The Bank of Japan cut its economic growth forecast and predicted inflation would accelerate in a report that omitted a reference to raising interest rates for the first time in two years.
The world's second-largest economy will grow 1.5 percent in the year ending March 31, less than an October estimate of 2.1 percent, the central bank said in its semi-annual outlook. Governor Masaaki Shirakawa and his six colleagues earlier today left the key lending rate at 0.5 percent.
``The outlook for economic activity and prices is highly uncertain,'' the central bank said. ``It is not appropriate to predetermine the direction of future monetary policy.''
Bonds rose the most in eight months on speculation a deteriorating economy will prompt Shirakawa to shelve his predecessor's policy of gradually raising Japan's borrowing costs, the lowest in the industrialized world. Growth is slowing as the U.S. housing recession weighs on demand for exports and rising raw-materials costs fan inflation and erode profits.
``They made it clear that they now have a neutral bias,'' said Hiroshi Shiraishi, an economist at Lehman Brothers Japan Inc. in Tokyo. ``The report makes clear that the downside risks in terms of growth dominate.''
The yen traded at 103.94 per dollar at 4:46 p.m. in Tokyo from 104.02 late yesterday in New York. The yield on Japan's five-year note fell 9.5 basis points, the most since August, to 1.135 percent.
Flexible Policy
``It's not appropriate to predetermine the direction of policy now,'' Shirakawa, who became governor on April 9, told reporters in Tokyo. He said policy needs to be ``flexible'' and the central bank is paying more attention to downside risks to the economy.
Policy makers said consumer prices will rise more than they predicted six months ago. The Bank of Japan, along with central banks in Australia, Europe and elsewhere in Asia, has to juggle the prospect of faster inflation and slowing growth.
Core consumer prices, which exclude fresh food, will rise 1.1 percent, compared with an earlier estimate of 0.4 percent, the bank said. Core prices won't deviate much from the central bank's zero to 2 percent range for price stability, it said.
The economy will grow 1.7 percent in the year ending March 2010 and core prices will increase 1 percent, the policy makers forecast. ``Close attention needs to be paid to future developments in economic activity and prices,'' the bank said.
Potential Growth
Growth in the current year and the next 12 months is still within the 1.5 percent to 2 percent range the bank considers to be Japan's potential growth rate, or the pace of expansion achievable when most of the country's labor and capacity is used.
The outlook report described Japan's lending conditions as ``generally accommodative'' compared with ``extremely accommodative'' in October.
The yen's gains are affecting exports while cushioning the impact of the rising cost of imported raw materials, Shirakawa said. The currency's strength should be measured against the euro and other major currencies as well as the dollar and board members reflected that view in today's report, he added.
The bank said it has kept the benchmark rate unchanged since raising it in February 2007 because risks including higher energy costs and a domestic housing slump created ``uncertainty'' in the economy.
``The Bank of Japan has time to wait and see for now,'' said Mamoru Yamazaki, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. ``The bank will resume the process of normalizing interest rates once it becomes confident that the economy will return to a sustainable growth path.''
Wait and See
Investors see a 56 percent chance for a rate increase by December, according to JPMorgan Chase & Co. calculations.
The bank removed language it had used since April 2006 that said it will ``adjust the level of interest rates gradually in accordance with improvements in the economic and price situation.''
Factory output fell at the fastest pace in five years in March, a report showed today. The unemployment rate fell to 3.8 percent, the ratio of jobs to applicants slid to the lowest in almost three years, and household spending declined 1.6 percent.
Housing starts tumbled 15.6 percent in March, the Land Ministry said today, halting five months of improvements.
``With consumption, production and employment all getting worse, the Japanese economy is weakening,'' said Yuji Kameoka, a senior economist at Daiwa Institute of Research in Tokyo, a unit of Japan's second-largest brokerage. ``The BOJ cannot move rates this year amid a slowing economy and accelerating inflation.''
Wednesday, April 30, 2008
U.K. House Prices Posted First Annual Drop Since 1996
U.K. house prices fell in April from a year earlier, the first such decline since 1996, after the credit squeeze dried up finance for property purchases, Nationwide Building Society said.
Home values dropped 1 percent to 178,555 pounds ($352,000) from a year earlier, said Britain's fourth-biggest mortgage lender. Its index is one of the measures used by the Bank of England when assessing the housing market. From March, prices fell 1.1 percent, double the pace economists had forecast.
Mortgage lenders approved the fewest new loans since at least 1999 last month after turmoil in credit markets prompted banks to tighten standards for borrowers. While the Bank of England has cut interest rates to stave off a recession, policy maker David Blanchflower said house prices may fall by a third and a report today showed consumer confidence fell to the lowest since 1992.
``We've been expecting some moderate fall in house prices this year, and that's only to be expected since we're seeing deteriorating affordability and tighter credit market conditions,'' said Nationwide Chief Economist Fionnuala Earley in a Bloomberg Television interview. She forecasts that prices may decline as much as 5 percent this year.
The pound fell after the report, slipping as much as 0.2 percent to 79.47 pence.
Blanchflower said late yesterday that house prices may drop by a third in the next three years and urged his colleagues on the Monetary Policy Committee to take ``aggressive action'' on rates.
Rate Declines
``Monetary policy, in my view, still remains restrictive currently, and we need to take action to loosen policy sooner rather than later,'' said Blanchflower in Edinburgh. The nine- -member MPC next decides on rates on May 8.
Britain's central bank this month cut its benchmark rate by a quarter point to 5 percent, the third reduction since December. That's still the highest among the Group of Seven nations.
Nationwide's report is the latest to suggest a downturn in the U.K. housing market is worsening. HBOS Plc, the country's largest mortgage lender, said this month that prices fell in March by the most since 1992. The Bank of England said yesterday that mortgage approvals dropped to 64,000 last month, the lowest since records began in 1999.
Consumer Spending
The end of Britain's decade-long property boom may hurt consumer spending and drag down economic growth this year. The economy expanded at its slowest pace in three years in the first quarter, and GfK NOP Ltd. said today that consumer confidence fell to the lowest in 16 years in April after the property slowdown and higher oil prices dented households' spending power.
``Although retail spending has so far been remarkably resilient as the housing market has faltered, lower house prices are likely to weigh down on the consumer over time,'' Earley said. ``Weakening housing market sentiment and demand, unrelated to the financial market turmoil, will mean that we should expect slower market conditions.''
Nigel Lawson, who served as finance minister from 1983 to 1989, said on April 9 that Britain is headed for a ``prolonged'' recession. Chancellor of the Exchequer Alistair Darling forecasts growth of at least 1.75 percent this year, down from 3 percent in 2007.
The global credit squeeze, which is almost nine months old, is putting further pressure on the housing market. The Bank of England on April 21 offered to swap government bonds for mortgage- backed securities. Darling is encouraging lenders to offer more generous mortgage deals to consumers.
The swap ``should introduce some more stability and reduce volatility in the financial markets,'' Earley said. ``In terms of turning the housing market around and returning to positive rates of growth in next few months, that's very unlikely.''
Home values dropped 1 percent to 178,555 pounds ($352,000) from a year earlier, said Britain's fourth-biggest mortgage lender. Its index is one of the measures used by the Bank of England when assessing the housing market. From March, prices fell 1.1 percent, double the pace economists had forecast.
Mortgage lenders approved the fewest new loans since at least 1999 last month after turmoil in credit markets prompted banks to tighten standards for borrowers. While the Bank of England has cut interest rates to stave off a recession, policy maker David Blanchflower said house prices may fall by a third and a report today showed consumer confidence fell to the lowest since 1992.
``We've been expecting some moderate fall in house prices this year, and that's only to be expected since we're seeing deteriorating affordability and tighter credit market conditions,'' said Nationwide Chief Economist Fionnuala Earley in a Bloomberg Television interview. She forecasts that prices may decline as much as 5 percent this year.
The pound fell after the report, slipping as much as 0.2 percent to 79.47 pence.
Blanchflower said late yesterday that house prices may drop by a third in the next three years and urged his colleagues on the Monetary Policy Committee to take ``aggressive action'' on rates.
Rate Declines
``Monetary policy, in my view, still remains restrictive currently, and we need to take action to loosen policy sooner rather than later,'' said Blanchflower in Edinburgh. The nine- -member MPC next decides on rates on May 8.
Britain's central bank this month cut its benchmark rate by a quarter point to 5 percent, the third reduction since December. That's still the highest among the Group of Seven nations.
Nationwide's report is the latest to suggest a downturn in the U.K. housing market is worsening. HBOS Plc, the country's largest mortgage lender, said this month that prices fell in March by the most since 1992. The Bank of England said yesterday that mortgage approvals dropped to 64,000 last month, the lowest since records began in 1999.
Consumer Spending
The end of Britain's decade-long property boom may hurt consumer spending and drag down economic growth this year. The economy expanded at its slowest pace in three years in the first quarter, and GfK NOP Ltd. said today that consumer confidence fell to the lowest in 16 years in April after the property slowdown and higher oil prices dented households' spending power.
``Although retail spending has so far been remarkably resilient as the housing market has faltered, lower house prices are likely to weigh down on the consumer over time,'' Earley said. ``Weakening housing market sentiment and demand, unrelated to the financial market turmoil, will mean that we should expect slower market conditions.''
Nigel Lawson, who served as finance minister from 1983 to 1989, said on April 9 that Britain is headed for a ``prolonged'' recession. Chancellor of the Exchequer Alistair Darling forecasts growth of at least 1.75 percent this year, down from 3 percent in 2007.
The global credit squeeze, which is almost nine months old, is putting further pressure on the housing market. The Bank of England on April 21 offered to swap government bonds for mortgage- backed securities. Darling is encouraging lenders to offer more generous mortgage deals to consumers.
The swap ``should introduce some more stability and reduce volatility in the financial markets,'' Earley said. ``In terms of turning the housing market around and returning to positive rates of growth in next few months, that's very unlikely.''
Announcements
- National Aluminium Company, Nalco has declared its standalone results for the quarter ended March 2008 (Q4). The company's standalone net sales stood at Rs 1,405.7 crore versus Rs 1,566.8 crore on YoY basis.During the same quarter its standalone net profit was at Rs 409.06 crore versus Rs 590.8 crore on YoY basis.
- 3i Infotech, IT solutions firm, has bought 100 per cent stake in US-based payment processing firm, Regulus Group. 3i Infotech has decided to pay a fixed consideration of $80 million for the buy out.
- IFCI Q4Loss of Rs 42.5 cr vs profit of Rs 668 crIncome at Rs 447 cr vs Rs 1053 crWrite-off for bad debts at Rs 378 cr vs Rs 111 crRs 416 cr receivable from Govt written off.
- Mercator Lines Limited has informed the Exchange vide its letter dated April 29, 2008 that : "The committee of Board of Directors of the Company in its meeting held today, interalia has approved allotment of 3,65,562 equity shares of Re. 1/- each in lieu of surrender of Foreign Currency Convertible Bonds (FCCB's) aggregating USD 500,000/- from bond holders; at a conversion price of Rs. 59/812. Consequently, the paid up capital of the company has increased to 23,52,60,949 equity shares of Re.1/- each. With this conversion, now there are 800 FCCB's Outstanding of aggregate amount of USD 8,000,000/-".
- Puravankara Projects has announced its fourth quarter and FY08 results. The company's FY08 consolidated net sales are up at Rs 565.81 crore from Rs 416.85 crore.
Its FY08 consolidated net profit was up at Rs 240.05 crore versus Rs 129.10 crore.
Its Q4 consolidated net sales were up at Rs 546.9 crore from Rs 140.95 crore.
Its Q4 consolidated net profit was up at Rs 72.71 crore from Rs 46.48 crore. - Hindustan Construction Company (HCC), has bagged a contract worth Rs 300 crore from Gurgaon-based Lanco Infratech, for execution of all civil works for Teesta Hydroelectric Project.
- Everonn System has announced it's Q4 results. Its net profit was at Rs 6.8 crore vs Rs 4 crore (QoQ). Its net sales was at Rs 30.5 croe vs Rs 29 crore (QoQ).
- Bank of India has announced its 08 results. Its standalone NII were at Rs 4,229.3 croe versus Rs 3,440.5 crore (YoY). Standalone net profit was at Rs 2,009.4 crore versus Rs 1,123.2 crore (YoY).Its other income stood at Rs 653.3 crore versus Rs 576.7 crore.
Its Q4FY08 net interest income was up 25.71% from Rs 967.95 crore to Rs 1216.85 crore - Polaris Software has entered into a unique partnership with the University of Western Sydney that will contribute to local capacity building and help address the issue of IT skill shortages in Australia.
- Veracode Inc., the leading provider of on-demand application security testing solutions, today announced that the company has entered into a strategic partnership with Tech Mahindra Limited and this will give Tech M access to a unique, on demand application security technology, which allows the company to further strengthen its application security capability as they expand into new market.
- Reliance Communication has announced its FY08 results. The company's consolidated FY08 net profit was at Rs 5401.1 crore versus Rs 3526.4 crore
Its consolidated net sales were up at Rs 18,827.4 crore from Rs 17,190.4 crore.
Its MTM loss of Rs 25 crore (Lower Than Mkt Expectations).
FY08Q4
Its consolidated net profit at Rs 1502.8 crore
Its standalone net profit was up 9.5% at Rs 1502.8 crore from Rs 1372.8 crore QoQ.
The company's standalone revenues up 8.9% at Rs 5311.3 crore from Rs 4874 crore, QoQ.
Its MTM Loss of Rs 8 crore. - HDFC has declared its fourth quarter results. Its Q4 net profit was up 39.62% from Rs 550.5 crore to Rs 768 crore. It includes one time gain of Rs 202 crore.
Its FY08 net profit was at Rs 2436 crore. - Reliance Communications Limited has informed the Exchange regarding the standalone Results for the year ended on 31-MAR-2008 as follows: Net Sales of Rs. 1341619 lacs for year ending on 31-MAR-2008. Net Profit / (Loss) of Rs. 258645 lacs for the year ending on 31-MAR-2008.
- Housing Development Finance Corporation Ltd. has informed the Exchange that the Board of Directors at its meeting held on April 30, 2008 has recommended a dividend of Rs. 25 per equity share for the financial year 2007-08 (Rs. 22.00 per equity share for the previous year).
- Bank Of Maharashtra has informed the Exchange that the Board of Directors of the Bank at its meeting held on April 30, 2008 has recommended dividend of 20% for the year ended March 31, 2008.
- Bank of Maharashtra has informed the Exchange regarding the consolidated Results for the year ended on 31-MAR-2008 as follows: Interest earned of Rs. 354059 lacs for the year ending on 31-MAR-2008 against Rs. 272208 lacs for the year ending on 31-MAR-2007. Interest expended of Rs. 231161 lacs for the year ending on 31-MAR-2008 against Rs. 162767 lacs for the year ending on 31-MAR-2007. Net Profit / (Loss) of Rs. 32976 lacs for the year ending on 31-MAR-2008 against Rs. 27289 lacs for the year ending on 31-MAR-2007.
RBI Governor announces Annual Policy Statement for the year 2008-09
Highlights
High priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while sustaining the growth momentum.
Swift response on a continuous basis to evolving adverse international and domestic developments through both conventional and unconventional measures.
Emphasis on credit quality and credit delivery while pursuing financial inclusion.
Bank Rate, Reverse Repo Rate and Repo Rate kept unchanged.
Scheduled banks required to maintain CRR of 8.25 per cent with effect from the fortnight beginning May 24, 2008.
GDP growth projection for 2008-09 in the range of 8.0- 8.5 per cent.
Inflation to be brought down to around 5.5 per cent in 2008-09 with a preference for bringing it close to 5.0 per cent as soon as possible. Going forward, the resolve is to condition policy and perceptions for inflation in the range of 4.0-4.5 per cent so that an inflation rate of around 3.0 per cent becomes a medium-term objective.
M3 expansion to be moderated in the range of 16.5-17.0 per cent during 2008-09.
Deposits projected to increase by around 17.0 per cent or Rs.5,50,000 crore during 2008-09.
Adjusted non-food credit projected to increase by around 20.0 per cent during 2008-09.
Active demand management of liquidity through appropriate use of the CRR stipulations and open market operations (OMO) including the MSS and the LAF.
Introduction of STRIPS in Government securities by the end of 2008-09.
A clearing and settlement arrangement for OTC rupee derivatives proposed.
Domestic crude oil refining companies would be permitted to hedge their commodity price risk on overseas exchanges/markets on domestic purchase of crude oil and sale of petroleum products based on underlying contract.
Currency futures to be introduced in eligible exchanges in consultation with the SEBI; broad framework to be finalised by May 2008.
Indian companies to be allowed to invest overseas in energy and natural resources sectors.
Reserve Bank can be approached for capitalisation of export proceeds beyond the prescribed period of realisation.
Loans granted to RRBs for on-lending to agriculture and allied activities to be classified as indirect finance to agriculture.
The shortfall in lending to weaker sections would be taken into account for contribution to RIDF with effect from April 2009.
RRBs allowed to sell loan assets to other banks in excess of their prescribed priority sector exposure.
The Reserve Bank to disseminate details of various charges levied by banks.
Asset classification norms for credit to infrastructure projects relaxed.
The prudential guidelines for specific off-balance sheet exposures of banks to be reviewed.
Reserve Bank to carry out supervisory review of banks' exposure to the commodity sector.
The limit of bank loans to individuals for housing having lower risk weight of 50 per cent enhanced from Rs. 20 lakh to Rs. 30 lakh.
Consolidated supervision of financial conglomerates proposed.
Working Group to be set up for a supervisory framework for SPVs/Trusts.
Inter-departmental Group to review the existing regulatory and supervisory framework for overseas operations of Indian banks.
All transactions of Rs. one crore and above made mandatory to be routed through the electronic payment mechanism.
Dispense with the extant eligibility norms for opening on-site ATMs for well-managed and financially sound UCBs.
Regulations in respect of capital adequacy, liquidity and disclosure norms for systemically important NBFCs to be reviewed.
Details
Domestic Developments
The advance estimates of the Central Statistical Organisation (CSO) placed real GDP growth at 8.7 per cent for 2007-08, over and above 9.6 per cent in 2006-07.
On a year-on-year basis, WPI inflation stood at 7.4 per cent at end-March 2008 as compared with 5.9 per cent a year ago. During 2007-08, headline inflation declined from 6.4 per cent at the beginning of the financial year to a low of 3.1 per cent in mid-October before firming up from mid-February 2008 onwards.
The average price of the Indian basket of international crude increased by 27.6 per cent from US $ 62.4 per barrel during 2006-07 to US $ 79.7 per barrel in 2007-08.
Money supply (M3) increased by 20.7 per cent (Rs.6,86,096 crore) in 2007-08 as compared with 21.5 per cent (Rs.5,86,548 crore) in 2006-07.
Reserve money increased by 30.9 per cent (Rs.2,19,326 crore) during 2007-08 as compared with 23.7 per cent (Rs.1,35,935 crore) in the previous year.
Aggregate deposits of SCBs increased by 22.2 per cent (Rs.5,80,208 crore) during 2007-08 as compared with 23.8 per cent (Rs.5,02,885 crore) in the previous year.
Non-food credit extended by the scheduled commercial banks (SCBs) increased by 22.3 per cent (Rs.4,19,425 crore) as compared with 28.5 per cent (Rs.4,18,282 crore) in the previous year.
The incremental non-food credit-deposit ratio for the banking system declined to 72.3 per cent during 2007-08 from 83.2 per cent in 2006-07, 109.3 per cent in 2005-06 and 130.0 per cent in 2004-05.
The total flow of funds from SCBs to the commercial sector, including non-SLR investments, increased by 21.9 per cent (Rs.4,31,256 crore) in 2007-08 as against 27.3 per cent (Rs.4,22,363 crore) in 2006-07.
During 2007-08, the financial markets experienced alternating shifts in liquidity conditions.
The total overhang of liquidity as reflected in the balances under the LAF, the MSS and surplus cash balances of the Central Government taken together increased to the intra-year peak of Rs.2,73,694 crore on March 27, 2008 before declining to Rs.2,43,879 crore on April 25, 2008.
Movements in interest rates in the domestic financial markets reflected the factors driving changes in liquidity with the banking system during 2007-08.
The average daily turnover in the foreign exchange market increased to US $ 57.3 billion at end-March 2008 from US $ 33.2 billion at end-March 2007.
Commercial banks' investment in Government and other approved securities increased by 22.9 per cent (Rs.1,81,222 crore) during 2007-08, significantly higher than 10.3 per cent (Rs.74,062 crore) in 2006-07.
Commercial banks' stock of statutory liquidity ratio (SLR) eligible securities marginally increased to 27.4 per cent of the banking system's net demand and time liabilities (NDTL) in March 2008 from 27.3 per cent in March 2007.
Interest rates offered by the public sector banks (PSBs) on deposits of above one year maturity moved from the range of 7.25-9.50 per cent in March 2007 to 8.00-9.25 per cent in March 2008.
The benchmark prime lending rates (BPLRs) of PSBs increased by 75 basis points from a range of 12.25-12.75 per cent to 12.25-13.50 per cent during 2007-08.
The BSE Sensex (1978-79=100) increased by 19.7 per cent during the year from 13072 at end-March 2007 to 15644 at end-March 2008.
The weighted average yield on primary issuance of the Central Government's dated securities increased by 23 basis points to 8.12 per cent in 2007-08 from 7.89 per cent in the previous year.
External Developments
Information available from the DGCI&S indicates that merchandise exports increased by 22.8 per cent in US dollar terms during April-February 2007-08 as compared with 23.2 per cent in the corresponding period of the previous year. Imports showed an increase of 30.1 per cent as compared with 25.2 per cent during the same period.
While the increase in oil imports was lower at 26.4 per cent as compared with 31.2 per cent, non-oil import recorded a higher growth of 31.8 per cent as compared with 22.6 per cent.
During April-February 2007-08, the trade deficit widened to US $ 72.5 billion which was 46.8 per cent higher than the deficit of US $ 49.4 billion in the corresponding period of the previous year.
The sustained strength of capital flows during 2007-08 is noteworthy as the foreign exchange reserves increased by US $ 110.5 billion to US $ 309.7 billion by end-March 2008.
The Indian foreign exchange market witnessed generally orderly conditions during 2007-08 with the exchange rate exhibiting two-way movements. The rupee appreciated by 9.1 per cent against the US dollar and by 7.5 per cent against pound sterling but depreciated by 7.7 per cent against the Japanese yen and by 7.8 per cent against the euro during 2007-08.
Global Developments
Global economic activity decelerated somewhat in relation to earlier expectations, mainly on account of the slowdown in the US economy.
According to the World Economic Outlook (WEO) of the International Monetary Fund (IMF), the forecast for global real GDP growth, on a purchasing power parity basis, is expected to slow from 4.9 per cent in 2007 to 3.7 per cent in 2008.
Continuing strong demand and dwindling stocks are reflected in a tight supply-demand food situation globally, leading to the emergence of food price inflation as a key risk to global stability.
The Food and Agricultural Organisation's (FAO) global food price index, which rose by 40 per cent in 2007 to the highest level on record, has continued to increase in the first quarter of 2008 as well, as world food stocks have fallen to their lowest levels in 25 years.
In the global foodgrains market, prices of major crops such as corn, soyabeans and wheat have increased by 58.2 per cent, 86.3 per cent and 56.5 per cent, respectively, by April 25, 2008 from a year ago in response to surging demand.
According to the Energy Information Administration (EIA), tight fundamentals, reflected by low available crude oil surplus production capacity, combined with supply concerns in several oil exporting countries, have continued to put upward pressure on world crude oil prices.
In the EMEs, the recent jump in headline inflation caused by higher energy and food prices are of concern since this requires a balanced response in controlling inflation while being alert to decelerating impulses from the slowdown in the developed countries and the possibilities of prolonged global financial market turmoil.
Since the beginning of the turbulence in August 2007, central banks of advanced economies have responded with both conventional and unconventional measures to ease liquidity stress in financial markets and solvency issues among large financial institutions.
Some central banks such as the US Federal Reserve, the Bank of England, the Bank of Canada have cut policy rates since the third quarter of 2007 when the financial market turmoil surfaced.
Central banks of several countries, including the euro area, New Zealand, Japan, Korea, Malaysia, Thailand and Mexico have not changed their rates since the last quarter of 2007.
Some central banks that have tightened their policy rates in recent months include the Reserve Bank of Australia, the People's Bank of China, the Banco Central de Chile and Banco Central do Brasil.
Large capital flows to EMEs have elicited monetary tightening responses from central banks either through hike in their policy rates or reserve requirements or both. Meanwhile, in several EMEs, central bank bonds have continued to absorb liquidity from the banking system.
Measures directly aimed at managing capital flows are also in evidence in many EMEs.
Overall Assessment
While aggregate supply capacities expanded and alleviated domestic macro-imbalances in 2007-08 to some extent, available indicators suggest that economic activity in India currently continues to be mainly demand-driven.
The pick-up in inflation during the fourth quarter of 2007-08 has mainly emanated from supply-side pressures such as the one-off increase in domestic petrol and diesel prices to partially offset the global crude oil price increase over the year; continuous hardening of prices of petroleum products that are not administered, rising prices of wheat and oilseeds and the adjustment in steel prices in March 2008 due to the surge in international prices.
The upsurge in inflation in India has occurred at a time when global commodity prices have been volatile at historically elevated levels and central banks in mature and emerging economies alike have been articulating heightened inflation concerns.
There are concerns that demand pressures, which have been reasonably contained so far, are being coupled with supply-side factors which, if not temporary, could impact domestic inflation significantly.
The moderation in non-food credit growth has been marked in respect of interest-sensitive sectors which had been recording significantly elevated growth rates in preceding years.
During the fourth quarter of 2007-08, financial markets were impacted by unusual swings and high volatility in foreign exchange flows as well as in cash balances of the Government with the Reserve Bank with consequent shifts in liquidity conditions.
Growth forecasts for EMEs have been moderated in the face of the financial turbulence and the anticipated slowdown in the US economy. A key risk to the outlook for EMEs is rising food, energy and commodity prices that are already imparting inflationary pressures and raising concerns about impacting the momentum of growth in these economies.
The recent monetary policy responses in the US have also heightened the uncertainties facing EMEs by widening interest rate differentials and increasing the costs of sterilisation, especially in a period when inflationary pressures warrant tightening.
The outlook for the global financial system is overcast by the rising incidence of losses and write-offs in banking systems in the US and Europe amidst dislocations in the securitised credit market. There are also growing uncertainties surrounding the viability of financial guarantors and doubts about their business models as well as the approach of rating agencies with potential systemic implications.
In the overall assessment, there have been significant shifts in both global and domestic developments in relation to initial assessments. The dangers of global recession have increased at the current juncture although consensus expectations do not rule out a soft landing. On the domestic front, the outlook remained positive up to January 2008. Since then, the prospects for growth in the year ahead have been trimmed as risks to inflation and inflation expectations from the upside pressures due to international food, crude and metal prices have become more potent and real than before.
Stance of Monetary Policy for 2008-09
For policy purposes, real GDP growth in 2008-09 may be placed in the range of 8.0 to 8.5 per cent, assuming that (a) global financial and commodity markets and real economy will be broadly aligned with the central scenario as currently assessed and (b) domestically, normal monsoon conditions prevail.
In view of the lagged and cumulative effects of monetary policy on aggregate demand and assuming that supply management would be conducive, the policy endeavour would be to bring down inflation from the current high level of above 7.0 per cent to around 5.5 per cent in 2008-09 with a preference for bringing it as close to 5.0 per cent as soon as possible.
In view of the monetary overhang, it is necessary to moderate monetary expansion and plan for a rate of money supply in the range of 16.5-17.0 per cent in 2008-09 in consonance with the outlook on growth and inflation so as to ensure macroeconomic and financial stability in the period ahead.
Consistent with the projections of money supply, the growth in aggregate deposits in 2008-09 is placed at around 17.0 per cent or around Rs.5,50,000 crore.
Based on an overall assessment of the sources of funding and the overall credit requirements of the various productive sectors of the economy, the growth of non-food credit including investments in bonds/debentures/shares of public sector undertakings and private corporate sector and commercial paper (CP) is placed at around 20.0 per cent in 2008-09.
Given the unprecedented complexities involved and the heightened uncertainties at this juncture, there are some key factors that govern the setting of the stance of monetary policy for 2008-09 viz., (i) the challenge of escalated and volatile food and energy prices; (ii) even as investment demand remains strong, supply elasticities are expected to improve further; (iii) recent initiatives in regard to supply-management by the Government of India and measures relating to the cash reserve ratio by the Reserve Bank of India; (iv) the importance of anchoring expectations relating to both global and domestic developments.
In view of the above unprecedented uncertainties and dilemmas, it is important to take informed judgements with regard to the timing and magnitude of policy actions; and such judgements need to have the benefit of evaluation of incoming information on a continuous basis.
To demonstrate on a continuing basis a determination to act decisively, effectively and swiftly to curb any signs of adverse developments in regard to inflation expectations.
The Reserve Bank will continue with its policy of active demand management of liquidity through appropriate use of the CRR stipulations and open market operations (OMO) including the MSS and the LAF, using all the policy instruments at its disposal flexibly, as and when the situation warrants.
Barring the emergence of any adverse and unexpected developments in various sectors of the economy, assuming that capital flows are effectively managed, and keeping in view the current assessment of the economy including the outlook for growth and inflation, the overall stance of monetary policy in 2008-09 will broadly be:
• to ensure a monetary and interest rate environment that accords high priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while being conducive to continuation of the growth momentum.
• to respond swiftly on a continuing basis to the evolving constellation of adverse international developments and to the domestic situation impinging on inflation expectations, financial stability and growth momentum, with both conventional and unconventional measures, as appropriate.
• to emphasise credit quality as well as credit delivery, in particular, for employment-intensive sectors, while pursuing financial inclusion.
Monetary Measures
Bank Rate kept unchanged at 6.0 per cent.
Reverse Repo Rate and Repo Rate kept unchanged at 6.00 per cent and 7.75 per cent, respectively.
The Reserve Bank retains the option to conduct overnight repo or longer term repo under the LAF depending on market conditions and other relevant factors. The Reserve Bank will continue to use this flexibility including the right to accept or reject tender(s) under the LAF, wholly or partially, if deemed fit, so as to make efficient use of the LAF in daily liquidity management.
Cash reserve ratio (CRR) of scheduled banks increased to 8.25 per cent with effect from the fortnight beginning May 24, 2008.
Developmental and Regulatory Policies
Financial Markets
Issuances of Floating Rate Bonds (FRBs) to be considered at an appropriate time taking into account market conditions.
The modalities for implementing the recommendations of the Internal Working Group to review the auction procedure for the Government securities are being worked out.
Wider dissemination of the investor friendly features of the regulations under the Government Securities Act, 2006 through media publicity and the website of the Reserve Bank for better customer service.
A module of the NDS auction for non-competitive bidding scheme in the auctions of State Development Loans (SDLs) being developed by the CCIL is expected to become functional by September 2008.
Action on the recommendations of the Working Group on Interest Rate Futures would be initiated on the basis of the feedback received.
With the enactment of the Government Securities Act, 2006 effective from December 1, 2007, it is proposed to introduce STRIPS in Government securities by the end of 2008-09.
A settlement mechanism in Government securities through settlement banks for participants who do not maintain current accounts but maintain SGL accounts with the Reserve Bank to be operationalised in May 2008.
To allow access to NDS-OM extended to investors such as other non-deposit taking NBFCs, corporates and FIIs through the CSGL route.
Following the enactment of the Payment and Settlement Systems Act, 2007, a clearing and settlement arrangement for OTC rupee derivatives to be put in place in consultation with the CCIL.
Introduction of repo in corporate bonds to be considered once the prerequisites like efficient price discovery through greater public issuances and secondary market trading, and an efficient and safe settlement system, based on Delivery versus Payments (DvP) III and Straight Through Processing (STP), are met.
To permit domestic crude oil refining companies to hedge their commodity price risk exposures on the basis of underlying contracts which are linked to international prices on overseas exchanges/markets on the basis of their past performance up to 50 per cent of the volume of actual imports during the previous year or 50 per cent of the average volume of imports during the previous three financial yeas, whichever is higher.
Currency futures to be introduced in the eligible exchanges in consultation with the SEBI; the broad framework to be finalised by the end of May 2008; RBI-SEBI Standing Technical Committee has been set up to advise on operational aspects.
Indian companies allowed to invest overseas in energy and natural resources sectors such as oil, gas, coal and mineral ores in excess of the current limits with prior approval of the Reserve Bank.
Indian parties may approach the Reserve Bank for capitalisation of export proceeds for exports outstanding beyond the prescribed period of realisation.
To permit authorised dealer (AD) banks to write off, in addition to claims settled by the Export Credit Guarantee Corporation of India (ECGC), the outstanding export bills settled by other insurance companies which are regulated by the Insurance Regulatory Development Authority (IRDA).
To enhance the present period for realisation and repatriation to India of the full export value of goods or software exported from six months to twelve months from the date of export, subject to review after one year.
Credit Delivery
With effect from April 2009, the shortfall in lending to weaker sections by the domestic SCBs would be taken into account for the purpose of allocating amounts for contribution to RIDF or funds with other financial institutions as specified by the Reserve Bank.
RRBs to be allowed to sell loan assets held by them under priority sector categories in excess of the prescribed priority sector lending target of 60 per cent, to enable greater flow of credit to this sector.
Pending finalisation of action on the recommendations of the Radhakrishna Committee, it is proposed to ask each domestic commercial bank, including RRBs, to select one district for introduction, on a pilot basis, of a simplified cyclical credit product for farmers to enable them to continuously utilise a core component of 20 per cent of the credit limit to ensure minimum year-round liquidity as long as the interest is serviced.
A simplified procedure for crop loans to landless labourers, share croppers, tenant farmers and oral lessees to be introduced whereby banks can accept an affidavit giving details of land tilled/crops grown by such persons for loans up to Rs.50,000 without any need for independent certification. Banks could also encourage the Joint Liability Group (JLG)/SHG mode of lending for such persons.
In collaboration with the Indian Banks' Association (IBA), the Banking Codes and Standards Board of India (BSCBI) is evolving a banking code for small and micro enterprises.
The report of the Working Group to examine the feasibility of reviving sick SMEs and to suggest remedial measures for potentially viable sick units placed on the Reserve Bank's website for wider dissemination/response.
A Working Group constituted to prepare RRBs to adopt appropriate technology and migrate to core banking solution to submit its report by June 30, 2008.
For 100 per cent financial inclusion, 277 districts identified and target achieved in 134 districts in 18 States and five Union Territories.
Banks to be permitted to classify 100 per cent of the credit outstanding under General Credit Card (GCC) from 50 per cent earlier, and overdrafts up to Rs.25,000 against 'no-frills' accounts in rural and semi-urban areas as indirect finance to agriculture under the priority sector.
A concept paper on Financial Literacy and Counselling Centres has been prepared and placed on the Reserve Bank's website on April 3, 2008 for public feedback.
A High Level Committee to review the Lead Bank Scheme expected to submit its report by July 2008.
In order to promote an incentive system for greater flow and efficient allocation of credit, an Internal Working Group to be set up to look at issues relating to credit delivery, credit pricing and credit culture in a holistic manner.
With a view to bringing about greater transparency, the Reserve Bank is in the process of collecting details of various charges levied by banks for public dissemination.
In order to ensure that all bank branches provide better customer services to members of public at bank counters for exchange of notes, it is proposed to introduce a scheme of incentives and penalties for bank branches (including currency chests), based on their performance in rendering such services.
Prudential Measures
In case of infrastructure projects to be financed by banks, the date of completion of the project should be clearly spelt out at the time of financial closure of the project and if the date of commencement of commercial production extends beyond a period of two years (as against the current norm of one year) after the date of completion of the project as originally envisaged, the account should be treated as sub-standard. The revised instructions are effective from March 31, 2008.
In view of the recent developments in the global financial markets and for ensuring financial stability, it is proposed to review current stipulations regarding conversion factors, risk weights and provisioning requirements for specific off-balance sheet exposures of banks and prescribe prudential requirements and place guidelines on the Reserve Bank's website by May 15, 2008.
Banks are required to review their advances to traders in agricultural commodities to ensure that bank finance is not used for hoarding and forward the first such review to the Reserve Bank by May 15, 2008 for carrying out supervisory review of banks' exposure to the commodity sector.
The limit of bank loans for housing enhanced from Rs.20 lakh to Rs.30 lakh for applicability of reduced risk weights at 50 per cent.
The Reserve Bank would complete the processing of applications for setting up Credit Information Companies by June 30, 2008.
The Reserve Bank has constituted an Internal Technical Group to propose criteria for the applicability of Basel norms to State Cooperative Banks/District Central Cooperative Banks/Regional Rural Banks that is expected to submit its report by June 30, 2008.
An Internal Working Group constituted by the Reserve Bank is currently studying the cross-country practices, including the legal issues to be laid down towards the road-map for adoption of a suitable framework for cross-border supervision and supervisory cooperation with overseas regulators, consistent with the framework envisaged in the Basel Committee on Banking Supervision.
As proposed in the Mid-Term Review of October 2007, realignment of various internal supervisory processes for implementing an enhanced consolidated supervision of financial conglomerates would be completed by August 31, 2008.
The Reserve Bank to constitute a Working Group to study and recommend a suitable supervisory framework for activities of SPVs/Trusts set up by banks.
An inter-departmental group set up to study impact assessment, periodic reviews of horizontal risks across the system, inclusion of supervisory review process prescribed under Pillar 2 of Basel II framework in the Risk-based supervision (RBS) assessment besides simplifying the existing system of risk profiling for an appropriate RBS framework.
The Reserve Bank has constituted an inter-departmental Group to review the existing regulatory and supervisory framework for overseas operations of Indian banks, the introduction of new products and processes, increasing off-balance sheet exposures including derivative products, and also to recommend appropriate changes, including off-site reporting systems.
On the Financial Stability Forum's (FSF) Report in April 2008 regarding strengthening of prudential oversight of capital, liquidity and risk management, enhancing transparency and valuation, changing the role and uses of credit ratings, strengthening the authorities' responsiveness to risk and implementing robust arrangements for dealing with stress in the financial system, the Reserve Bank had put in place regulatory guidelines covering many aspects and action being initiated on others.
The Reserve Bank has undertaken a detailed process of identifying the eligible credit rating agencies whose ratings may be used by banks for assigning risk weights for credit risk consistently for each type of claim, for both risk weighting and risk management purposes.
A Working Group to lay down a road-map for adoption of a suitable framework for cross-border supervision and supervisory cooperation with overseas regulators, consistent with the framework envisaged in the Basel Committee on Banking Supervision (BCBS) has been constituted in March 2008.
Institutional Developments
Following the enactment of the Payment and Settlement Systems Act, 2007, the Reserve Bank has placed the draft regulations under the Payment and Settlement Systems Act, 2007 on its website inviting public comments latest by May 15, 2008 to finalise regulations in consultation with the Government of India.
Banks are urged to ensure that security of banking transactions is adequately addressed while using IT-based products such as smart cards, hand held devices and secured message transfers.
The Reserve Bank has extended the waiver of processing charges for ECS / EFT / NEFT up to March 31, 2009.
The Reserve Bank is formulating draft guidelines for mobile payment systems in India to be placed on its website by June 15, 2008.
Effective April 1, 2008 all payment transactions of Rs. one crore and above in the money, Government securities and foreign exchange markets and the regulated entities (banks, PDs and NBFCs) have been made mandatory to be routed through the electronic payment mechanism.
A Working Group to be constituted comprising representatives of the Reserve Bank, Central/State Governments and the UCB sector to suggest measures, including the appropriate regulatory and supervisory framework, to facilitate emergence of umbrella organisation(s) for the UCB sector in the respective States.
To dispense with the extant eligibility norms for opening on-site ATMs for well-managed and financially sound UCBs in the States that have signed MoUs with the Reserve Bank and registered under the Multi-State Cooperative Societies Act, 2002.
With a view to liberalising and rationalising the branch licensing norms for UCBs, approvals for branch expansion, including off-site ATMs to be considered, based on annual business plans, subject to maintenance of minimum CRAR of 10 per cent on a continuing basis and other regulatory comfort.
To dispense with the minimum net worth criteria for undertaking insurance business provided other criteria as prescribed from time to time are met.
To increase the extant limit on individual housing loans from Rs.25 lakh to a maximum of Rs.50 lakh in respect of Tier-II UCBs, subject to certain conditions.
In the light of international developments and increasing bank exposure to these systemically important NBFCs, to review the regulations in respect of capital adequacy, liquidity and disclosure norms and issue revised instructions by May 31, 2008.
As part of the progress made by the Committee on Financial Sector Assessment (CFSA), the four Advisory Panels constituted by the Committee have prepared their draft reports. The reports of the CFSA as also those of Advisory Panels are expected to be finalised by end-June 2008 and will be placed thereafter on the Reserve Bank's website.
MARKET PREDICTION
GLOBAL MARKETS ARE FLAT COZ OF DISAPPOINTING HOUSING DATA CAME YESTERDAY.
MARKETS ARE IN RED....... CRUDE SMOOTHERING A BIT FOR HIGH..
INDIAN MONETARY POLICY SUPPORT THE MARKET IT SHOOTS UP AFTER 25 BPS CR R HIKE .
ALL BANKING & FINALCIAL SERVICES WITNESSING BUY.
NIFTY LEVEL 5150-5200-5250 FOR ALL LONG ...5130 WILL BE SL
FROM 5250 BOOK PROFIT ,WAIT FOR DIPS...EVERY DIPS HAVE A BUYING OPPORTUNITY TO US..
ALL TECH MID CAP STOCK AND REALESTATE WITNESSING BUYING ..
ALSO SIGNIFICANT OI BUILT UP.
TOTAL MARKET OI IS 61K CR PREVIOUSLY IT WAS AROUND 57 K CR
PUTCALL RATIO HOVERING AROUND 1.36.
BUY AT EVERY DIPS.
HAVE ANICE TRADING DAY
-MR SAM
MARKETS ARE IN RED....... CRUDE SMOOTHERING A BIT FOR HIGH..
INDIAN MONETARY POLICY SUPPORT THE MARKET IT SHOOTS UP AFTER 25 BPS CR R HIKE .
ALL BANKING & FINALCIAL SERVICES WITNESSING BUY.
NIFTY LEVEL 5150-5200-5250 FOR ALL LONG ...5130 WILL BE SL
FROM 5250 BOOK PROFIT ,WAIT FOR DIPS...EVERY DIPS HAVE A BUYING OPPORTUNITY TO US..
ALL TECH MID CAP STOCK AND REALESTATE WITNESSING BUYING ..
ALSO SIGNIFICANT OI BUILT UP.
TOTAL MARKET OI IS 61K CR PREVIOUSLY IT WAS AROUND 57 K CR
PUTCALL RATIO HOVERING AROUND 1.36.
BUY AT EVERY DIPS.
HAVE ANICE TRADING DAY
-MR SAM
Tuesday, April 29, 2008
MARKET PREDICTION
GLOBAL MARKETS ARE NERVOUS TODAY FOLLOWED BY EVENT OF FED RATE CUT ON 30.04.08.
IN INDIA, TODAY THERE IS A MONEYTARY POLICY MEETING WHERE RBI GOING TO INCREASE 25 BPS REPO RATE AS PER EXPECTATION.
LEVEL OF NIFTY IS 5060-5110-5150 FOR ALL LONG 5000 IS THE SL.
TOTAL OI IS 56K CR SINCE EXPIRY OF IT INCREASE 8K CR APROX.
PUT CALL RATIO IS HOVERING AROUND 1.35.
IF MARKET DOES NOT SUSTAIN ABOVE 5150 TECH COUNTER WOULD BE PRUDENT TO SHORT.
IN CASE MARKET BREACH 5060 LEVEL GO LONG IN POWER AND TELECOM.
HAVE A NICE TRADING DAY
-MR SAM
IN INDIA, TODAY THERE IS A MONEYTARY POLICY MEETING WHERE RBI GOING TO INCREASE 25 BPS REPO RATE AS PER EXPECTATION.
LEVEL OF NIFTY IS 5060-5110-5150 FOR ALL LONG 5000 IS THE SL.
TOTAL OI IS 56K CR SINCE EXPIRY OF IT INCREASE 8K CR APROX.
PUT CALL RATIO IS HOVERING AROUND 1.35.
IF MARKET DOES NOT SUSTAIN ABOVE 5150 TECH COUNTER WOULD BE PRUDENT TO SHORT.
IN CASE MARKET BREACH 5060 LEVEL GO LONG IN POWER AND TELECOM.
HAVE A NICE TRADING DAY
-MR SAM
Monday, April 28, 2008
Announcements
- Tata Consultancy Services (TCS), the country`s largest software exporter signed an eight year end-to-end IT application services contract with Scottish Water, worth an estimated 60 million pound nearly Rs 4,770.74 million on Monday.
- Anil Ambani led Reliance Energy reported on Monday a substantial increase in consolidated net profit for the year ended March 2008. During the year, the profit of the company surged 41.19% to Rs 11782.10 million from Rs 8344.80 million in the last year. The consolidated total income during the year climbed 22.54% to Rs 97,600.10 million, when compared with the prior year.The board of directors has recommended a dividend of Rs 6.30 a share (63%) on fully paid up equity shares of Rs 10 each for the year 2007-08. The dividend will be paid on the equity share capital of Rs 2,356.2 million.
- Indian Overseas Bank has disclosed a marginal rise in net profits for the quarter ended in March 2008. During the quarter, the company experienced a 5.58% rise in profits to Rs 3,059.54 million from Rs 2,897.63 million in the quarter ended March 2007.
- Domestic long distance mobile call tariffs dipped to a new low today, with cellular services market leader Bharti Airtel reducing STD rates to Rs 1.50 a minute from Rs 2.65. Bharti Airtel, 30 per cent owned by Singapore's SingTel, also announced a drastic cut in roaming rates under which incoming roaming calls will be charged at Re 1 a minute compared with the existing Rs 1.75.While roaming, the customer can make an outgoing local call at Re 1 a minute and an STD call at Rs 1.50 a minute, Bharti Airtel President Manoj Kohli told reporters here.
- Reliance Energy today reported 41.2% increase in consolidated net profit for the full year ended March 31, 2008, at Rs 1,178.21 crore when compared with Rs 834.48 crore posted in the fiscal year ended March 31, 2007. According to a release issued by Reliance Energy to the BSE today, FY08 total income was up 25.5% at Rs 9,760.01 crore from Rs 7,774.53 crore in FY07.
- Triveni Engineering has announced its Q2FY08 results. The net sales are at Rs 378.53 crore vs Rs 364.5 crore. Its OPM is at 22.5% versus 7%. It’s PAT is at Rs 34.3 crore versus Rs 5.4 crore.
- Lanco Industries Ltd has informed the Exchange that the Board of Directors of the Company at its meeting held on April 28, 2008 has recommended a dividend of 10% Re. 1/- per equity share for the year ended March 31, 2008. Further the Company has informed that the Register of Members and Share Transfer Books of the Company will remain closed from August 21, 2008 to August 27, 2008 .
- Ahead of RBI Policy meeting tomorrow, an NDTV Profit poll of economists states that 55% expect the RBI to hike repo rate, 45% feel there may be no change and 10% feel there may be a reverse repo rate hike. Repo rate may be increased by 25 bps feel Goldman Sachs, HSBC and IDBI Gifts, states NDTV Profit. The market has factored in a 25 bps repo rate hike.
- LIC Housing has come out with fourth quarter numbers. It has reported Q4 net profit at Rs 118 crore as against Rs 89.1 crore in same quarter of last year. Other income stood at Rs 39.6 crore versus Rs 12.7 crore. The company disbursed Rs 2598 crores during fouth quarter, registering a growth of 48% and likely to disburse Rs 8500 crore. For the year, the company sanctioned Rs 8618 crores, and disbursed Rs 7071 crores, a growth of 41% and 38% respectively. The Company's total income for the year was Rs 2164.92 crores versus Rs.1575.56 crores.
- Hexaware Technologies has announced its fourth quarter results. The company's Q4 PAT was at Rs 20.8 crore versus loss of Rs 81.15 crore, QoQ. Its revenues were at Rs 267 crore versus Rs 259.17 crore, QoQ.Its MTM losses at Rs 5.6 crore.
- Essar Oil has declared its results for quarter ended March 2008. The companys net sales were at Rs 47.46 crore versus Rs 265.27 crore. In the same quarter the company incurred a net loss of Rs 8.48 crore versus profit of Rs 0.99 crore.
- Siemens tumbles 10% on disappointing results:The company has announced its second quarter results. The company's Q2 standalone net profit was at Rs 1.7 crore versus Rs 108.1 crore, YoY.
- US Patent and Trademark Office, or PTO, has rejected Pfizer's application for re-issue of the Lipitor patent, reports CNBC-TV18. The US PTO's decision is in favour of Ranbaxy. The Indian pharma major plans to launch a Lipitor generic version In US from March 2010.
- Nelcast Limited has informed the Exchange regarding a press release dated April 28, 2008 titled "Nelcast records sales revenue of Rs 403.65 Cr; Capacity Expansion at a cost of Rs 60 Cr; Production capacity to reach 150,000 MT per annum by Oct'08; Exports set to increase by 100% in 2008-09".
- Among the Indian ADRs trading on the US bourses, Rediff was the major gainer by 9.42%, followed by ICICI Bank up by 5.24%. HDFC Bank & MTNL were up by 4%, while Wipro registered at gain of around 2% and Dr Reddy, Infosys and VSNL ended in Positive Territory. However, Patni Computer, Tata Motors and Satyam slipped into the red.
- ICICI Bank makes additional provisions of US$45mn for mark to market losses on its credit derivative obligations and credit-linked note portfolio in February and March 2008.
- : Amid global uncertainties, the US Inc is bullish on India as an investment destination compared to other emerging economies, but wants the country to improve its intellectual property rights regime and infrastructure, a survey said.
- ICICI Bank has applied for a license to set up a non-banking finance company.
India launches 10 satellites in a day
India's space agency launched 10 satellites on Monday mainly belonging to Germany and Canada, the Indian Space Research Organisation said, boosting its space research capabilities..
The satellites were carried into space by India's Polar Satellite Launch Vehicle which blasted off from a space centre off the country's eastern coast near Chennai.
"The launches were smooth and we saw to it that it went according to plan," a senior ISRO official said by telephone.
The Indian-made Cartosat-2A remote sensing satellite, which is fitted with a high resolution camera for recording clear images from space was the main satellite launched, an ISRO spokesman said from Bangalore.
High resolution images and data from the satellite will be used to manage infrastructure and natural resources in the country, officials said.
The other launches included a mini satellite to provide technological data, which India plans to share with other countries, and eight other smaller research satellites belonging to Germany and Canada under a commercial agreement.
"These launches were very important to boost our space research capabilities," the ISRO official said.
The satellites were carried into space by India's Polar Satellite Launch Vehicle which blasted off from a space centre off the country's eastern coast near Chennai.
"The launches were smooth and we saw to it that it went according to plan," a senior ISRO official said by telephone.
The Indian-made Cartosat-2A remote sensing satellite, which is fitted with a high resolution camera for recording clear images from space was the main satellite launched, an ISRO spokesman said from Bangalore.
High resolution images and data from the satellite will be used to manage infrastructure and natural resources in the country, officials said.
The other launches included a mini satellite to provide technological data, which India plans to share with other countries, and eight other smaller research satellites belonging to Germany and Canada under a commercial agreement.
"These launches were very important to boost our space research capabilities," the ISRO official said.
Fed likely to cut U.S. rates, could signal pause
The U.S. Federal Reserve is expected to put an exclamation point on its string of interest- rate cuts with a small reduction this week and may signal that its rate-cutting cycle is done for now.
Rising global inflation and the Fed's hope that a blend of monetary and fiscal stimulus will shore up the anemic U.S. economy suggest the central bank is ready to pause in the sharp easing cycle it kicked off in mid-September.
Fed Chairman Ben Bernanke and his colleagues have lowered benchmark overnight lending rates 3 full percentage points to 2.25 percent over that span.
Policy-makers meeting on Tuesday and Wednesday look set to lower them by a slim quarter point and then step aside to see whether their handiwork has the desired effect in spurring an economy socked by a housing slump and credit market disarray.
While officials still worry about downside risks for the economy, which they think may be facing recession, they also are concerned forecasts for an ebbing in inflation may prove off track. Soaring prices for oil and food have fed a global inflationary surge, sparking food riots in some countries.
"The Fed's intention to pause its easing cycle may be part of an international effort to stabilize the falling value of the dollar, in light of the deteriorating state of world food prices," said Ashraf Laidi, chief foreign exchange strategist at CMC Markets US in New York.
A Reuters survey on Friday of the 20 big bond firms that deal directly with the Fed in the markets found that all of them expect a quarter-point rate cut this week.
Interest-rate futures markets are less certain. Late on Friday, rate futures showed a 76 percent chance of a cut, but an almost one-in-four chance the Fed would hold steady. They also suggest rates will end the year back at 2.25 percent.
The policy-setting Federal Open Market Committee will announce its decision at around 2:15 p.m. EDT on Wednesday.
THE FISHER FACTOR
The FOMC slashed rates by three-quarters of a point in March, but drew two dissents by officials concerned lower rates could exacerbate price pressures. Wednesday's announcement will be pored over for hints the Fed now intends to pause.
The statement should have "somewhat stronger language justifying concerns over inflationary pressures, inflationary expectations, and soaring food and energy prices," said Dan North, chief economist at Euler Hermes in Owings Mills, Maryland.
Several Fed officials across the dove-hawk spectrum have already sharpened their rhetoric on inflation, while expressing guarded confidence the economy will have turned for the better by the second half of the year.
"Monetary policy decisions depend critically on the outlook for the economy over the medium term," Philadelphia Federal Reserve Bank President Charles Plosser said on April 18.
Plosser and Dallas Fed President Richard Fisher voted against the Fed's big rate cut on March 18, preferring less aggressive action. Fisher has emerged as the FOMC's anti-inflation ringleader, with two dissents this year.
He has urged the Fed to lean less on rate cuts and more on measures to provide liquidity to clogged financial markets as a way of easing the credit crisis without stoking inflation.
"It's really a question of, are we getting the bang for the buck (from interest rate cuts). And clearly we're not," Fisher said on Tuesday.
Indeed, some economists argue low rates have encouraged investors to bid up prices for oil and other commodities. Crude oil prices are up about 24 percent so far this year and the Reuters-Jefferies CRB index of commodity prices .CRB is up about 17 percent.
The past few weeks have brought food riots in Africa, record prices and export restrictions for rice, and even the imposition of buying limits on staples such as rice and flour at some U.S. warehouse stores -- events that should have penetrated the Fed's psyche.
"In a more normal economic downturn, another large Fed rate cut would be a given. But the huge upswing in global commodity prices complicates matters," said Rory Robertson, interest rate strategist at Macquarie Bank in Sydney.
U.S. economic data has been generally weak since the Fed's March 18 policy meeting, with reports showing a third straight monthly drop in employment, plunging consumer confidence and soft retail spending.
The government's initial estimate of U.S. first quarter gross domestic product is due on Wednesday. Analysts forecast growth at a median 0.2 percent annual pace, with estimates ranging from minus 0.8 percent to plus 1.5 percent.
Rising global inflation and the Fed's hope that a blend of monetary and fiscal stimulus will shore up the anemic U.S. economy suggest the central bank is ready to pause in the sharp easing cycle it kicked off in mid-September.
Fed Chairman Ben Bernanke and his colleagues have lowered benchmark overnight lending rates 3 full percentage points to 2.25 percent over that span.
Policy-makers meeting on Tuesday and Wednesday look set to lower them by a slim quarter point and then step aside to see whether their handiwork has the desired effect in spurring an economy socked by a housing slump and credit market disarray.
While officials still worry about downside risks for the economy, which they think may be facing recession, they also are concerned forecasts for an ebbing in inflation may prove off track. Soaring prices for oil and food have fed a global inflationary surge, sparking food riots in some countries.
"The Fed's intention to pause its easing cycle may be part of an international effort to stabilize the falling value of the dollar, in light of the deteriorating state of world food prices," said Ashraf Laidi, chief foreign exchange strategist at CMC Markets US in New York.
A Reuters survey on Friday of the 20 big bond firms that deal directly with the Fed in the markets found that all of them expect a quarter-point rate cut this week.
Interest-rate futures markets are less certain. Late on Friday, rate futures showed a 76 percent chance of a cut, but an almost one-in-four chance the Fed would hold steady. They also suggest rates will end the year back at 2.25 percent.
The policy-setting Federal Open Market Committee will announce its decision at around 2:15 p.m. EDT on Wednesday.
THE FISHER FACTOR
The FOMC slashed rates by three-quarters of a point in March, but drew two dissents by officials concerned lower rates could exacerbate price pressures. Wednesday's announcement will be pored over for hints the Fed now intends to pause.
The statement should have "somewhat stronger language justifying concerns over inflationary pressures, inflationary expectations, and soaring food and energy prices," said Dan North, chief economist at Euler Hermes in Owings Mills, Maryland.
Several Fed officials across the dove-hawk spectrum have already sharpened their rhetoric on inflation, while expressing guarded confidence the economy will have turned for the better by the second half of the year.
"Monetary policy decisions depend critically on the outlook for the economy over the medium term," Philadelphia Federal Reserve Bank President Charles Plosser said on April 18.
Plosser and Dallas Fed President Richard Fisher voted against the Fed's big rate cut on March 18, preferring less aggressive action. Fisher has emerged as the FOMC's anti-inflation ringleader, with two dissents this year.
He has urged the Fed to lean less on rate cuts and more on measures to provide liquidity to clogged financial markets as a way of easing the credit crisis without stoking inflation.
"It's really a question of, are we getting the bang for the buck (from interest rate cuts). And clearly we're not," Fisher said on Tuesday.
Indeed, some economists argue low rates have encouraged investors to bid up prices for oil and other commodities. Crude oil prices are up about 24 percent so far this year and the Reuters-Jefferies CRB index of commodity prices .CRB is up about 17 percent.
The past few weeks have brought food riots in Africa, record prices and export restrictions for rice, and even the imposition of buying limits on staples such as rice and flour at some U.S. warehouse stores -- events that should have penetrated the Fed's psyche.
"In a more normal economic downturn, another large Fed rate cut would be a given. But the huge upswing in global commodity prices complicates matters," said Rory Robertson, interest rate strategist at Macquarie Bank in Sydney.
U.S. economic data has been generally weak since the Fed's March 18 policy meeting, with reports showing a third straight monthly drop in employment, plunging consumer confidence and soft retail spending.
The government's initial estimate of U.S. first quarter gross domestic product is due on Wednesday. Analysts forecast growth at a median 0.2 percent annual pace, with estimates ranging from minus 0.8 percent to plus 1.5 percent.
Oil Rises to Record on U.K. Pipeline Shutdown, Nigeria Attack
Crude oil rose to a record near $120 a barrel after BP Plc shut a North Sea pipeline and gunmen attacked police guarding Nigeria's largest oil and gas terminal.
BP closed the Forties Pipeline System, carrying 40 percent of the U.K.'s oil production, after a strike at the Grangemouth refinery cut power supplies. Five police were killed in yesterday's attack in the Niger Delta where output has dropped by 50 percent since April 25, adding to concerns about supplies ahead of the Northern Hemisphere summer driving season.
``The bulls are still in control so it's no surprise to be near $120 on these supply concerns,'' said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. ``Nigeria is back on top of traders' minds. The disruptions are real and this is high-quality crude needed by the U.S. refineries for gasoline production in the summer.''
Crude oil for June delivery rose as much as $1.41, or 1.2 percent, to $119.93 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since the futures began trading in 1983. It was at $119.34 at 1:02 p.m. in Singapore. Prices have surged 82 percent in the past year.
The contract jumped 2.1 percent to $118.52 a barrel April 25 when the refinery strike and pipeline closure were announced.
``The production affected at the moment is pretty substantial,'' said David Moore, the commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``It all counts nowadays. The price would suggest the market is very tight.''
June Premium
Oil for delivery in June is selling at a premium of $1.04 a barrel to July supplies. The price difference becomes more pronounced for later month contracts as June's premium to the December future has jumped to $4.80 a barrel.
Brent crude for June settlement rose as much as $1, or 0.9 percent, to $117.34 a barrel London's ICE Futures Europe exchange and was trading at $117.06 a barrel at 12:53 p.m. in Singapore. It reached a record $117.56 on April 25.
Refinery production at Grangemouth will resume on April 29 at 7 a.m. local time. Units crucial to restart flows on the Forties pipeline will have priority, Richard Longden, spokesman for operator Ineos Group Holdings Plc, said yesterday.
Oil grades from the North Sea and Nigeria, Africa's biggest producer, are low in sulfur and favored by refiners. Nigeria is losing about 50 percent of its output after staff at Exxon Mobil Corp.'s operations went on strike April 24 and militants attacked a Royal Dutch Shell Plc pipeline later the same day.
``Nigerian crude is quite good quality and the U.S. probably imports about 10 percent to 15 percent from them,'' said Tetsu Emori, fund manager at Astmax Ltd. in Tokyo. ``It's affecting the supply and the quality'' for the refiners.
Exxon Strike
Nigeria pumped 1.96 million barrels a day in March, according to Bloomberg estimates. Recent attacks on Shell-run pipelines, including the latest one, are cutting oil flows by about 140,000 barrels a day, the country's oil minister H. Odein Ajumogobia said April 25. The Exxon Mobil strike is halting about 765,000 barrels a day, according to union estimates.
The loss of production in the North Sea and Nigeria follows reports of output declines in Russia and Mexico, two of the biggest suppliers that are not members of the Organization of Petroleum Exporting Countries.
``On top of everything in the U.K. and everything in Nigeria, it seems like everyday we're having new supply problems,'' said Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore in an interview with Bloomberg Television. ``It's political, it's supply. Everyday there's something pushing prices higher.''
New York oil futures are 79 percent higher than a year ago, with almost a quarter of that gain booked this month as the falling dollar and declining U.S. gasoline stockpiles spurred fund managers to invest in fuel and crude oil.
Net-Longs Increase
Hedge fund managers and other large speculators increased bets on rising oil prices a third time in the week ended April 22, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 70,562 contracts, a 6 percent gain, the Washington-based commission said in its Commitments of Traders report. This is the highest since the week ended March 21.
Oil prices are likely to fall to ``more realistic levels'' once the Forties pipeline has re-opened, said Ben Barber, a broker at Bell Commodities Ltd. in Melbourne. U.S. stockpiles and the dollar are rising and there is a risk prices will fall this week if the Federal Reserve signals an end to recent interest rate cuts.
``Oil is quite susceptible,'' he said.
The Federal Reserve will probably cut its target lending rate by a quarter-point to 2 percent on April 30, according to futures traded on the Chicago Board of Trade, the smallest reduction in four months.
BP closed the Forties Pipeline System, carrying 40 percent of the U.K.'s oil production, after a strike at the Grangemouth refinery cut power supplies. Five police were killed in yesterday's attack in the Niger Delta where output has dropped by 50 percent since April 25, adding to concerns about supplies ahead of the Northern Hemisphere summer driving season.
``The bulls are still in control so it's no surprise to be near $120 on these supply concerns,'' said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. ``Nigeria is back on top of traders' minds. The disruptions are real and this is high-quality crude needed by the U.S. refineries for gasoline production in the summer.''
Crude oil for June delivery rose as much as $1.41, or 1.2 percent, to $119.93 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since the futures began trading in 1983. It was at $119.34 at 1:02 p.m. in Singapore. Prices have surged 82 percent in the past year.
The contract jumped 2.1 percent to $118.52 a barrel April 25 when the refinery strike and pipeline closure were announced.
``The production affected at the moment is pretty substantial,'' said David Moore, the commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``It all counts nowadays. The price would suggest the market is very tight.''
June Premium
Oil for delivery in June is selling at a premium of $1.04 a barrel to July supplies. The price difference becomes more pronounced for later month contracts as June's premium to the December future has jumped to $4.80 a barrel.
Brent crude for June settlement rose as much as $1, or 0.9 percent, to $117.34 a barrel London's ICE Futures Europe exchange and was trading at $117.06 a barrel at 12:53 p.m. in Singapore. It reached a record $117.56 on April 25.
Refinery production at Grangemouth will resume on April 29 at 7 a.m. local time. Units crucial to restart flows on the Forties pipeline will have priority, Richard Longden, spokesman for operator Ineos Group Holdings Plc, said yesterday.
Oil grades from the North Sea and Nigeria, Africa's biggest producer, are low in sulfur and favored by refiners. Nigeria is losing about 50 percent of its output after staff at Exxon Mobil Corp.'s operations went on strike April 24 and militants attacked a Royal Dutch Shell Plc pipeline later the same day.
``Nigerian crude is quite good quality and the U.S. probably imports about 10 percent to 15 percent from them,'' said Tetsu Emori, fund manager at Astmax Ltd. in Tokyo. ``It's affecting the supply and the quality'' for the refiners.
Exxon Strike
Nigeria pumped 1.96 million barrels a day in March, according to Bloomberg estimates. Recent attacks on Shell-run pipelines, including the latest one, are cutting oil flows by about 140,000 barrels a day, the country's oil minister H. Odein Ajumogobia said April 25. The Exxon Mobil strike is halting about 765,000 barrels a day, according to union estimates.
The loss of production in the North Sea and Nigeria follows reports of output declines in Russia and Mexico, two of the biggest suppliers that are not members of the Organization of Petroleum Exporting Countries.
``On top of everything in the U.K. and everything in Nigeria, it seems like everyday we're having new supply problems,'' said Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore in an interview with Bloomberg Television. ``It's political, it's supply. Everyday there's something pushing prices higher.''
New York oil futures are 79 percent higher than a year ago, with almost a quarter of that gain booked this month as the falling dollar and declining U.S. gasoline stockpiles spurred fund managers to invest in fuel and crude oil.
Net-Longs Increase
Hedge fund managers and other large speculators increased bets on rising oil prices a third time in the week ended April 22, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 70,562 contracts, a 6 percent gain, the Washington-based commission said in its Commitments of Traders report. This is the highest since the week ended March 21.
Oil prices are likely to fall to ``more realistic levels'' once the Forties pipeline has re-opened, said Ben Barber, a broker at Bell Commodities Ltd. in Melbourne. U.S. stockpiles and the dollar are rising and there is a risk prices will fall this week if the Federal Reserve signals an end to recent interest rate cuts.
``Oil is quite susceptible,'' he said.
The Federal Reserve will probably cut its target lending rate by a quarter-point to 2 percent on April 30, according to futures traded on the Chicago Board of Trade, the smallest reduction in four months.
MARKET PREDICTION
GLOBAL MARKET ARE POSITIVE TODAY.
INDIA WILL FOLLOW THE SAME TREND.
LEVEL OF NIFTY IS 5060-5100-5210.
AFTER NEW SERIES STARTED MARKET HAS GIVEN STRONG BUYING.
TOTAL MARKET ROLL OVER WAS 48 K CR INTO MAY SERIES..
BUT ON FRIDAY TRADE OI ADDED 5000 K CR.
BANKING,FINANCIAL SERVICE,METAL,TELECOM WITNESSING HUGE BUYING .
AFTER BHARTI GREAT RESULT IT SHOOT UP 10%.
PUT CALL RATIO IS 1.37% IN MARKET.
IF MARKET SUSTAIN ABOVE 5100 GO LONG IN BANKING AND FINANCIAL SERVICE,TELECOM,AND METAL.
HAVE A NICE TRADING DAY..
-MR SAM
INDIA WILL FOLLOW THE SAME TREND.
LEVEL OF NIFTY IS 5060-5100-5210.
AFTER NEW SERIES STARTED MARKET HAS GIVEN STRONG BUYING.
TOTAL MARKET ROLL OVER WAS 48 K CR INTO MAY SERIES..
BUT ON FRIDAY TRADE OI ADDED 5000 K CR.
BANKING,FINANCIAL SERVICE,METAL,TELECOM WITNESSING HUGE BUYING .
AFTER BHARTI GREAT RESULT IT SHOOT UP 10%.
PUT CALL RATIO IS 1.37% IN MARKET.
IF MARKET SUSTAIN ABOVE 5100 GO LONG IN BANKING AND FINANCIAL SERVICE,TELECOM,AND METAL.
HAVE A NICE TRADING DAY..
-MR SAM
Friday, April 25, 2008
INSTANT VIEW - Annual inflation at 7.33 pct on April 12
India's wholesale price index rose 7.33 percent in the 12 months to April 12, accelerating from the previous week's annual rise of 7.14 percent, government data showed on Friday.
The rate, the last to be released before a Reserve Bank of India (RBI) policy review next week, was slightly below a median forecast of 7.38 percent in a Reuters poll of analysts.
KEY POINTS:
SUB-INDEX (WEIGHTING) Apr 12 Apr 5 Pct change
PRIMARY ARTICLES (22.025) 237.1 236.0 +0.5
Food articles (15.402) 228.6 228.5 --
Non-Food articles (6.138) 227.3 226.4 +0.4
Minerals (0.485) 630.2 595.8 +5.8
FUEL, POWER, LIGHT (14.226) 342.1 342.0 ---
AND LUBRICANTS
MANUFACTURED PRODUCTS (63.749) 197.6 197.6 0.0
Food Products (11.538) 203.2 203.1 +0.05
Annual inflation for the week ended Feb 16 was revised to 5.66 percent from 4.89 percent.
- The annual inflation rate was 6.34 percent during the corresponding week of the previous year.
- The wholesale price index stood at 226.9 points in the week ended April 12.
COMMENTARY:
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI:
"We do expect in this quarter ending June the inflation to be close to 7 percent. Once the impact of fiscal measures plays out, we could see inflation drift lower. It will remain a challenge to bring inflation below 6.5 percent."
GAURAV KAPUR, SENIOR ECONOMIST, ABN AMRO BANK, MUMBAI:
"Inflation could continue to hold between 7- 7.5 percent range over the next month. Moreover, the magnitude of revisions to past data indicate that the actual level of headline inflation could be 40-50 bps higher. Given that strong inflationary pressures are persisting, the recent CRR hike will not be enough to bring down inflation closer to the RBI comfort level. Thus we expect the RBI to hike at least the repo rate by 25 bps."
NAMRATA PADHYE, ECONOMIST AT IDBI GILTS, MUMBAI:
"Inflation is going to remain at an elevated level in the coming months. The impact of all these fiscal and monetary measures will start feeding in at the earliest in July-September. We have to see a significant easing in global commodity and food
prices for inflation to come down quickly."
"We expect an increase in the repo rate by 25 basis points in the policy next week."
SONAL VARMA, ECONOMIST, LEHMAN BROTHERS, MUMBAI:
"There has been some moderation in the pace of weekly rise in the WPI index, suggesting that some of the trade and supply-side measures taken by the government could be beginning to have an effect. Going forward, we expect inflation rate to remain in the 7.0-7.5 percent range in the coming weeks. In the April 29 policy, we expect the RBI to keep all rates unchanged, largely because of slowing growth."
D.K. JOSHI, PRINCIPAL ECONOMIST, CRISIL, MUMBAI:
"I don't see a significant role for the monetary policy in controlling inflation. RBI has already taken steps to suck liquidity which was to hike the CRR, now the responsibility lies to ensure adequate supply."
"Regarding supplies, food production, essentially wheat arrival numbers, have been very encouraging and the monsoon is expected to be normal and well distributed. There can be no better news than domestic production doing well"
"In coming months, we will see inflation close to 7 percent."
SHUCHITA MEHTA, ECONOMIST, STANDARD CHARTERED BANK, MUMBAI:
"We believe inflation is going to be a cause for concern and we will continue to see it rise, but pace of acceleration may moderate due to the steps taken by the RBI."
"Inflation continues to rise and RBI will be hawkish, but perhaps it can wait before taking any steps."
ABHEEK BARUA, ECONOMIST, HDFC BANK, NEW DELHI:
"I think the bottom line is that we're still not seeing the impact of the fiscal measures. Or the fiscal measures have not been adequate. The implication is that the RBI will not be able to relax its vigilance on inflation. Perhaps some more measures are due in the April 29 policy. It strengthens the case for monetary tightening."
"(It) would take form of repo rate hike combined with some selective credit controls, which would reduce the quantum of leverage in the commodity sector and also prevent things like hoarding."
MARKET REACTION:
The 8.24 percent bond maturing in 2018 was unchanged at 8.18 percent from before the release of the data.
The partially convertible rupee was at 40.17/18 per dollar, unchanged from before the data.
LINKS: Ministry of Commerce and Industry Web site at:
www.eaindustry.nic.in
BACKGROUND:
- Annual inflation reached 7.41 percent on March 29, its highest in more than three years.
- Last week, the central bank announced a 50 basis point increase in the cash reserve ratio (CRR) to take effect in two stages. It said the move would suck 185 billion rupees ($4.6 billion) of surplus cash from the banking system.
- The RBI next reviews monetary policy on April 29 and markets and analysts are divided whether the central bank will act again to rein in inflation. RBI governor Y.V. Reddy has said inflation was unacceptably high.
- The finance minister said on Tuesday the government would consider more export curbs and fiscal moves to tackle rising inflation if necessary. Steps already taken would calm price pressures, he said, but it would be some time before the impact was felt.
- The government has withdrawn export incentives on steel and cement, and banned cement exports to increase local supplies. It has also scrapped import duties on most edible oils and banned exports of non-basmati rice.
- The RBI aimed to contain inflation close to 5.0 percent in 2007/08 (April-March). It wants to condition expectations in the range of 4.0-4.5 percent with an inflation rate of around 3.0 percent as a medium-term goal.
- The wholesale price index is more closely watched than the consumer price index (CPI) because it has a higher number of products in its basket and is published weekly.
(Additional reporting by V. Ramakrishnan, Anurag Joshi, Catherine Bosley and Saikat Chatterjee in MUMBAI and Surojit Gupta in New Delhi)
The rate, the last to be released before a Reserve Bank of India (RBI) policy review next week, was slightly below a median forecast of 7.38 percent in a Reuters poll of analysts.
KEY POINTS:
SUB-INDEX (WEIGHTING) Apr 12 Apr 5 Pct change
PRIMARY ARTICLES (22.025) 237.1 236.0 +0.5
Food articles (15.402) 228.6 228.5 --
Non-Food articles (6.138) 227.3 226.4 +0.4
Minerals (0.485) 630.2 595.8 +5.8
FUEL, POWER, LIGHT (14.226) 342.1 342.0 ---
AND LUBRICANTS
MANUFACTURED PRODUCTS (63.749) 197.6 197.6 0.0
Food Products (11.538) 203.2 203.1 +0.05
Annual inflation for the week ended Feb 16 was revised to 5.66 percent from 4.89 percent.
- The annual inflation rate was 6.34 percent during the corresponding week of the previous year.
- The wholesale price index stood at 226.9 points in the week ended April 12.
COMMENTARY:
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI:
"We do expect in this quarter ending June the inflation to be close to 7 percent. Once the impact of fiscal measures plays out, we could see inflation drift lower. It will remain a challenge to bring inflation below 6.5 percent."
GAURAV KAPUR, SENIOR ECONOMIST, ABN AMRO BANK, MUMBAI:
"Inflation could continue to hold between 7- 7.5 percent range over the next month. Moreover, the magnitude of revisions to past data indicate that the actual level of headline inflation could be 40-50 bps higher. Given that strong inflationary pressures are persisting, the recent CRR hike will not be enough to bring down inflation closer to the RBI comfort level. Thus we expect the RBI to hike at least the repo rate by 25 bps."
NAMRATA PADHYE, ECONOMIST AT IDBI GILTS, MUMBAI:
"Inflation is going to remain at an elevated level in the coming months. The impact of all these fiscal and monetary measures will start feeding in at the earliest in July-September. We have to see a significant easing in global commodity and food
prices for inflation to come down quickly."
"We expect an increase in the repo rate by 25 basis points in the policy next week."
SONAL VARMA, ECONOMIST, LEHMAN BROTHERS, MUMBAI:
"There has been some moderation in the pace of weekly rise in the WPI index, suggesting that some of the trade and supply-side measures taken by the government could be beginning to have an effect. Going forward, we expect inflation rate to remain in the 7.0-7.5 percent range in the coming weeks. In the April 29 policy, we expect the RBI to keep all rates unchanged, largely because of slowing growth."
D.K. JOSHI, PRINCIPAL ECONOMIST, CRISIL, MUMBAI:
"I don't see a significant role for the monetary policy in controlling inflation. RBI has already taken steps to suck liquidity which was to hike the CRR, now the responsibility lies to ensure adequate supply."
"Regarding supplies, food production, essentially wheat arrival numbers, have been very encouraging and the monsoon is expected to be normal and well distributed. There can be no better news than domestic production doing well"
"In coming months, we will see inflation close to 7 percent."
SHUCHITA MEHTA, ECONOMIST, STANDARD CHARTERED BANK, MUMBAI:
"We believe inflation is going to be a cause for concern and we will continue to see it rise, but pace of acceleration may moderate due to the steps taken by the RBI."
"Inflation continues to rise and RBI will be hawkish, but perhaps it can wait before taking any steps."
ABHEEK BARUA, ECONOMIST, HDFC BANK, NEW DELHI:
"I think the bottom line is that we're still not seeing the impact of the fiscal measures. Or the fiscal measures have not been adequate. The implication is that the RBI will not be able to relax its vigilance on inflation. Perhaps some more measures are due in the April 29 policy. It strengthens the case for monetary tightening."
"(It) would take form of repo rate hike combined with some selective credit controls, which would reduce the quantum of leverage in the commodity sector and also prevent things like hoarding."
MARKET REACTION:
The 8.24 percent bond maturing in 2018 was unchanged at 8.18 percent from before the release of the data.
The partially convertible rupee was at 40.17/18 per dollar, unchanged from before the data.
LINKS: Ministry of Commerce and Industry Web site at:
www.eaindustry.nic.in
BACKGROUND:
- Annual inflation reached 7.41 percent on March 29, its highest in more than three years.
- Last week, the central bank announced a 50 basis point increase in the cash reserve ratio (CRR) to take effect in two stages. It said the move would suck 185 billion rupees ($4.6 billion) of surplus cash from the banking system.
- The RBI next reviews monetary policy on April 29 and markets and analysts are divided whether the central bank will act again to rein in inflation. RBI governor Y.V. Reddy has said inflation was unacceptably high.
- The finance minister said on Tuesday the government would consider more export curbs and fiscal moves to tackle rising inflation if necessary. Steps already taken would calm price pressures, he said, but it would be some time before the impact was felt.
- The government has withdrawn export incentives on steel and cement, and banned cement exports to increase local supplies. It has also scrapped import duties on most edible oils and banned exports of non-basmati rice.
- The RBI aimed to contain inflation close to 5.0 percent in 2007/08 (April-March). It wants to condition expectations in the range of 4.0-4.5 percent with an inflation rate of around 3.0 percent as a medium-term goal.
- The wholesale price index is more closely watched than the consumer price index (CPI) because it has a higher number of products in its basket and is published weekly.
(Additional reporting by V. Ramakrishnan, Anurag Joshi, Catherine Bosley and Saikat Chatterjee in MUMBAI and Surojit Gupta in New Delhi)
Announcements
Inflation rate rises to 7.33%
India's wholesale price index rose 7.33 per cent in the 12 months to April 12, accelerating from the previous week's annual rise of 7.14 per cent, Government data showed on Friday.
The rate was slightly below a median forecast of 7.38 per cent in a Reuters poll of analysts.
The annual inflation rate was 6.34 per cent during the corresponding week of the previous year.
The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.
RBI may raise rates: Bank of America
The Reserve Bank of India may raise its main short-term lending rate or repo rate by 25 basis points and allow its currency to gain to slow inflation that is running near three-year highs, Bank of America said in a note.
"While the Reserve Bank of India (RBI) will likely reiterate the need for heightened vigilance against threats to financial stability, maintaining price stability and moderating inflation expectations will take precedence in the near-term," Han-Sia Yeo, strategist at the bank wrote in a note on Thursday.
The Reserve Bank of India meets for a scheduled review on April 29.
Wholesale price inflation is running at near-three year peaks of 7.14 per cent in early April and a Reuters poll expects it to print at 7.38 per cent. The data is due around noon (0630 GMT).
"In our view, the intensifying price pressures will likely see RBI increasingly tolerant towards a stronger rupee," he said. It expects the rupee to rise to 39 in the second quarter of 2008. It was trading at 40.20/21 on Friday.
"Admittedly, currency appreciation is not an effective tool in tackling supply-side issues driving food inflation, but a stronger rupee should nonetheless provide a short-term ease in price pressure on non-food commodities," he said.
The RBI will keep reserve requirements unchanged after unexpectedly raising it by 50 basis points last week to drain surplus inflation-fuelling cash from the system, he said. Overnight rates are expected to drift up to 8 per cent by the second half of May, he added.
"The higher repo rate will send a clear signal on RBI's resolve on maintaining price stability and for banks to raise lending rates," the report said.
"On the other hand, the unchanged floor rate of 6 per cent would facilitate a swift easing of liquidity conditions in the event of any unanticipated reversal in capital flows," it said.
India's wholesale price index rose 7.33 per cent in the 12 months to April 12, accelerating from the previous week's annual rise of 7.14 per cent, Government data showed on Friday.
The rate was slightly below a median forecast of 7.38 per cent in a Reuters poll of analysts.
The annual inflation rate was 6.34 per cent during the corresponding week of the previous year.
The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.
RBI may raise rates: Bank of America
The Reserve Bank of India may raise its main short-term lending rate or repo rate by 25 basis points and allow its currency to gain to slow inflation that is running near three-year highs, Bank of America said in a note.
"While the Reserve Bank of India (RBI) will likely reiterate the need for heightened vigilance against threats to financial stability, maintaining price stability and moderating inflation expectations will take precedence in the near-term," Han-Sia Yeo, strategist at the bank wrote in a note on Thursday.
The Reserve Bank of India meets for a scheduled review on April 29.
Wholesale price inflation is running at near-three year peaks of 7.14 per cent in early April and a Reuters poll expects it to print at 7.38 per cent. The data is due around noon (0630 GMT).
"In our view, the intensifying price pressures will likely see RBI increasingly tolerant towards a stronger rupee," he said. It expects the rupee to rise to 39 in the second quarter of 2008. It was trading at 40.20/21 on Friday.
"Admittedly, currency appreciation is not an effective tool in tackling supply-side issues driving food inflation, but a stronger rupee should nonetheless provide a short-term ease in price pressure on non-food commodities," he said.
The RBI will keep reserve requirements unchanged after unexpectedly raising it by 50 basis points last week to drain surplus inflation-fuelling cash from the system, he said. Overnight rates are expected to drift up to 8 per cent by the second half of May, he added.
"The higher repo rate will send a clear signal on RBI's resolve on maintaining price stability and for banks to raise lending rates," the report said.
"On the other hand, the unchanged floor rate of 6 per cent would facilitate a swift easing of liquidity conditions in the event of any unanticipated reversal in capital flows," it said.
Reliance acquires UK-based WiMax operator
Reliance Communications Ltd, India's No. 2 mobile operator, said on Thursday it had acquired eWaves, a UK-based operator of fourth-generation (4G) services, and would launch 4G services globally.
It did not disclose financial details, citing silent period ahead of fourth quarter results, but the acquisition made through its Reliance Globalcom unit would be funded through internal accruals, a senior official said.
"We have taken a gigantic step in the broadband direction and looked at 4G WiMax to be the next step in our global aspirations," the unit's chief executive, Punit Garg, told reporters in Mumbai.
Reliance will invest $500 million over the next two to three years on WiMax, including voice services, in 50 countries with a focus on emerging Markets, the company said in a statement.
"Fifty percent of the growth (in WiMax) is in the emerging Markets," said Jay Metcalfe, founder of eWaves.
The UK firm has a joint venture in China, which would enable Reliance Communications to enter the world's largest broadband market, Garg said.
It did not disclose financial details, citing silent period ahead of fourth quarter results, but the acquisition made through its Reliance Globalcom unit would be funded through internal accruals, a senior official said.
"We have taken a gigantic step in the broadband direction and looked at 4G WiMax to be the next step in our global aspirations," the unit's chief executive, Punit Garg, told reporters in Mumbai.
Reliance will invest $500 million over the next two to three years on WiMax, including voice services, in 50 countries with a focus on emerging Markets, the company said in a statement.
"Fifty percent of the growth (in WiMax) is in the emerging Markets," said Jay Metcalfe, founder of eWaves.
The UK firm has a joint venture in China, which would enable Reliance Communications to enter the world's largest broadband market, Garg said.
GLOBAL MARKETS ARE POSITIVE DUE TO POSITIVE US JOB DATA AND EASING OF SOME MORE INTEREST RATE BY FED IN COMING WEEK...
TODAY STARTS THE NEW MAY CLEARING DAY WITH 49000 CR OI WITH PUT CALL RATIO IS 1.33.
NIFTY HAS SEEN SOME GOOD ROLL OVER OF 72%.
PEOPLE IN THE STREET ARE STILL BAISED.
LEVEL OF NIFTY 4970 SL FOR ALL LONG 5000-5060-5100.
STOCK TO BE WATCHED OUT MARUTI,BIOCON,MCDOWELL,INDIAN BANK LOOKS GOOD.
TODAY IS CRUCIAL DAY FOR MARKET INFLATION DATA...
CRUDE KISSING $120/BARREL.
HAVE A NICE TRADING AND WEAKEND
-MR SAM
TODAY STARTS THE NEW MAY CLEARING DAY WITH 49000 CR OI WITH PUT CALL RATIO IS 1.33.
NIFTY HAS SEEN SOME GOOD ROLL OVER OF 72%.
PEOPLE IN THE STREET ARE STILL BAISED.
LEVEL OF NIFTY 4970 SL FOR ALL LONG 5000-5060-5100.
STOCK TO BE WATCHED OUT MARUTI,BIOCON,MCDOWELL,INDIAN BANK LOOKS GOOD.
TODAY IS CRUCIAL DAY FOR MARKET INFLATION DATA...
CRUDE KISSING $120/BARREL.
HAVE A NICE TRADING AND WEAKEND
-MR SAM
Thursday, April 24, 2008
F D I LIMIT TO INDIAN TELECOM COMPANY INCREASE TO 74%
On February 4 the cabinet eased the ceiling on foreign direct investment (FDI) in the telecom sector to 74 per cent from 49 per cent. FDI will be allowed in basic, cellular, unified access services, STD, ISD, VSAT, public mobile radio trunked services, global mobile personal communication services and other value-added services.
"We need at least $20 billion (Rs86,740 crore) of investment and part of this has to come as foreign direct investment," said Maran. The increase in the FDI limit is expected to usher in a 20 per cent jump in foreign investments in the telecom sector within the next two years from the current Rs10,000 crore
'We have very transparent and clear new FDI rules. Operators did not have clear FDI structures and as a result, many offshore firms were holding different stakes in them. Now, such operators can come clean on investments,' IT and Telecom Minister Dayanidhi Maran stated during a press media early this week - exactly a week after the policy change.
But strict conditions have been imposed in order to address the security concerns raised by the Left parties.
As per the new rule,
telecom companies serving Internet service providers with gateways;
infrastructure providers (category-II);
radio paging service
will now have to disclose the status of foreign holding and certify every six months that the foreign investment was within the ceiling of 74 per cent. "Potential foreign investors will, however, need government approval before they increase their stake beyond 49 per cent," clarified Maran.Prior to the new rules being announced, two companies - Bharti and Hutch - had managed to exceed the 49 per cent FDI limit. From now, the licences of the companies that do not comply with the new stipulations will be revoked.
Another condition that service providers will now have to comply with is that a majority of the directors, including chairmen, managing directors, chief executive officers, chief technical and finance officers, will all have to be resident Indians.
Earlier, the Telecom Regulatory Authority of India (TRAI) was established in 1997 to resolve the security concerns raised by various agencies and provide a regulatory framework to the private sector telecom industry, then still in its infancy.
The new guidelines also bar the rerouting of traffic (whether mobile or landline) originating from India to other subscribers within India through any other country.
Also, telcos have been barred from transferring accounting information relating to subscribers (except for roaming or billing) outside India. Further, the details of companies' infrastructure also cannot be passed on to anyone other than the telecom equipment suppliers or manufacturers who undertake the installation and commissioning of the licensee company on signing of non-disclosure agreement.
In the last two years the telecom sector has emerged one of the fastest growing sectors in the country. This has been due to intense competition that has brought down tariffs as well as simplification of regulation that has promoted healthy competition among various service providers. As a result, telecom density in the country has risen to 7.5 per cent in FY04 compared to 3.64 per cent in FY01. The mobile services segment alone has been growing rapidly and has emerged as the fastest growing market in the world. This sector is expected to reach nearly 75 million by FY06. Currently India has over 40 million mobile users (source: DoT, August 2004). The government hopes to further increase the number of mobile users to 200-250 million by 2007.
Though competition has increased manifold, certain government policies seem to be designed to favour telecom PSUs. Penetration levels in rural areas have more or less remained stagnant. To raise resources for new infrastructure in these areas, cellular operators have to pay an 'access deficit charge' (ADC) to BSNL, the fixed line carrier.
Since over 90 per cent of the fixed line infrastructure is owned by BSNL, cellular firms have to pay a usage fee to BSNL, which in turn is passed on to the consumers. This in keeps the tariffs high.
However, the hike in FDI gives the consumer more options to choose from. Earlier, on the international basic telephony front, the end of VSNL's monopoly in 2002 brought two private players in the international basic telephony business and the immediate effect was the fall in tariffs. In the first six months only, the tariffs fell by 50 per cent and can expect to fall further as new entrants crowd market.
The hike in FDI has increased the attractiveness of the sector for foreign telecom majors like Vodafone of UK and Telenor or Norway of (along with some from the US and Hong Kong) who have long wanted to participate in the growth of the Indian telecom sector, provided investment conditions were made more investor-friendly.
The increases in foreign investments will go a long way in improving the growth of this sector. Specifically, players like Bharti Televentures, Idea Cellular and Hutchison-Essar Telecom, which have foreign partners, are likely to benefit. Other companies that have till now not explored the possibility of raising capital in this manner can have a fresh look at this source of capital. Consolidation is also likely to speed up.
"With increased foreign capital now being allowed, the move will provide the Indian telecom industry the much-needed impetus to deliver on its ambitious target of reaching between 200- and 250-million phone connections over the next three years," says joint managing director, Rajan Mittal, Bharti Tele-Ventures.
"We need at least $20 billion (Rs86,740 crore) of investment and part of this has to come as foreign direct investment," said Maran. The increase in the FDI limit is expected to usher in a 20 per cent jump in foreign investments in the telecom sector within the next two years from the current Rs10,000 crore
'We have very transparent and clear new FDI rules. Operators did not have clear FDI structures and as a result, many offshore firms were holding different stakes in them. Now, such operators can come clean on investments,' IT and Telecom Minister Dayanidhi Maran stated during a press media early this week - exactly a week after the policy change.
But strict conditions have been imposed in order to address the security concerns raised by the Left parties.
As per the new rule,
telecom companies serving Internet service providers with gateways;
infrastructure providers (category-II);
radio paging service
will now have to disclose the status of foreign holding and certify every six months that the foreign investment was within the ceiling of 74 per cent. "Potential foreign investors will, however, need government approval before they increase their stake beyond 49 per cent," clarified Maran.Prior to the new rules being announced, two companies - Bharti and Hutch - had managed to exceed the 49 per cent FDI limit. From now, the licences of the companies that do not comply with the new stipulations will be revoked.
Another condition that service providers will now have to comply with is that a majority of the directors, including chairmen, managing directors, chief executive officers, chief technical and finance officers, will all have to be resident Indians.
Earlier, the Telecom Regulatory Authority of India (TRAI) was established in 1997 to resolve the security concerns raised by various agencies and provide a regulatory framework to the private sector telecom industry, then still in its infancy.
The new guidelines also bar the rerouting of traffic (whether mobile or landline) originating from India to other subscribers within India through any other country.
Also, telcos have been barred from transferring accounting information relating to subscribers (except for roaming or billing) outside India. Further, the details of companies' infrastructure also cannot be passed on to anyone other than the telecom equipment suppliers or manufacturers who undertake the installation and commissioning of the licensee company on signing of non-disclosure agreement.
In the last two years the telecom sector has emerged one of the fastest growing sectors in the country. This has been due to intense competition that has brought down tariffs as well as simplification of regulation that has promoted healthy competition among various service providers. As a result, telecom density in the country has risen to 7.5 per cent in FY04 compared to 3.64 per cent in FY01. The mobile services segment alone has been growing rapidly and has emerged as the fastest growing market in the world. This sector is expected to reach nearly 75 million by FY06. Currently India has over 40 million mobile users (source: DoT, August 2004). The government hopes to further increase the number of mobile users to 200-250 million by 2007.
Though competition has increased manifold, certain government policies seem to be designed to favour telecom PSUs. Penetration levels in rural areas have more or less remained stagnant. To raise resources for new infrastructure in these areas, cellular operators have to pay an 'access deficit charge' (ADC) to BSNL, the fixed line carrier.
Since over 90 per cent of the fixed line infrastructure is owned by BSNL, cellular firms have to pay a usage fee to BSNL, which in turn is passed on to the consumers. This in keeps the tariffs high.
However, the hike in FDI gives the consumer more options to choose from. Earlier, on the international basic telephony front, the end of VSNL's monopoly in 2002 brought two private players in the international basic telephony business and the immediate effect was the fall in tariffs. In the first six months only, the tariffs fell by 50 per cent and can expect to fall further as new entrants crowd market.
The hike in FDI has increased the attractiveness of the sector for foreign telecom majors like Vodafone of UK and Telenor or Norway of (along with some from the US and Hong Kong) who have long wanted to participate in the growth of the Indian telecom sector, provided investment conditions were made more investor-friendly.
The increases in foreign investments will go a long way in improving the growth of this sector. Specifically, players like Bharti Televentures, Idea Cellular and Hutchison-Essar Telecom, which have foreign partners, are likely to benefit. Other companies that have till now not explored the possibility of raising capital in this manner can have a fresh look at this source of capital. Consolidation is also likely to speed up.
"With increased foreign capital now being allowed, the move will provide the Indian telecom industry the much-needed impetus to deliver on its ambitious target of reaching between 200- and 250-million phone connections over the next three years," says joint managing director, Rajan Mittal, Bharti Tele-Ventures.
F D I IN INDIA MINING
The new National Mineral Policy (NMP), which seeks to ensure assured right in mineral concessions, envisages foreign direct investment (FDI) of $2.5 billion annually, the Rajya Sabha was told today.
“FDI of about $2.5 billion per annum is expected in the mining sector from the fifth year of implementation of the new NMP,” Mines Minister Sis Ram Ola told the House in a written reply to a query.
He pointed out that the government did not accept the Hoda Committee’s report in toto on the NMP, which sought to ensure transferability of mineral concessions and transparency in allotment of concessions in order to reduce delays which are seen as impediments to investment and technology flow in the domestic mining sector.
The minister said the policy sought to develop a sustainable framework for optimum utilisation of the country’s natural mineral resources for the industrial growth in the country and at the same time improving the life of people living in the mining areas, which are generally located in the backward and tribal regions of the country.
“FDI of about $2.5 billion per annum is expected in the mining sector from the fifth year of implementation of the new NMP,” Mines Minister Sis Ram Ola told the House in a written reply to a query.
He pointed out that the government did not accept the Hoda Committee’s report in toto on the NMP, which sought to ensure transferability of mineral concessions and transparency in allotment of concessions in order to reduce delays which are seen as impediments to investment and technology flow in the domestic mining sector.
The minister said the policy sought to develop a sustainable framework for optimum utilisation of the country’s natural mineral resources for the industrial growth in the country and at the same time improving the life of people living in the mining areas, which are generally located in the backward and tribal regions of the country.
FY-08 tax receipts top Rs 5.88 trillion
India's tax receipts crossed Rs 5.88 trillion during 2007/08, and senior officials said the government was confident of attaining this year's target despite duty cuts and a possible slower growth in the economy. Direct taxes grew by 38 percent to Rs 3.09 trillion in the last fiscal year, while indirect taxes were more than Rs 2.79 trillion, the chairmen of the two tax boards said late on Wednesday. Higher revenue growth is crucial for the federal government as it plans to spend more on social projects, subsidies and a farm debt scheme while cutting fiscal deficit to 2.5 percent of gross domestic product in 2008/09 from 3.1 percent in 2007/08. In February, India slashed excise duties on a wide range of manufactured goods including cars and raised the income tax exemption limit to boost demand in Asia's third largest economy. The federal government has also cut import duties on edible oils as part of efforts to tame inflation that hit a three-year high of 7.41 percent in late March. "The economy is growing at a robust pace, income of individuals have gone up and compliance has increased. There has been evidence that lower tax rates have led to higher receipts," Chairman of Central Board of Direct Taxes, P K Misra, said.
"We will be exceeding the target for this year also," he said, referring to a 3.65-trillion-rupee budget estimate for 2008/09. Direct taxes exceeded an upwardly revised target of 3.04 trillion rupees in 2007/08 with corporate tax receipts growing 33.4 percent to Rs 1.89 trillion while income tax was up 44 percent at Rs 1.1 trillion, he said. "Another Rs 3,000 crore is expected to come." P C Jha, chairman of Central Board of Excise and Customs, told media: "We will no doubt cross the budget target this year also." India has set a target of Rs 3.23 trillion in indirect taxes which includes excise, customs and service tax. While duty cuts will definitely have some impact on revenues, Jha said the robust growth in industry and buoyant imports would offset the duty foregone.
"We will be exceeding the target for this year also," he said, referring to a 3.65-trillion-rupee budget estimate for 2008/09. Direct taxes exceeded an upwardly revised target of 3.04 trillion rupees in 2007/08 with corporate tax receipts growing 33.4 percent to Rs 1.89 trillion while income tax was up 44 percent at Rs 1.1 trillion, he said. "Another Rs 3,000 crore is expected to come." P C Jha, chairman of Central Board of Excise and Customs, told media: "We will no doubt cross the budget target this year also." India has set a target of Rs 3.23 trillion in indirect taxes which includes excise, customs and service tax. While duty cuts will definitely have some impact on revenues, Jha said the robust growth in industry and buoyant imports would offset the duty foregone.
Invest in property, hedge inflation risk
Inflation has touched high levels. It soared past the seven percent mark pulling up with it prices of food, essential commodities and manufactured goods.
Investments in debt
Debt or fixed income instruments seek to preserve capital and provide relatively small returns. These are low-risk, low-return investments. In an inflationary economy, investment in debt may not work out to be feasible. Suppose there is an instrument that yields four percent returns and the lock-in period is five years. If inflation is marching up with leaps and bounds, the value or purchasing power of money will come down in these five years. In order to beat inflation, the returns have to be greater than the meager four percent. Debt funds and bonds will erode your hard-earned money in a high inflation economy. The minimal returns from long-term bank deposits will not help you for your expenses like saving for children's marriage or education.
Investments in equity
The stock markets are highly volatile. There are times of bull rides, and at other times, disappointing bear market conditions. The alternating patterns of ups and downs take investors by surprise. This unpredictability is a major drawback of equity. Many investors churn out big profits, many others lose everything. Investments in equity must be done with a long-term perspective. Small investors can see good returns if they stay invested for 5-10 years. Stock markets are an excellent hedge against inflation. But the investor must be knowledgeable to pick fundamentally-strong stocks with excellent growth potential. Wrong picks can prove detrimental.
Investments in property
Investments in property are an excellent hedge against inflation. With inflation the construction costs are bound to go upwards. As the years roll by, the value of the property increases many times. Unlike investments in debt, the returns here are in line with inflation. Investing in a house or piece of land gives you the pride of ownership, much-needed capital appreciation and excellent rate of returns. It is considered a wise way of risk diversification and an excellent hedge against inflation.
Investments in debt
Debt or fixed income instruments seek to preserve capital and provide relatively small returns. These are low-risk, low-return investments. In an inflationary economy, investment in debt may not work out to be feasible. Suppose there is an instrument that yields four percent returns and the lock-in period is five years. If inflation is marching up with leaps and bounds, the value or purchasing power of money will come down in these five years. In order to beat inflation, the returns have to be greater than the meager four percent. Debt funds and bonds will erode your hard-earned money in a high inflation economy. The minimal returns from long-term bank deposits will not help you for your expenses like saving for children's marriage or education.
Investments in equity
The stock markets are highly volatile. There are times of bull rides, and at other times, disappointing bear market conditions. The alternating patterns of ups and downs take investors by surprise. This unpredictability is a major drawback of equity. Many investors churn out big profits, many others lose everything. Investments in equity must be done with a long-term perspective. Small investors can see good returns if they stay invested for 5-10 years. Stock markets are an excellent hedge against inflation. But the investor must be knowledgeable to pick fundamentally-strong stocks with excellent growth potential. Wrong picks can prove detrimental.
Investments in property
Investments in property are an excellent hedge against inflation. With inflation the construction costs are bound to go upwards. As the years roll by, the value of the property increases many times. Unlike investments in debt, the returns here are in line with inflation. Investing in a house or piece of land gives you the pride of ownership, much-needed capital appreciation and excellent rate of returns. It is considered a wise way of risk diversification and an excellent hedge against inflation.
MARKET PREDICTION
GLOBAL MARKETS ARE POSITIVE AFTER CRUDE & GAS PRICE TUMBLED DOWN AND ALSO SOME POSITIVE RESULT BY USA FIRM.
TODAY IS THE LAST DAY OF APRIL SERIES.
NITY WILL OPEN POSITIVE NOTE........LEVEL OF NIFTY IS 5000-5060-5100
BUY FROM 5100 AND ABOVE ELSE FROM 5000 LEVEL
GOOD OI INTEREST BUILD UP AFTER JAN MELT DOWN THAT IS 75600 CR.
MAY OI IS 38000 CR.
PUT CALL RATIO IS 1.35.
THIS TIME OIL EXPLORATON,METAL,CEMENT SEEN GOOD ROLL OVER.
FEW MID CAP STOCK LIKE CAIRN,WELGUJ,RPL,BRFL HAVE SEEN GOOD ROLL OVER.
HAVE A NICE EXPIRY DAY
TODAY IS THE LAST DAY OF APRIL SERIES.
NITY WILL OPEN POSITIVE NOTE........LEVEL OF NIFTY IS 5000-5060-5100
BUY FROM 5100 AND ABOVE ELSE FROM 5000 LEVEL
GOOD OI INTEREST BUILD UP AFTER JAN MELT DOWN THAT IS 75600 CR.
MAY OI IS 38000 CR.
PUT CALL RATIO IS 1.35.
THIS TIME OIL EXPLORATON,METAL,CEMENT SEEN GOOD ROLL OVER.
FEW MID CAP STOCK LIKE CAIRN,WELGUJ,RPL,BRFL HAVE SEEN GOOD ROLL OVER.
HAVE A NICE EXPIRY DAY
Wednesday, April 23, 2008
China Cuts Tax on Share Trading to Bolster Markets
China will cut a tax on share trading from tomorrow to support the country's stock markets after the benchmark equity index plunged 35 percent this year.
The stamp duty will be lowered to 0.1 percent, from 0.3 percent, the government said on its official Web site today.
``The government doesn't want to see a falling market, which cannot serve the purpose of fund-raising for big state companies,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million. ``We are going to see a rally.''
China's benchmark CSI 300 Index plunged this year on speculation the government will step up measures to cool inflation running at an 11-year high and on concern more stock sales will dilute the value of existing equities. The Shanghai Composite Index yesterday dropped by as much as 4 percent yesterday, taking the index 50 percent below its October record
The stamp duty will be lowered to 0.1 percent, from 0.3 percent, the government said on its official Web site today.
``The government doesn't want to see a falling market, which cannot serve the purpose of fund-raising for big state companies,'' said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million. ``We are going to see a rally.''
China's benchmark CSI 300 Index plunged this year on speculation the government will step up measures to cool inflation running at an 11-year high and on concern more stock sales will dilute the value of existing equities. The Shanghai Composite Index yesterday dropped by as much as 4 percent yesterday, taking the index 50 percent below its October record
MARKET UPDATES
- Direct or indirect compensation a government provides to private commercial firms in order to promote the export of domestic products. Examples include cash payments, tax exemptions, preferential exchange rates, and government subsidized financing for exports.
- More than half of the total number of IPOs listed on BSE and NSE in the last two years are trading below their offer price. During Apr. 1, 2006 - Mar. 31, 2008, the number of IPOs listed on the Bombay Stock Exchange stood at 150, of which 86 are trading below their offer price.on the National Stock Exchange, of the 162 IPOs listed during the same period, 88 were trading below the issue price and 38 were being traded at a discount of more than 40% of the issue price.
- Crude production in Nigeria, already running below capacity because of security problems, was buffeted again after rebels hit two oil pipelines there Monday. Royal Dutch Shell PLC has been unable to gain access to the pipelines, which feed into a key export terminal, a spokesman said.
- RPL plans setting up greenfield unit in Kuwait.
- Reliance Power to expedite hydropower projects; will invest Rs105bn in three years for 2100 MW.
- Reliance Retail forms 49:51 JV with US based stationary retailer Office Depot.
- Idea Cellular may sell its 16% stake in Indus Towers in December.
- Tata Teleservices Maharashtra (TTML) on Monday said it will seek shareholders' approval for hiving off its tower business into a subsidiary. Following the trend in the telecom industry, the company had announced its decision of hiving off its tower business on April 10. The move would help the company, which has around 3,500 towers now, lay greater focus on the passive infrastructure business that has huge potential.
- Shantanu Prakash, MD and CEO of Educomp Solutions said, “In our flagship product, Smart Class, we have gone from 331 schools in March 2007 to 933 schools in March 2008 - that’s an expansion of about three times. In ICT, again we have done over to 200% growth in number of schools. In MathGuru, the number of subscriptions has gone up by five times. So I think not just in one product, but across the spectrum of Educomp products, we are seeing the growth and penetration happening.”
- Kirloskar Oil Q4 net profit at Rs 36 cr
Kirloskar Oil Engines has announced its fourth quarter results. The company's Q4 net profit was down at Rs 36 crore versus Rs 46 crore.
Its net sales were at Rs Rs 617 crore. - Bajaj Hindusthan has declared its second quarter results. The company's Q2 standalone net profit was up at Rs 43 crore versus Rs 3.70 crore, YoY.
Its standalone net sales were down at Rs 490 versus Rs 514 crore - China's sixth-largest bank announced that its first-quarter net profit rose 157 pct from a year earlier to 6.32 bln bln yuan due to strong growth in both interest and non-interest income and a lower tax rate.Among other China banks, Bank of Communications was up 0.12 hkd or 1.14 pct at 10.66, China Construction Bank was up 0.01 hkd or 0.15 pct at 6.54, Bank of China down 0.01 hkd or 0.26 pct at 3.77 and Citic Bank up 0.19 hkd or 3.91 pct at 5.04.
- Ganesh Natrajan, Chairman of Nasscom expects IT companies to grow at 20% for FY09, based on a strong H2. The next six months would be difficult for IT companies.He added that irrespective of the deepening recession, the outsourcing spend would rise.He also expects a favourable government stance on the STPI (Software Technology Parks of India) issue.
- Coming F&O expiery on tips, market is going under consolidation, Steel policy today to be declared today, which is leading heavy selling pressure. Steel sector is facing some depression today.
- The government is looking to revive the IFCI's (Industrial Finance Corporation of India) stake sale process, reports CNBC-TV18, quoting Newswire 18. IFCI may again look to sell 26% stake to strategic investors. The IFCI’s board may consider stake sale at April 29 meet. The IFCI had called off its 26% stake sale plan in December 2007.
- DLF eyeing controlling stake in Orient Express.
- Combining its success in acquiring overseas coal blocks with plans to enter the shipping business, Reliance Power Ltd (RPL), part of the Reliance-Anil Dhirubhai Ambani Group, is exploring getting into the business of selling coal to other big consumers in India. Indonesian coal blocks can support one more 4,000MW imported coal-based power project in India, apart from servicing the needs of our 4,000MW UMPP and the 1,200MW project at Shahpur.
- Indian Bank has announced its fourth quarter and fiscal year 2008 numbers. It has posted 2.98% growth in its Q4 standalone net profit of Rs 242 crore as against Rs 235 crore in same quarter of last year and de growth of 10.47% in net interest income of Rs 513 crore as against Rs 573 crore.
What are the uses of crude oil?
Burning crude oil itself is of limited use. To extract the maximum value from crude, it first needs to be refined into petroleum products. The best-known of these is gasoline, or petrol. However, there are many other products that can be obtained when a barrel of crude oil is refined. These include liquefied petroleum gas (LPG), naphtha, kerosene, gasoil and fuel oil. Other useful products which are not fuels can also be manufactured by refining crude oil, such as lubricants and asphalt (used in paving roads). A range of sub-items like perfumes and insecticides are also ultimately derived from crude oil.
Furthermore, several of the products listed above which are derived from crude oil, such as naphtha, gasoil, LPG and ethane, can themselves be used as inputs or feedstocks in the production of petrochemicals. There are more than 4,000 different petrochemical products, but those which are considered as basic products include ethylene, propylene, butadiene, benzene, ammonia and methanol. The main groups of petrochemical end-products are plastics, synthetic fibres, synthetic rubbers, detergents and chemical fertilisers.
Furthermore, several of the products listed above which are derived from crude oil, such as naphtha, gasoil, LPG and ethane, can themselves be used as inputs or feedstocks in the production of petrochemicals. There are more than 4,000 different petrochemical products, but those which are considered as basic products include ethylene, propylene, butadiene, benzene, ammonia and methanol. The main groups of petrochemical end-products are plastics, synthetic fibres, synthetic rubbers, detergents and chemical fertilisers.
Crude oil nears $120 on supply woes, dollar slide
Crude oil futures popped to a fresh record Tuesday as supply threats gathered and the dollar tumbled against the euro. Light, sweet crude for May delivery rose to a new trading record of $119.90 a barrel before retreating to trade up $1.70 at $119.18 on the New York Mercantile Exchange. The May contract expires on Tuesday. More active June Nymex crude was trading at $118.50 a barrel, up $1.87. June Brent crude on the ICE futures exchange was also up $1.62 to $116.05 a barrel, after climbing to a record high $116.75 a barrel. Crude production in Nigeria, already running below capacity because of security problems, was buffeted again after rebels hit two oil pipelines there Monday. Royal Dutch Shell PLC has been unable to gain access to the pipelines, which feed into a key export terminal, a spokesman said. As well, a joint venture that includes Shell said it had been forced to shut in around 169,000 barrels a day of crude exports from its Bonny terminal in southern Nigeria for the rest of April and May after a separate pipeline attack last week. A strike threatened by workers at Ineos PLC's 196,000 barrel-a-day Grangemouth refinery in the UK also stoked worries that a shutdown could disrupt production from North Sea oil fields, including the Forties pipeline system. Through Monday, oil futures have risen 22 percent year-to-date. A mix of production snags and macroeconomic factors have fueled its record run. "The biggest difficulty for oil producers will be if the speculative funds that have flooded into commodity markets moves on," said Mike Fitzpatrick, an analyst at brokerage MF Global, in a note. "While there is no indication that the tidal wave of these funds is anywhere near cresting, it is very easy for them to flow in to and out of markets with the stroke of a computer key, so the higher prices go, the more vulnerable the market is to violent, albeit short reversals." Fitzpatrick said he doubted such a pullback would take place before Wednesday, when the Energy Information Administration delivers its weekly U.S. oil inventory estimates. On average, analysts polled by Dow Jones Newswires expect the data will show crude stockpiles rose by 1.5 million barrels last week, while gasoline stockpiles fell by 2.3 million barrels and distillate stockpiles remained unchanged. The dollar also dropped to a record low against the euro, which was recently at $1.5994. The greenback's decline has generally supported dollar-denominated oil futures as exporters adjust their prices to compensate for its weakness. Dollar deterioration and inflation expectations are "the most important factors" behind oil's price rise, Societe Generale analysts said in a note. "At the same time, the supply and demand fundamentals have been supportive secondary factors, but important nonetheless." In other Nymex trading on Tuesday, May gasoline futures rose 2.59 cents to $3.005 a gallon after earlier rising to a trading record of $3.02, while May heating oil futures rose 0.88 cent to $3.3202 a gallon after earlier rising to their own trading record of $3.35. May natural gas futures fell 8.2 cents to $10.652 per 1,000 cubic feet.
Grain output seen at record 227 mn tonne in 2007-08
Foodgrain production in crop year 2007-08 is estimated to have touched a record 227.32 million tonnes (mt), with output of rice, wheat, coarse grains, pulses, oilseeds and cotton crossing previous highs. The Centre’s third advance estimates for the crop year (June-May) released on Tuesday showed an over 10 mt increase in grain production over the final estimates for 2006-07, which stood at 217.28 mt. This translates to a change of 4.6% over last year’s final estimates. Rice production is estimated at an all-time high of 95.68 mt in 2007-08 against an average 92 mt production annually. Wheat production has been estimated at a record 76.78 mt compared to last year’s 75.81 m tonne, a 1.3% hike. The previous high was 76.36 m tonnes. Coarse cereals production at 39.67 mt was 5.75 mt above last year’s level, a good 17% jump. Pulses production is pegged at 15.19 mt in 2007-08, including toor output of 3.03 mt, the highest ever. Oilseeds output has been pegged at a new high of 28.21 mt compared to 24.29 mt in 06-07, with groundnut production topping with 8.87 mt compared with only 4.86 mt. However, there has been a 13.6% drop in mustard production, primarily due to inclement weather, agriculture secretary P K Mishra said. Just a day prior to the farm ministry’s planned state conference to focus on strategies for increasing production of rice and coarse cereals — the latter may be included in the National Food Security Mission — the current estimates leave limited scope for optimism against the prevailing high in grain prices both at the domestic and the global level. Inflation is at a three-year high and given the lower production in the previous year, carry over stocks have been impacted. This has forced the government to import 1.8 mt of wheat. This beefed up the buffer stock to the prescribed level for April 1, 2008 but there are already indications that the government may have to import wheat again this year, even while imposing restrictions on rice export. The demand for foodgrains was officially estimated at 214.03 mt for 2007-08, while the estimate for demand by the end of the 11th Plan period is pegged at 234.26 mt. Significantly, analysts feel the government has underestimated rising demand and consumption levels and underpegged the levels. Rice shortfall, for instance, was pegged by the government at around 1-1.5 m tonnes but analysts peg the shortfall at around five million tonnes. The met department has forecast that Southwest monsoons this year will be near normal, spelling good news for crop output this year, too. However, analysts maintain the measures taken by the government, including scrapping duty on crude edible oil imports and a reduced 7.5% import duty for refined palm and soya oils, could have an impact on farmers’ decision to plant oilseeds this year. Also, the government has not announced the expected bonus of Rs 100-150/ quintal for wheat although its price is at a high of Rs 16 per kg in the global market. This again could impact the wheat crop while export restrictions on rice could push farmers to planting more remunerative commercial crops instead of grains.
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