends and family using GPS on mobile phone, the latter is a mobile commerce platform.

While most Indians use mobile phones for talking or texting, NTT DoCoMo's entry, at a time when the country is on the verge of rolling out 3G services, could trigger a new phase of mobile applications and services.

The Japanese company, which has become a global rage with its services and data applications under the brand i-mode, is expected to share its expertise in developing consumer-friendly applications with Tata Telservices for the Indian market.

Docomo applications

Here are some samples of what could come to India from the DoCoMo's stable (acronym for Do Communications Over the Mobile Network.) i-Mode has an application called imadoco, which is a GPS-based facility allowing subscribers to know the location of family and friends at any given point in time.

There is another service called 2D barcode which enables subscribers to create barcodes containing personal data or company Web site URL.

So you can create a barcode containing your name, phone number, e-mail address, and print the barcode right onto your business card.

Then, your clients can scan the barcode with their camera phones and save your data instantaneously. Or you could subscribe to 'Osaifu-Keitai' which refers to mobile phones equipped with contactless IC card.

Many uses for mobiles

With this function, mobile phones can be utilised as electronic money, credit card, electronic ticket, membership card, airline ticket, and more. The company also has a whole range of mobile handsets that enables video, gaming and entertainment applications.

Before i-mode burst onto the scene on February 22, 1999, Japan was in the slow lane of the Internet revolution.

But after the launch of i-mode, NTT DoCoMo became Japan's biggest Internet service provider. Coincidently, the Japanese telecom major's entry into India comes at a time when the country's Internet and broadband growth has been sluggish.

While 70 million mobile users are accessing Internet on their mobile phones, operators are not getting more than 10 per cent of their revenues from data services.

The poor uptake is due to the lack of interesting applications and non-availability of spectrum.

While 3G spectrum, to be auctioned next year, will take care of the bandwidth issue, NTT DoCoMO could trigger a race among operators to offer non-voice services to consumers

Source: H B L

Morgan, Merrill Lynch & Citi exit R-Infra

 

Nevin John & P B Jayakumar in Mumbai

Foreign institutional investors such as Morgan Stanley, Merrill Lynch and Citigroup have sold off their holdings in Anil Ambani-promoted Reliance Infrastructure (R-Infra) after the company opened a buyback offer in March this year. Morgan Stanley is the latest FII to sell its stake (4.18 per cent) to the company in the September quarter, said sources in the know. After the company began the Rs 800-crore (Rs 8 billion) buyback in early March, the FIIs' total holdings in it have fallen to 16.89 per cent until September 2008 from 20.87 per cent in December 2007. According to the latest announcement, R-Infra has spent Rs 711 crore (Rs 7.11 billion) for the buyback of 7,260,000 equity shares until November 7. The company is expected to complete the first tranche of the total Rs 2,000-crore (Rs 20 billion) buyback by March 4, 2009. An R-Infra spokesperson said, "The company's buyback of shares is aimed at reinforcing investors' confidence. These shares are bought from the open market through a transparent process and are not dependent on the sellers." "The company is cautious about the pullback of FIIs, even though it happens to most firms, especially after the economic downturn. These FIIs sold off their stakes partly to the company and the remaining in the open market. Whenever FIIs sold shares heavily, the company held back the buyback for restricting the stock fall. As the situation is slightly improving, R-Infra is looking to increase the buyback since the share price is around Rs 600, which is considerably lower than the expectation of the company," the spokesperson added. Since the shares shot up by 16.28 per cent last week, the existing FIIs in the company, including Bank of New York and Natixis, are regaining confidence and continue holding their stakes, sources added. Bank of New York has a 2.58 per cent stake, though it sold off about 500,000 shares in the second quarter, when FIIs were exiting the domestic market in panic. Natixis holds 1.49 per cent stake in R-Infra, according to the information available on the Bombay Stock Exchange. Merrill Lynch and Citigroup had exited by selling off their 1.37 per cent and 1.51 per cent stakes, respectively, in the June quarter. With the buyback, the promoters' stake in the company, formerly known as Reliance Energy, has increased to 36.83 per cent from 34.68 per cent. According to the earlier plan, the company wanted to buy back 50 lakh-plus shares at a price not exceeding Rs 1,600 a share, aggregating to Rs 800.06 crore (Rs 8 billion), to raise the promoters' stake in the company. However, the fall in the share price has helped the company buy back more shares with the announced fund. If the situation continues, the company would quickly finish the first tranche and begin the second round of the Rs 1,200-crore (Rs 12 billion) buyback, said sources.

Source: Rediff

 

Power stocks to boost investor portfolio in long run

12 Nov 2008, 1543 hrs IST, Saikat Das, ECONOMICTIMES.COM

 

 

 

MUMBAI: With the recession buzz leaving investors browbeaten, power sector is seen as good bet for long term investors with huge future potential.

In the 11th Five Year Plan, a capacity addition of 78,530 MW has been chalked out by the ministry of finance. In the 12th Plan, the requirement of capacity addition works out to 82,000 MW. Nuclear power is also expected to give a fillip to the capacity additions.

"Irrespective of liquidity crunch, the demand of power will not be squeezed in a growing economy like India. For long term perspective, one can invest in this sector expecting returns more than fixed deposits with a timeline of 3-5 years," commented Manish Sonthalia, vice president – equity research, Motilal Oswal.

Interestingly, a McKinsey report estimates that India's electricity demand may triple to 3,35,00 MW by 2017.

The sector will prove to be a good support to an investor in the long run, even though the BSE Power Index has seen a fall of 74 per cent from Jan 8 when the index touched an all-time high of 4929.34 to a 52-week low of 1274.88 on Oct 27.

In comparison, the BSE Sensex lost 62.60 per cent during the period from Jan 10 when it touched a life high of 20582.08 to a 52-week low of 7697.39 on Oct 27.

However since the low, the power index has risen 50.4 per cent since compared to a recovery of 36.87 per cent on the Sensex.

Among the power generation companies, NTPC and Tata Power are the best bets for investment, according to analysts. Tata Power's ambitious expansion plans along with its foray into retail power distribution and NTPC's foray into newer projects have made analyst bullish on them. Further, falling coal and oil prices will add to profit margins.

Armed with their strong balance sheet, government support and proven project execution skills, NTPC is expected to add around 65 per cent of the total generation capacity by the central sector, which is 25,115 MW, according a research report by SMC Global.

Tata Power has targeted to increase its power generation capacity from present 2300 MW to 10,000 MW by 2012.

Motilal's Sonthalia sees an upside of 50 per cent within two years for Tata Power stock and has set a target price between Rs 180-190 for NTPC.

In power equipment segment, BHEL and Larsen & Toubro, which trade at attractive levels of Rs 1,386 (PE 25.74) and Rs 870.90 (PE 22.39) respectively, also appear to be good buys for the long term.

In transmission, Power Grid is available around Rs 75 (share listed at Rs 80 two years back). Investors would do well to buy the stock owing to the company's monopolistic nature wherein it enjoys the right to lay grids nation wide.

Analysts also make a case for KEC International. Jaisheel Garg, senior research analyst, SMC Global, said, "Unlike in the past when only 10% of KEC's orders used to come from the domestic market, it now derives about 50% of its revenue. It expects a 70:30 revenue mix (international:domestic), which is also reflected in its current order book."

Alex Mathew , head – research, Geojit Financial, said, "In order to achieve the projected 9%-10% GDP growth, the government has no alternative but to focus on power sector. This augurs well for long term investment in power sector. Investors should start buying at every decline in the bear market."