The word on the street is that SIPs have failed. Investors who have been investing steadily through Systematic Investing Plans find that their investors too are deep under water. Even SIPs that have been running for long periods are in losses or barely breaking even. There's no denying this. If you started an SIP about five years ago when the Sensex (^BSESN : 10348.83 +446.84) was at 5,000 and invested Rs 10,000 a month in a fund that about kept pace with the Sensex, you would be just about even today. You would have invested Rs 6 lakh but the current value of investment would be about Rs 5.9 lakh. The losses are far worse for SIPs that were started later. Investors who started SIPs say, three years ago, are down by a total of 24% over a period when the Sensex has lost 14%.
Naturally, investors are seriously put off by this. After all, SIPs were supposed to be the panacea of fund investment. They epitomise the slow and steady method of investment that people like me advise, don't they? Then how can SIP apparently do so much worse than lump-sum investments? There are even articles in the press saying that fund investors are cancelling their SIP plans in some numbers. Why has this happened? And are investors right in stopping their investments now?
The first thing that is obvious here is that SIPs do not guarantee profits under all circumstances. The point of SIPs is that you keep buying at all levels-high and low-regardless of what your instincts urge you to do. You automatically buy more when the market is low and less when the market is high. Without an SIP, investors invariably tend to do the opposite. In the long-term, given the general upward trend of stock prices, this strategy leads to much better profits than picking and choosing and trying to time the markets themselves.
But that does not amount to magic. In the face of the kind of collapse that the stock markets have seen over the last year, no investing strategy is immune. If you have been doing an SIP over the last five years, then most of that period, you have been investing at very high levels of the markets. You have been investing when the market was at 10,000 and 15,000 and 20,000 and even 22,000. It's no surprise that now when it's down to 9,000 or 10,000 you are in losses.
And as for comparing this to a lump sum investment made five years ago, obviously anyone making a single investment at 5,000 and comparing it to 10,000 has doubled his money. But such people do not exist. I can't imagine any human being who could have invested five years ago and then stopped investing more. To actually have followed such a strategy you would have to able to foresee the future or be a genius. To compare this to a real world investors' SIP is a useless exercise of 20/20 hindsight.
The more important issue is whether investors should be stopping their SIPs under current circumstances. In my opinion, that would be disastrous. The whole point of SIP investment is to keep investing when the market is down. If you are going to run an SIP when the markets are up and abandon it when they are down then what's the point? It's just market timing under the guise of SIPs. When the markets recover again, it's only then that you will reap the benefits of investing when they were down.
The author is CEO, Value Research
Sunday, April 05, 2009
IMF sees world economy shrinking up to 1 pct in 2009
MADRID (Reuters) - The International Monetary Fund sees the world economy contracting by between 0.5 and 1 percent in 2009, Managing Director Dominique Strauss-Kahn said in an interview published on Wednesday.
He said a recovery could come in the first two quarters of 2010.
"If ... economic policies are appropriate, the recovery should come in the first two quarters of 2010," he told Spanish newspaper El Pais.
The IMF said last month in two reports prepared for a meeting of Group of 20 nations this week that the global economy will shrink as much as 1 percent this year -- its first contraction since World War Two.
It forecast a gradual recovery in 2010.
Separately, Strauss-Kahn said it was possible the European Central Bank could resort to purchasing assets with newly created money to boost the money supply.
"I'm sure that, if necessary, it will not hold back, but be active against a fall in prices," he said.
With regards to Spain, Strauss-Kahn said although Spanish banks were not directly exposed to U.S toxic assets they had created their own.
"I'm more worried about the consequences of the real estate boom on the Spanish banking system than the direct impact of U.S toxic assets," he said.
He said there could be problems with some Spanish banks needing government help although the system overall was healthy.
Spain on Sunday launched its first bank rescue of the global financial crisis to prevent solvency problems at unlisted savings bank Caja Castilla la Mancha (CCM).
Spanish banks' capital and liquidity levels are being worn down by limited access to money markets and soaring debt defaults during Spain's recession.
He said a recovery could come in the first two quarters of 2010.
"If ... economic policies are appropriate, the recovery should come in the first two quarters of 2010," he told Spanish newspaper El Pais.
The IMF said last month in two reports prepared for a meeting of Group of 20 nations this week that the global economy will shrink as much as 1 percent this year -- its first contraction since World War Two.
It forecast a gradual recovery in 2010.
Separately, Strauss-Kahn said it was possible the European Central Bank could resort to purchasing assets with newly created money to boost the money supply.
"I'm sure that, if necessary, it will not hold back, but be active against a fall in prices," he said.
With regards to Spain, Strauss-Kahn said although Spanish banks were not directly exposed to U.S toxic assets they had created their own.
"I'm more worried about the consequences of the real estate boom on the Spanish banking system than the direct impact of U.S toxic assets," he said.
He said there could be problems with some Spanish banks needing government help although the system overall was healthy.
Spain on Sunday launched its first bank rescue of the global financial crisis to prevent solvency problems at unlisted savings bank Caja Castilla la Mancha (CCM).
Spanish banks' capital and liquidity levels are being worn down by limited access to money markets and soaring debt defaults during Spain's recession.
Thursday, February 19, 2009
Inflation at more than a-year low of 3.93%
Inflation declined to over 14 months low of 3.92 per cent for the week ended February 7, on account of lower prices of manufactured items.
The wholesale price index, coming below four per cent, may prompt the Reserve Bank of India to cut key policy rates. An indication was made by the RBI Governor D Subbarao in Tokyo yesterday.
During the week, prices of manufactured items such as sugar, imported edible oil and textile items such as cotton yarn got cheaper.
At the same time, prices of chemical products, iron and steel and cables became cheaper.
On the contrary, some food items such as pulses, fruit and vegetables and maize became dearer during the week though prices of tea declined.
Fuel items too became expensive during the week on account of higher prices of naphtha and furnace oil, which went up by 10 per cent and 5 per cent respectively, despite fall in prices of crude oil.
The wholesale price index, coming below four per cent, may prompt the Reserve Bank of India to cut key policy rates. An indication was made by the RBI Governor D Subbarao in Tokyo yesterday.
During the week, prices of manufactured items such as sugar, imported edible oil and textile items such as cotton yarn got cheaper.
At the same time, prices of chemical products, iron and steel and cables became cheaper.
On the contrary, some food items such as pulses, fruit and vegetables and maize became dearer during the week though prices of tea declined.
Fuel items too became expensive during the week on account of higher prices of naphtha and furnace oil, which went up by 10 per cent and 5 per cent respectively, despite fall in prices of crude oil.
RPL, Rel Infra under regulatory lens
The finance ministry has told Parliament that companies belonging to both the Ambani brothers — Reliance Petroleum and Reliance Infrastructure — were being investigated for alleged violation of norms governing insider trading and overseas borrowings, respectively.
Reliance Petroleum (RPL) is one of the 19 companies against which market regulator SEBI has received complaints alleging insider trading in the past three years, acting FM Pranab Mukherjee said on Wednesday.
Responding to another question, minister of state for finance Pawan Kumar Bansal said that the Reserve Bank had referred cases of alleged violation of the external commercial borrowings (ECB) regulations by Reliance Infrastructure, earlier known as Reliance Energy, to the Enforcement Directorate. A Reliance Infrastructure spokesperson said the company had been legally advised that there had been no Fema violations.
The allegation of insider trading in Reliance Petroleum pertains to a series of events in November 2007, when 10 entities sold stock futures of RPL in the first week of the month, days before parent Reliance Industries (RIL) started trimming its stake in the refiner.
Reliance Industries confirmed to ET that these entities conducted these transactions
on behalf of RIL. In an emailed response, the company spokesperson said: “All the entities have acted as agents of Reliance Industries (RIL). The entire sale proceeds net of commission was paid over by these entities to RIL. The resulting income accruing from the
transactions has been duly accounted for in the books of RIL for the period ending March 31, 2008.”
The spokesperson further said: “As mentioned earlier, all profits (net of commission) for both forward and cash segments have been duly accounted for in the books of Reliance Industries and hence, there is no question of insider trading.”
The queries from ET and RIL’s response both occurred before Wednesday’s developments. In case of Reliance Infrastructure, the controversy relates to investment of ECB proceeds in fixed deposits and debt mutual funds, something not permitted by the ECB guidelines in force at the time. Reliance Infrastructure had raised ECBs of $360 million and $150 million in July and November 2006.
ECB norms at the time of these transactions required funds to be parked outside the country and was also not to be used in the capital market.
RBI had passed a compounding order on the alleged violations regarding the $360 million and a penalty of Rs 124.68 crore was levied. The company did not pay the penalty and sought compounding of both the ECBs — $360 million and $150 million.
The application was not found to be in order and the company was allowed to file a separate application for compounding of the alleged offence relating the second ECB. The matter was referred to the ED, as the company did not respond further, the minister said in the written reply.
Reliance Petroleum (RPL) is one of the 19 companies against which market regulator SEBI has received complaints alleging insider trading in the past three years, acting FM Pranab Mukherjee said on Wednesday.
Responding to another question, minister of state for finance Pawan Kumar Bansal said that the Reserve Bank had referred cases of alleged violation of the external commercial borrowings (ECB) regulations by Reliance Infrastructure, earlier known as Reliance Energy, to the Enforcement Directorate. A Reliance Infrastructure spokesperson said the company had been legally advised that there had been no Fema violations.
The allegation of insider trading in Reliance Petroleum pertains to a series of events in November 2007, when 10 entities sold stock futures of RPL in the first week of the month, days before parent Reliance Industries (RIL) started trimming its stake in the refiner.
Reliance Industries confirmed to ET that these entities conducted these transactions
on behalf of RIL. In an emailed response, the company spokesperson said: “All the entities have acted as agents of Reliance Industries (RIL). The entire sale proceeds net of commission was paid over by these entities to RIL. The resulting income accruing from the
transactions has been duly accounted for in the books of RIL for the period ending March 31, 2008.”
The spokesperson further said: “As mentioned earlier, all profits (net of commission) for both forward and cash segments have been duly accounted for in the books of Reliance Industries and hence, there is no question of insider trading.”
The queries from ET and RIL’s response both occurred before Wednesday’s developments. In case of Reliance Infrastructure, the controversy relates to investment of ECB proceeds in fixed deposits and debt mutual funds, something not permitted by the ECB guidelines in force at the time. Reliance Infrastructure had raised ECBs of $360 million and $150 million in July and November 2006.
ECB norms at the time of these transactions required funds to be parked outside the country and was also not to be used in the capital market.
RBI had passed a compounding order on the alleged violations regarding the $360 million and a penalty of Rs 124.68 crore was levied. The company did not pay the penalty and sought compounding of both the ECBs — $360 million and $150 million.
The application was not found to be in order and the company was allowed to file a separate application for compounding of the alleged offence relating the second ECB. The matter was referred to the ED, as the company did not respond further, the minister said in the written reply.
Tuesday, January 06, 2009
Best management lesson from BHAGBAT GITA
Five ‘Paandavas’: They represent our ‘Five Senses’ Viz. touch, taste, smell, sight and hearing.
(We also have other powers e.g. to think, to speak and to walk etc.)
Numerous ‘Kauravas’: They represent our never ending ‘Material Desires’. Material Desires
lead to ‘Material Pleasures’ and ‘Material Pains’ to be experienced by the soul through various
forms of ‘Material Lives’ on various ‘Material Planets’ Viz. Earth, Heaven and Hell.
Shri ‘Krishna’: He, as the charioteer represents our ‘Mind’ i.e. the ‘Director’ of our life. The
soul is linked to body through Mind.
The Chariot with Four Horses and Two Wheels: It represents that the charioteer of life i.e. the
mind has to control ‘Anger’, ‘Ego’, ‘Deception’ and ‘Greed’. It is to ensure Non-violence,
Peace, Truth and Simplicity. The two wheels represent ‘Sacrifice’ and ‘Forgiveness’.
Kurukshetra: It is the field of battle i.e. our current form of life as a ‘Human being’.
The War: It represents the war which ‘Five Senses’ have to fight against ‘Material Desires’ for
detaching the soul from material pleasures and pains. The control of mind over five senses
enables the soul to get enlightened for its spiritual growth. ‘Meditation’ helps in self-realization
to detach the soul from trap of ‘Karma’ related to material pleasures and pains, caused by
‘Material Actions’ through Thoughts, Speech and Physical Actions, either directly or indirectly.
Conversation between Shri ‘Krishna’ and ‘Arjuna’: It represents the ‘Learning Process’ which
we have to undergo to learn true ‘Spiritual Principles’.
The Victory: We, the eternal souls have to win over our material desires by controlling our
senses, which are directed by the mind. We have to detach our own self i.e. the soul, from
material pleasures and pains as applicable to our material form of life, which is currently as a
human being on one of the material planets called as ‘Earth’. When the soul achieves
“Omniscience” then it becomes completely enlightened. Such soul gets relieved from the birthdeath
cycle, into various material forms of lives, spread across various material planets. At the
end of such ‘Human life’ the soul enters into the ‘Spiritual Space’ i.e. it achieves “Salvation”. It
is also called as “Moksha / Nirvana” etc. in different languages. Thus the soul wins freedom
from material pleasures, pains and formalities attached to the material forms of lives forever.
Explanation of ‘Life’:
The true life is the eternal soul. Soul is an invisible living energy. The soul takes birth in a
material form of life and then takes rebirth in some other material form on death of the former
one, which has no beginning as per the ‘Theory of Karma’. The theory of karma is governed by
the ‘Laws of Life by Nature’, which is based on the principle of ‘Action-Reaction’. The
completely enlightened soul can win freedom and separate itself from the slavery of material
forms of lives forever i.e. Salvation. To become ‘completely enlightened’ means to get rid of
karma that traps the soul in material pleasures and pains. Salvation is the peak of spiritual
growth. It is the ultimate peace and happiness for the soul out of its permanent liberation from
the slavery of temporary material forms of lives on material planets Viz. Earth, Heaven and Hell.
(We also have other powers e.g. to think, to speak and to walk etc.)
Numerous ‘Kauravas’: They represent our never ending ‘Material Desires’. Material Desires
lead to ‘Material Pleasures’ and ‘Material Pains’ to be experienced by the soul through various
forms of ‘Material Lives’ on various ‘Material Planets’ Viz. Earth, Heaven and Hell.
Shri ‘Krishna’: He, as the charioteer represents our ‘Mind’ i.e. the ‘Director’ of our life. The
soul is linked to body through Mind.
The Chariot with Four Horses and Two Wheels: It represents that the charioteer of life i.e. the
mind has to control ‘Anger’, ‘Ego’, ‘Deception’ and ‘Greed’. It is to ensure Non-violence,
Peace, Truth and Simplicity. The two wheels represent ‘Sacrifice’ and ‘Forgiveness’.
Kurukshetra: It is the field of battle i.e. our current form of life as a ‘Human being’.
The War: It represents the war which ‘Five Senses’ have to fight against ‘Material Desires’ for
detaching the soul from material pleasures and pains. The control of mind over five senses
enables the soul to get enlightened for its spiritual growth. ‘Meditation’ helps in self-realization
to detach the soul from trap of ‘Karma’ related to material pleasures and pains, caused by
‘Material Actions’ through Thoughts, Speech and Physical Actions, either directly or indirectly.
Conversation between Shri ‘Krishna’ and ‘Arjuna’: It represents the ‘Learning Process’ which
we have to undergo to learn true ‘Spiritual Principles’.
The Victory: We, the eternal souls have to win over our material desires by controlling our
senses, which are directed by the mind. We have to detach our own self i.e. the soul, from
material pleasures and pains as applicable to our material form of life, which is currently as a
human being on one of the material planets called as ‘Earth’. When the soul achieves
“Omniscience” then it becomes completely enlightened. Such soul gets relieved from the birthdeath
cycle, into various material forms of lives, spread across various material planets. At the
end of such ‘Human life’ the soul enters into the ‘Spiritual Space’ i.e. it achieves “Salvation”. It
is also called as “Moksha / Nirvana” etc. in different languages. Thus the soul wins freedom
from material pleasures, pains and formalities attached to the material forms of lives forever.
Explanation of ‘Life’:
The true life is the eternal soul. Soul is an invisible living energy. The soul takes birth in a
material form of life and then takes rebirth in some other material form on death of the former
one, which has no beginning as per the ‘Theory of Karma’. The theory of karma is governed by
the ‘Laws of Life by Nature’, which is based on the principle of ‘Action-Reaction’. The
completely enlightened soul can win freedom and separate itself from the slavery of material
forms of lives forever i.e. Salvation. To become ‘completely enlightened’ means to get rid of
karma that traps the soul in material pleasures and pains. Salvation is the peak of spiritual
growth. It is the ultimate peace and happiness for the soul out of its permanent liberation from
the slavery of temporary material forms of lives on material planets Viz. Earth, Heaven and Hell.
Friday, January 02, 2009
Huge call writing from 3100-3300 caps Nifty upside
In a topsy-turvy trade, Indian stock markets managed to end in green on expectations of rate cut and stimulus package led to a rally in rate sensitive sectors friday . National Stock Exchange’s 50-share Nifty ended 0.44 per cent higher at 3046.75. Intraday, it touched a high of 3079.85 and low of 3021.80, a band of around 58 points. The index settled at a P/E ratio of 13.
In futures, Nifty January contract provisionally closed at a premium of 8.6 points to spot. The premium narrowed from 31 points earlier. The Nifty January contract price gained 0.38 per cent and added 20 lakh shares in open interest. The selling quantity was slightly higher than buy quantity, which shows players went short in the contract in late trade. The cost of carry was at 1.55 per cent.
For the second consecutive day, traders unwound short calls at 3000 strike while huge call writing was seen from 3100-3300 strikes. On the other hand, huge put buying was observed at 3000 while bulls wrote puts at 2900 and 2800 strikes. The options data indicates that Nifty will likely trade in 2870-3000 levels in the coming sessions.
“Traders booked profits in late trade as they unwound longs before the opening of major Asian markets on Monday, which were closed for New Year celebration. The government is expected to announce a stimulus package Friday evening but markets have already factored in the rational move. However, any extra over the expected might boost markets in the next session," said Ankit Sinha, CEO-Spark Advisory.
"Given the build up in options, I expect Nifty to remain in a range but with slight negative bias. Nifty has a strong resistance at 3100 levels while it has got a strong support in 2800-2900 zones in near term," Sinha added.
In stocks futures, Reliance Industries January gained 2.15 per cent and added 1.30 lakh shares in open interest. State Bank of India advanced 1.14 per cent and open interest added 2.75 lakh shares. Reliance Natural Resources saw huge unwinding of longs but the contract price rose 3.41 per cent to end at 62.25.
DLF gained 3.05 per cent with 8 lakh shares get added in open interest. Unitech advanced 4.74 per cent and added 38 lakh shares in open interest. Tata Steel slipped 0.37 per cent and shed 47750 shares in open interest. Bharati Airtel fell 2.09 per cent while, Reliance Communications jumped 2.15 per cent.
Total F&O turnover on NSE was Rs 31,631 crore, up 41 per cent from Thursday.
In futures, Nifty January contract provisionally closed at a premium of 8.6 points to spot. The premium narrowed from 31 points earlier. The Nifty January contract price gained 0.38 per cent and added 20 lakh shares in open interest. The selling quantity was slightly higher than buy quantity, which shows players went short in the contract in late trade. The cost of carry was at 1.55 per cent.
For the second consecutive day, traders unwound short calls at 3000 strike while huge call writing was seen from 3100-3300 strikes. On the other hand, huge put buying was observed at 3000 while bulls wrote puts at 2900 and 2800 strikes. The options data indicates that Nifty will likely trade in 2870-3000 levels in the coming sessions.
“Traders booked profits in late trade as they unwound longs before the opening of major Asian markets on Monday, which were closed for New Year celebration. The government is expected to announce a stimulus package Friday evening but markets have already factored in the rational move. However, any extra over the expected might boost markets in the next session," said Ankit Sinha, CEO-Spark Advisory.
"Given the build up in options, I expect Nifty to remain in a range but with slight negative bias. Nifty has a strong resistance at 3100 levels while it has got a strong support in 2800-2900 zones in near term," Sinha added.
In stocks futures, Reliance Industries January gained 2.15 per cent and added 1.30 lakh shares in open interest. State Bank of India advanced 1.14 per cent and open interest added 2.75 lakh shares. Reliance Natural Resources saw huge unwinding of longs but the contract price rose 3.41 per cent to end at 62.25.
DLF gained 3.05 per cent with 8 lakh shares get added in open interest. Unitech advanced 4.74 per cent and added 38 lakh shares in open interest. Tata Steel slipped 0.37 per cent and shed 47750 shares in open interest. Bharati Airtel fell 2.09 per cent while, Reliance Communications jumped 2.15 per cent.
Total F&O turnover on NSE was Rs 31,631 crore, up 41 per cent from Thursday.
Monday, December 15, 2008
Technicals suggest bullishness; 3000 crucial level for Nifty
Technical indicators like the Relative Strength Index heading in the positive direction and momentum oscillator Directional Movement Index in the buy mode suggest one should be optimistic on the markets in the near term.
However, with foreign players selling in cash and index futures, fall in Nifty futures premium along with call writing at 3000 levels, analysts are advising market players to book profits in their long positions on Nifty around 2950-3000 levels to re-enter at lower levelsOn Friday, after a decline of 3.5 per cent in early trade, indices recovered sharply in the late trade. Nifty December futures closed at 2921.70, a premium of just 0.35 points from 8 points on Thursday. However, given the long build up in the midcap stocks suggests restoration of confidence in the market.
"This is a traders market. Players are directionless. Investors are going short in early trade and covering up shorts at late trade and vice-versa. If one can look through the technical chart for past few days, markets are making a doji candle-- suggesting market is waiting for a breakout to either side," said Sanjay Rao, analyst at Spark Advisory.
Call buying was observed at 2900 and 3200 strike while good amount of tussle can be seen at 3000 level. Bears unwound their written calls at 3100 strike. On the other hand, huge amount of put writing was observed from strike 2900 to 2700. The call build up was little lackluster while solid put writing was seen at lower levels. This indicates Nifty will remain volatile in a range but won't fall significantly from current levels.
3000 is a very crucial level and if Nifty decisively breaches this level on closing basis, one can again go long on Nifty. On the downside Nifty is likely to take strong support at 2800-2825 levels where we have seen aggressive put writing.
Put-call ratio of Nifty open interest rose sharply to 1.34 levels from 1.08 levels earlier last week. This rise in put-call ratio led by huge put writing at 2800 strike indicates market players expect 2800 to act as a very strong support for Nifty in near term.
"Nifty once again stopped the fall around the congestion zone of 2700-2800 to bounce back into early 2900. The confidence in the rally was visible in the put writing in near at the money strikes of 2700, 2800 & 2900 along with reduction in calls. However the over optimism depicted into put-call ratio of Nifty December futures of 1.41 might just hold the pace of increments approaching the hurdle around 3000," Motilal Oswal said in a report.
On weekly basis, overall open interest increased by whopping Rs 11,978 crore or 30 per cent to Rs 51,615 crore. Nifty futures added enormous 28 per cent in open interest and foreign players net bought index futures worth Rs 2002 crore. To be sector specific, long build up was seen in oil & gas, power, sugar and telecom sector.
Stock specific build up of long positions were observed in Balrampur Chini, Essar Oil, IDBI, JP Associates, Reliance Infra, Triveni Engineering and Voltas to name a few. Volatility index fell further to 49.43 per cent from 52.05 per cent in the week.
However, with foreign players selling in cash and index futures, fall in Nifty futures premium along with call writing at 3000 levels, analysts are advising market players to book profits in their long positions on Nifty around 2950-3000 levels to re-enter at lower levelsOn Friday, after a decline of 3.5 per cent in early trade, indices recovered sharply in the late trade. Nifty December futures closed at 2921.70, a premium of just 0.35 points from 8 points on Thursday. However, given the long build up in the midcap stocks suggests restoration of confidence in the market.
"This is a traders market. Players are directionless. Investors are going short in early trade and covering up shorts at late trade and vice-versa. If one can look through the technical chart for past few days, markets are making a doji candle-- suggesting market is waiting for a breakout to either side," said Sanjay Rao, analyst at Spark Advisory.
Call buying was observed at 2900 and 3200 strike while good amount of tussle can be seen at 3000 level. Bears unwound their written calls at 3100 strike. On the other hand, huge amount of put writing was observed from strike 2900 to 2700. The call build up was little lackluster while solid put writing was seen at lower levels. This indicates Nifty will remain volatile in a range but won't fall significantly from current levels.
3000 is a very crucial level and if Nifty decisively breaches this level on closing basis, one can again go long on Nifty. On the downside Nifty is likely to take strong support at 2800-2825 levels where we have seen aggressive put writing.
Put-call ratio of Nifty open interest rose sharply to 1.34 levels from 1.08 levels earlier last week. This rise in put-call ratio led by huge put writing at 2800 strike indicates market players expect 2800 to act as a very strong support for Nifty in near term.
"Nifty once again stopped the fall around the congestion zone of 2700-2800 to bounce back into early 2900. The confidence in the rally was visible in the put writing in near at the money strikes of 2700, 2800 & 2900 along with reduction in calls. However the over optimism depicted into put-call ratio of Nifty December futures of 1.41 might just hold the pace of increments approaching the hurdle around 3000," Motilal Oswal said in a report.
On weekly basis, overall open interest increased by whopping Rs 11,978 crore or 30 per cent to Rs 51,615 crore. Nifty futures added enormous 28 per cent in open interest and foreign players net bought index futures worth Rs 2002 crore. To be sector specific, long build up was seen in oil & gas, power, sugar and telecom sector.
Stock specific build up of long positions were observed in Balrampur Chini, Essar Oil, IDBI, JP Associates, Reliance Infra, Triveni Engineering and Voltas to name a few. Volatility index fell further to 49.43 per cent from 52.05 per cent in the week.
Thursday, December 11, 2008
Inflation drops to 8%
Inflation based on the wholesale price index (WPI) for the week ended November 29 dropped to 8% from 8.4% in the previous week due to lower prices of fruit and vegetables. A UTVi poll of eight analysts had seen inflation at 8%.
The official WPI for all commodities for the week ended 29 November, 2008 declined 0.04% to 233.6 (provisional) from 233.7 (provisional) in the previous week.
Inflation was at 3.89% during the corresponding week of the previous year.
The index for primary articles declined 0.2% to 249.9 (provisional) from 250.5 (provisional) for the previous week. The index for food articles group declined 0.4% to 244.7 (provisional) due to lower prices of fruit & vegetables and barley (2% each) and gram (1%). The prices of ragi, urad, bajra and maize (1% each) moved up.
The index for fuel, power, light and lubricants remained unchanged at its previous week's level of 345.
The index for manufactured products was also unchanged at its previous week's level of 203.1.
The government also revised the final index for the week ended 4 October, 2008 to 239.7 as against 239.6 (provisional), and the annual rate of inflation based on the final index stood at 11.49% compared with 11.44% (provisional) reported earlier.
The official WPI for all commodities for the week ended 29 November, 2008 declined 0.04% to 233.6 (provisional) from 233.7 (provisional) in the previous week.
Inflation was at 3.89% during the corresponding week of the previous year.
The index for primary articles declined 0.2% to 249.9 (provisional) from 250.5 (provisional) for the previous week. The index for food articles group declined 0.4% to 244.7 (provisional) due to lower prices of fruit & vegetables and barley (2% each) and gram (1%). The prices of ragi, urad, bajra and maize (1% each) moved up.
The index for fuel, power, light and lubricants remained unchanged at its previous week's level of 345.
The index for manufactured products was also unchanged at its previous week's level of 203.1.
The government also revised the final index for the week ended 4 October, 2008 to 239.7 as against 239.6 (provisional), and the annual rate of inflation based on the final index stood at 11.49% compared with 11.44% (provisional) reported earlier.
Monday, December 08, 2008
Govt unveils Rs 30,700-cr stimulus package
The government on Sunday unveiled a Rs 30,700-crore fiscal stimulus package mainly comprising additional spending and excise duty cuts Global stimulus pkg
India battles crisis
Highlights of package
aimed at boosting consumption, the latest in a flurry of measures being rolled out by policymakers, keen to steer the economy away from a painful slowdown.
The government’s fiscal package, announced a day after the central bank cut a key interest rate, has Rs 20,000 crore in additional expenditure, an across-the-board 4% excise duty cut amounting to Rs 8,700 crore and benefits worth Rs 2,000 crore for exporters.
In addition, the government hopes to precipitate infrastructure projects worth Rs 100,000 crore through faster clearances of public-private partnership projects, and ensure their easier financing by way of a tax break on fund raising by the India Infrastructure Finance Company, a specialist lender to the infrastructure sector.
The government will also take steps to ensure that already budgeted expenditure of Rs 300,000 crore will actually be spent over the next four months of the current fiscal to end-March 2009, as it increasingly resorts to pump-priming to shore up the economy that continues to face headwinds from the global financial market turmoil.
These measures complement Saturday’s one percentage point cut in the repo rate cut announced by the central bank, and the refinance facilities for housing and small and medium industries that are designed to boost the flagging realty and manufacturing sectors.
Planning Commission deputy chairman Montek Singh Ahluwalia told reporters that the government would not hesitate in taking further expansionary measures if the economic situation worsened. The latest measures will lift the government fiscal deficit above its target of 2.5% of gross domestic product this year, Mr Alhuwalia said, adding that a higher fiscal deficit was tolerable in the current environment and was an appropriate “counter-cyclical” policy.
“It is a desirable step in times of external contraction.” The fiscal package drew a mixed response from industry. Car manufacturers reacted positively and promised to pass on the duty cuts to consumers, which will bring prices down by between Rs 8,000 and Rs 45,000. Public sector banks are expected to announce easier terms for housing, auto and personal loans on Monday.
“We were anticipating a package of Rs 70,000 crore. A few sectors such as steel, cement, construction and real estate need boost from the government,” said Assocham president Sajjan Jindal. The trade body is expecting another package of around Rs 30,000 crore in January.
“Given the extent of problems that are being faced by the industry, we hope that Sunday’s announcement is only part of the total fiscal package and more such measures will be seen in the near future,” said CII director general Chandrajit Banerjee.
An official statement said the government has been concerned about the impact of the global financial crisis on the Indian economy. The global crisis has already forced several developed economies into a recession, and hit India too. The economic growth this year is expected to ease to around 7%, down from the 9% average of the past three years.
Instead of cutting duties selectively, the government has cut the Cenvat or excise duty by 4% on all products barring petroleum products. The three major rate slabs of central excise duty, of 14%, 12% and 8%, will now stand at 10%, 8% and 4%, and Mr Ahluwalia said the government was hopeful that companies would pass on the benefit of the cuts to consumers.
This could give a fillip to domestic demand in sectors such as automobiles, consumer durables and cement that are most affected by the economic slowdown. The package provides Rs 1,450 crore to the export sector, which for the first time in five years saw a 12% drop in October. Exporters will get refunds of terminal excise duty, a lower interest rate of 7% for pre- and post-shipment credit for sectors such as handloom, textiles, leather, marine, gems and jewellery and small and medium enterprises.
It allows labour-intensive medium, small and micro enterprises collateral-free lending on loans of Rs 50 lakh up to Rs 1 crore. Besides, the lock-in period for loans under an existing credit guarantee scheme are being cut to 18 months from 24, a move that will encourage banks to give more loans to the sector. RBI has already announced an increase in refinance facilities to SIDBI, which lends to small enterprises.
The housing and infrastructure sectors also received significant emphasis in the government package. To ensure that infrastructure projects are not starved of funds, the government allowed the India Infrastructure Finance Company to raise Rs 10,000 crore by way of tax-free bonds, giving it a larger pool of funds to refinance long-term loans to the sector. The power sector has been allowed duty-free import of naptha.
India battles crisis
Highlights of package
aimed at boosting consumption, the latest in a flurry of measures being rolled out by policymakers, keen to steer the economy away from a painful slowdown.
The government’s fiscal package, announced a day after the central bank cut a key interest rate, has Rs 20,000 crore in additional expenditure, an across-the-board 4% excise duty cut amounting to Rs 8,700 crore and benefits worth Rs 2,000 crore for exporters.
In addition, the government hopes to precipitate infrastructure projects worth Rs 100,000 crore through faster clearances of public-private partnership projects, and ensure their easier financing by way of a tax break on fund raising by the India Infrastructure Finance Company, a specialist lender to the infrastructure sector.
The government will also take steps to ensure that already budgeted expenditure of Rs 300,000 crore will actually be spent over the next four months of the current fiscal to end-March 2009, as it increasingly resorts to pump-priming to shore up the economy that continues to face headwinds from the global financial market turmoil.
These measures complement Saturday’s one percentage point cut in the repo rate cut announced by the central bank, and the refinance facilities for housing and small and medium industries that are designed to boost the flagging realty and manufacturing sectors.
Planning Commission deputy chairman Montek Singh Ahluwalia told reporters that the government would not hesitate in taking further expansionary measures if the economic situation worsened. The latest measures will lift the government fiscal deficit above its target of 2.5% of gross domestic product this year, Mr Alhuwalia said, adding that a higher fiscal deficit was tolerable in the current environment and was an appropriate “counter-cyclical” policy.
“It is a desirable step in times of external contraction.” The fiscal package drew a mixed response from industry. Car manufacturers reacted positively and promised to pass on the duty cuts to consumers, which will bring prices down by between Rs 8,000 and Rs 45,000. Public sector banks are expected to announce easier terms for housing, auto and personal loans on Monday.
“We were anticipating a package of Rs 70,000 crore. A few sectors such as steel, cement, construction and real estate need boost from the government,” said Assocham president Sajjan Jindal. The trade body is expecting another package of around Rs 30,000 crore in January.
“Given the extent of problems that are being faced by the industry, we hope that Sunday’s announcement is only part of the total fiscal package and more such measures will be seen in the near future,” said CII director general Chandrajit Banerjee.
An official statement said the government has been concerned about the impact of the global financial crisis on the Indian economy. The global crisis has already forced several developed economies into a recession, and hit India too. The economic growth this year is expected to ease to around 7%, down from the 9% average of the past three years.
Instead of cutting duties selectively, the government has cut the Cenvat or excise duty by 4% on all products barring petroleum products. The three major rate slabs of central excise duty, of 14%, 12% and 8%, will now stand at 10%, 8% and 4%, and Mr Ahluwalia said the government was hopeful that companies would pass on the benefit of the cuts to consumers.
This could give a fillip to domestic demand in sectors such as automobiles, consumer durables and cement that are most affected by the economic slowdown. The package provides Rs 1,450 crore to the export sector, which for the first time in five years saw a 12% drop in October. Exporters will get refunds of terminal excise duty, a lower interest rate of 7% for pre- and post-shipment credit for sectors such as handloom, textiles, leather, marine, gems and jewellery and small and medium enterprises.
It allows labour-intensive medium, small and micro enterprises collateral-free lending on loans of Rs 50 lakh up to Rs 1 crore. Besides, the lock-in period for loans under an existing credit guarantee scheme are being cut to 18 months from 24, a move that will encourage banks to give more loans to the sector. RBI has already announced an increase in refinance facilities to SIDBI, which lends to small enterprises.
The housing and infrastructure sectors also received significant emphasis in the government package. To ensure that infrastructure projects are not starved of funds, the government allowed the India Infrastructure Finance Company to raise Rs 10,000 crore by way of tax-free bonds, giving it a larger pool of funds to refinance long-term loans to the sector. The power sector has been allowed duty-free import of naptha.
Friday, December 05, 2008
U.S. Job Losses Probably Reached 26-Year High as Economy Sank
U.S. employers probably cut jobs in November at the fastest pace in a quarter century as the yearlong recession engulfing the world’s largest economy deepened, economists said before a report today.
Payrolls shrank by 333,000 workers last month, the biggest drop since July 1982, according to the median estimate in a Bloomberg News survey. The jobless rate may have jumped to 6.8 percent, the highest level since 1993.
Job losses are likely to keep cascading into next year as the collapse in credit and slump in spending hurt companies from General Motors Corp. to Citigroup Inc. and AT&T Inc. President- elect Barack Obama, confronting what he called a “crisis of historic proportions,” announced a plan last week to save or create 2.5 million jobs in two years.
“The pace of contraction has really picked up,” said Julia Coronado, a senior economist at Barclays Capital Inc. in New York. The labor market “is in a severe deterioration phase. Job cuts are across the board.”
The Labor Department’s report is due at 8:30 a.m. in Washington. Payroll estimates of the 73 economists surveyed ranged from losses of 220,000 to 470,000. The jobless rate last month probably rose from 6.5 percent in October.
The 11th consecutive drop in payrolls would follow a 240,000 decline in October and bring the number of jobs eliminated so far this year to more than 1.5 million. Factories probably accounted for about a third of the decline in jobs last month, according to the survey median.
Jobs, Recession
The employment slump was a key factor in determining the start of the recession. The National Bureau of Economic Research, the arbiter of U.S. business cycles, announced this week that a contraction began in December 2007, the month payrolls peaked.
At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982.
Other reports have indicated the labor market is deteriorating. The Institute for Supply Management’s gauge of employment at service industries dropped last month to the lowest level since records began in 1997. Its index for manufacturing jobs fell to a 17-year low.
The declines prompted John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, to raise his forecast for the November payroll loss to 450,000.
First-time jobless claims, a government measure of firings, have held over half a million in each of the last four weeks, the longest stretch since 1982.
More Pessimism
As economic data for last month deteriorated, economists at Goldman Group Inc. were among those marking down estimates for gross domestic product and boosting forecasts for unemployment. The economy will shrink at a 5 percent annual rate this quarter and decline at a 3 percent pace in the first three months of 2009, Goldman’s chief U.S. economist Jan Hatzius said in a note.
Goldman forecasts the jobless rate will climb to 9 percent by late 2009.
The employment report, the second issued since Obama was elected president on Nov. 4, is likely to add to pressures on policy makers to craft additional stimulus measures. Obama named a team that includes New York Federal Reserve Bank President Timothy Geithner as Treasury Secretary-designate and former Fed Chairman Paul Volcker as head of a new White House panel aimed at reviving the economy.
“It’s time to not just address the immediate economic threats but to start laying the groundwork for long-term prosperity,” Obama, 47, said Dec. 3 as he announced former energy secretary Bill Richardson as his nominee for Commerce Secretary. “The most significant issue that we are facing right now is how do we put people back to work.”
Auto Slump
U.S. automakers have been particularly hard hit as sales last month dropped to the lowest level in 26 years. The top executives of General Motors, Ford Motor Co. and Chrysler LLC this week appealed to Congress for as much as $34 billion in government assistance.
The Ann Arbor, Michigan-based Center for Automotive Research projects that a collapse of GM would lead to job losses totaling 2.5 million, including 1.4 million people in industries not directly tied to manufacturing. Chrysler yesterday announced it had cut 5,000 jobs last week.
Service companies are also slashing staff. AT&T, the largest U.S. phone company, will cut 12,000 jobs, striving to trim expenses as the U.S. economy falters, the Dallas-based company said in a statement yesterday. Citigroup said last month is plans to eliminate 52,000 jobs worldwide.
Payrolls shrank by 333,000 workers last month, the biggest drop since July 1982, according to the median estimate in a Bloomberg News survey. The jobless rate may have jumped to 6.8 percent, the highest level since 1993.
Job losses are likely to keep cascading into next year as the collapse in credit and slump in spending hurt companies from General Motors Corp. to Citigroup Inc. and AT&T Inc. President- elect Barack Obama, confronting what he called a “crisis of historic proportions,” announced a plan last week to save or create 2.5 million jobs in two years.
“The pace of contraction has really picked up,” said Julia Coronado, a senior economist at Barclays Capital Inc. in New York. The labor market “is in a severe deterioration phase. Job cuts are across the board.”
The Labor Department’s report is due at 8:30 a.m. in Washington. Payroll estimates of the 73 economists surveyed ranged from losses of 220,000 to 470,000. The jobless rate last month probably rose from 6.5 percent in October.
The 11th consecutive drop in payrolls would follow a 240,000 decline in October and bring the number of jobs eliminated so far this year to more than 1.5 million. Factories probably accounted for about a third of the decline in jobs last month, according to the survey median.
Jobs, Recession
The employment slump was a key factor in determining the start of the recession. The National Bureau of Economic Research, the arbiter of U.S. business cycles, announced this week that a contraction began in December 2007, the month payrolls peaked.
At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982.
Other reports have indicated the labor market is deteriorating. The Institute for Supply Management’s gauge of employment at service industries dropped last month to the lowest level since records began in 1997. Its index for manufacturing jobs fell to a 17-year low.
The declines prompted John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, to raise his forecast for the November payroll loss to 450,000.
First-time jobless claims, a government measure of firings, have held over half a million in each of the last four weeks, the longest stretch since 1982.
More Pessimism
As economic data for last month deteriorated, economists at Goldman Group Inc. were among those marking down estimates for gross domestic product and boosting forecasts for unemployment. The economy will shrink at a 5 percent annual rate this quarter and decline at a 3 percent pace in the first three months of 2009, Goldman’s chief U.S. economist Jan Hatzius said in a note.
Goldman forecasts the jobless rate will climb to 9 percent by late 2009.
The employment report, the second issued since Obama was elected president on Nov. 4, is likely to add to pressures on policy makers to craft additional stimulus measures. Obama named a team that includes New York Federal Reserve Bank President Timothy Geithner as Treasury Secretary-designate and former Fed Chairman Paul Volcker as head of a new White House panel aimed at reviving the economy.
“It’s time to not just address the immediate economic threats but to start laying the groundwork for long-term prosperity,” Obama, 47, said Dec. 3 as he announced former energy secretary Bill Richardson as his nominee for Commerce Secretary. “The most significant issue that we are facing right now is how do we put people back to work.”
Auto Slump
U.S. automakers have been particularly hard hit as sales last month dropped to the lowest level in 26 years. The top executives of General Motors, Ford Motor Co. and Chrysler LLC this week appealed to Congress for as much as $34 billion in government assistance.
The Ann Arbor, Michigan-based Center for Automotive Research projects that a collapse of GM would lead to job losses totaling 2.5 million, including 1.4 million people in industries not directly tied to manufacturing. Chrysler yesterday announced it had cut 5,000 jobs last week.
Service companies are also slashing staff. AT&T, the largest U.S. phone company, will cut 12,000 jobs, striving to trim expenses as the U.S. economy falters, the Dallas-based company said in a statement yesterday. Citigroup said last month is plans to eliminate 52,000 jobs worldwide.
Tuesday, December 02, 2008
Actis mops up $2.9 bn; India to get $1 bn
Here’s some good news amid the havoc wreaked by the terrorists in Mumbai. Leading private equity firm Actis has closed a $2.9-billion private equity fund, of which about $1 billion is likely to be invested in Indian companies over the next four years.
Actis’ success bucks the trend among funds that have generally been finding it difficult to raise growth capital.
The Actis Emerging Markets 3 fund was targeting a corpus of $2.5 billion and managed to raise $400 million more. This indicates that global investors are confident about growth prospects in emerging economies such as India, Latin America, South East Asia and Africa.
“Actis has been a consistent private equity investor in India for more than 10 years. Over this period, Actis has worked with promoters and management teams to create value for their businesses. This fund-raising is an endorsement of our investment track record,” said Actis partner and South Asia head JM Trivedi.
Actis’ plan to invest $1 billion in India over the next three to four years will bring hope to many companies as the current liquidity crisis had restricted borrowing options for corporates, particularly those in the real estate sector. Also, with valuations coming off highs seen in the two-year equities boom, private equity funds are keen to invest. The broader Sensex has fallen 57% since its peak in July.
The UK-based private equity firm, which was spun off from CDC, was in the news recently after Nilgiri’s Dairy — where Actis has a controlling equity stake — sold its hospitality business as part of a strategy to exit non-core businesses.
The private equity firm was also among the first to introduce the concept of management buyouts in India when in 2005, it sold off the international trading business division of ICI India, which it had acquired earlier.
Actis’ $2.9-billion fund is one of the largest dedicated emerging market private equity funds to close this year and doubles the amount raised by the same firm in 2004.
The investors include a diversified group of 100 investors from across the world, including a number of first-time investors in emerging markets. An Actis statement says that the fund will be used to build a diversified portfolio of between 30 and 40 investments across China, India, Africa, Latin America and South East Asia, typically investing a minimum of $50 million of equity capital in buyout and growth transactions.
However, other private equity firms that compete with Actis say the fund-raising underlines how emerging market buyout groups are able to find money from investors, while US and Europe-oriented funds are finding it very difficult.
A number of private equity firms that have recently had year-ending meetings in the US have received strict directives to focus only on existing transactions and cut costs; there has been a significant slowdown in the number of deals too.
Actis’ success bucks the trend among funds that have generally been finding it difficult to raise growth capital.
The Actis Emerging Markets 3 fund was targeting a corpus of $2.5 billion and managed to raise $400 million more. This indicates that global investors are confident about growth prospects in emerging economies such as India, Latin America, South East Asia and Africa.
“Actis has been a consistent private equity investor in India for more than 10 years. Over this period, Actis has worked with promoters and management teams to create value for their businesses. This fund-raising is an endorsement of our investment track record,” said Actis partner and South Asia head JM Trivedi.
Actis’ plan to invest $1 billion in India over the next three to four years will bring hope to many companies as the current liquidity crisis had restricted borrowing options for corporates, particularly those in the real estate sector. Also, with valuations coming off highs seen in the two-year equities boom, private equity funds are keen to invest. The broader Sensex has fallen 57% since its peak in July.
The UK-based private equity firm, which was spun off from CDC, was in the news recently after Nilgiri’s Dairy — where Actis has a controlling equity stake — sold its hospitality business as part of a strategy to exit non-core businesses.
The private equity firm was also among the first to introduce the concept of management buyouts in India when in 2005, it sold off the international trading business division of ICI India, which it had acquired earlier.
Actis’ $2.9-billion fund is one of the largest dedicated emerging market private equity funds to close this year and doubles the amount raised by the same firm in 2004.
The investors include a diversified group of 100 investors from across the world, including a number of first-time investors in emerging markets. An Actis statement says that the fund will be used to build a diversified portfolio of between 30 and 40 investments across China, India, Africa, Latin America and South East Asia, typically investing a minimum of $50 million of equity capital in buyout and growth transactions.
However, other private equity firms that compete with Actis say the fund-raising underlines how emerging market buyout groups are able to find money from investors, while US and Europe-oriented funds are finding it very difficult.
A number of private equity firms that have recently had year-ending meetings in the US have received strict directives to focus only on existing transactions and cut costs; there has been a significant slowdown in the number of deals too.
India's exports shrink for first time in 3 years
India's exports in October shrank an annual 12.1 percent, the first year on year decline in nearly three years, as slowing output at home and troubled economies in key overseas markets slashed demand.
Overseas sales in the month plunged to $12.82 billion from $14.59 billion in 2007, and analysts said tight credit conditions had added to the woes of exporters.
"Two things contributed to fall in exports -- one, the global slowdown, and second very tight credit conditions during the month," said D.K. Joshi, principal economist with domestic rating agency Crisil.
Economists predicted exports may fall short of 20 percent growth in the 2008/09 fiscal year, way below a target for the 12 months of 25 percent expansion.
Exports recorded their last contraction in November 2005, when they fell an annual 11.4 percent.
High borrowing costs and frozen credit as the global economic crisis spilled into Indian markets have slowed economic activity.
Growth in imports also eased sharply to 10.6 percent in October from a scorching 43.3 percent growth the month before as oil prices tumbled and industrial activity slowed.
Imports in October stood at $23.36 billion, helping the trade deficit narrow slightly to $10.54 billion in October compared with $10.63 billion in September, data showed on Monday.
Palaniappan Chidambaram, who on Sunday was shifted from the Finance Ministry to the internal security portfolio following the Mumbai attacks, said last week he was considering help for top export sectors, including textiles, vehicles and jewellery.
Exports during April to October were up 23.7 percent at $107.8 billion from a year earlier.
"The fall in export growth in October is an aberration which will correct in subsequent months. But we won't attain 20 percent plus growth for this fiscal year," added Crisil's Joshi.
Oil imports still rose 22 percent during the month from a year earlier to $7.96 billion despite a slump in crude prices from their July peaks.
For April-October, the trade deficit stood at $73 billion, much higher than $45.64 billion a year ago.
Overseas sales in the month plunged to $12.82 billion from $14.59 billion in 2007, and analysts said tight credit conditions had added to the woes of exporters.
"Two things contributed to fall in exports -- one, the global slowdown, and second very tight credit conditions during the month," said D.K. Joshi, principal economist with domestic rating agency Crisil.
Economists predicted exports may fall short of 20 percent growth in the 2008/09 fiscal year, way below a target for the 12 months of 25 percent expansion.
Exports recorded their last contraction in November 2005, when they fell an annual 11.4 percent.
High borrowing costs and frozen credit as the global economic crisis spilled into Indian markets have slowed economic activity.
Growth in imports also eased sharply to 10.6 percent in October from a scorching 43.3 percent growth the month before as oil prices tumbled and industrial activity slowed.
Imports in October stood at $23.36 billion, helping the trade deficit narrow slightly to $10.54 billion in October compared with $10.63 billion in September, data showed on Monday.
Palaniappan Chidambaram, who on Sunday was shifted from the Finance Ministry to the internal security portfolio following the Mumbai attacks, said last week he was considering help for top export sectors, including textiles, vehicles and jewellery.
Exports during April to October were up 23.7 percent at $107.8 billion from a year earlier.
"The fall in export growth in October is an aberration which will correct in subsequent months. But we won't attain 20 percent plus growth for this fiscal year," added Crisil's Joshi.
Oil imports still rose 22 percent during the month from a year earlier to $7.96 billion despite a slump in crude prices from their July peaks.
For April-October, the trade deficit stood at $73 billion, much higher than $45.64 billion a year ago.
Tuesday, November 25, 2008
Indian realty sector set for correction: Goldman Sachs
India’s property market is poised for a correction and residential property rates will have to drop by up to 30% in some geographies for affordability to catch up, according to a Goldman Sachs Economic Research report released on Monday.
However, such a fall could trigger significant negative effects on the economy with construction, consumption and investment taking a hit. Related industries such as steel and cement on the backend, and hotels, trade and transport on the front-end will be impacted, it said.
Income growth will fall, reducing demand for housing as the economy continues to slow due to the knock-on effects of the global financial crisis, lowering demand for real estate.
Besides income growth, demographics, interest rates, inflation and expectations of future projects affect demand. Commercial real estate demand will also take a beating due to the slowdown in IT and business process outsourcing (BPO) sectors, it said.
A fall in collateral will hurt firms’ balance sheets, increase funding costs, hurt confidence and reduce investment demand.
However, India’s favourable demographics, low mortgage penetration, falling interest rates and ongoing infrastructure demand will keep the property downturn from being protracted, it said.
However, such a fall could trigger significant negative effects on the economy with construction, consumption and investment taking a hit. Related industries such as steel and cement on the backend, and hotels, trade and transport on the front-end will be impacted, it said.
Income growth will fall, reducing demand for housing as the economy continues to slow due to the knock-on effects of the global financial crisis, lowering demand for real estate.
Besides income growth, demographics, interest rates, inflation and expectations of future projects affect demand. Commercial real estate demand will also take a beating due to the slowdown in IT and business process outsourcing (BPO) sectors, it said.
A fall in collateral will hurt firms’ balance sheets, increase funding costs, hurt confidence and reduce investment demand.
However, India’s favourable demographics, low mortgage penetration, falling interest rates and ongoing infrastructure demand will keep the property downturn from being protracted, it said.
The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.
House prices in 20 U.S. cities declined in the year ended in September at the fastest pace on record as rising foreclosures pushed down property values.
The S&P/Case-Shiller home-price index dropped 17.4 percent in September from a year earlier, more than forecast, after a 16.6 percent decline in August. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
Mounting foreclosures are contributing to the drop in home prices, while adding to the inventory of unsold homes on the market. Lower property values are weighing on household wealth, causing consumers to cutback on spending and increasing the likelihood that the U.S. economy will contract for a second consecutive quarter.
“Price declines have already led to considerable improvements in affordability, but more foreclosures and an inventory overhang will keep depressing prices,” Abiel Reinhart, an economist at JPMorgan Chase Bank in New York, said before the report.
Home prices decreased 1.8 percent in September from the prior month after declining 1 percent in August, the report showed. The figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month-to-month.
GDP Declines
A government report showed the U.S. economy shrank in the third quarter faster than previously estimated as consumer spending plunged by the most in almost three decades. Gross domestic product contracted at a 0.5 percent annual pace from July through September, the most since the 2001 recession, according to revised figures from the Commerce Department today in Washington. The government’s advance estimate issued last month showed a 0.3 percent decline.
S&P/Case-Shiller also released quarterly figures for nationwide home prices. That measure showed a 16.6 percent drop in the three months through September from the previous three months, compared with a 15.1 percent drop in the second quarter.
Economists forecast the 20-city index would fall 16.9 percent from a year earlier, according to the median of 28 estimates in a Bloomberg News survey. Projections ranged from declines of 16 percent to 17.2 percent.
Compared with a year earlier, all areas in the 20-city survey showed a decrease in prices in September, led by a 31.9 percent drop in Phoenix and a 31.3 percent decline in Las Vegas.
Downward Pressure
“The turmoil in the financial markets is placing further downward pressure on a housing market already weakened by its fundamentals,” David Blitzer, chairman of the index committee at S&P, said in a statement.
Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
Reports this month showed mounting foreclosures are pushing prices down and hurting demand. Existing home sales, which account for about 90 percent of the market, dropped in October and prices fell by the most on record, the National Association of Realtors said yesterday.
The median price of an existing home plunged 11.3 percent in October from a year earlier and fell to the lowest level since March 2004, according to the Realtors.
Sales of distressed properties accounted for 45 percent of last month’s total, up from about 40 percent in September, the agents’ group also said. Foreclosure filings were up 25 percent in October from a year ago, according to RealtyTrac Inc., the Irvine, California-based seller of default data.
The drop in home construction has subtracted from growth since the first quarter of 2006. The downturn is likely to remain a drag on the economy until the home sales and prices improve.
D.R. Horton Inc., the largest U.S. homebuilder, reported its sixth straight quarterly loss today. The Fort Worth, Texas- based company said orders fell 38 percent while the cancellation rate was 47 percent.
The S&P/Case-Shiller home-price index dropped 17.4 percent in September from a year earlier, more than forecast, after a 16.6 percent decline in August. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
Mounting foreclosures are contributing to the drop in home prices, while adding to the inventory of unsold homes on the market. Lower property values are weighing on household wealth, causing consumers to cutback on spending and increasing the likelihood that the U.S. economy will contract for a second consecutive quarter.
“Price declines have already led to considerable improvements in affordability, but more foreclosures and an inventory overhang will keep depressing prices,” Abiel Reinhart, an economist at JPMorgan Chase Bank in New York, said before the report.
Home prices decreased 1.8 percent in September from the prior month after declining 1 percent in August, the report showed. The figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month-to-month.
GDP Declines
A government report showed the U.S. economy shrank in the third quarter faster than previously estimated as consumer spending plunged by the most in almost three decades. Gross domestic product contracted at a 0.5 percent annual pace from July through September, the most since the 2001 recession, according to revised figures from the Commerce Department today in Washington. The government’s advance estimate issued last month showed a 0.3 percent decline.
S&P/Case-Shiller also released quarterly figures for nationwide home prices. That measure showed a 16.6 percent drop in the three months through September from the previous three months, compared with a 15.1 percent drop in the second quarter.
Economists forecast the 20-city index would fall 16.9 percent from a year earlier, according to the median of 28 estimates in a Bloomberg News survey. Projections ranged from declines of 16 percent to 17.2 percent.
Compared with a year earlier, all areas in the 20-city survey showed a decrease in prices in September, led by a 31.9 percent drop in Phoenix and a 31.3 percent decline in Las Vegas.
Downward Pressure
“The turmoil in the financial markets is placing further downward pressure on a housing market already weakened by its fundamentals,” David Blitzer, chairman of the index committee at S&P, said in a statement.
Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
Reports this month showed mounting foreclosures are pushing prices down and hurting demand. Existing home sales, which account for about 90 percent of the market, dropped in October and prices fell by the most on record, the National Association of Realtors said yesterday.
The median price of an existing home plunged 11.3 percent in October from a year earlier and fell to the lowest level since March 2004, according to the Realtors.
Sales of distressed properties accounted for 45 percent of last month’s total, up from about 40 percent in September, the agents’ group also said. Foreclosure filings were up 25 percent in October from a year ago, according to RealtyTrac Inc., the Irvine, California-based seller of default data.
The drop in home construction has subtracted from growth since the first quarter of 2006. The downturn is likely to remain a drag on the economy until the home sales and prices improve.
D.R. Horton Inc., the largest U.S. homebuilder, reported its sixth straight quarterly loss today. The Fort Worth, Texas- based company said orders fell 38 percent while the cancellation rate was 47 percent.
Fed Commits $800 Billion More to Unfreeze Lending
The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.
The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.
With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation.
“They’re trying to put funds into the system, trying to unfreeze these markets,” said William Poole, the former St. Louis Fed president, in an interview with Bloomberg Television. “Clearly, the Fed and the Treasury are beginning to take a large amount of credit risk.”
The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae, the statement said.
Aid for Housing
“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said.
Separately, under the new Term Asset-Backed Securities Loan Facility, the Fed will lend up to $200 billion on a non-recourse basis to holders of AAA rated asset-backed securities backed by “newly and recently originated” loans, such as for education, automobiles, credit cards and loans guaranteed by the Small Business Administration, the Fed said.
The Treasury will provide $20 billion of “credit protection” to the Fed in the lending program, using funds from the $700 billion financial-rescue package. The Treasury said in a statement that the facility may expand over time and cover other assets, such as commercial and private residential mortgage- backed debt.
On the ABS facility, the Fed is trying to avoid having “continued disruption of these markets” that would limit lending and “thereby contribute to further weakening of U.S. economic activity,” the central bank said.
ABS Program
Under the new lending program, known as the TALF, the New York Fed will auction a fixed amount of loans each month for a one-year term. Assets will be held in a special-purpose vehicle to be created by the Fed. The program will stop making new loans on Dec. 31, 2009, unless the Fed Board of Governors extends it.
Lenders providing credit under the TALF “must have agreed to comply with, or already be subject to,” executive- compensation restrictions in the October bailout law, the statement said.
The Fed will start buying the direct debt of government- sponsored enterprises -- Fannie, Freddie and a dozen federal home loan banks -- through primary dealers in government debt from next week. The purchases of mortgage-backed securities will be done through asset managers, and officials aim to begin the effort by year-end.
Purchases of both types of debt “are expected to take place over several quarters,” the Fed said.
The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.
With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation.
“They’re trying to put funds into the system, trying to unfreeze these markets,” said William Poole, the former St. Louis Fed president, in an interview with Bloomberg Television. “Clearly, the Fed and the Treasury are beginning to take a large amount of credit risk.”
The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae, the statement said.
Aid for Housing
“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said.
Separately, under the new Term Asset-Backed Securities Loan Facility, the Fed will lend up to $200 billion on a non-recourse basis to holders of AAA rated asset-backed securities backed by “newly and recently originated” loans, such as for education, automobiles, credit cards and loans guaranteed by the Small Business Administration, the Fed said.
The Treasury will provide $20 billion of “credit protection” to the Fed in the lending program, using funds from the $700 billion financial-rescue package. The Treasury said in a statement that the facility may expand over time and cover other assets, such as commercial and private residential mortgage- backed debt.
On the ABS facility, the Fed is trying to avoid having “continued disruption of these markets” that would limit lending and “thereby contribute to further weakening of U.S. economic activity,” the central bank said.
ABS Program
Under the new lending program, known as the TALF, the New York Fed will auction a fixed amount of loans each month for a one-year term. Assets will be held in a special-purpose vehicle to be created by the Fed. The program will stop making new loans on Dec. 31, 2009, unless the Fed Board of Governors extends it.
Lenders providing credit under the TALF “must have agreed to comply with, or already be subject to,” executive- compensation restrictions in the October bailout law, the statement said.
The Fed will start buying the direct debt of government- sponsored enterprises -- Fannie, Freddie and a dozen federal home loan banks -- through primary dealers in government debt from next week. The purchases of mortgage-backed securities will be done through asset managers, and officials aim to begin the effort by year-end.
Purchases of both types of debt “are expected to take place over several quarters,” the Fed said.
U.S. Stock-Index Futures Rally on Fed’s Plan to Boost Lending
U.S. stock-index futures advanced, signaling the market may extend its biggest two-day rally since 1987, after the Federal Reserve committed as much as $800 billion to help resuscitate lending.
SLM Corp., the student lender known as Sallie Mae, rallied 14 percent, while CIT Group Inc., a commercial-finance company, jumped 11 percent after the Fed said the funds will be used to purchase mortgage-related debt and support loans to consumers and small businesses. Citigroup Inc. advanced 7.1 percent after its chief financial officer said the bank has no need to sell assets in order to conserve capital.
Futures on the Standard & Poor’s 500 Index expiring in December gained 2.5 percent to 869.1 at 9:11 a.m. in New York. Dow Jones Industrial Average futures rose 162, or 1.9 percent, to 8,547 and Nasdaq-100 Index futures jumped 1.6 percent to 1,164.75.
“This is a more direct effort, as opposed to shoring up the balance sheets of key banks,” said Erick Maronak, the New York-based chief investment officer at Victory Capital Management, which oversees $61 billion. “Hopefully that alone will restore confidence and get things moving again.”
The S&P 500 has rallied 13 percent from an 11-year low on Nov. 20 after the government guaranteed troubled assets at Citigroup and President-elect Barack Obama picked Fed Bank of New York chief Tim Geithner as his Treasury secretary.
JPMorgan climbed 5.2 percent to $29 in trading before the official open of U.S. exchanges, while Bank of America Corp. added 2.9 percent to $15.01.
General Electric, the economic bellwether whose products range from lightbulbs to power-plant turbines, rose 1.3 percent to $15.46. Intel Corp., the world’s biggest maker of semiconductors, added 10 cents to $13.66.
Citigroup Gains
Citigroup, the New York-based bank that got $306 billion of loan guarantees from the government over the weekend, advanced 42 cents to $6.37. CFO Gary Crittenden said in a Bloomberg Television interview that there is “no need for us to sell assets at this point, although we’ll continue to work away on non-strategic assets.”
Futures maintained gains even after the Commerce Department said the U.S. economy shrank in the third quarter faster than previously estimated as consumer spending plunged by the most in almost three decades. Gross domestic product contracted at a 0.5 percent annual pace from July through September, the most since the 2001 recession, according to revised. The government’s advance estimate issued last month showed a 0.3 percent decline.
SLM Corp., the student lender known as Sallie Mae, rallied 14 percent, while CIT Group Inc., a commercial-finance company, jumped 11 percent after the Fed said the funds will be used to purchase mortgage-related debt and support loans to consumers and small businesses. Citigroup Inc. advanced 7.1 percent after its chief financial officer said the bank has no need to sell assets in order to conserve capital.
Futures on the Standard & Poor’s 500 Index expiring in December gained 2.5 percent to 869.1 at 9:11 a.m. in New York. Dow Jones Industrial Average futures rose 162, or 1.9 percent, to 8,547 and Nasdaq-100 Index futures jumped 1.6 percent to 1,164.75.
“This is a more direct effort, as opposed to shoring up the balance sheets of key banks,” said Erick Maronak, the New York-based chief investment officer at Victory Capital Management, which oversees $61 billion. “Hopefully that alone will restore confidence and get things moving again.”
The S&P 500 has rallied 13 percent from an 11-year low on Nov. 20 after the government guaranteed troubled assets at Citigroup and President-elect Barack Obama picked Fed Bank of New York chief Tim Geithner as his Treasury secretary.
JPMorgan climbed 5.2 percent to $29 in trading before the official open of U.S. exchanges, while Bank of America Corp. added 2.9 percent to $15.01.
General Electric, the economic bellwether whose products range from lightbulbs to power-plant turbines, rose 1.3 percent to $15.46. Intel Corp., the world’s biggest maker of semiconductors, added 10 cents to $13.66.
Citigroup Gains
Citigroup, the New York-based bank that got $306 billion of loan guarantees from the government over the weekend, advanced 42 cents to $6.37. CFO Gary Crittenden said in a Bloomberg Television interview that there is “no need for us to sell assets at this point, although we’ll continue to work away on non-strategic assets.”
Futures maintained gains even after the Commerce Department said the U.S. economy shrank in the third quarter faster than previously estimated as consumer spending plunged by the most in almost three decades. Gross domestic product contracted at a 0.5 percent annual pace from July through September, the most since the 2001 recession, according to revised. The government’s advance estimate issued last month showed a 0.3 percent decline.
Friday, November 21, 2008
November may be worse, say car firms
Sales expected to dip 15% - one of the worst monthly falls.
With banks refusing to reduce interest rate on auto loans, car sales are expected to fall by 15 per cent in November — one of the worst monthly falls, at least in the last four years.
Reluctance on the part of leading private banks to either soften interest rates on car loans or ease the stringent lending criteria even after RBI aggressively pruned its key lending rates in the last two months, has led to a major slump in demand for automobiles.
Car makers say the situation has worsened of late with the consumers postponing purchases on the expectation that prices will come down over Finance minister P Chidambaram's recent appeal to the automobile industry to slash vehicle prices.
Last month, the car sales recorded a fall of nearly 10 per cent when compared to the same month of the previous year. "The going has become extremely tough, we do not expect the industry to record any growth this month. We are trying to avoid being in the red too. However, I expect the rest of the car industry to be in the negative in the current month," said Arvind Saxena, senior V-P (marketing and sales), Hyundai Motor India.
Recently, some of the leading auto makers, including Maruti Suzuki, had announced production cuts at its plants. Auto dealers are also at the receiving end of the slowdown. In many parts of the country, dealers, saddled with a huge inventory of unsold cars, are forced to shell out huge discounts, generally from their own account, in order to clear stocks.
"Things have surely started to take an ugly turn. Not only bookings have fallen dramatically, but in some markets they are facing cancellations also. There should be a fall of 15 per cent in overall sales this month. We fear that customers will hold back their purchases to March next year with a hope of an excise duty reduction in the upcoming budget," said S P Shah, president of Federation of Automobile Dealers Association, which is the apex body of dealers in the country.
The car segment posted growth of 3.5 per cent from April to October this financial year as against 13.4 per cent recorded during the seven-month period last year. Apart from October, the segment recorded fall in August and July. Jnaneswar Sen, vice-president of Honda Siel Cars India, said, "All our models, except the new City, are not doing well. Sales have been down drastically, well-to-do consumers are coming into showrooms but are disappointed due to lack of adequate financial provision. We do not foresee a helpful period."
The recent announcements about price hikes by two of the leading car-makers — Maruti Suzuki and Hyundai — have only deterred prospective buyers, believe analysts. Maruti had hiked prices by 1 per cent, while Hyundai had said it will look at a 2- per cent hike, although there has not been any upward revision yet.
The monthly sales numbers, which are handed out by auto companies, display wholesale dispatches from their factories and not the actual retail numbers. Manufacturers have been pushing inventory till the end of last month. Many analysts feel that the current month will pull out a much clearer picture of the turmoil.
"Baring two-wheelers, which may report healthy sales in the northern market, the four-wheeler industry will report flattish to negative growth this month. Last year in the same month, the segment reported good sales, which means that there will be high base to match with," said S Ramnath, auto analyst, SSKI Securities.
With banks refusing to reduce interest rate on auto loans, car sales are expected to fall by 15 per cent in November — one of the worst monthly falls, at least in the last four years.
Reluctance on the part of leading private banks to either soften interest rates on car loans or ease the stringent lending criteria even after RBI aggressively pruned its key lending rates in the last two months, has led to a major slump in demand for automobiles.
Car makers say the situation has worsened of late with the consumers postponing purchases on the expectation that prices will come down over Finance minister P Chidambaram's recent appeal to the automobile industry to slash vehicle prices.
Last month, the car sales recorded a fall of nearly 10 per cent when compared to the same month of the previous year. "The going has become extremely tough, we do not expect the industry to record any growth this month. We are trying to avoid being in the red too. However, I expect the rest of the car industry to be in the negative in the current month," said Arvind Saxena, senior V-P (marketing and sales), Hyundai Motor India.
Recently, some of the leading auto makers, including Maruti Suzuki, had announced production cuts at its plants. Auto dealers are also at the receiving end of the slowdown. In many parts of the country, dealers, saddled with a huge inventory of unsold cars, are forced to shell out huge discounts, generally from their own account, in order to clear stocks.
"Things have surely started to take an ugly turn. Not only bookings have fallen dramatically, but in some markets they are facing cancellations also. There should be a fall of 15 per cent in overall sales this month. We fear that customers will hold back their purchases to March next year with a hope of an excise duty reduction in the upcoming budget," said S P Shah, president of Federation of Automobile Dealers Association, which is the apex body of dealers in the country.
The car segment posted growth of 3.5 per cent from April to October this financial year as against 13.4 per cent recorded during the seven-month period last year. Apart from October, the segment recorded fall in August and July. Jnaneswar Sen, vice-president of Honda Siel Cars India, said, "All our models, except the new City, are not doing well. Sales have been down drastically, well-to-do consumers are coming into showrooms but are disappointed due to lack of adequate financial provision. We do not foresee a helpful period."
The recent announcements about price hikes by two of the leading car-makers — Maruti Suzuki and Hyundai — have only deterred prospective buyers, believe analysts. Maruti had hiked prices by 1 per cent, while Hyundai had said it will look at a 2- per cent hike, although there has not been any upward revision yet.
The monthly sales numbers, which are handed out by auto companies, display wholesale dispatches from their factories and not the actual retail numbers. Manufacturers have been pushing inventory till the end of last month. Many analysts feel that the current month will pull out a much clearer picture of the turmoil.
"Baring two-wheelers, which may report healthy sales in the northern market, the four-wheeler industry will report flattish to negative growth this month. Last year in the same month, the segment reported good sales, which means that there will be high base to match with," said S Ramnath, auto analyst, SSKI Securities.
Growth target of 8% possible: PM
Prime Minister Manmohan Singh today assured that industrialists that notwithstanding the global economic crisis India would be able to achieve a growth target of 8 per cent.
Speaking at the two-day Hindustan Times leadership summit, Singh said: "I give you my assurance that despite an adverse international environment, India has the ability and capacity to achieve about 8 per cent growth target."
He, however, said that amidst a deep global crisis we can not pretend that we are not effected. Looking back, Singh said his government had anticipated the slowdown and made provisions for coping with it in the last union budget.
He said the provisions for decent agriculture prices, social safety network like the national rural employment guarantee scheme and implementation of the pay commission report had been some of the farsighted moves of his government.
Holding out assurances, Singh said that his government would mobilize all instruments of policy be it fiscal policy, exchange rate, monetary policy or public investment policy to "see that shortage of demand is neutralized to the maximum".
He asked the industries to have confidence in the system and opt for working with the government in coping with the current situation. "No instrument would be spared to support the growth of enterprise,’’ he said.
The PM promised "liberal credits and bringing down the cost of credit" to help the small and medium enterprises (SME), exporters and labour intensive enterprises, which, he said, "often get neglected" during the policymaking.
Singh, however, said that government was worried that large scale layoffs should not become the order of the day in the industry. "I assure you that the government is committed to see that the ship of Indian industry is not left in the choppy waters but sails with dignity."
On the global financial crisis, Manmohan Singh said that recent G-20 summit in New York had paved way for larger role of India and other developing countries in the Global Financial Stability Forum.
The PM said that he was reluctant to attend the summit as all previous such meets had merely proved to be "breakfast and dinner-eating occasions". He, however, attended it after getting assurances of a meaningful meeting with the US President George Bush.
However, he said this time, at G-20, for the first time the developing nation’s voice was heard with respect.
Speaking at the two-day Hindustan Times leadership summit, Singh said: "I give you my assurance that despite an adverse international environment, India has the ability and capacity to achieve about 8 per cent growth target."
He, however, said that amidst a deep global crisis we can not pretend that we are not effected. Looking back, Singh said his government had anticipated the slowdown and made provisions for coping with it in the last union budget.
He said the provisions for decent agriculture prices, social safety network like the national rural employment guarantee scheme and implementation of the pay commission report had been some of the farsighted moves of his government.
Holding out assurances, Singh said that his government would mobilize all instruments of policy be it fiscal policy, exchange rate, monetary policy or public investment policy to "see that shortage of demand is neutralized to the maximum".
He asked the industries to have confidence in the system and opt for working with the government in coping with the current situation. "No instrument would be spared to support the growth of enterprise,’’ he said.
The PM promised "liberal credits and bringing down the cost of credit" to help the small and medium enterprises (SME), exporters and labour intensive enterprises, which, he said, "often get neglected" during the policymaking.
Singh, however, said that government was worried that large scale layoffs should not become the order of the day in the industry. "I assure you that the government is committed to see that the ship of Indian industry is not left in the choppy waters but sails with dignity."
On the global financial crisis, Manmohan Singh said that recent G-20 summit in New York had paved way for larger role of India and other developing countries in the Global Financial Stability Forum.
The PM said that he was reluctant to attend the summit as all previous such meets had merely proved to be "breakfast and dinner-eating occasions". He, however, attended it after getting assurances of a meaningful meeting with the US President George Bush.
However, he said this time, at G-20, for the first time the developing nation’s voice was heard with respect.
Govt mulls Rs 75,000 cr refinance window
The government and Reserve Bank of India (RBI) are working on opening a massive Rs 75,000 crore refinance window to provide concessional funds for infrastructure, housing and small and medium enterprises (SMEs) by partly leveraging the country’s foreign exchange reserves.
The broad plan is to provide refinancing through India Infrastructure Finance Company Ltd (IIFCL), the government-owned special purpose vehicle set up in 2006, National Housing Bank (NHB) and Small Industrial Development Board of India (Sidbi), a senior government official said.
Funds to these institutions will be available at 7 to 9 per cent to enable banks to earn a decent spread but cap lending between 10 and 11 per cent (see table), significantly lower than current prime lending rates of 13 to 17 per cent.
The announcement of this special financial window, which is expected at the end of this month, is designed to send a powerful signal to banks to lend to sectors that are considered key to economic growth. “In my view, they need such institutionalised signalling,” a senior government official said.
India is expected to grow at 7 to 7.8 per cent this year against two consecutive years of expansion at 9 per cent.
The largest chunk of the refinancing — Rs 50,000 crore or $10 billion — is being earmarked for infrastructure by leveraging India’s forex reserves. “Allocating $10 billion for infrastructure will do more to increase our credibility than the implicit reduction of usable reserves by that amount would do to reduce our protection from external shocks,” a government official commented.
Under the plan, RBI will buy bonds worth up to $10 billion from IIFCL’s London subsidiary at a coupon of 2.5 per cent, the same rate it earns on its reserves. India’s reserves currently stand at $251.4 billion.
Since IIFCL will provide banks with refinance at 9 per cent, the 6.5 per cent spread it earns by doing so is expected to cover possible exchange losses. Critically, the government, however, will bear any exchange loss beyond this percentage.
“We should agree to this arrangement in view of exceptional circumstances,” a bureaucrat said. “It may be noted that in circumstances where there is an exchange loss on this transaction, it will be more than made up by valuation gains in rupees on any reserve use,” he added.
The Planning Commission has suggested IIFCL should provide re-finance to banks for up to 75 per cent of the cost of an infrastructure project. This is expected to be a temporary measure, for two years.
The broad plan is to provide refinancing through India Infrastructure Finance Company Ltd (IIFCL), the government-owned special purpose vehicle set up in 2006, National Housing Bank (NHB) and Small Industrial Development Board of India (Sidbi), a senior government official said.
Funds to these institutions will be available at 7 to 9 per cent to enable banks to earn a decent spread but cap lending between 10 and 11 per cent (see table), significantly lower than current prime lending rates of 13 to 17 per cent.
The announcement of this special financial window, which is expected at the end of this month, is designed to send a powerful signal to banks to lend to sectors that are considered key to economic growth. “In my view, they need such institutionalised signalling,” a senior government official said.
India is expected to grow at 7 to 7.8 per cent this year against two consecutive years of expansion at 9 per cent.
The largest chunk of the refinancing — Rs 50,000 crore or $10 billion — is being earmarked for infrastructure by leveraging India’s forex reserves. “Allocating $10 billion for infrastructure will do more to increase our credibility than the implicit reduction of usable reserves by that amount would do to reduce our protection from external shocks,” a government official commented.
Under the plan, RBI will buy bonds worth up to $10 billion from IIFCL’s London subsidiary at a coupon of 2.5 per cent, the same rate it earns on its reserves. India’s reserves currently stand at $251.4 billion.
Since IIFCL will provide banks with refinance at 9 per cent, the 6.5 per cent spread it earns by doing so is expected to cover possible exchange losses. Critically, the government, however, will bear any exchange loss beyond this percentage.
“We should agree to this arrangement in view of exceptional circumstances,” a bureaucrat said. “It may be noted that in circumstances where there is an exchange loss on this transaction, it will be more than made up by valuation gains in rupees on any reserve use,” he added.
The Planning Commission has suggested IIFCL should provide re-finance to banks for up to 75 per cent of the cost of an infrastructure project. This is expected to be a temporary measure, for two years.
Monday, November 17, 2008
11 economies in decline
Brazil
Partial view of a Petrobras off-shore oil platform in Angra dos Reis, 180 km south of Rio de Janeiro.GDP: 5.23%
Inflation: 5.74%
Unemployment: 7.7%
Markets: -44.16%
Gallon of gas: $5.83
Interest Rates: 13.75%
Sinking crude prices are a tremendous blow to this oil-driven economy. The stock market is also suffering huge losses, dragged down by the country's oil giant Petrobras. Meanwhile, Brazil's real is down 35% against the dollar, since oil set a record high in July.
China
GDP: 9.74%
Inflation: 6.43%
Unemployment: 4%*
Markets: -64.92%
Gallon of gas: $3.48
Interest Rates: 6.66%
The country's GDP sinks to a 5-year low as manufacturing exports slow amid weak global demand. And mass layoffs at factories are worse than the official 4% unemployment rate suggests, since China does not track employment outside of major cities. A $586 billion government stimulus package aims to boost housing, health care and infrastructure, and includes tax breaks for struggling exporters.
Germany
GDP: 1.85%
Inflation: 2.94%
Unemployment: 7.43%
Markets: -41.12%
Gallon of gas: $8.58
Interest Rates: 3.25%
The German economy, which is Europe's biggest, slid into recession in the third quarter when its GDP contracted by 0.5%. And officials say that they don't expect to see any economic growth in 2009. Consumer confidence index is actually in negative territory, at -53.5, compared with an historical average of 27.1. The government hopes a $642 billion bailout will support the nation's banking system.
Iceland
GDP: 0.3%
Inflation: 7.93%
Unemployment: 2.2%
Markets: -45.81%
Gallon of gas: $7.54
Interest Rates: 18%
This tiny country is suffering near total economic collapse in the wake of the global crisis; in October its stock market crashed and its central bank went bankrupt. The Krona is down nearly 50% against dollar in past 6 months. Iceland receives $2.1 billion from International Monetary Fund, but says it will need $4 billion more.
India
GDP: 7.93%
Inflation: 7.93%
Unemployment: 7.8%
Markets: -51.48%
Gallon of gas: $4.95
Interest Rates: 7.5%
Consumer demand for gold, which typically soars during the Diwali wedding festival, sinks by roughly 20%, signaling trouble. The country's foreign debt expanded to 3.6% of its GDP in 2008, and in October the central bank lends $37.4 billion to financial institutions in October in an effort to boost credit.
Japan
GDP: 0.69%
Inflation: 1.57%
Unemployment: 4.05%
Markets: -42.45%
Gallon of gas: $5.78
Interest Rates: 0.3%
The sock market hits a 26-year low in October, and the government cuts interest rates for first time in more than seven years. It also unveils a $275 billion stimulus package, including loans for small and medium-sized businesses, as well as tax rebate checks to households.
Russia
GDP: 7%
Inflation: 14.03%
Unemployment: 5.9%
Markets: -65.53%
Gallon of gas: $3.93
Interest Rates: 11%
Sinking natural gas and oil prices shrink exports, and investor jitters over Russia's military takeover of Georgia crush the stock market. Russian banks are hit particularly hard by the credit crisis because they hold significantly more in foreign debt than national assets. The central bank sets up a $50 billion lending facility for financial institutions, and the finance minister indicates there is more money coming.
Saudi Arabia
GDP: 5.85
Inflation: 11.45%
Unemployment: 13%†
Markets: -50.5%
Gallon of gas: $0.45
Interest Rates: 4%
OPEC production cuts in October hit this country the hardest -- it signals that it can't afford to cut back any more. Falling oil prices are hampering the economy and holding up much-needed public construction projects. Meanwhile, the cost of living here is soaring on escalating food and housing costs.
South Africa
GDP: 3.83%
Inflation: 11.78%
Unemployment: 23.2%
Markets: -30.64%
Gallon of gas: $4.64
Interest Rates: 12%
Metals exports such as gold and platinum are hurt by falling precious metals prices, and soaring food and electricity prices are driving a steep increase in inflation. Unemployment had hit a seven-year low in March, but is rising as the economy slows.
United Kingdom
GDP: 0.99%
Inflation: 3.78%
Unemployment: 5.4%
Markets: -34.2%
Gallon of gas: $8.09
Interest Rates: 3%
Both the Prime Minister and the Treasury chief say the British economy is likely in a recession. The pound is at a 6-year low against the dollar, and retail sales are down for first time in nearly 4 years. A $63 billion bailout for the banking sector offers some relief.
United States
GDP: 1.57%
Inflation: 4.22%
Unemployment: 5.62%
Markets: -33.10%
Gallon of gas: $3.8
Interest Rates: 1%
Home prices plummet by as much as 40% in some parts of the country, and nearly one million homes have been lost to foreclosure since the mortgage crisis began in August 2007. The government is flooding the frozen financial system with nearly $3 trillion to restore liquidity, and, despite a $168 billion stimulus package that was unveiled last spring, political support for a second stimulus package is gaining momentum.
Partial view of a Petrobras off-shore oil platform in Angra dos Reis, 180 km south of Rio de Janeiro.GDP: 5.23%
Inflation: 5.74%
Unemployment: 7.7%
Markets: -44.16%
Gallon of gas: $5.83
Interest Rates: 13.75%
Sinking crude prices are a tremendous blow to this oil-driven economy. The stock market is also suffering huge losses, dragged down by the country's oil giant Petrobras. Meanwhile, Brazil's real is down 35% against the dollar, since oil set a record high in July.
China
GDP: 9.74%
Inflation: 6.43%
Unemployment: 4%*
Markets: -64.92%
Gallon of gas: $3.48
Interest Rates: 6.66%
The country's GDP sinks to a 5-year low as manufacturing exports slow amid weak global demand. And mass layoffs at factories are worse than the official 4% unemployment rate suggests, since China does not track employment outside of major cities. A $586 billion government stimulus package aims to boost housing, health care and infrastructure, and includes tax breaks for struggling exporters.
Germany
GDP: 1.85%
Inflation: 2.94%
Unemployment: 7.43%
Markets: -41.12%
Gallon of gas: $8.58
Interest Rates: 3.25%
The German economy, which is Europe's biggest, slid into recession in the third quarter when its GDP contracted by 0.5%. And officials say that they don't expect to see any economic growth in 2009. Consumer confidence index is actually in negative territory, at -53.5, compared with an historical average of 27.1. The government hopes a $642 billion bailout will support the nation's banking system.
Iceland
GDP: 0.3%
Inflation: 7.93%
Unemployment: 2.2%
Markets: -45.81%
Gallon of gas: $7.54
Interest Rates: 18%
This tiny country is suffering near total economic collapse in the wake of the global crisis; in October its stock market crashed and its central bank went bankrupt. The Krona is down nearly 50% against dollar in past 6 months. Iceland receives $2.1 billion from International Monetary Fund, but says it will need $4 billion more.
India
GDP: 7.93%
Inflation: 7.93%
Unemployment: 7.8%
Markets: -51.48%
Gallon of gas: $4.95
Interest Rates: 7.5%
Consumer demand for gold, which typically soars during the Diwali wedding festival, sinks by roughly 20%, signaling trouble. The country's foreign debt expanded to 3.6% of its GDP in 2008, and in October the central bank lends $37.4 billion to financial institutions in October in an effort to boost credit.
Japan
GDP: 0.69%
Inflation: 1.57%
Unemployment: 4.05%
Markets: -42.45%
Gallon of gas: $5.78
Interest Rates: 0.3%
The sock market hits a 26-year low in October, and the government cuts interest rates for first time in more than seven years. It also unveils a $275 billion stimulus package, including loans for small and medium-sized businesses, as well as tax rebate checks to households.
Russia
GDP: 7%
Inflation: 14.03%
Unemployment: 5.9%
Markets: -65.53%
Gallon of gas: $3.93
Interest Rates: 11%
Sinking natural gas and oil prices shrink exports, and investor jitters over Russia's military takeover of Georgia crush the stock market. Russian banks are hit particularly hard by the credit crisis because they hold significantly more in foreign debt than national assets. The central bank sets up a $50 billion lending facility for financial institutions, and the finance minister indicates there is more money coming.
Saudi Arabia
GDP: 5.85
Inflation: 11.45%
Unemployment: 13%†
Markets: -50.5%
Gallon of gas: $0.45
Interest Rates: 4%
OPEC production cuts in October hit this country the hardest -- it signals that it can't afford to cut back any more. Falling oil prices are hampering the economy and holding up much-needed public construction projects. Meanwhile, the cost of living here is soaring on escalating food and housing costs.
South Africa
GDP: 3.83%
Inflation: 11.78%
Unemployment: 23.2%
Markets: -30.64%
Gallon of gas: $4.64
Interest Rates: 12%
Metals exports such as gold and platinum are hurt by falling precious metals prices, and soaring food and electricity prices are driving a steep increase in inflation. Unemployment had hit a seven-year low in March, but is rising as the economy slows.
United Kingdom
GDP: 0.99%
Inflation: 3.78%
Unemployment: 5.4%
Markets: -34.2%
Gallon of gas: $8.09
Interest Rates: 3%
Both the Prime Minister and the Treasury chief say the British economy is likely in a recession. The pound is at a 6-year low against the dollar, and retail sales are down for first time in nearly 4 years. A $63 billion bailout for the banking sector offers some relief.
United States
GDP: 1.57%
Inflation: 4.22%
Unemployment: 5.62%
Markets: -33.10%
Gallon of gas: $3.8
Interest Rates: 1%
Home prices plummet by as much as 40% in some parts of the country, and nearly one million homes have been lost to foreclosure since the mortgage crisis began in August 2007. The government is flooding the frozen financial system with nearly $3 trillion to restore liquidity, and, despite a $168 billion stimulus package that was unveiled last spring, political support for a second stimulus package is gaining momentum.
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