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Monday, June 30, 2008

Stock, bond slumps echo 1974 bear run

Michael Patterson NEW YORK

IT'S been 14 years since investors suffered as big a retreat in stocks and bonds and some of the largest money managers say the losses may have more in common with the 1974 bear market before the worst is over. The Standard & Poor's 500 Index dropped 3.4% since March and investors in Treasuries lost 2.88%, the steepest combined plunge in 14 years, according to data compiled by Merrill Lynch and Bloomberg. Equity and debt markets fell in tandem for only the sixth time since the savings and loan crisis of the 1990s as oil closed at a record 19 times and concern grew that inflation will cut the value of bond payments.
    Dreman Value Management, BlackRock and Cambiar Investors, which together oversee $1.38 trillion, are buying banks, phone companies and oil producers to weather more declines in benchmark indexes. David Dreman, whose DWS Dreman Small Cap Value Fund beat 90% of its peers over five years, bought Cleveland-based KeyCorp as financial firms fell to a 10-year low last week. BlackRock added AT&T for the best dividend yield since 2006. Cambiar says Marathon Oil is inexpensive.
    "Between inflation and the liquidity crisis, this is one of the toughest markets I've seen," said Dreman, who oversees about $15 billion in Jersey City, New Jersey. "But it's not a market you sell into. Any loss
es you take by being too early will be more than offset by buying cheaply."
    Dreman founded his firm in 1977, three years after the S&P 500 fell 30% for its worst annual loss in the last 60 years. Stocks plunged as the Arab oil embargo pushed up US consumer prices as much as 12.3%, at the time the biggest annual advance since 1947. Consumer prices climbed 4.2% in the 12 months to May. The Reuters/Jefferies CRB Index, a gauge of 19 commodities, added 49% in the past year, exceeding the record 48% annual gain in 1973.

    Investors were whipsawed this month by the Dow Jones Industrial Average's worst June since 1930 and the biggest losses in Treasuries in four years. Bets that the Federal Reserve will increase interest rates helped spur a 1,292-point tumble in the Dow average this month on concern higher borrowing costs will prolong the worst profit slump in six years.
    The Dow industrials added 37.86, or 0.3%, to 11,384.37 as of 9:45 am in New York. The S&P 500 increased 5.23, or 0.4%, to 1283.61. Just two of 10 industries in the S&P 500 rose this year. Energy producers gained 6.3% and a group of mining and chemical companies added 0.5%. Massey Energy, the fourth-biggest US coal producer, advanced 155% for the index's biggest rally after the Richmond, Virginia-based company's first-quarter profit topped analysts' forecasts. — Bloomberg



Credit crunch slows cement companies’ expansion plans

Rising Raw Material Costs, Real Estate Slowdown Add To Worries

Mithun Roy & Kausik Datta MUMBAI

COSTLIER raw material and tight credit conditions have slowed down cement companies' ambitious Rs 50,000 crore expansion plan to add 80-90 million tonnes capacity in three years. Adverse economic factors and problems in land acquisition have made expansion almost impossible, industry officials told ET. Some of them said they will be happy if even half of the proposed expansion goes through.
    Holcim executive committee member Paul Hugentobler told ET that "not many companies who had announced expansion plans two years ago are on schedule." A Holcim team dispatched to photograph sites of some new projects reported last week that there is little progress on the ground. "The equity market is dead and the debt market is not in a good shape, making fund-raising a huge task," said Mr Hugentobler.
    Yet, according to Mr Hugentobler, this would not hurt Holcim much. "We have three strong balance-sheets to bank on," he said, referring to the financial strength of ACC, Ambuja Cements and parent Holcim, "which is not the case with many others." Expansion plans of ACC and Ambuja Cement may be a little delayed, he said, indicating that won't be a cause for major concern.
    This was corroborated by an analyst with a domestic brokerage. He said ACC's expansion plans at Bargarh, New Wadi and Chanda are slightly behind schedule. These will add 7.2 million tonnes of capacity, taking total capacity to 29.6 million tonnes.
    According to the Cement Manufacturers' Association, last year saw capacity addition of
27 million tonnes, taking the total to 170 million tonnes. The demand is estimated at around 200 million tonnes and is expected to grow at 8-10%. Some doubt the trend will continue. "2007-08 was a golden year due to large government spending. High commercial activity and the housing boom due to higher per capita income kept cement offtake growth in double digits," said an analyst.
    Daljeet S Kohli, head of research, Emkay Global Financial Services said that margins are facing rising pressure. "The sales growth rate fell sharply with a drastic cut in house construction as the real estate industry is under pressure."
    Cement makers blame the government. Said ACC managing director Sumit Banerjee: "The cement industry was targeted by the govern-ment, when the commodity is cheaper than any other commodity." An analyst said a large chunk of the cement industry's revenue goes to the exchequer as tax and loyalty payments. The government has taken several steps to check cement prices, the latest being an export ban (since relaxed) and a 12% ad valorem duty on cement above Rs 250 per 50 kg bag. Last year, cement import was made duty-free.

    The expansions at Grasim's Shambhupura and Tadpatri units will be over in H1FY09, while the Kotputli plant is expected to go on stream in Q3FY09. Upon completion, Grasim's cement capacity (including UltraTech) will rise to 48.7 million tonnes. Grasim commands 30% share in Maharashtra and Karnataka, which account for 42% of India's cement market. Analysts Jagdishwar Toppo and Nitesh Jain of Enam said in a note that the sector has underformed on concerns of large impending capacity additions, substantial erosion in industry profitability due to price correction, cost pressure and government intervention. Even brownfield expansions are delayed 6-9 months and greenfield projects are delayed by about one year as against an anticipated delay of 3-6 months.
    India Cements is planning to spend Rs 2,100 crore for capacity expansion, raising it to about 14 MTPA from 9.1 MTPA through debottle-necking, upgradation of facilities and setting up two grinding units. The units of 1 MTPA capacity each would come up at Chennai and Perli by the end of Q1 FY09.
    mithun.roy@timesgroup.com 




QUICK BYTES

Deccan Aviation launches helicopter charter service

• BANGALORE: Private sector company Deccan Aviation on Monday announced the launch of helicopter charter service from BIA (Bangaluru International Airport) to select locations in the city, a Deccan Aviation release stated. The fare for these helicopter charters are in the range of Rs 4,800-5,800 per person (per trip).
USOF meet on July 2 to chart roadmap for more towers

• NEW DELHI: Department of telecom (DoT) has called a meeting on July 2 to start the process for phase II of shared mobile infrastructure network in rural areas which would to attract more players to these untapped markets. Universal Service Organisation Fund (USO) has already launched the initiative to provide subsidy support for setting up and managing 7,871 infrastructure towers.
Kinetic to start component supply for Nano in 2 mths

• MUMBAI: Kinetic Engineering on Monday said it will start supplying component for Tata Motors' small car project within the next two months. "We will begin supplying component to Tata Motors' small car project within two months from now," said Kinetic Engineering chairman Arun Firodia.
No need of subsidies for wind energy firms: Tulsi Tanti

• BANGALORE: The billionaire chairman of Suzlon Energy Tulsi Tanti has said wind energy firms do not require subsidies, as the prices of fossil fuels like oil, gas and coal are becoming more expensive. Quoting Tanti, German business weekly WirtschaftsWoche said that wind energy does not need subsidies as the fossil fuels are turning more costly.
Zenith Software to tie up with Norway-based SOC

• BANGALORE: Zenith Software Ltd (ZSL) based in Banglore, announced its plans to foray into the Scandinavian market through partnership with Norway-based Software Offshoring Consulting on Monday. Software Offshoring Consulting (SOC) is part of the Norwegian Data-Invest Group, according to a statement released by ZSL.
Satra Properties to develop Rs 120-cr project in Dubai

• MUMBAI: Real estate developer Satra Properties on Monday said it will develop about Rs 120-crore commercial complex in Dubai for which it has purchased property worth Rs 29.7 crore.



Red-hot oil burns a hole in current account

For First Time After 2000, Current Account In BoP Ends In A Deficit During Q4

RUNAWAYoil prices have cast a shadow on India's macro numbers. For the first time in eight years, India recorded a deficit in its current account in the country's balance of payments during the fourth quarter of a fiscal. A sliding stock market and a major slowdown in debt offerings only add to the sense of gloom.
    On Monday, the Sensex fell to its lowest close in 14 months at 13461.60, down 340.62 points or 2.47% from its previous close. Bond yields rose as market sentiment was hit by concerns about tightening liquidity. Yield on the 10-year benchmark bond ended the day at 8.69%, rising from Friday's close of 8.58%.

    The current account during the fourth quarter of 2007-08 ended in a deficit despite a 36% rise in income from services and remittances from Indians abroad. This is mainly attributed to the surge in oil prices.
    The current account in the balance of payments measures the net position of a country's exports and imports of goods and services. A deficit implies that imports far outpace exports.
    An economy's current account deficit is also a measure of how much external savings it succeeds in absorbing, to enhance investment over the level permitted by domestic savings. India's current account deficit has consistently been below Plan targets. Even with an abnormal spurt in imports in the
last quarter, thanks to soaring crude prices, the current account deficit amounted to $17.4 billion or 1.5% of GDP, according to a release by the Reserve Bank of India. At this level, the deficit is modest and entirely sustainable and desirable. The trouble, according to economists, would be if the deficit balloons out of hand in the coming months, thanks to ever rising crude prices.
    According to the latest provisional data released by the Reserve Bank of India, the current account deficit stood at $1041 million during the quarter ended March 2008 compared with a surplus of $2,563 million a year ago.
'Current a/c deficit still within acceptable levels'
    THIS is despite the fact that services income and remittances among others being high ($22.75 billion) to absorb the trade deficit of $23.79 billion during the quarter. India runs a deficit on the current account overall but over the last eight years, the last quarter of a fiscal has seen a hump in flows which results in a surplus on this account.
    The silver lining, however, is in the form of remittances by overseas Indians. Remittances touched a new high and even net foreign direct investment (FDI), which continued to be robust despite a huge growth in outbound FDI.
    Government managers reckon that it is too early to set-off the alarm bells. Last week, chief economic advisor Arvind Virmani told ET that the net (negative) effect of the oil price spurt on the current account deficit could be much less than what pessimists portend. This is because high oil prices (now at $143 a barrel) result in a higher income and demand for goods and services from oil exporting countries, which could be an opportunity for India, he said. According to Aditya Birla group chief economist Ajit Ranade it is quite heartening to note that despite high crude prices, the current account deficit at 1.5% of GDP is still within acceptable levels. "But we will have to watch out in the next quarter. If there is a slowdown in the global economy, we need to be also vigilant about the slackening of inflows through services exports," he said.

    Yes Bank chief economist Shubhada Rao said that the current account deficit was entirely due to the crude import bill. If crude prices continue to be over $130 a barrel, the current account will remain under stress. The overall balance of payments for the quarter ended in a surplus of $24.99 billion ($20.45 billion) on the back of better capital inflows of $25.4 billion ($17.13 billion) during the quarter.
    The current account deficit for the full fiscal year
widened by a further $17.4 billion, 78% higher than previous year's deficit of $9.77 billion. Remittances also continued to post a strong growth. The year ended with the highest ever remittances as reflected in private transfers at $40.78 billion as against $27.94 billion a year ago. Net invisibles including remittances, software services income and investment income 36% increased from $53.4 billion to $72.65 billion. Capital account surplus during the quarter amounted to $25.42 billion during the quarter ended March 2008 driven largely by strong growth in FDI, portfolio investment and borrowings by India Inc.
    For the full financial year, the capital account surplus more than doubled to $108 billion, compared to $45.77 billion last year. Foreign direct investment ($15.54 billion), portfolio investment ($29 billion) and external commercial borrowings ($22.11 billion) accounted for a bulk of net capital inflows during the year.







HDFC, ICICI Bank hike home loan rates by 75 bps

State Bank Increases Rates By 50 Bps

HOUSEHOLD budgets, already stretched by spiralling prices, will get further strained due to higher outgo on home loans. Home loan market leader HDFC on Monday announced a 50 basis points hike in interest rate for all existing borrowers with floating rate loans. For new borrowers, the hike will be as much as 75 basis points on floating as well fixed rate loans.
    This means that the EMI for new customers will be Rs 1,033 for every Rs 1 lakh on a 20-year loan. For existing floating
rate customers, the EMI will increase by Rs 34 for every Rs 1 lakh loan with an outstanding tenure of 20 years.
    Under the revised rate structure, the floating rate for new borrowers is 11%, while the fixed rate is 14% — a level last seen in the mid-90s. The rate hike will be effective from July 1.
    Minutes after HDFC's announcement, the country's second
largest bank, ICICI also announced a 75 basis points hike in the fixed as well as floating home loan interest rate. The fixed rate of interest for ICICI home loans will now be 14.75% — possibly the costliest in the sector.
    State Bank of India (SBI) has also decided to raise interest rates on home and auto loans by 50 bps on all credit linked to prime lending rates (PLR).

    The revision in PLR came after SBI raised its PLR from 12.25% to 12.75% last week following the Reserve Bank of India increasing its key short-term lending rate to banks and the mandatory cash deposits (CRR)that banks need to keep with the central bank by 50 bps
each. Punjab National Bank also raised its PLR to 13%.
    The only solace for households is higher returns on deposits. Both HDFC and ICICI Bank have increased the interest rate on deposits. While HDFC has hiked it by 50 bps, ICICI will offer 50 to 100 bps more to new deposits and renewals.
Canara, BoI spare home loans
    IT MAYbe mentioned that HDFC had lowered its PLR by a quarter point in February. Meanwhile, two government banks Canara Bank and Bank of India decided to spare home loan and auto loan borrowers from the rate hike, even as they increased interest rates for other categories of borrowers. Canara Bank and Bank of India have raised their PLRs by 50 bps to 13.25%, but left home loan
and auto loan rates untouched. On a floating rate basis, Bank of India offers home loans in the band of 9.25-10% and Canara Bank charges 10-10.75%.
    On Monday, two other state-owned banks — Allahabad Bank and Dena Bank — announced their decisions to raise PLRs. Both banks have raised PLRs by 50 bps to 13.5%. Meanwhile, Canara Bank, Allahabad Bank and Dena Bank also raised their deposit rates by 25 to 75 basis points, while Bank of India is yet to take a decision on the same.





Sunday, June 29, 2008

firms that trade at a price

Ranjit Shinde and Supriya Verma tell you where to shop when you have just 100 bucks. Here is the list of companies which showcase robust financials and belong to the universe of firms that trade at a price
below Rs 100


"Psychology is probably the most important factor in the market — and one that is least understood."
    SO BELIEVES David Dreman, the guru of contrarian investing. His statement testifies itself more often than ever in times of panic in the stock market. A slump in the market may augment manifold the impression of every bad news on the investor's psyche. This may result in a lower risk-taking ability, while placing bets in the market.
    Though at ET Intelligence Group, weclosely track the stock market and provide insights on trends and future expectations, psychology and that too, market psychology, is not our expertise. But it becomes not only an interesting exercise, but also an essential one to tap into the way investors shape their thinking during times of turbulence.
    This week, ETIG presents a list of companies which have performed exceptionally well over the past three years based on a stringent set of parameters. Though this may appear to be a regular exercise from ETIG's stable, it is unique as it takes into account only those companies whose stocks have been trading at a price below Rs 100. The reason behind drawing up such a list in the first place was to address the issue of declining risk appetite of investors who feel battered by the recent crash in the stock market. But what does it have to do with the stocks
that carry a price tag of Rs 100 and below?
    The general perception is that stocks of blue-chip companies, which trade at prices in three and four digits, are expensive in terms of absolute numbers. Though their 'expensiveness' is backed by healthy business fundamentals, investors often turn their back on these heavyweight scrips during tough times. This is because it requires a sizeable kitty to buy a good number of shares of these companies. For instance, to accumulate 100 shares of a scrip that trades at Rs 3,500, one may have to shell out Rs 3.5 lakh. In happier times, it may not be a tough call for a retail investor to go for the kill. However, during market adversities, an investor may feel apprehensive about the same bet.
    In contrast, a scrip that costs, say, Rs 50 may call for a lower sum of investment and may appeal more for the same reason. This feeling of 'buying cheap' becomes prominent when times are bad. To help investors zero-in on the space populated by stocks that cost less than 100 bucks, ETIG carried out an exercise involving over 1,400 stocks. These were then put through a stringent criteria to select 10 stocks that fit the bill. Do read the methodology we put to use in order to get the list out.
    While these companies trade at a price below Rs 100, they boast of an enviable track record. Here, we present the list of 10 companies that met our criteria.
    The companies that have made it to our list are from various sectors. There are
four companies from the IT sector and two from electrical machinery. The list also contains two bearings companies.
    Interestingly, six out of 10 companies in our list are currently trading at a price-toearnings (P/E) multiple of less than 10. Further, the stock prices of two companies in the list have fallen more than 50% over a span of one year. The period encompasses the current fall in the market.
    We ranked the companies based on their FY07 revenues. On top was Kolkata-based storage battery maker Exide Industries. At Rs 2,085.5 crore, its FY07 net sales grew by 35.6%. This is the fastest rate of growth in the past three years. Sales further grew to Rs 3,606 crore in FY08. It has a debtequity ratio of 0.52 and generates an over 20% return on capital employed (RoCE).
    Berger Paints is the second company on the list. It is among the top few paint manufacturers of India. Apart from offering a range of paints, it also provides customised home painting solutions. At a 31% RoCE, the company has a low debt-equity ratio of 0.4. With a P/E multiple of 12, it is cheap when compared to the industry average of 24. However, its net profit margin is comparable at 7%.
    Teledata Informatics, which currently trades at Rs 15.9, is the third biggest company in our list. It provides software
solutions to utilities and education sectors and also offers network communications solutions. The company has been recording robust financials. However, its valuations have undergone a substantial decline over one year. The company, which was trading at a P/E of about seven times its trailing 12 month earnings, now trades at a P/E of about one. It needs to be mentioned that the company demerged its business late last year. Teledata's stock has fallen by about 71% in a year, the sharpest for any company in our list. Other software companies that secured a berth in our list were Aftek, Aztecsoft and Visesh Infotecnics. Apart from these companies, bearings companies NRB Bearings and ABC Bearings also feature in our list. Each of them makes ball and roller bearings. Each of them makes ball and roller bearings. Out of the two, ABC Bearings has a higher RoCE, yet it is currently trading at a lower valuation in terms of P/E. But there is a caveat emptor. Do not mistake this list for stock recommendations. Do a little bit of your own calculations and assess your risk appetite and only then take a plunge into these stocks. As they say, past performance is no guarantee for future returns... M E T H O D O L O G Y
AMONG 1,500 companies that were trading at a price below Rs 100, we selected companies with net sales of more than Rs 100 crore and profit after tax (PAT) of at least Rs 10 crore. We then looked for companies with robust financial performance. We started off by eliminating all those companies that had recorded less than 15% growth in net sales and PAT in any of the past three years. Further, we filtered companies on the basis of debt-to-equity ratio and return on capital employed (RoCE). While a high debt-to-equity ratio indicates that a company may not be able to generate enough cash to satisfy its debt obligations, a low leverage ratio increases a company's potential to raise funds. Hence, we selected companies which had a debtto-equity ratio of less than 1.5. In order to carry sustainable operations, it is necessary for a company to operate at an RoCE which is well above its cost of capital. Only those companies with an RoCE of more than 15% could make it to the next stage. The final criterion was to do away with all companies whose three-year average net cash flows from operating activities was less than 50% of their reported cash profit.





Reliance plans specialty stores for cellphones

RELIANCE Retail is planning to open a chain of specialty stores to retail mobile phone handsets across the country. The mobile handset retail initiative will be spearheaded by Navneet Saluja, who was earlier heading Reliance Retail's operations in Delhi-NCR. Reliance Retail stores will compete with similar stores of other major retailers, including Subhiksha, RPG and Essar-Virgin's The MobileStore. When contacted, a Reliance Retail spokesman said: "Our initiatives are a full spectrum design across various defined formats and categories within Reliance Retail. As regards separate mobile telephone format, we will make announcement at an appropriate time."
    Reliance Retail's strategy has been to have a large presence across all categories and formats and the company's foray into mobile phones is an extension of that strategy. The roll-out of food & grocery stores, Reliance Fresh, the company's best known format, has been quick although with its own share of controversies. But other specialty formats, which started slow, are now picking up. For a faster roll-out and in order to overcome challenges related to acquiring retail space, the company has chosen to take the franchisee route. Reliance Retail is also entering into alliances with foreign players for some of its specialty formats, where it thinks the foreign partners' experience could come in handy. Reliance Retail operates stores in various categories, including food & grocery, consumer durables and IT, apparel, wellness products, footwear, books & music, and jewellery.

    Samsung now 2nd largest player
THE high-voltage Indian cellphone market has undergone a fresh round of shake-up, reports Writankar Mukherjee from Kolkata. The latest ORG data reveals that while Nokia is enjoying the leadership position, there has been a change in the position for the second slot. Korean vendor Samsung has now replaced Sony Ericsson to emerge as the second largest player in the market. Recently released ORG report shows that Sony Ericsson has lost marketshare from 8.1% in March to 5.8% in May. Samsung, which increased its share to 7.4% from 7% between March and May, has jumped to the second slot.


10 drowning st

MUMBAI: Stock markets are known to defy logic. In early January, when stock prices were at stratospheric levels, the street was betting on the Sensex topping 25000. Six months on, the irrational exuberance is gone. Instead, there is a paranoia and some doomsayers are now predicting that the benchmark index will slide to 10000 before long.

The growing sense of gloom is reflected in the reports put out by a few prominent brokerages which have set a target of 12000 for the Sensex.

On the face of it, almost all factors — technical and fundamental — point to the market sliding further in the coming days. The Sensex has breached a key support level of 14000, and the Nifty is precariously poised above the 4000-mark. The worry lines are in the form of soaring domestic inflation and global crude oil prices and the shadow of early polls.

With rising interest rates threatening to put the brakes on local consumption growth, the operating margins of companies are already under pressure. Against this backdrop, analysts are not expecting the first quarter corporate earnings to provide any cheer either.

Several foreign institutional investors, once die-hard fans of the India growth story, are now fleeing in droves. Local mutual funds and insurance companies, on the other hand, have been net buyers of equities for the past few months, but that has had little impact on prices.

The scenario in global markets, too, is bad if not worse. According to Emerging markets Portfolio Funds Research (EPFR), investors have pulled out in net terms over $12 billion from emerging market equities during the first half of 2008 compared with a net inflow of around $2 billion same period last year. Developed markets fared no better, with net outflows totalling $104 billion for the half year, so far.

Given this gloomy scenario, is there any hope of salvation for the bulls? But just like cricket — the other national obsession — stock markets, too, are marked by glorious uncertainties.

Some contrarians feel that the pessimism now on display may have been overdone. Inflation fuelled by high oil prices has been cited as one of the main causes for the turmoil in the equity market. But according to some experts, it is not the absolute headline inflation number that is doing the damage.

In fact, it has been the rapid pace of the rise that has raised concerns of policy intervention by the government, which, in turn, could hurt corporate earnings in several sectors. And the massive selling by foreign funds over the past few months is likely to provide the foundation for the next round of upswing.

In the past couple of months, many hedge funds are said to have been going short on the Indian market by borrowing shares from foreign portfolio investors who are allowed to issue participatory notes (PNs) — derivative instruments which have as their underlying Indian stocks.

Since the PN-issuing foreign fund transacts on behalf of a number of overseas clients, and retains ownership of those shares, it has an assorted inventory of shares at its disposal. It can then lend these shares to those overseas funds which are looking to go short on the market, for a fee.

What is more, even those FIIs registered with Sebi, and which have presence in international markets, can borrow shares from a PN-issuing competitor through this offshore route. The steep fall in stock prices of sectors like realty and banking shares is said to be the handiwork of hedge funds who have been borrowing shares and then dumping them in the market.

Besides, some prominent market operators too are said to be heavily short in many frontline stocks. These players had covered up a part of their positions during last week's panic, but continue to remain bearish on the market.
Broking circles say that the market now looks oversold, and a whiff of positive news could spark off an all-round scramble to cover up short positions, thus sending stock prices shooting through the roof.

One such trigger could be a significant softening in crude oil prices. The market is already factoring in the worst — even $175 to the barrel — and in the event of oil prices slipping to $125 or thereabout, there could be an improvement in sentiment globally.

There is also a view that in the event of a recession in the US, investors may see China and India as relatively safe investment havens considering that these two countries have been fastest-growing economies in the world for a while. Given the worsening fundamentals back home, it is still possible that bears may have the last laugh after all. But it's unlikely to be an easy victory for the

Inflation may go up to 13% in two months: Experts


MUMBAI: Inflation is likely to peak to around 13 per cent over the next two months before gradually moderating to around 8.5 to 9 per cent by end of this fiscal, economists have said.

The country's economic growth too would moderate below earlier forecast of 8 per cent to around the 7.5-7.8 per cent level in FY 2009, they said.

"I expect inflation to peak to around 12.5-13 per cent in the next two months before beginning to decline. But double-digit inflation will continue at least for the next four to five months," Yes Bank's Chief Economist, Shubhada Rao said.

Global fuel prices present the most important concern to policy makers, the economists said. "Inflation will be contingent upon oil prices," Crisil's Director and Principal Economist D K Joshi said.

"Prices of products such as aviation turbine fuel and naphtha have shot up 40 per cent year-on-year," Enam Securities' Chief Economist Sachidanand Shukla said.

While inflation would peak at around 12.5-13 per cent, Joshi expected the yearly average inflation rate to be around the 8.5 to nine per cent mark.

This figure, again, is much higher than the 5.5 per cent projected by some economists earlier.

Rao, however, pegged the average at a much higher nine to 9.5 per cent.

Thursday, June 26, 2008

15% active stocks on BSE trading at 52-week lows


The stocks of about 15 per cent of the actively traded 3,300 companies have hit a 52-week low on the Bombay Stock Exchange (BSE) in the past couple of days.
 
The cutting of speculative positions built on colossal leverage sums, and the diversion of funds by top institutions to commodities such as crude oil and gold have taken its toll even on the so-called 'fundamentally strong stocks'.
 
The list includes some of the frontline companies such as ICICI Bank, Tata Motors, State Bank of India, HDFC Bank, Reliance Capital, Reliance Communications, DLF and Maruti Suzuki among others.
 
The stocks of over 55 large-cap companies, categorised as 'A' by BSE, have hit their 52-week lows. Other 200 mid- and small-cap companies and nearly 100 penny stocks have hit lows.
 
Out of nearly 5,000 BSE-listed companies, 1,500 have been suspended for non-compliance issues. 
 

FRONTLINE ATTACK

Stocks

52-week
high

52-week
low

ICICI Bank

1,465

675

Tata Motors

840

460

SBI

2,540

1,155

Reliance Capital

2,925

911

DLF

1,225

418

(Price in Rs)


While the Sensex has plunged by nearly 34 per cent, or 7,400 points, since its January peak, the shares of these companies have lost 40-70 per cent compared to their peak prices.
 
"It is the best time to invest in equities," believes Gaurang Shah, Geojit Financial Services' Vice President, Portfolio Management.
 
Investors should start looking at companies which do not depend on a single vertical for their revenues and purchase those stocks which they were trying to buy at peak prices. "Those looking for the markets to hit rock-bottom would regret as no one can predict it," Shah says.
 
If Ramdeo Agarwal, Joint Managing Director, Motilal Oswal, is to be believed, then the bear attack on the frontline stocks is not likely to last very long as is being deemed by marketmen.
 
"The corporate earnings would still be growing by over 20 per cent. And, it is likely that the economy could grow between 7 and 8 per cent, so there is no real need of worry. Also, the inflation would start moderating by the year end, considering the steps taken by the Reserve Bank of India," he says.



Wednesday, June 25, 2008

IDEA ADDS SPICE

To Acquire BK Modi's 40.8% For Rs 2,176 Cr Two cos to merge at a later stage; Telekom Malaysia to get 20% in the merged entity

IN ONE of the biggest deals in the Indian telecom sector, Aditya Birla group's Idea Cellular on Wednesday said it would acquire BK Modi's Spice Communications to strengthen its position in the growing telecom market. The deal consists of four related, but distinct transactions. To begin with, Idea will acquire the Modis' 40.8% stake in Spice. Subsequently, Idea will launch the mandatory 20% open offer for the Spice shareholders, jointly with Telekom Malaysia International (TMI). At a later stage, Idea will merge Spice with itself and offer a 14.99% stake to TMI through a preferential allotment. Idea will earn Rs 7,294 crore ($1.7 billion, assuming an exchange rate of Rs 43) by selling this stake to TMI. This would make it one of the largest FDI infusions into India.
    Idea has agreed to buy the Modis' 28.14 crore shares for Rs 77.30 each, totalling Rs 2,176 crore. In addition, it will shell out Rs 544 crore, or over Rs 19 a share, to the Modis as a noncompete fee. This is under the 25% limit (with reference to the open offer price to non-promoter investors) prescribed by the market regulator Sebi for such payments. The 14.99% preferential allotment to TMI will ensure that Idea, despite being the purchaser, ends up as a net gainer in the transaction. The net income for
Idea, after making payment to the Modis, will be Rs 4,574 crore.
    The Idea-TMI combine will launch the open offer at Rs 77.30 jointly with TMI, which now holds a 39.2% stake in Spice. At this stage it is not clear who will pick up how much. Idea will earn Rs 7,294 crore by selling 46.47 crore preferential shares to TMI for Rs 156.96 apiece. According to the merger formula, Spice shareholders will get 49 Idea shares for every 100 shares they hold. The payment to the Modis is being funded through internal accruals. After
completion of the deal, which is expected to be done in the next six months, Idea's equity base will be expanded due to issue of fresh shares to TMI, and also because of the share swap.
    On Wednesday, Idea scrip closed at Rs 102.05, up 2.9% while Spice scrip touched an all-time high of Rs 73.40, before closing at Rs 72.35, a 33% gain over the previous day's close.
    ETfirst reported on June 10 that Spice shares will be
acquired by Idea at between Rs 77 and Rs 78 per share. On June 12, we reported that TMI will buy just under 15% stake in Idea through preferential offer and will hold around 20% in the merged entity. "Spice will be delisted and TMI's holding in the new Idea (post-merger) will be a maximum of 20% (depending on the response to the open offer) and one non-executive board seat," AV Birla group chairman Kumar Mangalam Birla told ET. HOW DOES THE DEAL CHANGE THE TELECOM LANDSCAPE?
India will now have 11 telecom operators instead of 12 and the pecking order will change. Idea will become a stronger No.5 operator with over 31 million users. It is now just
5 million subscribers away from BSNL WHAT DOES IT MEAN FOR IDEA CELLULAR?
AV Birla Group company gets a foothold in Punjab and Karnataka, 4.4 million subscribers, a strategic investor in Telekom Malaysia and a net income of Rs 4,500 crore.
Idea turns a debt-free company
WHAT HAVE MODIS AND SPICE SHAREHOLDERS GAINED?

Modis make a cool Rs 2,720 crore by selling stake in the loss-making venture. This includes a non-compete fee of Rs 544 crore. Spice shareholders get 49
shares in Idea for every 100 shares held
HOW DOES TELEKOM MALAYSIA INTERNATIONAL BENEFIT?

It becomes a strategic investor in the 5th-largest operator in India. TM has 44 m users across 10 countries; Idea adds 31m to that. TM
will have one member on the new Idea board Idea to be a debt-free company
    THE management of the merged entity will be with the Birla group, which will have between 46% and 48% in the company. The 40.8% Spice Telecom stake being acquired by Idea from the BK Modi Group will be cancelled, post the transaction. DSP Merrill Lynch acted as the financial advisor to Idea, while Enam Securities worked for Modi. Lazard was the financial advisor to TMI.
    The deal makes Idea virtually a debt-free company because of the net gain of around Rs 4,500 crore from the deal. Around Rs 2,700 crore was raised by selling stake in Indus Towers to Providence Partners last month. "With this, we become a debt-free company and Idea takes on a high growth trajectory," said Mr Birla.
    Idea Cellular managing director, Sanjeev Aga, told ET the deal will give Idea an entry into Punjab and Karnataka, where Spice is present and which accounts for 11% of India's total wireless subscribers. Spice has 4.4 million subscribers. With a total of over 31 million subscribers postmerger, Idea will be the fifth largest operator in India, ahead of Tata Teleservices (TTSL) which has nearly 26 million users.
    It will also consolidate Idea's position, with its all-India market share increasing from 9.5% to 11.1%. Idea is
close to launching operations in Mumbai, Bihar, Tamil Nadu and Orissa in the next four-five months. With Punjab and Karnataka coming into its kitty through the deal, Idea will have almost a nation-wide footprint spanning 17 key circles.
    Also, Spice has spectrum in the 900 MHz GSM band, which carries more subscribers than the 1,800 Mhz band. Idea already has spectrum in the 900 Mhz band in seven circles areas, which will increase to nine, driving scale economies and operational synergies. "This will result in lower operating and capital expenditure," said Mr Aga.
    TMI has 44 million users across 10 Asian markets. "TMI's experience of operating 3G in similar markets will be of value to Idea, as also the convergent interests of the two companies in areas extending from international traffic to roaming and mobile value added services. Idea and TMI would sign a business co-operation agreement to this effect," Mr Aga added.
    Spice group chairman BK Modi said, "This divestment will enable Spice to redeploy resources and strengthen the group's mobile ecosystem businesses led by mobile VAS, mobile devices, telecom retail and customer support. This transaction makes Spice an operator agnostic services provider, where we will continue to provide services to the Indian mobile telephony market."






Tuesday, June 24, 2008

RBI Hikes Repo Rate, Cash Reserve Ratio By Half A Point Each

GOVT, MINT STREET GO ALL-OUT

IT'S WAR ON INFLATION

INDIVIDUAL borrowers, corporates, stock market investors and cash-starved property developers will have to walk a long, painful road, with their worst fears coming true. In a double blow, the Reserve Bank of India has hiked the benchmark repo rate and cash
reserve ratio (CRR) by 50 basis points each. Repo rate is the rate at which banks borrow from RBI, while CRR is the slice of customer deposits that banks set aside as cash with the central bank. The monetary actions, announced late on Tuesday evening, re
flect a desperate political leadership and a decisive central bank taking inflation head on.
    Home loan leader HDFC is expected to hike its interest rates and all banks, government-owned as well as private, will revise their prime lending rates. Thanks to hardening bond yields — a re
flection of interest rates in the money market — even sub-PLR loans will go up. "We will take a call on interest rate at the end of the week or Monday. Any new rate will be effective July 1. Those developers who have been merely accumulating land will face the crunch. However, I don't expect home loan demand to suffer," said HDFC MD Keki Mistry.For a home loan borrower, a 50 basis point hike in repo rate means an increase of Rs 35 in the EMI for every Rs 1-lakh loan. Large PSU banks like PNB are also planning to hike rates.
Not just home loans, two-wheeler, auto, as well as working capital for companies, will turn more expensive by 50 to 100 basis points. Banking scrips will be hit
hard by the move, followed by realty and auto.
    The key question is to what extent higher rates will affect investment demand, and pull down GDP growth.
SENSEX ON EDGE
The hike in repo
rate and CRR by RBI after the market hours on Tuesday could give the marauding bears another excuse to go on the rampage on Wednesday, after Tuesday's big fall.
Fund-raising to get tougher
    ACCORDING to Ambuja Cements MD AL Kapur: "Corporate margins and expansion plans will be adversely affected. Even raising money will be a huge task. This measure, which is aimed at controlling headline inflation, will put the economy in a Catch-22 situation."
    While the move was expected and only die-hard optimists in the financial market will be caught on the wrong foot, a twin hike will only deepen the gloom in the stock market. "...In the wake of a terrible week, it's not the best of news. Growth will suffer and markets are likely to remain under pressure, " said BSE broker Ramesh Damani.
    The half-a-point CRR hike will see close to Rs 16,000 crore being
withdrawn from the market. This comes at a time when the central bank is draining close to Rs 1,000 crore every day by selling dollars to support the rupee. The cost of overnight money has gone up to 8.5%, and on Tuesday banks borrowed Rs 38,000 crore from RBI. From Wednesday, their borrowing costs will go up by half-a-percentage point.
    Bharat Banka, president and head of finance at the Aditya Birla group, however, feels that corporate growth will not be affected in the short term. "No sector other than real estate and construction has so far faced any problem in raising funds at a reasonable rate," he said.
    According to Hemant Mishr of Stanchart: "The markets were positioned for monetary action after the higher than expected inflation
numbers over the past few weeks. Given the government and the RBI's resolve to contain inflation, we expect more action and a policy mix of monetary, exchange rate and fiscal steps to contain inflation."
    With overnight rates quoting at 8.5%, the yield on the 10-year bond is expected to shoot up closer to 9% in the short term. Spreads on corporate bonds are expected to widen to over 75 basis points, close to the 10% level. "If inflation continues at the present level, I expect that the yield on the 10-year bond would be in the 9% to 9.5% range," said Ashish Vaidya of HDFC Bank.
    Dealers said the increase in rates would also push up the cost of overseas borrowing for corporates, since hedging foreign currency will also be more expensive.






Sunday, June 22, 2008

Kronos upbeat on India, signs on Satyam as alliance partner

MUMBAI: US-based workforce management solutions major, Kronos, has signed on domestic IT major, Satyam, as its alliance partner for service delivery and implementation of its solutions.

Kronos has also acquired a prestigious customer in Pune-based Bharat Forge, taking its total customer base in the country to around 20 in less than a year, including several MNCs such as Nokia.

Buoyed by the good response, Kronos, which runs its Indian operations from Bangalore, now plans to enhance its brand in the country, build more partnerships and invest in marketing and advertising.

"We started our operations here in August last and since then we have grown very well. Now we want to take our business to the next level," Kronos' Vice-President--International Business, Mick Adamson said.

Growth potential was immense, Adamson said, adding that he was "very optimistic" about Kronos' growth in the country.

"There's so much of business in the workforce management solutions space - people want to manage employee costs and usher in higher efficiencies. They want to have sophisticated products to manage data," he said.

The company presently has 80 personnel in India with a development centre at Noida which develops Kronos applications.

Inflation: All eyes on the central bank


Our Bureau NEW DELHI



    THE CENTRAL bank is clearly now in the driver's seat in the government's fight against inflation. Calling it the first line of defence to douse scorching inflation, the government said the Reserve Bank of India would take monetary steps to counter inflation and address inflationary expectations.
    RBI governor Y V Reddy met prime minister Manmohan Singh and finance minister P Chidambaram and discussed measures to control inflation.
    Finance secretary D Subba Rao said: "We expect the central bank to take some more action. It is for the RBI to take a decision and do so when it is appropriate. The RBI governor has held discussions with both the prime minister and the finance minister on Saturday."
    The RBI is scheduled to review its monetary policy on July 29. It is not clear whether the central bank will wait to take steps till the US Federal Reserve meeting, where its chairman Ben S. Bernanke is expected to bring in a pause in view of rising inflation in the world's largest economy.
    On whether the government had run out of fiscal options to control inflation, Mr Rao said: "The government has not run out of fiscal options to control inflation, but the first line of defence in monetary action by the RBI." Inflation touched a higherthan-expected double digit figure of 11.05% — a 13-year high for the week
ended June 7. This reflected a 10% increase in administered fuel prices on June 4. The RBI had hiked the repo rate by 25 basis points to 8% on June 11.
    The RBI will take into account all factors before taking these steps. Finance ministry officials felt that increasing interest rates would not have an impact on real interest rates in the long term, therefore not affecting investment demand. Deposits are already accruing negative returns. Bankers and analysts expect the RBI to hike both the repo and cash reserve ratio by at least 25 basis points.
    Arvind Virmani, chief economic adviser to the ministry of finance, said: "The increase in inflation this time is different from the earlier supply side shocks. Similar shocks have been experienced by other economies. What monetary action will do is to put a lid on inflationary expectations. Central banks across the world are moving to address inflationary expectations. There are limits to how much we can manage supply side pressures. As pointed out, even if demand side pressures are not a part of the problem, managing demand can be a part of the solution."
    "There is certainly a trade off between growth and inflation. And in times like this, inflation will be top priority. The GDP growth rate projections remain as stated at 8.5%, with a plus or minus difference of 0.5%," Mr Rao said. Mr Chidambaram has said in his statement that cutting taxes and thereby borrowing more to finance expenditure will also prove to be inflationary in future.








The Week That Was

corporate
Ranbaxy, Pfizer settle Lipitor dispute

RANBAXY Laboratories made another big announcement a week after its promoters sold their shareholding to Japanese drug major Daiichi Sankyo. The Indian drugmaker and US pharma giant Pfizer announced that they have reached an out-of-court settlement over the world's largest selling drug, Lipitor (Atorvastatin). The settlement allows Ranbaxy to launch its generic version of Lipitor, the $12.7-billion cholesterollowering medicine, and combination drug Caduet on November 30, 2011, in the US with 180-day exclusive marketing rights along with the innovator company. Industry estimates peg Ranbaxy's revenue going up for Lipitor at $1.5 billion over a four-year period. A day after the announcement was made, Ranbaxy's shares fell by 7.68% or Rs 45.95 to close at Rs 552.25 on the Bombay Stock Exchange (BSE).
ADAG THREATENS LEGAL SUIT AGAINST RIL
After the initial shock and awe of RIL's sudden intervention into the probable Reliance Communications-MTN (South African telecom major) deal, the Anil Dhirubhai Ambani Group (ADAG) adopted an aggressive posture, threatening to take up legal action against Mukesh Ambani-led Reliance Industries. Earlier, RIL had claimed that MTN would have to consider the legal implications of acquiring Reliance Communications. However, talks between both the parties (RCOM and MTN) continued on the due diligence on RCOM. The proposed deal is worth $70 billion.
TARO PHARMA FILES SUIT AGAINST SUN
Isareli firm Taro Pharma commenced litigation against its former suitor Sun Pharma to prevent the Indian company from blocking the sale of its Irish unit. The litigation was filed in Israel. Taro has also cautioned its investors against selling its shares to Sun Pharma, which already holds a 34.4% stake in the company. In May last year, Sun Pharma had entered into an agreement with Taro to acquire the company for $460 million. However, last month, Taro Pharma announced that it had unilaterally withdrawn from the sale agreement, citing low valuation of the company after it made a financial turnaround. Taro has also invited Sun to submit an offer to purchase the Irish operations. If it wishes to do so, the company said that it would seriously consider the offer.

    economy
Direct tax collections
    rise, Govt relieved
DIRECT tax receipts rose 71.3% in the first two months of the current fiscal year from a year ago, indicating the economy was sustaining its growth pace. The buoyancy in revenue collection comes as a relief for the government, which is struggling to meet fiscal deficit targets amid the pressures of a soaring subsidy bill and farm debt waiver. The Central Board of Direct Taxes on Wednesday said that corporate tax receipts in the April-May period rose 68.05% to Rs 8,126 crore from Rs 3,185 crore in the same period last year. Income tax collections (including FBT, STT and BCTT) grew 73.05% to Rs 14,690 crore from Rs 8,489 crore. Total direct taxes for the twomonth period stood at Rs 22,840 crore, up from Rs 13,335 crore. The robust growth in direct taxes was achieved despite larger refund payouts at Rs 9,014 crore. Tax deducted at source (TDS) continued to grow this fiscal at about 51%. Refunds were issued to over 48 lakh taxpayers, compared with about 44.5 lakh worth refunds in 2006-07. The criteria for issuing refunds without verification of TDS instruments have been relaxed to gross TDS claims of up to Rs 5 lakh and net refund claim of Rs 25,000 per taxpayer. This is to provide better taxpayer services, particularly in issuing of refunds.
STATE GOVTS ASK CENTRE TO SHARE LOSS
State governments asked the Centre on Monday to share at least half of the Rs 8,000-
crore revenue loss they would incur on account of reducing duty on petrol, diesel and cooking gas this fiscal. State governments, which obliged the central government by reducing taxes on petro products, have limited power to generate resources, empowered group of state finance ministers on VAT chairman Asim Dasgupta said. While reducing the duties on crude, petrol and diesel on June 4, forfeiting Rs 22,660 crore a year, prime minister Manmohan Singh had asked state governments to slash sales tax rates on fuel. States such as West Bengal, Kerala, Tamil Nadu, Maharashtra, Haryana, Bihar, Gujarat, Andhra Pradesh, Delhi, Orissa, Uttarakhand and Goa immediately obliged Mr Singh. The committee also asked the civil aviation ministry to give details of how prices of aviation turbine fuel (ATF) are fixed. Civil aviation minister Praful Patel last week made a strong case for giving ATF declared-good status in a meeting with prime minister and finance minister.
technology
BPOs may feel inflation heat soon

THE Indian BPO sector may also feel the heat of double-digit inflation, causing vendors to increase prices for their services, a study published in June by research firm DataMonitor seems to indicate. The study that tracked pricing for contact centre services globally found that one of the largest influencers on price shifts in the outsourcing sector relates to changes in inflation in the delivery locations. "Across selected markets, there has been some increases in general pricing ranging from as low as 2.4% to nearly 8%, which need to be taken into account by the vendor in the form of reduced levels of profitability or by passing inflationary increases back to the client," the study carried by lead analyst Peter Ryan and his team said. The study was based on how inflation moved in 2007 in UK, US, Mexico, China, India, Philippines and other countries. India had the highest rise in inflation among the listed onshore and offshore locations after Philippines and South Africa. The study was done across three categories, onshore locations such as UK and US, mature offshore locations such as India and Philippines and emerging offshore locations such as Argentina and Chile.
SPECTRANET BOUGHT FOR RS 125 CR
Spanco Telesystems and the promoter group of Shyam Telecom have acquired Spectranet, Punj Lloyd's internet services provider (ISP) arm. The deal is reported to be in the region of Rs 125 crore. Spanco and the Shyam group will together hold 100% in the entity through a joint venture, Citycom, formed for this purpose. Spectranet employs 350 people across Delhi, Bangalore and Mumbai. It offers internet services, internet data centre services, managed optic fibre build out and maintenance, and cable TV solutions. Spanco and the Shyam group intend to invest in expanding broadband network from the existing three cities to about 10. Chandigarh, Chennai, Jaipur, Ahmedabad, Kolkata and Pune are some of the cities it plans to extend the network to. A communication from the company said around Rs 500 crore will be invested in network expansion. The JV is an equal partnership but may eventually have larger holding from the Shyam group, which also has other interests in telecom. The Shyam group operates telecom services in Rajasthan through Shyam Telelink and has Shyam Telecom, a listed entity in telecom equipment manufacturing, in its fold.

    markets
    
Sensex down 4%,
touches 43-week low
THE market mood has turned distinctly bearish following a slew of negative factors as the benchmark sensex lost lustre for the fifth week in a row and ended the week down by over 4% to nearly 43-week low of 14,571.29. Spiralling inflation to double digit at 11.05% due to higher crude oil prices, sustained selling by foreign funds and political concerns mainly weighed on the market sentiment which dragged the sensex to its lowest level in the current calender year. The Bombay Stock Exchange (BSE) barometer virtually crashed by 2,863.65 points or 16.42% in last five weeks. It also slumped by a whopping 6,635.48 points or 31.29% from its all-time peak of 21,206.77 recorded on January 10 in the current calender year. The benchmark sensex gyrated in a wide range of 15,789.62 points and 14,519.27 points before concluding the week at 14,571.29 points from last weekend's close of 15,185.92 points, a steep fall of 618.33 points or 4.07%. The Sensex has not seen this level since August 24, 2007 when it closed on 14,424.87 points. Similarly, the S&P CNX Nifty of the National Stock Exchange (NSE) also tumbled by another 169.55 points or 3.75% to end the week at 4,347.55 from previous weekend's close of 4,517.10 points. Inflation which was higher than market anticipation created a flutter on the bourses with the benchmark sensex tanking over 500 points on Friday.

Weak global cues also cast shadown on the market sentiment. Not a single sectoral index, mainly interest rate sensitive, ended the week in positive terrain as selling emerged all across the board. Realty, capital goods and oil and gas indices suffered a sharp setback. The sectorial BSE-Realty index was the worst sufferer and ended the week sharply down by 437.09 points or 7.51% on widespread fear that RBI is likely to take monetary measures further to stem inflation which led to slower growth of the sector. The BSE-CG index crashed by 619.37 points or 5.15% to end the week at 11,399.79 points and the BSE-Oil&Gas index by 497.12 points or 5.01% to 9,419.89 points. Foreign Institutional Investors (FIIs) nearly pulled out Rs 7,478 crore in the current month till June 19 and sold shares worth Rs 22,847 crore in the current calender year so far, mainly weighing on the market sentiment. The broad-based BSE-100 Index dipped by another 301.37 points or 3.76% to finish the week at 7,716.24 points from last weekend's close of 8,017.61 points. The BSE-200 Index and the Dollex 200 were also quoted sharply lower at 1,809.24 and 701.00 at the weekend compared to last weekend's close of 1,879.05 and 728.69 respectively. The BSE-500 Index plunged by 217.01 points or 3.64% to end the week at 5,747.62 points from 5,964.63 points and the Dollex-30 too ended lower at 2,784.04 from 2,904.75 at the last weekend.
politics
Mumbai Sikhs protest,
demand action
Thousands of Sikhs blocked railway tracks, damaged a station and observed a shutdown in parts of Mumbai Saturday to protest the killing of a member of the community by the Dera Sacha Sauda sect chief's bodyguards. They vowed to continue "peaceful" protests until the culprits were brought to book. Around 5,000 Sikhs squatted on railway tracks near Mulund station and stopped
suburban and long distance train services from 11.30 am, causing hardship to thousands of office-goers and college students. A Central Railway spokesman said the agitators blocked all the four lines and damaged the Mulund railway station. The blockade was lifted after two hours with police help and train services were resumed, he added.
MCCAIN ATTACKS OBAMA OVER TRADE
Republican presidential candidate John McCain ventured to Canada to attack his
Democratic opponent on trade, while Barack Obama dismissed McCain's push for U.S. offshore oil drilling as making ``absolutely no sense.'' The rivals were hammering at each other on economic issues that are key to American voters'. McCain attacked Obama over his opposition to the North American Free Trade Agreement while Obama jabbed at McCain's proposal to allow offshore oil drilling. The Federal Election Commission also showed the two presumptive presidential nominees almost even in fundraising during the month of May.











Thursday, June 19, 2008

Traders look for a future in Hang Seng

Index Futures In HK Bring Profits

"WHAT is in a name?" asked Shakespeare. Day traders on Dalal Street could not agree more. If trading in an index future nets decent profits at the end of the day and gives them their daily high, it does not matter if that index is called Hang Seng or Nifty.
    Faced with shrinking volumes and volatility in the futures and options (F&O) market in India, some adventurous day traders have decided to seek their fortunes in the Hong Kong market, but without the trouble of having to emigrate.
    For the past few weeks, day trader Amol Bhovad (name changed), and his friends in the same profession, have been starting their trading activities at 8 in the morning (Hong Kong is two and a half hours ahead of India, and trading starts at 10:00 am local time). Thanks to a tie-up with a broker in Hong Kong, who has provided them access to an online software enabling them to trade on the Hong Kong Stock Exchange, Bhovad and his group can directly trade in Hang Seng futures, subject to the limits specified by their broker.
    This is similar to the software provided by some leading retail brokerages, whereby traders can transact over the internet at a speed very close to that offered by lease lines.
'Internet trading in Hang Seng
futures cheaper'

    ACCORDING to Bhovad, two key factors why they zeroed in on Hang Seng are transaction costs and the daily movement in the index.
    The transaction cost on Rs 1 crore worth of Nifty futures, inclusive of securities transaction tax, stamp duty, turnover fees etc, works out to around Rs 1,280. It costs about one fourth of that to transact in Rs 1 crore worth of Hang Seng futures over the net.
    Also, the Hang Seng is somewhat similar to the Nifty in terms of its constitution. The Nifty consists of 50 stocks, while the Hang Seng is made up of 43 stocks. Also Hang Seng futures are liquid without the index being too volatile.

    "We are just beginning to get a feel of that market," says Bhovad, "it will be some time before we can make consistent profits, but we are confident of getting there in the next couple of months."
    For Bhovad, like most other day traders, profit margins have been squeezed by the ongoing slump in the stock market since January this year and the move to remove the income tax rebate on STT and instead treat that as a business income.
    "Being enabled to trade in Hang Seng is one thing, but making profits on those trades is quite another," says Om Prakash Damani, director Pratibhuti Vinihit, and with over two decades of experience as a trader. He dismisses the new-found interest in Hang Seng as a fad, one that will die out before long.

    "For that matter you can trade in any international market sitting in India, but unless you are well acquainted with those markets, the probability of losing money is higher," he adds. Market watchers say a few reputed market operators had tried dabbling in oil futures in the last couple of months, but lost a packet after their bets went awry.





IT Returns - E-Filing ( very useful information)

Please forward to all your friends and family members.

You can submit your IT return on-line by following process.

1. GO TO http://incometaxindiaefiling.gov.in/portal/index.jsp

2. REGISTER AND CREATE USER (USERNAME AS YOUR PAN NO)

3. GO TO https://incometaxindiaefiling.gov.in/portal/individual_huf.do

4. DOWNLOAD ITR-1

5. FILL THE FORM

6. CHECK THE FORM

7. GENERATE BARCODE

8. GENERATE XLS AND SAVE ON YOUR SYSTEM

9. GO TO https://incometaxindiaefiling.gov.in/portal/login.do AND LOGIN AGAIN  

10. CLICK ON SUBMIT RETURN.

11. UPLOAD XLS FILE.

12. CLICK ON UPLOAD.

 
Congratulations: YOU HAVE SUBMITTED YOUR RETURN.

YOU CAN ALSO CHECK YOUR refund STATUS IF ANY.

 

Thursday, June 12, 2008

Mega projects set for rollout key to Reliance’s global play


Our Bureau MUMBAI



    RELIANCE Industries (RIL) will soon join the big league once its refinery and offshore gas fields begin production, chairman Mukesh Ambani told shareholders on Thursday.
    "Reliance is now on the verge of a quantum leap in one of its several growth platforms — energy. Two very large projects founded on the energy growth platform will be commissioned in the second half of this financial year. They are historic milestones in Reliance's leap to global heights," Mr Ambani said at the company's 34th annual
general meeting in Mumbai.
    The $5.7-billion refinery at Jamnagar Export Refinery Project (JERP), with a capacity of 27 million metric tonnes per annum, will be the largest refinery site in the world once it starts before December this year. Commissioning of oil and gas production systems will amplify Reliance's stature in deep-water oil and gas
space, Mr Ambani stressed. The East-West gas transmission system, built by Reliance Gas Transportation Infrastructure (RGTIL)and which connects major Indian towns and cities, is already setting new benchmarks.
    "These projects will enable Reliance to become a major energy player. They are set to make a material difference to the global energy industry. And they will help transform India's energy security. In the process, Reliance is poised for a historic leap. From India's number one company to the world's leading energy giant."
    Analysts, however, are more cautious in their assessment. Merrill Lynch in its latest research report dated June 10 on oil and gas has kept RIL's exploration and production valuations unchanged. The report said, "RIL-RNRL litiga
tion could delay D-6 gas production start and ramp-up. Other than the execution risk, the biggest risk with the D-6 production and rampup is the RIL-RNRL litigation."
    The Bombay High Court has restrained RIL from selling gas from Krishna Godavari (KG) basin to third parties. The next hearing is scheduled on July 22 when the court resumes after vacation. RIL shares on the BSE marginally gained 1% or Rs 22 to close at Rs 2281.75 over the previous day's close. The shares have gained 1.5% in the past one week and have lost over 10.5% in the past one month.

'If you don't like
    RIL stock, sell it'
MUMBAI: If you don't like the Reliance stock, sell them away," an irate Mr Ambani told a shareholder at Thursday's AGM pestering him about bonus shares. The shareholder argued that Mr Ambani is spending Rs 8,000 crore in building the world's costliest house, another Rs 600 crore to gift an aircraft to his wife and when it comes to rewarding the shareholders through bonus issue, he turns a miser. Mr Ambani tried to pacify him and invited him to have a cup of tea, but the shareholder carried on and warned Mr Ambani that he may come down to the earth one day. The shareholder also alleged that Mr Ambani did not stick to his words and has not awarded a bonus despite having promised one in the past few AGMs. This further angered Ambani and he banged on the dais and said, "Don't speak a lie at a corporate AGM. This is not a political meeting. The proceedings of every year AGM are recorded and I never promised any bonus issue. It is a decision to be taken by the RIL board. Corporates mein aisa hi chalta hai... (This is the way how corporates function)." — Our Bureau

RIL chairman, along with his wife Nita Ambani, at the company's AGM in Mumbai — Nalin Solanki



Big 6 Switch to bigger deals, corner 2.4% of global work

THE top six India-based offshore service providers, collectively referred to as the 'SWITCH' companies (Satyam, Wipro, Infosys, TCS, Cognizant and HCL Technologies), accounted for 2.4% of the total worldwide IT services market in 2007 as compared to 1.9% in 2006, according to a report by Gartner.
    Collectively and individually, this group of companies have achieved growth rates that have outpaced the rest of the market, Gartner said while adding: "All indications are that the Western European market is the next target growth area for offshore services."
    Arup Roy, senior research analyst, Gartner, said: "With such strong growth rates that exceed the overall market, the Indiabased IT services providers are increasing in their competitiveness
    and taking market share away from the
rest of the market. Increasingly, they are competing in larger outsourcing deals, with deal values routinely exceeding $100 million and spanning multiple years."
    The growth rates experienced by these IT firms has also seen them expanding expanding into a broader base of services. "Consequently, they (SWITCH companies) are now regularly invited to bid for larger and
more-complex outsourcing contracts, requiring multiple services. There is a gradual shift in increasing their revenue share from discrete project-based outsourcing services to annuity-based multiyear outsourcing contracts, thereby ensuring ongoing revenue streams. The approach has involved expanding the portfolio of service offerings, tapping new regions and focusing more on high-value services," Mr Roy said. In 2007, the India-based group of SWITCH companies accounted for 3.6% of the US IT services market, compared with 2.8% in 2006 and grew its Western European revenue 51% in 2007, almost four times the total market. In 2007 the group accounted for 1.9% of the Western European IT services market, compared with 1.5% in 2006.





VALUE PILL


EVEN IF THE SCRIP TRADES ABOVE RS 500 AFTER THE OPEN OFFER, YOU STAND TO PROFIT, SAY ANALYSTS

Ashish Rukhaiyar MUMBAI



    THE impending open offer price of Rs 737 per Ranbaxy share does not seem to have arbitrageurs excited. This is evident from the lacklustre trend in the stock price since the deal with Daiichi was announced pre-market hours on Wednesday. On Thursday, Ranbaxy fell 3.1% to close at Rs 543.50. But market watchers feel there could be decent — if not lavish — money to be made from the open offer after factoring in various assumptions like company fundamentals, valuations, number of shares tendered in the open offer, future prospects and post offer price of the stock.
    Interestingly, many brokerages were peddling their analysis of the "money making proposition" on Thursday in their attempt to please their clientele for whom the recent past has been tough. According to one such study, even if Ranbaxy shares trade in a price upward of Rs 500 post the open offer, investors stand a chance to make a decent profit.
    The explanation goes like this. Since minority investors hold a little over 65% in Ranbaxy, only one-third of the shares submitted in the open offer will be accepted, assuming all minority investors participate. An investor, who buys 100 shares from the market for Rs 543.50 and tenders them in the open offer, will receive Rs 737 per share for only 31 shares, while the remaining 69 will be returned to him.
    The average price for these 69 shares would come to Rs 456. For the investor to make a meaningful profit on his remaining shares, any price above Rs 480 would suffice.
    CLSA, on Thursday, termed the offer "attractive from minor
ity shareholders perspective". "With a minimum 30.7% of shares being likely to be accepted in the open offer (Rs 737 per share) and our fair price estimate of Rs 525 per share (for residual 69.3% shares), we arrive at target price of Rs 590," said the foreign brokerage.
    However, therein also lies the catch. For, analysts who feel that there is not much on the table for investors, say there is no guarantee that price would remain above Rs 500 post-open offer. They are of the view that the stock would come under heavy selling pressure after the open offer as investors who bought with the sole aim of arbitrage gains would sell in the open market. There are many who differ as institutional investors who hold more than 40% are long-term investors and typically do not resort to selling in the open market after the open offer. This would take care of the stock price after the open offer, they add.
    Valuations also suggest that investors stand a chance to profit from the sale of residual shares in the open market. Currently, the stock is trading at a PE of 33.87. Historically, Ranbaxy has been trading at higher PEs compared to its peers like Cipla and Dr Reddy's Labs. At a price of Rs 500, the PE would come to around 31, which is only slightly higher than its 2007 average PE of 28.62. KRIS director Arun Kejriwal said the deal is a sure way of generating "risk-free return". "In uncertain times, when people are not confident whether the bottom has been made, Ranbaxy offers a good opportunity to park money," says Mr Kejriwal.
    However, the preferential issue would also play an important role as it would change the acceptance ratio. If the preferential issue is made before the open offer then the capital base would be enhanced, affecting the acceptance ratio.
    ashish.rukhaiyar@timesgroup.com 




Tuesday, June 10, 2008

Google Alert - india shares and stock market

Google News Alert for: india shares and stock market

Indian Rupee Falls to 14-Month Low; Stock Slide to Spur Outflow
Bloomberg - USA
The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 1.2 percent today, extending yesterday's 3.25 percent slump, the most in two months. ...
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Nifty June turns into premium
Economic Times - Gurgaon,Haryana,India
MUMBAI: In a topsy-turvy trade, Indian stock market recovered from the day's low but ended in negative territory Tuesday. The recovery was on the back of ...
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Google Alert - india shares and stock market

Google News Alert for: india shares and stock market

Stock slide pushes Nifty to lowest 2008 close
Economic Times - Gurgaon,Haryana,India
"But, this is not to say the India growth story has vanished. Blue chip companies are not going to close down just because their shares are trading sharply ...
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Monday, June 9, 2008

Sebi cracks the whip on insider trading, moots new norms

MUMBAI: The Securities and Exchange Board of India (Sebi) mooted a reduction in the deadline for disclosing price-sensitive information such as change in shareholding, voting rights etc.

Any acquisition or sale of shares may be disclosed within two days of the trade instead of 9 now, if the proposal is notified.

Sebi on Monday said the amendments were suggested because "in order to have an efficient market, it is essential that all relevant information which has an impact on the price of the shares of a company is promptly disseminated to the market."

So the director or major shareholder or a person exposed to essential information will have to inform the company within one working day of trading the shares or getting a confirmation of the transaction being completed.  The company, in
turn, would be given another working day to inform the exchanges.

Currently an insider gets 4 working days to disclose, while the company is given 5.

The rationale for the said disclosure is diluted over the 9 days provided for it said the Sebi consultative paper on amendments to SEBI (Prohibition of Insider Trading) Regulations, 1992.




Oil-Rich Nations, BRICs Lift IT Industry

SPENDING ON IT is set to rise despite a US-led economic slowdown, as oil-rich regions, such as Russia and the Middle East spend their petrodollars on large-scale IT projects. The rising popularity of low-cost, ultra portable laptops in emerging markets in China, India and Latin America will also boost the global technology industry, which is facing signs of weakening corporate spending as the US subprime crisis hits company earnings.
    Executives from top IT companies were bullish on their prospects at last week's Computex trade fair, saying growth was looking good even at a time of shaky consumer confidence, wobbly company earnings and rising raw materials costs. "Some of the key growth drivers will be big emerging markets. The BRIC countries (Brazil, Russia, India and China) hold a lot of promise," said Robert Chu, VP of Asia Pacific at Hitachi's hard disk drive unit. IT spend by companies, consumers and governments may grow 6% to $1.43 trillion this year, compared with 7% growth a year earlier, with weakness in the US largely offset by growth in BRIC nations and other vibrant economies. Although rocketing oil prices have dented earnings, they are also allowing oil exporters to spend more on technology. "High oil prices are pushing up the economy in Russia and the Middle East, driving the ability of companies and the governments to keep increasing their IT spending," said Stephen Minton, VP of IDC's Worldwide IT Markets.
    Dell underlined the optimistic outlook last week when it posted a higher-than-expected quarterly profit, driven by cost cuts and strong demand from consumers and markets outside
the US. Facing soaring fuel and food costs, and finding lenders less willing to hand over cash, consumers are turning to cheaper, smaller laptops, called Netbooks, or mobile internet devices. The rising popularity of Netbooks is another area where technology companies can achieve growth. Asustek Computer expects sales of its handbag-sized Eee PC laptops to double to 10 million units next year, while Acer said smaller, cheaper laptops are seeing significant growth from emerging markets. "The notebook market is growing for the next 2-3 years, and with the entry of new mobile internet devices, the market can double in size, changing the profile of the industry," Acer president Gianfranco Lanci said.
    Intel also sees potential in the market for lowcost computers. But analysts are wary about corporate tech
spending. "In the past, what happened to the economy in a year started affecting IT spending in the middle of the following year. There's a possibility that subprime-related impacts will appear a bit later," Gartner research director Hiroyuki Katayama said. reuters



 

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