FIRST ORDER 25%

We recommend

Thursday, May 31, 2012

House-hunters beat bandh for Mhada lottery

Mumbai: For Vinayak Pagare, a 40-something businessman owning a travel agency, early afternoon is normally the time he meets prospective clients in his Thane office. But, this Thursday was different for Pagare. Notwithstanding the bandh call to oppose petrol price hike, Pagare and his wife were at Rang Sharada auditorium at 11 am where the lottery to sell 2,593 Maharashtra Housing and Area Development Authority (Mhada) flats was being conducted. 
    "I know winning a lottery is pure luck, but being present at the venue and hoping against hope to win a home were more pressing concerns than that of the bandh,'' said Pagare, after spending a disappointing one-hour watching the giant screen roll out names of successful winners of Mhada lottery. 
    This is the third time Pagare didn't win a flat inthe lottery. 
    Pagare was not the only one. A large number of Mumbaikars—though not in lakhs as in earlier lotteries—had beaten bandh concerns to turn up at the venue. "I wanted to see how the lottery was conducted and was hoping my family wins a flat,'' said Maya Korde, a 30-something film artiste from Goregaon. She, along with her kin, had applied in 10 projects. S B Ballal, a retired professional and his wife, had come all the way from Pune to reach the venue at 11am. 
    The bandh apart, Mhada's decision to reject 11,179 applications over discrepancies in details provided saw angry protests by applicants. According to an aggrieved applicant, Dr Ashok Sabale, "Either Mhada is confused about its own rules or the software is faulty. How can applications of a couple be rejected merely for bearing the same bank account number? Is it not obvious that a working couple like us could hold a joint bank account but have separate PANs?'' 
    Mhada had rejected all six applications made separately by Sabale and his wife. Satish Gavai, Mhada's chief executive officer dismissed the protests as stray incidents. "We were very clear that no concessions would be given this year and that every applicant should hold a unique bank account and a PAN card. We did this as only agents have the financial capacity to apply in multiple projects,'' said Gavai. 
    Prabhu Khot, an accountant who volunteered to work as an observer in the lottery, won an LIG flat in Malwani. Khot won the lottery after applying three times. Similar was the case with Renuka Bhopale, a Mhada employee, who won an MIG flat in Malwani. 
Next draw in 2013 
Mhada is planning another lottery to sell 4,272 flats in 2013. Of these, the bulk of 2,486 flats will be located in Virar for Land MIG flat purchasers. The rest of the flats are located in Kole Kalyan (Santa Cruz), Charkop, Malwani, Powai, Mulund and Kurla and will comprise Economically Weaker Section, LIG and MIG buyers. There will no flats for the HIG.


QUICK CHECK: Hopefuls at the lottery


Economy gasps as growth sputters to 9-yr low of 5.3% 6.5% GDP Rate In 2011-12 Way Below Govt’s Estimates

New Delhi: India's economic growth has come down to a nine-year low of 5.3% in the January-March quarter of this year, showing up in bolder relief than ever before the signs of the severe stress in the economy, and prompting calls for urgent action to reverse the trend. 
    Data released by the Central Statistics Office (CSO) on Thursday showed growth in 2011-12 stood at 6.5%, much lower than the 8.4% posted in the previous year. It was below the government's previous estimate of 
6.9% and way off the mark of estimates handed out periodically by top government policymakers. 
    The Indian economy, once the star among emerging market economies, has steadily slowed since the January-March quarter of 2010-11, and on Thursday after digesting the January-March growth figure of 5.3%, some economists cut their growth estimates for 2012-13. 
    The manufacturing sector growth fell 0.3% in the March quarter compared to an expansion of 7.3% in the corresponding period the previous year. Agriculture posted a growth of 1.7%, sharply lower than the 7.5% growth in the March quarter of 2010-11 For the full year, the manufacturing sector grew 2.5% in 2011-12 compared with 7.6% in 2010-11. 
SLUGGISH ELEPHANT March quarter GDP growth at 5.3%, against 9.2% in Q4 of 2010-11 
Manufacturing scrapes the bottom with 0.3% decline, agriculture grows just 1.7%, services slow down to 7.9% from 10.6% 
Overall 2011-12 growth at 6.5%, lower than estimates of 6.9% Economists are scaling down growth projection 
for 2012-13 
Industry in gloom. Says govt should pull out all stops to stem the slide 
Growth in core sectors slows to 2.2% in April 
    Growth in the eight core industries slowed in April, pointing to a rut. Coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity grew 2.2% in April, lower than the 4.2% posted in the same month last year. P 19 
Govt in denial? FM hints that the worst is over 
    The finance ministry seemed to be in denial on Thursday, with officials saying India was still growing faster than many Eurozone countries. Pranab Mukherjee too suggested the worst was over, saying the factors for sluggishness had "bottomed out". P 19 Experts urge govt to step up reforms
New Delhi:The slide in the economic growth has led to calls for quick action on the part of the government. The sluggishness in the services sector, which accounts for nearly 60% of GDP, emerged as a worry for policymakers already burdened by the slowing economy and stubborn inflation. Data showed the services sector growth slowed to 7.9% in the March quarter compared with a10.6% expansion in the sameyear-ago period. The domestic demand-driven economy has been hit hard by high inflation, interest rates, rising global commodity prices, lack of economic reforms and delay in implementation of projects. This, in turn, has hit business confidence, forcing domestic players to explore investment options overseas. 
    Policymakers have consistently blamed the global economic environment and the lack of cooperation from the opposition in approving key economic legislations as reasons for the slowdown. The March quarter data came on a day when the opposition had called for a shutdown to protest the sharp increase in petrol prices. Analysts say the disappointing growth numbers could spoil the mood further and heighten the anxiety. 
    Finance Minister Pranab Mukherjee termed the March quarter data as disappointing but said the figures should be seen in the light of overall global developments. He attributed the slowdown to tight monetary policy and the weak global sentiment affected growth in domestic private investment. 
    But economists pointed to two key risks which included uncertainty about the monsoons and the European debt crisis and said the need of the hour was to step up reforms and ease supply bottlenecks.


COME AGAIN? 
There are several reasons that growth is almost universally predicted to be sustained at a high rate of 8-9% per annum and more, over the next few decades... —PRANAB MUKHERJEE ON AUG 6, 2011




MHADA lottery 2012 declares 2,593 winners; check your luck

Mumbai: The Maharashtra Housing and Area Development Authority (MHADA) has announced the lucky-draw results for MHADA lottery 2012, for the sale of 2,593 flats in Mira Raod, Sion, Borivali, Kurla, Charkop areas of Maharashtra. The results are available at the Board's front office at Bandra.



MHADA is expected to upload the results over website: http://mhada.maharashtra.gov.in/.

MHADA lottery 2012 are mainly targeted at low-income group (LIG) and middle income group (MIG) category - only 172 for high income group (HIG).

To avoid any scam-like situation, MHADA had cancelled over 6,000 applications over discrepancies in the details provided in the application.

Wednesday, May 30, 2012

Don’t Sell your Equity Investments in Panic


Should you get rid of your equity investments or shift money to some other safe haven? Madhu T has some suggestions


    To say the investors are worried is an understatement. In fact, they are really worried sick. According to financial advisors, a sizeable number of investors are on the verge of hitting the panic button. 
Market experts are faced with a deluge of queries from their harried clients these days: Is penny pinching the only way to tackle the current problems? Can I stop my SIP now and resume it later when my expenses come down and the situation in the market improves? Can I get rid of my equity investments and shift the money to some safe place? 
"Yes, to some extent it is true that people are really worried. Though not in large numbers, they are really nervous about the whole situation – the market hasn't delivered in the last three to four years; the macro economic scenario is depressing and they don't see the government taking any concrete step to salvage the situation," says D Sundararajan, investment consultant, Trendy Investment, a wealth management firm. 
"This is quite a testing time for many investors. They really don't have any confidence left because of the economic climate. They also have to deal with higher cost of living and higher EMIs," says a mutual fund official who doesn't want to be named. "However, I would like to tell investors not to take hasty decisions. They should really think it through or discuss it with their financial advisor before taking any major decision." 
DO THINGS NATURALLY 
Many experts believe that some investors may be overreacting to the current scenario. "The trouble with most people is that they believe they are witnessing the worst scenario in history. If you ask some seasoned investors or even your parents, they would tell you they have seen worse," says a wealth manager, who doesn't want to go on record. "My advice is to do things which you would naturally in an adverse situation. For example, your expenses are going up. Instead of finding ways to fund the extra expenses, you should always try to find ways to reduce it. Cutting down on your investments to fund your extra expenses would be a huge mistake," he adds. 
Hemant Rustagi, CEO, Wiseinvest, says the market always surprises, and this time will not be an exception. "Mostly, the market springs a surprise when everyone is almost on the verge of giving up. I am telling people the same thing that they shouldn't write it off in a haste," he says. 
TEXT BOOK RULES DON'T WORK 
Investment experts confess that the golden rules from text books, like — have an asset allocation; stick to it all the time; get on with your plan, irrespective of the market and so on — are not having the desired impact on the clients this time. "It is becoming more and more difficult to convince them. We try to counsel them, but if they are really worried, we help them redraw their asset allocation to equity," says Sundararajan. "It is done on a case to case basis. If the investor understands the current scenario and is not unduly worried about the equity investments, we ask him to continue with his plan. If the investors are really bothered and don't want to take any chance at all, we allow them to reduce their equity exposure. For example, we have reduced the equity exposure of a number of people nearing retirement, or in the age group of 50-60 years, substantially by 20-25%. We have shifted the money to short-duration funds as they didn't want to take the interest rate risk," says Sundarajan. 
Many experts like Sundararajan are asking their clients to be cautious about their new investments in equity as there is no clarity on interest rates, inflation and government's response to challenges faced by the economy. 
DON'T PROVE THEM RIGHT 
Kartik Jhaveri, director of wealth management firm Transcend Consulting, says his only request to nervous investors is: "please don't prove your critics right". "If they get out now, they will prove to the world that retail investors always lose money in the market. This is because most of them get out when the market is not doing good, and miss the opportunity to make it big when the market recovers. Or they will get into the market when the rally is almost over and stay in invested for a couple of years and start cribbing that they didn't make any money," he says. 
"Prove the world wrong this time. Don't stop your investments and be there to witness the birth and end of the rally," he adds. 
Experts like him want investors to remember that their investing programme is done with a certain purpose in mind, and all they have to be sure about is that they are using the "correct way to create wealth". 
"Understand that there will be different business cycles every five or seven years, and there will be rallies as well as big falls. If you act in haste, you will be disappointed," cautions Jhaveri. 




FIIs Raise Bearish Bets on Bank Nifty on Asset Quality Worries


Recent bounce-back fails to impress as weak rupee, loan recasts seen queering the macro pitch
Foreign investors have been building bearish bets on bank Nifty futures over the past month on concerns over their asset quality and a weakening rupee which could act as a spoiler to RBI cutting interest rates by adding to high inflation. 
Outstanding positions, or open interest (OI) on Bank Nifty futures, have increased by 52.56% since April 24, driven by FIIs' selling the index, whose price level has fallen by roughly 6% over the period, says an Angel Broking report citing market regulator Sebi data on FII exposure. 
These bets are now being rolled over, signalling FIIs' cautious-to-negative outlook on banking stocks despite the recent market bounce-back. 
The report makes the observation on the premise that FII exposure to index futures is restricted largely to Nifty and Bank Nifty futures, with other index futures such as IT, MiniNifty, PSE, and Infra being illiquid. While open interest in Bank Nifty futures has risen since April 24, that of Nifty has also risen but by a much lesser 9%, indicating that most of the shorts formed by FIIs in index futures were in Bank Nifty futures. 
"With so many sell positions built up, one could argue about Bank Nifty getting a leg up because of short- covering but that appears unlikely given the possibility of a further depreciation of the euro, which could affect the rupee-dollar equation," argued Siddarth Bhamre, Angel Broking's head of derivatives and the report's author. "There does not seem to be any trigger for short-covering to happen in a big way." Given the lack of any trigger for a trend reversal despite the recent market bounce-back, FIIs have been rolling over their bearish positions to the June series. 
According to Bhamre, bank Nifty has witnessed a 48.43% rollover ahead of Thursday's derivatives expiry, implying that FIIs are rolling over their shorts in the index. Loan restructuring is expected to touch a high of . 2 lakh crore by the current financial year-end (FY13), according to Crisil. The large quantum of restructuring reflects the prevailing stress on corporate India's credit quality because of lower profitability, weak demand and tight liquidity, the rating agency said. 
A weaker currency also affects banks' outlook as risk of imported inflation added to the already high inflation rate makes the central bank loathe to cut interest rates, which affects their profitability. 
"Shorts build-up has been witnessed in Bank Nifty futures and individual stock counters such as SBI, Axis, ICICI Bank and HDFC Bank," said Yogesh Radke, head of quantitative research, including derivatives research, Edelweiss Securities. "Despite the recent bounce-back in markets the perception of most investors and traders towards banking stocks remains cautious to negative because of the concerns on asset quality, global concerns and currency weakness." 




Mhada rejects 11k lottery applications

Mumbai:The Maharashtra Housing and Area Development Authority (Mhada) has rejected 11,179 forms of those who had applied for 2,593 flats to be sold through lottery on Thursday. This is the first time that the authority has cancelled so many forms before the lottery was held. 

    Now, the number of applications has dropped to approximately 1.4 lakh from the earlier over 1.5 lakh. 
    Mhada officials said the rejection followed a major scam wherein an inquiry committee found that 425 winners of the 2011 lottery had submitted fake addresses and bank account numbers. While 100 winners resubmitted their papers for fresh scrutiny, the committee found that nearly 30 applicants had won the lottery more than once since 2006. Mhada is soon expected to file a FIR against the applicants who submitted fake papers and brokers who are involved in the scam. 
    According to a Mhada Act provision, the board is supposed to scrutinize the documents before including them in a lottery. However, the board does not invite any enclosures from the applicants as the form is filled online, and hence, the procedure for scrutiny is dropped. This works to certain applicants' advantage as they fill forms repeatedly. "To avoid a re
peat of 2011, we insisted that every applicant submits address proof and Permanent Account Number this time," a Mhada spokesperson said. 
    An analysis revealed that Pratiksha Nagar in Sion was the preferred location for middle-income group category buyers. Mhada has received more than 18,000 applications for the 84 flats in Pratiksha Nagar. Projects at Malwani, Malad received the highest low-income group applications—14,787 for 282 flats while Vinobha Bhave Nagar received 14,339 applications for 137 flats. Powai with 55 flats was the preferred location for 11,897 high-income group buyers. 

    TURNED DOWN 

• Four forms rejected due to wrong names on Demand drafts 

• 6,385 applications rejected as a single person has applied under various income groups for same and different projects 

• 618 rejected as a single person has applied under SC, ST and general categories for the same project 

• 3,995 had same bank account numbers but different names 

• 177 bore same Permanent Account Numbers but different names

Pain in Spain drags India Re to new low of 56.23

Currency Loses Over Re 1 In 2 Sessions


Mumbai:The rupee breached the 56-level once again to end the day at 56.23 — its lowest close and near its all-time intraday low of 56.38 seen last week. The rupee weakened against the dollar which gained in the international market after trouble in Spain's banks pulled the euro down to atwo-year low. 
    "Intervention by the Reserve Bank of India prevented the rupee from sinking to a new low against the dollar. Although the domestic currency had come close to its previous low, which is seen as a resistance level, there was no major supply and import demand persisted," said a dealer with a private bank. The rupee, which closed at 55.68 on Tuesday, opened weaker and quickly slipped past the 56-mark to trade around 56.20. 
Dollar sales by the central bank helped pull back the currency to 56.14 levels, however, fresh bad news from Europe dragged the rupee down to close at its low of 56.23. 
    Following Wednesday's decline, the rupee has lost more than one rupee in the last two trading sessions and continues to be the worst performing Asian currency although the Indonesian Ru
piah and the Malaysian Ringitt also weakened against the dollar. 
    This week saw some positive developments in Greece where surveys showed that elections may throw up a probailout party. owever, Spain is now turning out to be a bigger worry than Greece. On Wednesday, the Spanish government said that it would infuse 19 billion euros into distressed real estate lender Bankia SA whose troubles had led to a run on Spanish institutions. Also the Bank of Spain warned that the country may sink deeper into a recession. Dealers are worried about Spain because it is a much larger economy and 
may prove more difficult to bail out by the larger economies of northern Europe. 
    According to David Joy, chief market strategist, Ameriprise Financial, the present global situation reflects the triumph of fear over valuation. "In Brazil, the Bovespaindex is trading at 9.4x expected 2012 earnings. The S&P 500 is trading at 12.7x. In Europe, the Euro Stoxx 50 index is trading at a 8.9x P/E ratio. Each of these represents a meaningful discount to their long-term averages, but these are not average times. Three full years into the economic recovery, investors' first reaction remains to flee, not to fight," he said in a note. 

BROKEN BY BANKIA 

tIndian currency weakened due to the euro plunging to a two-year low on bank trouble in Spain, which is turning out to be a bigger worry than Greece 
tSpanish govt will infuse 19bn euros into distressed Bankia 
tDealers are worried as Spain is a much larger economy and difficult to bail out 
tIn the domestic forex market, RBI intervened with dollar sales that prevented the rupee from sinking to another intra-day low 
tThe slide has ensured rupee's status as the worst 
performing Asian currency



Tuesday, May 29, 2012

FOOD FOR THOUGHT HUL Blueprints Fresh Recipe for Foods Ramp-up

Integrates food services business with out-of-home arm to create retail formats
It's a paradox Unilever has been living with for many years now—if the Anglo-Dutch consumer products giant is able to squeeze out more than half of its revenues from foods, why does the foods portfolio of the Indian subsidiary account for less than a fifth of its top line? 
Hindustan Unilever Ltd (HUL) is taking another shot at correcting that anomaly by integrating its food services business, Unilever Food Solutions (UFS), with the Out of Home (OOH) arm. This, the company feels, will help drive the foods portfolio by creating new opportunities to push packaged food brands like Knorr and Kissan. 
"The integration will enable us scale up with speed and have an aligned portfolio and innovationdriven pipeline across the retail and institutional business," says an HUL spokesperson said. OOH will also be able to leverage UFS' expertise with category and channel strategies, talent and training capabilities and learnings across markets," he adds. The game plan is to extend OOH's reach beyond institutional vending into the food & beverage (F&B) consumer retail space-—think cafes and ice cream parlours -- and leverage the portfolio of HUL's F&B brands. 
The restructuring is the first revamp of the foods business since Geetu Verma, HUL's first external executive director (foods), came on board in September 2011 from PepsiCo. Company insiders say HUL is implementing Unilever CEO Paul Polman's suggestion made a year ago on an Indian visit of driving OOH growth to ramp up revenues of the foods business. Polman is keen to drive growth of foods in emerging markets – which today are more successful in home & personal care (HPC) – thereby reducing the over-dependence on the sluggish developed economies. 
HUL, whose foods sales grew in single digits in fiscal year 2012 – personal care was the primary driver with 17% growth – is still hunting for that magic recipe. Says Kannan Sitaram, operating partner at India Equity Partners, a private equity firm, who had spent more than two decades with Unilever: "HUL has yet to chalk out a clear foods strategy. It needs to replicate the incubation strategy it followed in personal care --with hand wash, body wash, conditioners and the like -- in foods, and scale up promising categories that are small now." 
In fiscal year 2012, the foods portfolio grew by 8% and contributed 18% to HUL's bottom line of Rs 21,154 crore. For Unilever, the global foods portfolio contributed 52% to turnover in 2011 although volume growth did dip a bit. 
Along with inadequate scale, profitability too is a concern for HUL. In the quarter ended March 2012, profit margins at the before interest and tax level in beverages fell by 124 basis points and in packaged foods by 253 basis points. 
"As of today HUL is only interested in growing the top line; it is not a big profit centre for the company yet," says Anand Shah, equity analyst tracking fast moving consumer goods at Elara Capital. "The company needs to get into new categories but the Unilever portfolio has its limitations in India," adds Shah. 
Indeed, some of the power brands in the Unilever foods portfolio – like Hellmann's (mayonnaise) and Blue Band (margarine) -- would have limited traction in the Indian mass market. So, other than relying on Unilever labels like Lipton and Knorr, HUL also has to count on home-grown brands like Annapurna (salt and atta) and local categories like idli-dosa mixes to push growth. 
OOH is clearly a high-growth space, but the fear is that HUL may be too late. The company has just a handful of Bru cafes, although it is the midst of an aggressive ramp-up of its Kwality Swirl's parlours. Says Damodar Mall, director, food strategy, Future Group: "HUL's foods business needs a complete re-think. It has missed the bus in the icecream parlours and Bru cafes space; the latter has been taken over by Cafe Coffee Day and Barista." He adds that HUL has got its act together in HPC, but not in foods. 
"The next two years will be critical; HUL needs to put an audacious food strategy in place." Mall also says that food retailers are "hungry for action from large players like HUL." 
The integration of UFS with OOH has its merits. UFS offers branded food products and services for hotels, restaurants, institutional caterers and flight kitchens. 
HUL made an entry in OOH in 2002 through institutional vending services; it has a presence in over 100 cities across India with Lipton and Bru beverage vending machines. Giving these brands a retail face is HUL's new challenge.




Flush with Cash, Oilcos may Cut Petrol Price 2/L

STATE REFINERS POST ROBUST Q4 NOS.
IOC, HPCL and BPCL clock 3-fold jump in net; ONGC gains on weak rupee, costly oil

State-run oil companies are ready to cut prices of petrol by about . 2 per litre after reporting strong earnings, signalling a surprise turnaround in the sector that scared investors with talk of astronomical losses from subsidised fuel sales. 
Oil marketing companies could cut retail price of petrol by about . 1.67 per litre (about . 2 after taxes) from June 1 in view of the drop in the average rupee price of petrol in the international market, Hindustan Petroleum Corp Chairman & Managing Director S Roy Choudhury told reporters. HPCL's fourth-quarter net profit jumped to . 4,631 crore, more than four times its earnings a year ago. IndianOil, which reported an over-three-fold jump in fourthquarter net profit to . 12,670 crore, is also keen to pass on the benefit of lower international prices to customers. IOC Chairman RS Butola said: "We will pass on the entire benefit to consumers. I would like to pass on 50 paise, 70 paise or 90 paise, whatever we gain, to consumers in the next pricing cycle." Profits of oil marketing companies were boosted by the highestever contribution of . 44,466 crore from Oil & Natural Gas Corp (ONGC). Despite the generous contribution — given through state-mandated discounts on crude oil sales — ONGC's fourthquarter profit doubled to . 5,644 crore while PAT for the entire fiscal rose 33% to . 25,123 crore. 
The state exploration company supplies crude oil at a rate linked to the dollar price of international grades of oil. The depreciation of the rupee and an increase in international prices in the last quarter, thus, led to windfall gains for ONGC. 
State-run refiners had earlier complained that their combined revenue loss from the sale of fuel at government-determined rates would amount to . 1.38 lakh crore in 2011-12, and they would post losses for the full year. 
However, contributions from the government and upstream players such as ONGC, Oil India and Gail India have propped up their balance sheets. 
Citing prospects of heavy losses, oil marketing companies had raised the pre-tax price of petrol by . 6.28 per litre last Wednesday, immediately after the budget session of Parliament.



Will Quit Public Life if Proven Guilty, Says PM Silencing Critics Prime Minister Manmohan Singh hits out at ‘irresponsible allegations’

 Prime Minister Manmohan Singh on Tuesday rubbished Team Anna's allegations of corruption against him and his cabinet and said he would quit public life if allegations levelled against him in the allocation of coal blocks were proven. "I will give up my public life if allegations are proved against me. It is unfortunate that irresponsible allegations relating to irregularities in allocation of coal blocks are being made without confirming facts," Singh told reporters on his way back from Myanmar. 
The issue of coal block allocation came in the public domain in March after a leaked draft report of the Comptroller and Auditor General (CAG) said the government had given away blocks estimated to be worth . 10.7 lakh crore to private firms. It had said the allocation of 155 blocks between 2004 and 2009 gave companies "undue benefits" of . 10.7 lakh crore. 
Citing the draft CAG report, Team Anna had said the prime minister, who was in charge of the department, 'abused his position to give huge pecuniary benefits to private parties'. It sought an investigation against him and 14 other ministers on charges of corruption. On Monday, the PMO issued a clarification on the charges levelled by Team Anna on the allocation of coal blocks between 2006 and 2009, and said the coal blocks were privatised to meet the growing demand that Coal India failed to meet. Meanwhile, even members of Team Anna were divided over charges of corruption against the prime minister. Hegde Disapproves of 'Shikhandi' Comment 
Former Karnataka Lokayukta Santosh Hegde dissociated himself from the charges against Singh. "I do not have the material that Team Anna has as I was not in the meeting (where the issue was discussed). Without studying the material against the ministers, I do not want to comment on it or associate myself with it," Hegde told reporters in Bangalore. He also disapproved of Team Anna member Prashant Bhushan calling the prime minister Shikhandi. "It is not proper. You don't use such words against the prime minister," he said. Earlier, the coal ministry had defended the government, saying blocks were allocated impartially and in the interest of economic growth. The coal ministry says the value of these blocks should not be estimated on the basis of open market prices. "Since the blocks are allocated to private companies only for captive purposes for the specified end-use, the question of linking the blocks to the market price of coal does not arise at all," the ministry said. 
It said the blocks were given to companies at a time demand was weak and there was hardly any pressure for allocation, but several sectors needed captive mines to spur growth. "To put the country on a path of higher growth, capacities in power, steel, cement sectors were required to be added expeditiously. This was one of the main reasons for continuation of allocation of the captive coal blocks," the coal ministry said.




Sunday, May 27, 2012

RIL Moves HC on New Consent Order Rules Wants to settle insider trading charges via consent

Reliance Industries (RIL) has approached the Bombay High Court, urging that it be allowed to settle insider trading allegations under a set of regulations that were recently discarded by market regulator Sebi. 
India's largest private sector company by revenues has approached the court in an effort to try and ensure that it has the option of settling the case through a negotiated or consent process in line with the earlier rules, said two people familiar with the matter. Last week, Sebi promulgated new rules that exclude relatively serious offences such as insider trading, front-running, serious frauds and unfair trade practices from the consent process. 
Sebi is investigating RIL for insider trading allegations linked to some transactions in 2007. Previous attempts, when the old regulations were in place, to settle the matter through the consent process have failed. The court is yet to hear the case and has not issued any notice. 
Consent orders are negotiated settlements between the regulator and alleged securities law offenders, in which the latter pays a monetary penalty called a consent fee. The settlement often involves a voluntary debarment from the capital markets and comes without admission or denial of guilt. RIL had not responded to queries seeking comment at the time the story was filed. 
The last high-profile case in which a negotiated settlement was reached involved the Reliance group headed by Anil Ambani. The telecom-to-power conglomerate's chairman and four of its senior officials paid . 50 crore — the highest settlement fee — and were barred from investing in the capital markets for one year. Sebi Twice Rejected RIL's Application 
That case relates to alleged routing of funds raised overseas to the stock markets in 2007. 
The latest development comes at a time Sebi is set to go ahead with enforcement proceedings — quasi-judicial proceedings that will result in determination of innocence or guilt — in a number of high-profile cases that are outside the ambit of the consent process, according to the new norms. These include the insider trading case against RIL; a case of alleged front-running by some officials of HDFC Asset management, one of India's largest mutual funds in terms of assets under management; and another case against HSBC for its role in a financing arrangement linked to alleged manipulation of stock prices of listed entities of the Adani Group, according to people with direct knowledge of the proceedings. 
Sebi has earlier twice rejected RIL's application for settling the case through the consent order route, after the company offered to pay what officials dealing with the case considered paltry amounts. The case dates to 2007, when a few entities allegedly connected to Reliance Industries sold a 4.1% stake of Reliance Petroleum for . 4,023 crore. To prevent a slump in the Reliance Petroleum stock, the shares were first sold in the futures market and then in cash, leading to a profit of over . 500 crore. 
A top official in Sebi said the new consent norms were unique to India. The new rules will help eliminate subjectivity and ensure greater consistency with the introduction of a formula to compute fines. While the earlier model was on the lines of the settlement mechanism followed by the US Securities and Exchange Commission, the revamped rules were entirely indigenous. 
The regulator is learnt to have consulted some of the top legal brains in the country before framing the new rules. 
Supreme Court advocate Amit Agarwal said the new circular did not quell the grievance that the settlement process was non-transparent and arbitrary. 
The circular, issued with the objective of providing more clarity on scope and applicability of the consent mechanism, on one hand substantially reduces the scope of settlement by classifying specified defaults as non-negotiable, but at the same time, leaves a window for settlement of the very same defaults, he says. 
MS Sahoo, advocate and former whole-time member of Sebi, said the new framework was old wine in new bottle. It allows settlement of all kinds of defaults, subject to discretion of the authorities. 
Sebi will use discretion initially to deny consent settlement in serious cases while the high-powered panel and whole-time members will use discretion subsequently to allow consent in those very cases, he says. "A formula, however, robust and comprehensive it may be, can't capture all possible factors. If the evidence available is such that the probability of conviction is negligible, the delinquent would never settle the default for the formula-driven amount. As a consequence, only the defaults with substantial evidence would be settled under consent while those with inadequate evidence would be adjudicated on merit. If no formula is used in adjudication where there is application of mind by one person only, it is not necessary to use a formula in consent settlement which passes through three committees and application of mind by at least nine persons, including a justice and two whole-time members." Sahoo says.

RIL-Ministry Spat Forces PMO to Look at Oil, Gas Pacts Rangarajan to head committee, to press for revision in terms of production sharing contracts for future deals

A committee headed by C Rangarajan will review terms of the contract that oil & gas companies sign with the government, after a controversy between Reliance Industries and the oil ministry over declining KG-D6 output highlighted the need for a change in the clauses. 
Top government officials told ET the Prime Minister's Office has taken the lead in the initiative, realising the need for a robust contract that will reduce messy disputes and attract more foreign investment in the critical sector. 
Headed by C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, the committee will seek to rewrite some of the terms in the production sharing contracts (PSCs) and will not affect agreements that have already been signed, two people with knowledge of the matter said. The decision, they added, was taken after meetings between Prime Minister Manmohan Singh and Oil Minister Jaipal Reddy last week. 
The PSCs were first drafted under the New Exploration Licensing Policy (NELP) in 1997. They provide a framework under which private companies can recover their development costs or capital expenditure from oil & gas revenues after which the profits are shared with the government as per a specific formula. 
The trigger for the current review appears to be the ongoing spat between Reliance Industries and the oil ministry over declining production and cost recovery for the private player from KG-D6, the country's biggest gas field. 
The ministry, which is trying to fight off accusations of favouritism towards Reliance Industries, issued a notice to the company earlier this month for not fulfilling obligations and failing repeatedly to meet targets, factors which it said caused considerable losses to the government. The notice imposed a penalty of . 6,600 crore on RIL. The ministry also struck down Reliance's proposal to recover $1.2 billion in costs incurred on the D6 field, saying the company had drilled fewer wells than originally committed. 
Reality Check 
What are Production Sharing Pacts? 
They provide a framework under which private oil firms can recover costs from the revenues after which profits are shared with government 
Why the Review 
PMO keen to avoid disputes & attract investment. But experts say fl aws are in implementation, not in PSC Need for Freedom on Gas Pricing 
Gas output from the premier field had dropped from close to 61.8 million standard cubic metres per day in March 2010 to 33.67 mmscmd in April this year. The Comptroller & Auditor General had charged the oil ministry with laxity in enforcing contracts with private companies, including RIL, and warned the ministry of the risks involved in approving capital expenditure without an internal audit of the gas field after 2009-10. 
Reliance had served an arbitration notice on the government in November 2011, anticipating penalties, and moved the Supreme Court this year after the Centre failed to appoint an arbitrator. RIL has consistently maintained that the fall in output is due to geological reasons and drilling more wells will not change the situation. It has also said the PSC allows it to recover costs irrespective of the level of production. A former senior official in the government, who headed the oil ministry, said the PSCs had broadly stood the test of time. The flaws were in implementation rather than the terms, he said, while making out a case for strengthening the Directorate General of Hydrocarbons — a quasi regulator for oil & gas exploration. "Unless some of these issues are sorted out and there is greater freedom on pricing of gas, many private sector companies may stay away from investing in the sector," he said. 
The latest development comes even as RIL has pitched for an increase in the current gas price of $4.2 per million metric British thermal units (mmBtu), saying rates should reflect global trends. An empowered group of ministers headed by Finance Minister Pranab Mukherjee is examining the issue, though the oil ministry has opposed a mid-course change. As per the original formula, prices were to be revised in 2014. The issue has now been referred to the law ministry. Earlier, the PM had said exploitation of natural resources should lead to a win-win solution for both investors and Indian citizens.

Time to tap your own enterprise to make wealth Given the uncertain macro-economic environment, rely on your own abilities to earn an income

The optimism about India is at an all-time low among investors. Investors are no longer sure how long they may have to wait to earn double-digit returns on their equity stocks. In our obsession with the macro picture, we may be overlooking other ground realities. There are opportunities galore, not in investing in other enterprises, but in the possibilities of our own incomes. 
    My neighbour is a retired bank officer who loves to travel to new and exotic locations. She does not fund this goal through an asset allocation for her retirement corpus. She comes up with new ideas every year for children of working women. Batches of young kids learn to cook, knit, sew or simply make paper bags with her. The fee she charges for the two-month workshop in April and May is used to fund her holidays in June and July. She has been doing this over several years and does not care about the stock market. This year she has more kids than in the last three, and laughs when I tell her that the market is down. The opening up of the Indian economy has meant that opportunities to earn have expanded immensely. Several enterprising individuals have grabbed these with both hands. 
    The children of my maid and driver are studying in English-medium schools. They aspire to become engineers and management professionals. While they empathise with their parents' hard work, they aspire for a life far better than that of their parents. Social scientists point out that the countries where the next generation hopes to do better than the previous one tend to enjoy sustained growth and prosperity. My maid and driver do not know which IPOs succeeded or failed, but are confident that they have made the right investment in their kids. 
    The taxi driver who has been dropping me to the airport for so many years, went on to create a dial-a-driver service for partygoers. They use cell phones, a superb resource allocation strategy that ensures the driver reports to you at the promised time, each time. Several new, unheard of services include teams of teenage boys, who scrub and clean your apartment over the weekend; personal shoppers, who send you MMSes for instant approvals. These entrepreneurs have not heard about the Greek crisis or the falling rupee, and it's unlikely they will care about these. 
    What is the common thread in all these cases? The focus on deriving income from economic opportunities. Those of us who are looking at the stock market know that when we invest in stocks, we are investing in other people's enterprises. This may be only a part of the story of opportunities that a growing and developing economy like India offers. The other real and all-pervasive opportunity lies in the million simple income-enhancing ideas tapped by enterprising individuals. 
    The objective of an investment portfolio is to create an alternate and additional income-generating asset, which can support and replace the income stream from our jobs. We lend our capital to others to use and earn a return from it. Even before we depend on the ability of others to utilise this capital efficiently, it may be worthwhile asking whether we have optimised the use of the human asset, or considered enhancing our income in the context of the growing possibilities. 
    A retired investor's financial plan need not be about protecting capital, earning interest income, or investing a portion in equity. It should be about the potential for an alternate income in the first 10-15 years when health and energy levels are high enough to be put to productive use. A young investor need not speculate on stocks and derivatives to earn a chance gain. It may be worthwhile considering a moonlighting opportunity to tend a bar, write online content, chip in to manage events, or double-up as a DJ. 
    The breaking down of barriers in the various opportunities to earn an income makes it possible for failed entrepreneurs to return to work, young earners to change careers, young parents to work from home and for others to make mid-life course corrections. These profitable pursuits are not reflected in the loan books of banks or return from investment portfolios. They are visible in the consumption boom around us. The new confident optimisers of income and human asset potential are buying durables for their homes, eating out, taking holidays, and spending on their wardrobes. They integrate into the macro-economic cycles and numbers indirectly. 
    To earn, save, plan and systematically invest is the traditional approach to enhancing wealth. This relies so much on the efficient use of capital by large businesses. In an environment, where large enterprises are at risk from government policies, lack of reforms, crony capitalism, and international shocks, wealth lies in simpler endeavours. There is no need to throw the optimism about India out of the window. Perhaps shifting sight from the macro to micro will be adequate. 
    —The author is Managing Director, Centre for Investment Education 
    and Learning, and can be reached at uma.shashikant@ ciel.co.in 

Gautam Gambhir’s Kolkata Knight Riders score 192/5,

IN A CLIFFHANGER, KKR WIN THEIR FIRST IPL TITLE AFTER RECORD CHASE
KNIGHTS PULL OFF COUP, DETHRONE KINGS
Gautam Gambhir's Kolkata Knight Riders score 192/5, the highest target ever achieved in an IPL final, to win with 2 balls to go and deny Chennai Super Kings a hat-trick of titles

Twists & Turns 
    CSK race to 190/3 as Suresh Raina comes good with 38-ball 73 
    Player of the season Sunil Narine gets just one of the first 13 overs, which allows CSK batsman to get into groove. Ends with 0/37 
    Gambhir, IPL—5's second-highest runscorer with 590 runs, falls early. But Manvinder Bisla (89) and Jacques Kallis (69) post 136-run stand to swing match back for KKR 
    Michael Hussey catches a Kallis slogsweep but topples over boundary as a dismissal turns into a six on the last ball of the 16th over 
    Kallis holes out off a Hilfenhaus full toss in the second-last ball of the 19th over as KKR seem to be choking on the brink of victory 
    With KKR needing 16 runs off 7 balls, Shakib al-Hasan is caught off Hilfenhaus but it's called a no-ball for being above waist height and the batsmen run 2. Shakib then hits a 4 as a single ball costs CSK 7 runs 
    Batting at No. 7, Manoj Tiwary (9 runs off 3 balls) finishes off match in final over





I want to apologize to the kids for my misbehaviour at MCA. I shouldn't have behaved in that manner. But today my team has won, so I guess all you fans should forgive me Shah Rukh Khan | 
KKR OWNER



A STAR IS BORN 
Man of the match Manvinder Sultansingh Bisla, 27, blazed 89 off just 48 balls. The Hisarborn wicketkeeperbatsman earlier played for Deccan Chargers and Kings XI Punjab. Was approached during a recent TV sting on match-fixing but refused to take the bait


Saturday, May 26, 2012

Falling rupee: a kick in the pants for Congress

Will the crash of the rupee to a record low of Rs 54.68 per dollar be a "kick in the pants", to quote economist Arvind Subramanian, that finally forces the government to slash unwarranted subsidies and deepen reforms? Hopefully yes. 
    But Rohini Malkani of Citibank says, after a US visit, that foreign investors view the government as structurally paralyzed. They expect GDP growth to slow to 6-7%, and the exchange rate to fall to Rs 60 per dollar. There is a silver lining. A relentlessly falling rupee and stock market may finally force the anti-reform crowd—including Sonia Gandhi—to swallow bitter medicine needed to cure the current economic malaise. 
    Many alarm bells are ringing. Consumer price inflation is up from 7.4% in January to 10.4% in April. The current account deficit is a record 4% of GDP. Both industrial production and exports shrank in March. The Eurozone crisis has caused billions to be pulled out of all emerging markets. India is especially vulnerable: its credit rating is already at the bottom of the investment-grade range. Any further downgrade will reduce it to junk status, accelerating the exit of foreign investors. 
    Manmohan Singh and Pranab Mukherjee know what's to be done. Commenting on the Budget, Singh said the fiscal deficit must be cut to curb inflation. Open-ended subsidies for petroleum products and urea, threaten to become thrice the entire outlay on NREGA, the government's flagship employment programme. 
    Ideally, the government should decontrol petrol and diesel, limit subsidized cooking gas connections, and replace the kerosene subsidy with free distribution of solar lamps. Urea should be moved to a fixed nutrient-based subsidy, like other fertilizers. And foreign direct investment in multi-brand retail-—cleared by the Cabinet but not yet notified —should officially be notified. 
    Politicians worry about double-digit inflation, which always spells electoral disaster. However, many Congressmen think inflation can be curbed by everrising subsidies. They cannot see how raising diesel or urea prices can curb inflation. 
    Answer: inflation is caused by excess demand in the economy, arising from insufficient production (bad investment climate, paralysis in clearances) and excessive spending (big fiscal deficits). Excess demand also sucks in excessive imports, hitting the balance of payments. 
    This cannot be checked by additional subsidies, for this additional spending itself creates additional excess demand. Note: inflation is low in countries with no oil subsidies, like the US. The solution lies in pruning excess demand at source — by reducing government spending. 
    The axe should fall on the least rational spending. It is surely irrational to spend thrice as much on oil subsidies as on NREGA. The resultant hole in government finances has fuelled a vicious cycle of high inflation, trade deficits and still higher fiscal deficits. 
    Realpolitik pundits rule out any controversial measure during or just before a session of Parliament, since the Opposition will protest violently and paralyze Parliament. Nor are any reforms possible before state elections, which are typically decided on swings of 1-2% of the vote. A reform hitting just 1-2% of voters can be electorally fatal, say these pundits 
    Well, Parliament goes into recess next week, and will not reconvene till July. No state election is due till the year-end. So, the coming weeks constitute a heaven-sent window of time for action. 
    Alas, some politicians oppose any action till the presidential election in July. This is daft. There are no populist vote banks to be wooed in a presidential election. Only elected legislators participate in the presidential election, so what matters is getting enough political parties behind your candidate. 
    Identity politics matters. If, for instance, the Congress party fields a Muslim like Vice President Hamid Ansari, it will be difficult for the Samajwadi Party, Trinamool Congress or Left Front (all of whom woo the Muslim vote) to oppose him. The BJP may propose a rival Muslim like Abdul Kalam. Regional parties have proposed Purno Sangma, a Christian. Whether legislators vote for Ansari, Kalam or Sangma will not depend on whether or diesel and urea prices are decontrolled. 
    Many opposition parties will, of course, castigate these measures. But June is a hot month when politicians go abroad or to hill stations, and political activity is at its lowest ebb. If the government acts forcefully within the next three weeks, opposition protests will be weak, and largely forgotten before the July presidential election. 
    Is this logic strong enough to sway Sonia? Maybe not. But if foreign confidence in India keeps ebbing, and the Greek election on June 17 leads to that country's exit from the Eurozone, the rupee will plummet further, maybe even to Rs 60 per dollar. That should concentrate Sonia's mind wonderfully.


Thursday, May 24, 2012

Petrol Hike Fuels Bank Rally Investors go long on bank stocks on hope that RBI may cut interest rate on further fuel price hikes

 Traders covered their bearish bets on banks on Thursday and initiated long positions amid hopes the RBI may cut policy rates if the government raises diesel and cooking gas prices on the heels of increasing petrol prices. Bank of Baroda led the rally in banking stocks with a 5.2% gain. Axis Bank rose 3.6%, ICICI Bank advanced 3.5% and SBI edged up 0.6% on Thursday. BSE's Bankex, which rose 2.3%, was the biggest gainer among indices. 
The RBI had said it would ease monetary policy further — after cutting a policy rate a month ago — only if the government tightens its finances. Fuel subsidy burden has been the biggest drain on the government's finances. 
"If diesel and LPG prices are raised as hoped, banking stocks could extend Thursday's gains, which were built mainly on expectations of such hikes," said Rajat Rajgarhia, director-research, Motilal Oswal Securities. "This, along with a correction in crude oil prices over the past two weeks and robust Q4 numbers, could act as strong support for the likes of ICICI Bank and SBI." 
The jump in banks and ONGC shares contributed to the rally in benchmark indices on Thursday. BSE Sensex gained 274.20 points, or 1.7%, to close at 16222, its biggest gain in almost two months. Nifty gained 85.75 points, or 1.77 %, to end the day at 4921. 
Traders' optimism regarding bank stocks was borne out of an increase in the open interest on the stocks' derivatives contracts, the prices of which also rose. Outstanding positions, or open interest, jumped on Thursday by 9.8 lakh lots to 71.94 lakh in ICICI Bank futures. Axis Bank futures saw a build up of 9.6 lakh lots to 1.1 crore, SBI futures rose 3.35 lakh lots to 55.03 lakh and Bank of Baroda futures saw a rise in open interest by 1.91 lakh lots to 30.23 lakh. 
According to Siddarth Bhamre, head of derivatives, Angel Broking, reining in the subsidy bill will help banks because foreign investors would view this development positively and possibly revive their investment in equities, especially in large-cap stocks. "If this happens, banking stocks, which account for a fifth of Nifty's weightage, would be sure-shot candidates for investors looking for value picks," he said. 
Bhamre said SBI, Axis Bank and ICICI Bank are top picks if the government went ahead and reduced fuel subsidies further. However, deteriorating asset quality will keep a lid on probable gains in bank shares. "While GNPAs (gross nonperforming assets) have peaked, we expect higher restructuring in 1HFY13 to keep valuations in check," said Motilal Oswal Securities in a note to clients. 
Analysts said private banks are better placed than their public sector peers in asset quality. 
"Asset quality remained dichotomous; private banks improved further while PSU banks weakened more, measured across parameters like credit costs, NPL and coverage ratios and restructured assets (PSU banks restructured 2.5% of loans in 4Q12)," said Citi in a note to its clients. "We expect more deterioration – but a moderation in the pace of new slippages though will be vulnerable to further macro deterioration," it said.




Ratan Tata India’s Most Powerful CEO, Mistry Debuts at No. 15


Vijay Mallya, Sunil Mittal and Anil Ambani among big losers in ET-Corporate Dossier listing
Tata Sons Chairman Ratan Tata heads the ET-Corporate Dossier ranking of India Inc's Most Powerful CEOs for the fourth year running. Set to retire by the end of the year, Tata will leave a vacancy at the top, just as former Infosys chairman NR Narayana Murthy dropped off the list of Most Powerful CEOs only when he ceased to be a chief executive. This year's ranking includes Cyrus Mistry for the first time, at No. 15, by virtue of his appointment as vice-chairman and chairmandesignate of Tata Sons. The annual ranking includes a few other major changes as well, owing mainly to the tumultuous environment that has left several business houses severely mauled. While Mukesh Ambani has managed to retain his position at second place, brother Anil has fallen six positions to 11. Sunil Mittal has had an even more drastic fall, to 16th position from No. 3 last year, mirroring the state of the telecom sector. Kumar Mangalam Birla has, however, not let his problems over the 2G issue eclipse his success in the other sectors, such as retail. The 500 senior executives interviewed by IMRB for the survey have placed him third in the power rankings, up from seven last year. Vijay Mallya has been ejected from the top 10, along with fellow MP Naveen Jindal. Mallya and Jindal have been ranked at 43rd and 17th positions, respectively. Azim Premji has remained rock steady at No. 4 while the fifth position is occupied by banker Chanda Kochhar, who is not only India Inc's Most Powerful Woman but also the list's top professional CEO. After retiring from ICICI Bank, KV Kamath appears in a new avatar in the top 10 this year — as executive chairman of Infosys. The other non-promoter CEO in the top 10 is L&T's AM Naik, who has climbed a massive 23 positions this year, from 30 to seven. The list also features a ranking of global Indian business leaders, with London-based LN Mittal at the top, and Indra Nooyi of Pepsi-Co and Nikesh Arora of Google at No. 2 and 3, respectively. Nobel laureate Amartya Sen heads the separate ranking of global thought leaders. 
For the complete listing of India Inc's Most Powerful CEOs, see today's issue of Corporate Dossier




1.38L APPLY FOR 2,593 APARTMENTS 53 Mumbaikars to fight over each Mhada flat this yr

Mumbai: More than 1.38 lakh prospective buyers submitted their applications for a Maharashtra Housing and Area Development Authority (Mhada) flat at Axis Bank branches on Thursday, the last day to apply for the 2,593 flats on sale. 
    Mhada officials say the response is overwhelming as compared to 2011. In 2011, with 1.31 lakh applicants vying for 4,034 flats, there were roughly 32 applicants trying their luck for each flat. In 2012, the number 
has almost doubled to roughly 53 applicants per flat, as 1.38 lakh applicants vie for a share of 2,593 flats located at Mira Road, Sion, Kurla, Powai, Charkop and Borivli. The final list of category-wise successful applicants will be declared on May 28-29, after the forms are scrutinized for eligibility. Of the 2,593 flats, 1,726 flats are in Mira Road, while 867 are in Sion, Kurla, Borivli, Powai and Charkop. 
    A majority of the flats belong to the low-income group category and only 172 are for the high-income group. 
    To avoid last year's fiasco, where over 300 applicants had submitted fake addresses, Mhada has this year insisted on applicants submitting address proof and a photocopy of their Permanent Account Number. 
    The lowest range of Mhada houses starts from Rs 15 lakh in Kurla and 19 lakh in Malad for 200 sq ft, plus apartments meant for the low-income groups. Even the most expensive 700 sq ft plus two-bedroom apartments for high-income groups cost Rs 55 lakh in Powai and Rs 57 lakh in Borivli, which is far below the market rate of such houses. 
    In comparison, data of under-construction and ready-tomove-in houses by private developers in Mumbai shows that the least expensive house in Mumbai costs Rs 60 lakh, while the price of an average house is as high as Rs 2.18 crore. 
    The response to the lottery is akin to that witnessed in the past three years. In the year 2010, Mhada sold 5.2 lakh forms for over 3,400 flats, of which 3.28 lakh were deposited at Saraswat Bank branches. Similarly, in 2009, 7.56 lakh forms were sold for over 3,000 flats and of these, 4.33 lakh forms were deposited at the bank. In 2008, 1.89 lakh forms were sold for over 2,000 flats and 65,000 forms were deposited at the bank.

Wednesday, May 23, 2012

Indian cos’ debt more than doubles in 4 yrs

Telecom Rollout, Power Projects & Under-Recoveries Push Up Borrowings

Mumbai: A slew of factors-—funding of under-recoveries by oil marketing companies, investments by power, infrastructure and energy companies, rollout of telecom networks and mergers & acquisitions— drove the debt levels of top 50 Indian companies to Rs 8.5 lakh crore during last fiscal, more than double in four years. 
    A lacklustre stock market and regulatory bottlenecks forced corporates to rely on borrowed capital to fuel their growth plans, increasing the collective debt by 18% over fiscal 2010-11, an analysis by Crisil Ratings showed. 
    In comparison, in FY11 a significant part of the total debt, Rs 7.3 lakh crore, was due to the financing of 3G spectrum by telecom players. Cellular operators paid Rs 1.07 lakh crore for 3G spectrum and broadband airwaves. In FY08, the aggregate debt of the 50 companies, rated by Crisil, stood at Rs 3.8 lakh crore. 
    But in FY12, "debt levels increased primarily in oil & gas and power sectors," said Sudip Sural, director, Crisil Ratings. "In the energy sector, a significant portion of the debt was on account of short-term borrowings by oil marketing companies for funding the rising levels of under-recoveries. And in the power sector, the incremental debt moved in tandem with the increased pace of project execution, mainly in generation and transmission." 
    Seshagiri Rao, joint MD & CFO, JSW Steel, said that when corporate growth is strong, companies often go for expansion, part financed by internal accruals. 
    But a dip in economy impacts business performance and then companies opt for debt financing. Even as the debt level has increased, in an environment of high interest rates, a slowing economy and sluggish revenue growth, the ability to service this debt will remain a challenge, industry observers said. 
    For example, Tata Steel, which has a debt of about Rs 47,700 crore on its books, said that it plans to raise around Rs 19,000 crore as debt to fund its Rs 37,000 crore, sixmillion tonne Odisha project. And in the telecom sector, Vodafone India, which incurred a capex of Rs 6,220 crore in FY12 and had a net debt of Rs 30,000 crore, plans to up its investments in the country. 
    Crisil Ratings predicts the debt level of 50 large corporates rated by it will rise albeit marginally, by about 3-5%, in FY13. 
    However, a lot hinges on government policies, especially in the upcoming sale of 2G spectrum, land acquisitions and mining policies, and investment policy in the fertilizer sector, which could shoot up debt levels further, Sural said. 
    For example, pending government clearances, several projects are stuck at various stages of implementation. Hindalco's greenfield aluminium smelter and 900 MW captive power project, which are linked to Mahan coal mine in Madhya Pradesh, have hit roadblocks on environment approvals. And Ahmedabadbased Adani Group has put its power projects in Gujarat and MP on hold till uncertainties over coal linkages are resolved. 
    Although top corporates are better placed to withstand the challenges of servicing higher debt levels, "the conditions at small and medium size companies could be more difficult," said Dhananjay Sinha of Emkay Global, a domestic broking house. "Build up of inventories and financial dislocations arising from impairment of cash slows are likely to impact this segment more significantly."




Re dives to 56.01 on fears of Greek exit from euro

Mumbai: The rupee weakened beyond 56 per US dollar and closed at 56.01 as the euro fell to a 20-month low against the dollar on fears of a Greek exit from the common currency. Forex dealers said that the petrol price hike was a positive for the exchange rate and equity markets, but Thursday's opening would depend on how the global sentiment in respect of euro moves tonight. 
    The rupee was among the worst losers in Asia as traders felt that weak macroeconomic indicators made the rupee more vulnerable in a risk-off scenario. A 'risk-off ' scenario is a term used to describe an environment in which investors shun markets despite higher returns in favour of safe haven investments even if returns are negligible. 
    "Ideally, the petrol price hike should support the rupee as it shows a move away from the policy paralysis. This and more such bold moves would really help India to come out of a negative perception. However, given that there is a lot of risk aversion overseas, tomorrow's (Thursday's) movement will depend a lot on what happens in the international markets overnight," said Ashish Vaidya, head of fixed income currency and commodities at UBS. 
    The local currency, which opened at around 55.68, soon fell to the day's low of 56.22. However, the currency recovered to close at 56.01. 
    Quotes in the forward market indicate that the rupee could slip close to 58 in six months or beyond 59 in 12 months. 
    "While fundamental stresses persist at the core of rupee weakness, added uncertainties regarding Greece's future and Chinese growth have only exacerbated the situation," said Priyanka Kishore, forex strategist at Standard Chartered Bank. According to Kishore, technical charts show that the rupee could stop somewhere between 57.32-58.62, most likely around 58.54/58.62. 
UNENDING SLIDE 
tRe slipped to 56.22 intra-day as euro fell to 20-mth low against dollar on Greek exit fears 
tDomestic currency fared worst among Asian losers as traders felt weak macroeconomic indicators made the rupee more vulnerable 
tForward market quotes indicate rupee could slide to 58 in six months, or beyond 59 in a year




Global stocks, euro, oil sink over Grexit jitters

New York: The threat of a financial crisis spreading from Europe shook markets on Wednesday. The euro dropped to a nearly two-year low against the dollar. Oil prices sank to their lowest this year, and stocks took another fall. 
    The Dow Jones industrial average fell 180 points to 12,322 shortly after noon Eastern US time. The Dow has lost 6.7% this month, nearly wiping away all its gains for the year. Energy, banks and technology stocks fell the most. 
    In Brussels, leaders of the 27 countries that make up the European Union met to discuss ways to keep the debt crisis in Europe from getting worse, including proposals to promote jobs and growth. 
    Analysts are turning increasingly skeptical that European leaders will succeed at preventing Greece from dropping the euro or agree on ways to jump-start the region's economy. The Organization for Economic Cooperation and Development warned Tuesday that the 17 countries that use the euro risk falling into a "severe recession." 
    Germany's DAX and France's CAC-40 closed more than 2% lower. The euro continued falling against the dollar, reaching $1.25, its lowest level since July 2010. Concerns about the stability of the European currency union if Greece leaves have knocked 5% off the euro this month. Yields on German government bunds fell as money shifted into low-risk investments. 
    If Greece exits, it could spread havoc throughout the global financial system. Bond traders may turn on other struggling governments in Spain and Italy. One big fear is that people in Spain and Italy will start a bank run, pulling euros out of banks for fear that their countries will soon follow Greece's lead. European banks have close ties to US banks. 
    In other trading, the Standard & Poor's 500 index fell 19 points at 1,297. The Nasdaq composite index slumped 42 points to 2,796. 
    Benchmark crude lost $1.50 to $90.37 in New York. It fell as low as $90.18 earlier in the day. Prices haven't been below $90 since November 1. 
    The dollar rose and yields on US government debt fell as traders shifted money into the protection of Treasurys. The yield on the 10-year note sank to 1.71%, close to a record low, from 1.77% late Tuesday. AGENCIES



City fumes after petrol price hike Latest Increase Sees Rate Near 80-Mark


The single largest increase in petrol prices in India's history has understandably caused ripples of shock among consumers who found the Rs 7.92 hike per litre too hard to stomach. In one fell swoop, each user now has to shell out over 12% more on his daily commute, not to mention the snowball effect the increase will have on general inflation. 
    Until Wednesday, petrol cost Rs 70.66 per litre in Mumbai and the latest hike will see the rate near the Rs 80-mark. 
    No longer does the upper middle class remain insulated from the ambit of inflation. "Jo humpey guzarni hai ek baar guzar jaaye/ Woh kitne situmgar hain, khull jaaye toh achha ho!" said actor Farooque Shaikh, voicing the common man's helplessness. The Urdu verse urges the powers-thatbe to do the worst they can in one stroke so that their torturous ways are exposed. 
    Actor Hema Malini admitted to scolding her staff at the enormous petrol bills they run up each month. "I scrutinize my monthly expenses when I sign the transport vouchers and I cannot help being shocked at the cost escalation," she said. "If well-to-do households feel this way, one can only imagine the plight of the average consumer. At this rate, we will all have to travel by autorickshaws now." 
    Former bureaucrat Dinesh Afzulpurkar is not immune to the substantial spike either. "I travel from my Nariman Point residence to Shushrusha Hospital in Dadar, where I am a director, each day. I cannot help notice how my fuel costs have risen in the past year or two, but this increase is too uncomfortable to bear. Salaried employees will suffer," he said. 
    The new peak has caused vehicle owners to reconsider their mode of travel. Nilesh Vaidya, a security manager at a five-star hotel, commutes from Goregaon to Vile Parle each day but often travels to other cities, including Pune by car. His reaction was one of stunned silence. Like him, Abdul Shahid Siddiqui, a dealer in antiques at a South Mumbai hotel, failed to see why the economists in government could not avoid such an enormous "rationalization". "Where is this country headed? This is 'zulm' (atrocity). The poor will soon have no means of living an honourable, dignified existence. Even the average salesperson uses a two-wheeler, it is not as if petrol is a luxury of the upper class," he said. 
    Anxiety was visible at ground zero too. As he handled long queues of last-minute fillers, pump manager Jagdish Ingle was anxiously debating how to fend them off once stocks ran dry. "People accuse us of halting supplies deliberately. How do I explain that I suffer the same predicament? I travel to work from Jogeshwari to Grant Road and I am wondering if I should take the train instead," he says. Ingle had bought a motorcycle to escape the sardine-can situation in trains. In Ghatkopar, pump owner Pulin Shah agonized over having to pay Rs 1.6 lakh every day to procure the same amount of fuel for his gas station. 'IT'S A GRIM INDICATION OF UNION GOVT'S WRONG FISCAL POLICY'

Opera House, 9pm

    The latest 
    hike is a grim indication of the Union government's wrong fiscal policy. It will throw the common man's budget out of gear 
Ram Naik | FORMER PETROLEUM MINISTER, BJP LEADER


I will end up spending Rs 25,000 more and no client will reimburse these hidden costs 
Chetan Raikar | 
ENGINEER

One cannot cut down on travel but several other budgetary cuts will be made in every home 
Dinesh Afzulpurkar 
| FORMER CHIEF SECRETARY


MHADA LOTTERY Over 2.1 lakh e-applications submitted for 2,593 houses

Mumbai: The Maharashtra Housing and Area Development Authority (Mhada) has received more than 2.1 lakh applications for 2,593 flats. 
    For the fifth year running, the Mhada has received an enthusiastic response for the flats put up on sale throughout the city. 
    On Wednesday, the last day for online submission, 64,349 forms were received for flats in Mira Road and 1,49,490 applications were submitted for in Sion, Powai, Charkop and Borivli. "Approximately, 1.5 lakh forms have already been deposited in Axis Bank. We expect more applicants 
to come forward on Thursday, which is the last date for submission," said a senior Mhada official. Of the 2,593 flats, 1,726 are in Mira Road while 867 are in Sion, Kurla, Borivli and Charkop. A majority of the flats belong to the low-income group category and only 172 are for the high-income group. 
    The lowest range of Mhada houses (200 sq ft) starts from Rs 15 lakh in Kurla and 19 lakh in Malad. Flats in the high-income group (700 sq ft) cost Rs 55 lakh in Powai and Rs 57 lakh in Borivli. Last year over 1.30 lakh applicants were vying for 4,034 Mhada apartments, while in 2010, 3.28 lakh people applied for 3,449 houses in Mumbai.

Petrol price up 7.92 to 78.58, sharpest hike ever


UPA Allies Call It Unilateral, Ask For A Rollback

NewDelhi:By the time you read this, the price of petrol would have gone up by more than Rs 7.50 a litre across the country. The increase, the steepest-ever, came a day after Parliament's Budget session ended and PM Manmohan Singh talked about the need for "difficult decisions". 
    After adding state taxes, petrol will cost Rs 73.18 a litre in Delhi, Rs 78.58 in Mumbai, Rs 77.88 in Kolkata and Rs 77.53 a litre in Chennai. This marks an increase of around 10% and puts a squeeze of roughly Rs 6,000 a year on a family that spends an average of Rs 5,000 per month on petrol. 
    This is the first upward revision in petrol price since November 4, 2011. The highest increase till now had been Rs 5 per litre. State-run oil marketers twice raised prices by this amount—on May 15, 2011 and May 24, 2008 when the petrol price crossed the Rs 50 a litre mark for the first time. 
    The decision immediately drew 
howls of protest and demands for rollback from parties across the political spectrum, including UPA allies such as Trinamool Congress chief Mamata Banerjee. But the West Bengal chief minister also made it clear that she would not rock the UPA boat. 
    Consumers too voiced their anguish even as they thronged petrol pumps for a "cheaper" tank-up one last time. Police had to be called in to control the spiraling queues in many pumps in Delhi and elsewhere. 
    The announcement of price revision came while oil minister S Jaipal Reddy is away in Turkmenistan to attend a ceremony for signing a fournation gas pipeline deal. 
    Finance minister Pranab Mukherjee laid the onus of the hike on oil marketers. "The decision has been taken. Petrol is a deregulated commodity," he said. 
Congress gambles with middle-class patience... 
    The government seems to be testing the patience of the middle class. But the timing of the shocker of a raise, after seven-and-a-half months, seems political. The next political challenge, elections in BJP-ruled Gujarat and Himachal, are in November and the Congress is hoping the angst will die down by then or better still, the middle class will come to terms with the 'new normal' in petrol prices. P 12 
...But will take credit for 
    1.50 cut expected soon 
    Consumers can look forward to a cut of more than Re 1 in petrol prices by the end of this month, given the trend in the Singapore bulk market. Indeed, government sources said the reduction was already factored in by the state oil firms. "Unless there's a dramatic fall in the rupee's value against the dollar, a reduction of 1 or 1.50 per litre is quite certain. After taxes, it would be around 2 a litre," a source said. P 12 
Re slides to 56.01/$, hits markets, foreign travel 
The rupee continued its free fall against the US dollar, plunging to a new record low of 56.23 on Wednesday. It closed at 56.01. The rupee's weakness now threatens to push India out of the trillion-dollar market capitalization club. The sensex fell 78 points, to end below 16,000. Meanwhile, Indians travelling abroad are spending less since costs, in rupees, have jumped 15-20% in a month. P 19 Do or die measure, contend oil firms 
New Delhi: The government had freed petrol prices in June 2010 when crude came down to around $40 a barrel from a historic high of $147 per barrel in July 2008. But in practice, oil companies do not move without a signal from the parent oil ministry which officially continues to deny any control. 
    Sources said the increase was stage-managed. Oil companies usually review prices on the fifteenth and last day of each month. But Wednesday's increase was announced midweek to take advantage of Reddy's absence after the Parliament session. 
    Reddy reportedly gave his go-ahead for raising petrol prices before leaving for Turkmenistan. His absence gave an opportunity for the government to distance itself from the rise and reinforce the impression that it did not control its price as it was a deregulated fuel. But oil companies described the hike as a "do-or-die" measure. R S Butola, chairman of market leader Indian Oil Corporation, argued that the price had to be increased steeply since they had not revised it for the last seven months even though global prices of crude went up 3.5% and petrol in bulk markets rose 14.5%, even as the rupee continued its slide against the dollar. 
    "All three retailers together piled up a loss of Rs 2,321 crore between the last price hike in November and March 31. Since March alone, we have taken a hit of Rs 2,330 crore. The rupee too has fallen some 3-4%. The government would not have compensated these losses as petrol is a deregulated product," he said. 
    The IOC chairman refused to comment when asked whether he had secured the ministry's nod earlier to raise petrol prices. "We had told the government either it takes back control over petrol or we would have no option but to raise the price steeply. We did what we had to do. There was no choice left for us," he said.






Tuesday, May 22, 2012

India Plays Spoiler as Global Markets Rally Re’s new low pulls down stocks; Mathematical models show currency could fall below 60 to $

 India stood out like a sore thumb, with the rupee crashing to a new low and stocks falling while the rest of the world rallied on hopes that Europe, the epicentre of financial turmoil, may shift its stance to growth from austerity. 
The effect of the Reserve Bank of India's (RBI) move to curtail currency arbitrage on Monday was short-lived as policy inaction led to Morgan Stanley lowering its forecast for economic growth. The slide resumed when the demand for US dollars from oil importers and a government department hit the market, said traders. 
Finance Minister Pranab Mukherjee left the fate of the currency to market forces, saying, "The government is taking a series of steps. However,managing rupee is market-related... There is a lot of volatility." 
Investors worry that policymakers are running out of ammunition to protect the currency, which is already down about a quarter since last July despite curbs on speculation. 
"It seems all grim," Morgan Stanley's Ridham Desai said in a note. "The macro mix exposes India to global events more than it may choose to." 
Morgan forecasts current account deficit — the excess of imports over exports — and fiscal deficit to fall this year, which will help equities. 
The rupee fell 0.7% to 55.39 per dollar at close, after touching an all-time low of 55.47. The Sensex lost 1% to end at 16,026.41, its lowest level since January 9, and is off 13% from its February 21 high, Bloomberg data shows. 
Fitch Ratings' downgrade of Japan's long-term local currency by a notch, and Morgan Stanley reducing India's growth forecast to 6.3% from 7% for fiscal 2013 weakened investor sentiment. While stocks and currencies of most countries are weakening as investors fear Greece's exit from the euro could lead to a financial catastrophe, India is faring worse since its deteriorating macroeconomic fundamentals are multiplying woes. The enormous demand for imported products, with the government subsidising oil prices, and the sudden stoppage of overseas fund flows are pressuring the rupee. The government needs to lure foreign investors with friendly policies. 
"The next target we are looking at is 56 per dollar," said Navin Raghuwanshi, senior VP, Development Credit Bank. India may be De-coupled 
"Sixty per dollar looks very ambitious at this point, though with what we have seen in the recent past, nothing seems impossible. I think, alarm bells may start ringing at 56-57 per dollar, and the regulators may do something drastic at that point to stop the fall." 
The Stoxx Europe 600 Index rose 1.2% and the MSCI All-Country World Index climbed 0.5% on hopes that Wednesday's meeting of European leaders in Brussels could throw up some plan to save the euro. European leaders will do "everything necessary" to keep Greece in the euro grouping, German Finance Minister Wolfgang Schaeuble had said. But India may be de-coupled since it faces its own set of macro troubles. 
The RBI has probably used up most of the tools at its disposal since December last, when rising current account and fiscal deficit triggered an outflow of US dollars. It eased interest rates for non-resident Indians and forced corporates to bring in their dollar earnings. There could be a few more measures up the central bank's sleeve like forcing Indian corporates with surplus in overseas operations to bring in the dollars, though it may be read as a sign of desperation. "The measures taken yesterday were rendered ineffective," said Hariprasad, head of treasury, Centrum Direct. "Rupee is a purely domestic story now, driven by the fundamentals. There is nervousness in the market, and it is very difficult to forecast the levels now. It is a unidirectional fall and markets are looking up to the government now for some clues." Some valuation models of banks show that the currency could fall to 63 to the dollar. Goldman Sachs, which raised the year-end currency target to 50 per dollar from 49, its model shows a lower level. The so-called Goldman Sachs Dynamic Equilibrium Exchange Rate Model, which reflects the global context that captures factors in both the developed and developing world, shows the rupee may fall to as low as 63.5. 
Even the global markets may turn shaky as the Greece sovereign crisis, which has been playing for two years, explodes if the second election in months also leads to a fractured mandate. Some fear that the financial markets may remain volatile with banks shrinking their balance sheets to reduce risk. "Global economies will de-lever for what seems like forever," Bill Gross, managing director and co-CIO of PIMCO, said in a tweet. 
"QEs can only do so much. Careful," he said referring to quantitative easing by the Federal Reserve, a euphemism for printing notes.


RBI may take big bang steps to tame rupee Currency Hits New Low Of 55.47 Against $

Mumbai: The foreign exchange market is bracing itself for sledgehammer measures by the Reserve Bank of India given the sharp depreciation in the rupee in the last few sessions. The rupee further weakened against the dollar to close at 55.40 after hitting 55.47 intra-day on Tuesday following a downgrade of Japan by rating agency Fitch. 
    The rupee, which opened stronger against the dollar, soon started weakening steadily to close at the day's low. Dealers said that none of the central bank's measures to steady the rupee have had an impact. RBI has exhausted close to $20 billion of its reserves in supporting the rupee. It has allowed corporates to pay more on external borrowings, freed interest rates on non-resident deposits, and cracked down on banks going long on the dollar. 
    The most recent measure by RBI was curbs on trade in currency derivatives. Yet the rupee continues to weaken largely on the back of a world-wide dollar rally. 
    The most drastic measures could be limits on dollar purchases which could reduce pressure from importers. It was also widely expected that the central bank would open a separate window to sell dollars directly to oil companies thereby eliminating a large chunk of demand. 
    Besides increased demand for dollars from exporters who are leaving no position "unhedged", the local unit is coming under pressure because of sales by foreign institutional investors who turned net sellers in April 2012. 
    Forex dealers are waiting for the outcome of the Greek election on June 17 which will provide a pointer to whether Greece would continue to remain in the Eurozone. The main concern of the markets is of a disorderly exit—one where there is complete confusion over financial contracts with investors being forced to write off billions. According to Nick Firoozye, Senior Interest Rates Strategist, Nomura, the Greek exit from the euro would be not at all orderly. "Approximately 20% of the world's reserves are in euro, and a larger notional amount of euro swaps are traded that that of than dollar. That is a significant underpinning of the global financial market. An exit would almost automatically be disorderly: you would need to determine the governing law of individual contracts and obligations; whether redenomination is allowed or whether default is inevitable on some, as well as the obligations of central banks and governments. These issues are not at all straightforward —we can try and be as prepared as possible but it is not going to be easy in any way." 
GREXIT DILEMMA


Siddhartha Sanyal | Chief India economist, Barclays 
On Greek exit: The rupee is set to stay under pressure in a risk-off scenario and even a Greek exit from the euro will not improve it in the near term. The hopes of the rupee being favoured with oil prices coming off have not materialized and the only way out at the moment for the rupee seems to be further policy intervention 
On rupee: The exchange rate will be 56 by next month and 54 in three months



Dharmakirti Joshi | Chief economist, Crisil 
On Greek exit: Nervousness in Europe increases volatility in the forex market. We do not know how the situation will unfold in Greece... but the general result would be risk-aversion. The bad news is that our trade deficit is very high and most of our imports are price-inelastic. The good news is that the forex reserves and financial institutions are strong and, with 
    depreciation, Indian 
    assets become 
    attractive 
On rupee: The rupee could firm up to 49 in 8-10 months if there are measures to bring stability to the currency



Shubhada M Rao | President & chief economist, 
Yes Bank 
On Greek exit: The lingering Eurozone concerns may see another bout of intensification (of pressure on the rupee) around mid-June... If Greece fails to come to a consensus, the risk-off environment will prevail. The piecemeal measures and direct intervention by RBI have not been able to arrest the rupee's slide... Perhaps, an incisive and bigbang approach is needed now 
On rupee: The fair value of the rupee should be in the 52-53 range

Monday, May 21, 2012

Facebook Sinks as Nasdaq Scrambles to Square Trades

Co loses $19 b in market value amid huge volumes; other internet darlings also feel the heat
 Facebook shares sank on Monday in the first day of trading without the full support of the company's underwriters, leaving some investors down 25% from where they were Friday afternoon. Facebook's debut was beset by problems, so much so that Nasdaq said on Monday it was changing its IPO procedures. That may comfort companies considering a listing but does little for Facebook, whose lead underwriter Morgan Stanley had to step in and defend the $38 offering price on the open market. 
Without that same level of defence, its shares fell $4.50 to $33.73 in the first 1-1/2 hours of trading. That represented a decline of 11.8% from Friday's close and 25% from the intra-day high of $45 a share. "At the moment it's not living up to the hype," Frank Lesh, a futures analyst and broker at FuturePath Trading in Chicago said, adding that some people may have decided to hang back and buy the stock on the declines. "Look at the valuation on it. It might have said 'buy' to a few people, but boy it was awfully rich," he said. 
The losses wiped some $19 billion off of the company's market capitalisation — not far from what chief executive Mark Zuckerberg was worth personally when the stock debuted. Volume was again massive, with more than 96 million shares trading hands, making it by far the most active stock on the US market. Nearly 581 million shares were traded on Friday. "One of the things that we are seeing in Facebook is a lot of emotional trading, in that over the weekend much of the media coverage was negative, and that could be weighing on investors' decisions to get out of the stock," said JJ Kinahan, TD Ameritrade's chief derivatives strategist. 
The drop was so steep that circuit breakers kicked in a few minutes after the open to restrict short sales in the stock, according to a notice from Nasdaq. Shares in other one-time Internet darlings fell in lockstep with Facebook on Monday, with Yelp, LinkedIn and Zynga all lower at mid-morning. 
The news was not all bad, though, as the Nasdaq rose 1.2%. High-profile tech stocks rose sharply, with Apple up 3.3% and Amazon 1.6% higher. 
As the stock fell, there was a long list of questions — ranging from whether the underwriters priced the shares too high to how well prepared the Nasdaq was to handle the biggest Internet IPO ever — and few immediate answers. "It was just a poorly done deal and it just so happens to be the biggest deal ever for Nasdaq and they pooched it, that's the bottom line here," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. Nasdaq said Monday morning the changes it was making would prevent a repeat of what happened Friday, when glitches prevented some traders from knowing for hours whether their trades had been completed. The exchange also said it would implement procedures to accommodate orders that were not properly executed last week, which could ultimately lead to compensation for some investors. 
"It doesn't instill confidence for clients. Talk about trying to convince them it isn't a casino," one Midwestern financial adviser said on Monday. Separately, a source said Morgan Stanley's brokerage arm still had a 'large number' of share orders from Friday that were not confirmed, which it was working to resolve. A Facebook spokeswoman declined to comment on the share price issue. But analysts said that after the initial frenzy, investors were quickly becoming cautious about the stock. "Investors are aware of the risk embedded in the stock price. There are concerns about growth and advertisers' frequent lack of certainty how best to use Facebook," said Brian Wieser at Pivotal Research Group, who has a $30 target on the stock. "At$38, the stock is priced for perfection in a manner that implied that risks were negligible." — Reuters




 

blogger templates | Make Money Online