Sugar is affordable this festival season. Marketmen say it will become expensive by next summer when supply could drop.
Sugar companies are certainly betting on it. But given the miasma of global recession, encashing the demand-supply mismatch may not be so easy.
ET helps you join the dots between consumer pessimism and the future of sugar.
Indian sugar prices are steady for now because the government has been pushing mills to sell at least 2 mt each month. With five states going to polls in the next few weeks, the last thing it wants is voters getting ugly on food prices.
Fortuitously for Indian consumers, the collapse in global sugar prices was well-timed with the festival season. The big funds and index traders are rapidly unwinding their long positions, which has led to selling pressure. That has queered the pitch for Indian exports.
All of 2007, sugar was tugged up by the price of ethanol, which itself was linked to crude oil. Now that crude oil is at 2006-levels , the correction in sugar and ethanol prices was inevitable.
At the same time, Brazilians have begun aggressively exporting sugar because their currency—real—has fallen to a three-and-half-year low against the dollar. A weak real has offset the fall in sugar prices. Put together, sugar is bearish for now.
But mills have not lost heart. All forecasts point to a drop in supply in 2009. The world may run short by 5 mt due to a 4% cut in global sugar production in 2009. Bad weather in countries such as Cuba have further put pressure on supply.
In India, the drop in production could be especially dramatic. Farmers have been so upset with tardy payment for cane that they have shifted to other crops. In top producer Maharashtra, sugar production will fall 30% this year. Over all, Indian sugar production could fall 20% in 2008-09 and a further 14% in 2009-10 sugar season. With Indian demand and supply likely to be finely balanced next year and dry trade pipeline, the industry is betting on a price rise.
On the face of it, this decline in production appears to be just what the doctor ordered for sugar mills. But the recovery in bottomlines may not be so quick or so widespread. There are two googlies mills would have to dodge.
One, when farmers grow less cane, mills too crush less.
That strains their capacity utilisation and sales figures. In Uttar Pradesh, where mills have reserved cane area, they can hope to pick up any cane grown within 15-km radius. But in states without cane zoning, the fight for cane could get very bitter indeed next year.
Already mills in Maharashtra are bearing the brunt of decline in cane area. The state government has decided to issue licenses only to factories where sugarcane availability is more than half their crushing capacity for the entire season. Of the 173 mills in the state, at least 20 may have to shut shop this year. Next year this problem could worsen.
The second googly could be dampening consumer demand if the economy slows down. In most middle-class households, the monthly sugar consumption is price insensitive because they rarely buy more than 8-10 kg. So even if prices jump by Rs 5/kg, that means an extra expenditure of Rs 50/month. No one is really bothered.
It is actually the sugar consumed indirectly that could get affected if the world does go into recession. When times get tough, households tend to reduce purchase of expensive processed foods, sauces, icecreams, jams, cold drinks, juices, confectionery and luxury chocolates to offset higher expenses in other areas. Since these are not toppriority foods, their consumption is usually the first to get lopped off.
This in turn could impact the demand for sugar by processed food and beverage companies, who are the single largest purchasers of sugar in India. If sugar becomes more expensive due to a squeeze in supply while demand for end products drops, food companies are likely to rework their sums. Cola companies, where sugar is a significant part of input costs, will be especially keen to negotiate discounts.
The joker in the pack next year would be ethanol. Brazil, the world’s biggest producer, has been scaling up capacity to increase export to the US and EU. In 2009 that could be tough. Exports to the US, Brazil’s main ethanol market abroad, are frozen for now because US ethanol prices have fallen so much that Brazilian ethanol, even with a weaker real, stands no chance.
The slump in US fuel demand means a slump in ethanol demand as well. Brazil’s domestic demand for ethanol was boosted by flex-fuel cars—cars that can run on any mixture of gasoline and ethanol. Brazilian demand for the biofuel rose to 1.6 billion litres per month currently from 550 million litres five years ago. But most flex fuel cars are bought on credit. If there is an economic slowdown , this credit would be affected.
The exchange rate could also impact ethanol output. Some analysts believe that if the real weakens further, it would encourage Brazilian mills to produce sugar for export, rather than ethanol for the domestic market. That could cool global sugar prices.
After years of oversupply, global sugar supply is finally balancing with demand. Any new threat to global production would tilt the balance firmly towards a shortage. That is definitely headline news. However, there is no straight line between high commodity prices and individual corporate profits. As always, the best business strategy will win.
Thursday, October 23, 2008
RBI eases ECB access for companies
The government and the Reserve Bank of India (RBI) have eased the norms on overseas borrowing for Indian companies to boost inflows and help corporates raise funds for projects.
The revised rules provide for companies to pay a higher interest of upto 500 bps over the six-month libor on external commercial borrowings (ECBs). Companies can bring in the proceeds immediately and can also use dollar borrowings for rupee expenditure.
The easing of norms comes at a time when a number of Indian companies, who are already in the international loan markets, are finding it difficult to raise funds. The turbulence in global financial markets has impacted this market significantly and with banks reluctant to lend to each other, raising foreign currency funds is going to be tough.
Bankers say that liquidity is limited to the shorter end of the borrowing spectrum with global banks loath to lend for the medium and long term. According to the new rules notified by the RBI late on Wednesday, from now on, ECBs up to $500 million per borrower per financial year would be permitted for rupee expenditure or foreign currency expenditure for permissible end-uses under the automatic route.
The norm of a minimum average maturity period of seven years for ECBs of more than $100 million for rupee capital expenditure by borrowers in the infrastructure sector has been dispensed with.
The relaxation may not result in an immediate inflow of funds, given that overseas credit markets are frozen and spreads over libor have been widening. Roiled by the financial turmoil, banks abroad are reluctant to lend to corporates in emerging markets. They are looking at cutting down or are only maintaining their Indian exposure.
However, the new norms could benefit many AAA and AA rated Indian corporates to access the markets as and when the market eases up.
Telecom companies, who had earlier pitched for allowing the proceeds of ECBs for payment of licence/permit for 3G spectrum have been given that facility. At present, ECB proceeds are required to be parked overseas until actual expenditure takes place.
Now, companies can either keep these funds offshore or keep it with the overseas branches or subsidiaries of Indian banks abroad or to remit these funds to India for credit to their rupee accounts with banks in India until it is used.
Given the tight liquidity conditions in the market, RBI has said that banks have been allowed to pay upto 300 bps over six-month libor on ECBS between three and five years as against 200 bps earlier. For longer-term borrowings, corporates have been allowed to pay as much as 500 bps over six-month libor. Given that six-month libor is ruling at 3.7%, lenders will be allowed to pay out up to 8.7% interest on dollar borrowings.
The central bank also said that it will be keeping a close watch on the unhedged foreign exchange exposures of SMEs. A system of monitoring such unhedged exposures by the banks on a regular basis is being put in place.
Other earlier restrictions including the $500-million limit per company per financial year under the automatic route as well as conditions relating to eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.
Seshagiri Rao, finance director, JSW said: "This will benefit corporates as one layer of approval, from RBI, has now been removed. Top-rated companies should be able to roll-over existing liabilities within the enhanced spreads now allowed by RBI." He added that JSW group companies would definitely look at the option of raising foreign loans in the wake of this relaxation.
According to Hemant Mishra, MD and head global markets (India), StanChart, "this is in line with the ministry and the RBI's proactive approach of managing the dollar liquidity shortage in the local market. This step will make it easier for India Inc to tap into the overseas capital market and also helps domestic liquidity in the process. There would be incremental appetite for quality India paper at the right price, once the international liquidity situation gets better."
Usually, the credit markets slow down towards the end of the calendar year. This might be accentuated this time because of the ongoing credit crunch. For the fiscal ended March 31,2008 Indian corporates had made overseas borrowings of $30.95 billion. This is as against borrowings of $25.35 billion in the previous fiscal. In the current fiscal, between April and August, corporates had borrowed $8.12 billion.
Said Robin Banerjee, director (finance) Essar Steel: "This will encourage flow of foreign exchange debt into India since they are cheaper than Indian debt if you don't consider rupee depreciation, which can be appropriately hedged. This is a positive step to build confidence and ensure flow of funds in tight market conditions.
"We are yet to study the details, but at first brush, they appear to be very positive for the industry," said a top Vodafone-Essar official. Said Idea Cellular MD Sanjeev Aga, "While Idea is not affected, this may be a useful step for the sector. However, there are several loose ends in the preparation for the 3G auctions and it would be desirable that these are meticulously addressed instead of rushing through."
Highlights
" All in cost ceilings (libor plus spread plus issue expenses) have been relaxed by the RBI. More corporates can use the ECB window
" $500 Mn for rupee expenditure
" Telecom companies can use the ECB for raising money for license/permit for 3G Spectrum
" Corporates can remit these funds to India for credit to their rupee accounts in India, pending utilisation for permissible end-use.
" Monitoring of unhedged exposures of SMEs being put in places
* Corporates unlikely to benefit in the short term as global banks are still not comfortable in lending.
The revised rules provide for companies to pay a higher interest of upto 500 bps over the six-month libor on external commercial borrowings (ECBs). Companies can bring in the proceeds immediately and can also use dollar borrowings for rupee expenditure.
The easing of norms comes at a time when a number of Indian companies, who are already in the international loan markets, are finding it difficult to raise funds. The turbulence in global financial markets has impacted this market significantly and with banks reluctant to lend to each other, raising foreign currency funds is going to be tough.
Bankers say that liquidity is limited to the shorter end of the borrowing spectrum with global banks loath to lend for the medium and long term. According to the new rules notified by the RBI late on Wednesday, from now on, ECBs up to $500 million per borrower per financial year would be permitted for rupee expenditure or foreign currency expenditure for permissible end-uses under the automatic route.
The norm of a minimum average maturity period of seven years for ECBs of more than $100 million for rupee capital expenditure by borrowers in the infrastructure sector has been dispensed with.
The relaxation may not result in an immediate inflow of funds, given that overseas credit markets are frozen and spreads over libor have been widening. Roiled by the financial turmoil, banks abroad are reluctant to lend to corporates in emerging markets. They are looking at cutting down or are only maintaining their Indian exposure.
However, the new norms could benefit many AAA and AA rated Indian corporates to access the markets as and when the market eases up.
Telecom companies, who had earlier pitched for allowing the proceeds of ECBs for payment of licence/permit for 3G spectrum have been given that facility. At present, ECB proceeds are required to be parked overseas until actual expenditure takes place.
Now, companies can either keep these funds offshore or keep it with the overseas branches or subsidiaries of Indian banks abroad or to remit these funds to India for credit to their rupee accounts with banks in India until it is used.
Given the tight liquidity conditions in the market, RBI has said that banks have been allowed to pay upto 300 bps over six-month libor on ECBS between three and five years as against 200 bps earlier. For longer-term borrowings, corporates have been allowed to pay as much as 500 bps over six-month libor. Given that six-month libor is ruling at 3.7%, lenders will be allowed to pay out up to 8.7% interest on dollar borrowings.
The central bank also said that it will be keeping a close watch on the unhedged foreign exchange exposures of SMEs. A system of monitoring such unhedged exposures by the banks on a regular basis is being put in place.
Other earlier restrictions including the $500-million limit per company per financial year under the automatic route as well as conditions relating to eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.
Seshagiri Rao, finance director, JSW said: "This will benefit corporates as one layer of approval, from RBI, has now been removed. Top-rated companies should be able to roll-over existing liabilities within the enhanced spreads now allowed by RBI." He added that JSW group companies would definitely look at the option of raising foreign loans in the wake of this relaxation.
According to Hemant Mishra, MD and head global markets (India), StanChart, "this is in line with the ministry and the RBI's proactive approach of managing the dollar liquidity shortage in the local market. This step will make it easier for India Inc to tap into the overseas capital market and also helps domestic liquidity in the process. There would be incremental appetite for quality India paper at the right price, once the international liquidity situation gets better."
Usually, the credit markets slow down towards the end of the calendar year. This might be accentuated this time because of the ongoing credit crunch. For the fiscal ended March 31,2008 Indian corporates had made overseas borrowings of $30.95 billion. This is as against borrowings of $25.35 billion in the previous fiscal. In the current fiscal, between April and August, corporates had borrowed $8.12 billion.
Said Robin Banerjee, director (finance) Essar Steel: "This will encourage flow of foreign exchange debt into India since they are cheaper than Indian debt if you don't consider rupee depreciation, which can be appropriately hedged. This is a positive step to build confidence and ensure flow of funds in tight market conditions.
"We are yet to study the details, but at first brush, they appear to be very positive for the industry," said a top Vodafone-Essar official. Said Idea Cellular MD Sanjeev Aga, "While Idea is not affected, this may be a useful step for the sector. However, there are several loose ends in the preparation for the 3G auctions and it would be desirable that these are meticulously addressed instead of rushing through."
Highlights
" All in cost ceilings (libor plus spread plus issue expenses) have been relaxed by the RBI. More corporates can use the ECB window
" $500 Mn for rupee expenditure
" Telecom companies can use the ECB for raising money for license/permit for 3G Spectrum
" Corporates can remit these funds to India for credit to their rupee accounts in India, pending utilisation for permissible end-use.
" Monitoring of unhedged exposures of SMEs being put in places
* Corporates unlikely to benefit in the short term as global banks are still not comfortable in lending.
Q2 Results
Voltamp Transformers has posted a net profit of Rs 27.33 crore for the second quarter ended September 30, a 47.64 per cent rise over the year-ago period.
The firm had clocked a net profit of Rs 18.51 crore in the same quarter last fiscal, Voltamp Transformers said in a filing with the Bombay Stock Exchange.
Net sales rose by 14.78 per cent at Rs 169.96 crore for the quarter under review from Rs 148.07 crore a year ago.
For six months ended September 30, the company reported a net profit of Rs 50.50 crore, a growth of 42.09 per cent over the corresponding year-ago period. It had a net profit of Rs 35.54 crore in the same period last fiscal.
The company's net sales rose to Rs 340.11 crore during six months from Rs 277.34 crore in the year-ago period.
Shares of the company were trading at Rs 405.05, down 3.24 per cent on the BSE.
**** Coromandel Fertilisers Q2 net up 71 pc at Rs 181 cr * Fertiliser and chemical manufacturer Coromandel Fertilisers Ltd today said its consolidated net profit for the its September quarter stood at Rs 181 crore, up by 71.56 per cent over the corresponding period a year ago.
The company had a consolidated net profit of Rs 105.5 crore in the same quarter last fiscal, Coromandel Fertilisers Ltd said in a filing to the Bombay Stock Exchange.
Its consolidated total income for the quarter rose to Rs 3,404.7 crore from Rs 1,802.7 crore for the year-ago period.
While net profit for the six months ended September 30, 2008 stood at Rs 374.8 crore, against Rs 131.2 crore for the same period last fiscal.
Shares of the company were trading at Rs 132.20, up 5.30 per cent in afternoon trade on the BSE.
Yes Bank Q2 net up 40 pc at Rs 64 cr * Private sector lender Yes Bank today said its net profit for the second quarter ended September 30 grew by 40.50 per cent at Rs 63.62 crore over the corresponding quarter last fiscal.
The bank registered a net profit of Rs 45.28 crore in the second quarter of FY'08, Yes Bank said in a filing with the Bombay Stock Exchange.
Total income for the quarter under review rose to Rs 569.93 crore from Rs 379.38 crore in the year-ago period.
"In the recent market environment, Yes Bank has preserved to ensure highest credit quality of assets while sustaining income and growth objectives," Yes Bank Managing Director and CEO Rana Kapoor said.
Shares of the company were trading at Rs 80.05, 0.44 per cent in afternoon trade on the BSE.
*** Blue Dart Express Q2 net dips 22 pc at Rs 13 cr * Courier and logistics major Blue Dart Express today said its net profit for the second quarter ended September 30 declined 22.08 per cent at Rs 13.58 crore over corresponding period last fiscal.
The firm registered a net profit of Rs 17.43 crore in the second quarter of FY'08, Blue Dart Express said in a filing with the BSE.
The company's net sales rose to Rs 262.84 crore in the quarter from Rs 207.30 crore in the same period a year ago.
For the six months ended September 30, Blue Dart Express reported a net profit of Rs 64.95 crore against Rs 50.99 crore in the corresponding period a year ago. Net sales of the firm rose to Rs 747.13 crore this fiscal from Rs 576.44 crore in the same period last year.
Shares of the company were trading at Rs 520, down 5.45 per cent in afternoon trade on the BSE.
Kirloskar Oil Q2 net dips 18 pc at Rs 27.3 cr * Kirloskar Oil Engines Ltd today said its net profit for the second quarter ended September 30 declined 18.75 per cent at Rs 27.3 crore over the corresponding period a year ago. The company had clocked a net profit of Rs 33.6 crore in the same quarter last fiscal, Kirloskar Oil Engines Ltd said in a filing with the Bombay Stock Exchange.
Net sales for the quarter under review rose to Rs 592 crore from Rs 543.5 crore for the corresponding period last fiscal.
For the six months ended September 30, 2008, the company posted a net profit of Rs 56.8 crore against a net profit of Rs 51 crore for the same period last year.
The company's net sales rose to Rs 1,157.8 crore for the reviewed period from Rs 1,035.1 crore for the same period last fiscal. Shares of the company were trading at Rs 55.50, down 1.16 per cent in afternoon trade on the BSE.
**** Sona Koyo Q2 net loss at Rs 7.32 cr * Steering gears and drive line components maker Sona Koyo Steering Systems today said its net loss for second quarter ended September 30 stood at Rs 7.32 crore, against a net profit of Rs 8.79 crore in the same period a year ago.
The firm's total income for the quarter under review rose to Rs 180.27 crore from Rs 166.30 crore in the second quarter of the previous fiscal, Sona Koyo Steering Systems Ltd said in a filing with the Bombay Stock Exchange.
For the six months ended September 30, the firm announced a net loss of Rs 8.96 crore, while net profit in the same period last fiscal stood at Rs 16.77 crore.
Shares of the company were trading at Rs 10.50, up 4.17 per cent on the BSE.
Bajaj Electricals Q2 net dips 7 pc at Rs 12 cr * Bajaj Electricals today said its net profit for the second quarter ended September 30 declined by 7.43 per cent at Rs 12.2 crore over the corresponding period last fiscal. The company had clocked a net profit of Rs 13.18 crore in the second quarter of fiscal 2008, Bajaj Electricals said in a filing with the Bombay Stock Exchange.
Net sales of the firm rose to Rs 378.57 crore in the quarter from Rs 304.28 crore in the same period a year ago.
For the six months ended September 30, the firm reported a net profit of Rs 22.22 crore, against Rs 20.96 crore in the corresponding period a year ago.
Bajaj Electricals' net sales rose to Rs 695.91 crore in the quarter under review from Rs 556.41 crore in the same period last year.
Shares of the company were trading at Rs 338.15, down 1.33 per cent in afternoon trade on the BSE.
*** Nippon Batteries Q2 net down 12 pc at Rs 4 cr * Nippon Batteries today said its net profit for the second quarter ended September 30 dipped by 11.95 per cent at Rs 3.83 crore over the corresponding quarter last fiscal.
The company had a net profit of Rs 4.35 crore in the second quarter FY'08, Nippon Batteries said in a filing with the BSE.
Total income for the quarter under review rose to Rs 73.09 crore from Rs 71.10 crore in the same period last year.
For the six months ended September 30, the company reported a net profit of Rs 7.55 crore, against Rs 8.56 crore in the corresponding period a year ago.
The firm's total income rose to Rs 143.10 crore in the second quarter from Rs 144.16 crore in the same period a year ago.
Shares of the company were trading at Rs 310, up 1.64 per cent in afternoon trade on the BSE.
Century Textiles Q2 net dips 57 pc at Rs 28 cr * B K Birla Group-controlled Century Textiles & Industries today said its net profit for second quarter ended September 30 declined 56.98 per cent at Rs 28.55 crore over the same period a year ago. The firm had a net profit of Rs 66.37 crore for Q2 of fiscal 2008, Century Textiles said in a filing with the BSE.
Its total income rose to Rs 872.11 crore in Q2 of current fiscal from Rs 784.95 crore in the same period last year.
For the six months ended September 30, Century Textiles reported a net profit of Rs 91.05 crore. It had clocked a net profit of Rs 170.48 in the same period last fiscal, and its total income rose to Rs 1,825.93 crore in the six-month period from Rs 1,631.92 crore in the same period in the last fiscal.
Shares of the company were trading at Rs 205.50, down 0.92 per cent on the BSE.
*** Tourism Finance Corp Q2 net at Rs 5 cr * Tourism Finance Corporation of India today said its net profit for the second quarter ended September 30 stood at Rs 4.90 crore, clocking more than a three-fold jump from the corresponding period year ago.
The company had a net profit of Rs 1.36 crore in Q2 of fiscal 2008, TFCI informed BSE.
Income from operations rose to Rs 18.24 crore in the quarter under review from Rs 12.52 crore in the same period a year ago.
For the six months ended September 30, the company posted a net profit of Rs 10.11 crore against Rs 2.96 crore in the corresponding period a year ago.
Income from operations rose to Rs 32.50 crore in the quarter under review from Rs 25.47 crore last year.
Shares of the company were trading at Rs 13.65, down 2.15 per cent in the afternoon trade on the BSE.
Bajaj Auto Finance Q2 net up 21 pc at Rs 4 cr * Consumer finance company Bajaj Auto Finance today said its net profit for the second quarter ended September 30 rose by 20.89 per cent at Rs 4.57 crore over the corresponding period a year ago. The company clocked a net profit of Rs 3.78 crore for second quarter FY'08, Bajaj Auto Finance said in a filing with the BSE.
Total income for the quarter rose to Rs 136.82 crore from Rs 123.10 crore in the same period a year ago.
For the six months ended September 30, Bajaj Auto Finance reported a net profit of Rs 7.58 crore against Rs 7.89 crore in the same period last year.
Total income rose to Rs 264.62 crore in the second quarter this fiscal from Rs 226.90 crore a year ago.
Shares of the company closed at Rs 70.30, down 2.02 per cent on the BSE.
*** GNFC Q2 net dips 34 pc at Rs 79 cr * Gujarat Narmada Valley Fertilisers today said its net profit for the second quarter ended September 30 dipped by 34.45 per cent at Rs 79.04 crore over the corresponding period a year ago.
The company posted a net profit of Rs 120.58 crore in Q2 of last fiscal, GNFC said in a filing with the BSE.
Net sales of the company rose to Rs 868.13 crore in the quarter under review, from Rs 1,141.18 crore in the same period a year ago.
For the six months ended September 30, the firm reported a net profit of Rs 107.31 crore against Rs 196.37 crore in the same period last fiscal.
Net sales of the company rose to Rs 1,405.96 crore from Rs 1714.83 crore in the same period a year ago.
Shares of the company were trading at Rs 54.55 crore, down 2.76 per cent on the BSE.
Shalimar Paints Q2 net up 1 pc at Rs 2 cr * Shalimar Paints today said its net profit for the second quarter ended September 30 rose 0.86 per cent at Rs 2.33 crore over the corresponding period a year ago. The company had a net profit of Rs 2.31 crore in Q2 of fiscal 2008, Shalimar Paints said in a filing with the Bombay Stock Exchange.
Net sales of the company rose to Rs 101.47 crore for the quarter under review from Rs 80.51 crore in the same period last fiscal.
Shares of the company closed at Rs 183.50,down 8.11 per cent on the BSE.
**** Jindal Saw Q2 net up 11 pc at Rs 100 cr * Jindal Saw today said its net profit for the second quarter ended September 30 grew by 11.11 per cent at Rs 100.08 crore over the corresponding period a year ago.
The firm had a net profit of Rs 90.07 crore in Q2 of last fiscal, Jindal Saw said in a filing with the BSE.
Total income of the firm rose to Rs 1,488.68 crore for the quarter under review from Rs 1,430.53 crore in the same period a year ago.
For the six months ended September 30, Jindal Saw posted a net profit of Rs 285.68 crore, a 17.86 per cent growth over the corresponding year-ago period. The company had clocked a net profit of Rs 242.37 crore in the same period last year.
Jindal Saw's total income decreased to Rs 3,463.33 crore during the six-month period from Rs 3,989.79 crore in the year-ago period.
Shares of the company closed at Rs 355.45, down 3.08 per cent on the BSE.
Bajaj Finserv Q2 net at Rs 12 cr * Bajaj Group financial services arm Bajaj Finserv today posted a consolidated net loss of Rs 11.87 crore for the second quarter ended September 30, while it had a net profit of Rs 47.73 crore in the corresponding quarter last fiscal.
Total income of the company rose to Rs 92.37 crore in the quarter under review from Rs 84.11 crore in the same period a year ago, Bajaj Finserv informed the Bombay Stock Exchange.
On a standalone basis, it posted a net profit of Rs 14.23 crore for the quarter ended September 30, while it clocked a net profit of Rs 16.6 crore in the same period a year ago.
Bajaj Finserv has significant presence in the insurance business through its 74 per cent holding in Bajaj Allianz Life Insurance, a 74 per cent holding in Bajaj Allianz General Insurance, and in retail financing through its 40.53 per cent holding in Bajaj Auto Finance.
Shares of the company closed at Rs 150, down 0.40 per cent on the BSE.
*** Neyveli Lignite Corp Q2 net dips 18 pc at Rs 188 cr * State-run Neyveli Lignite Corp today said its net profit for the second quarter dipped 18.46 per cent at Rs 188.39 crore over the corresponding period last fiscal.
The company posted a net profit of Rs 231.04 crore in the Q2 of FY 2008, Neyveli Lignite said in a filing with the BSE.
Its total income rose to Rs 818.31 crore for the September quarter from Rs 882.08 crore in the same period in FY 2008 .
For the six months ended September 30, the company has a net profit of Rs 474.22 crore, against Rs 512.41 crore in the corresponding year-ago period.
Total income rose to Rs 2,055.93 crore in the Q2 ended September 30 from Rs 1,808.01 crore in the year-ago period.
Shares of the company closed at Rs 62.50, down 2.50 per cent on the BSE.
* Hinduja Foundries, one of the largest suppliers of castings to automobile makers, today said its net profit for second quarter ended September 30 declined by 77.13 per cent at Rs 1.07 crore over the corresponding period a year ago. The company had a net profit of Rs 4.68 crore for the same quarter last fiscal, Hinduja Foundries Ltd said in a filing with the Bombay Stock Exchange.
Its net income rose to Rs 119.85 crore for Q2 of current fiscal from Rs 110.51 crore for the same quarter last year.
For the six months ended September 30, 2008, it posted a net profit of Rs 5.65 crore, while the company had a net profit of Rs 8.77 crore for the same quarter last fiscal.
Its net income rose to Rs 245.05 crore for the reviewed period from Rs 215.05 for the corresponding period last year.
Shares of the company closed at Rs 101.20, down 4.53 per cent on the BSE.
**** Greenply Industries Q2 net at Rs 11.14 cr * Plywood and laminate products maker Greenply Industries today posted a marginal growth in its net profit at Rs 11.44 crore for the second quarter ended September 30 over the corresponding period a year ago.
The company had a net profit of Rs 11.18 crore for the same quarter last fiscal, Greenply Industries Ltd said in a filing with the Bombay Stock Exchange.
Its net income rose to Rs 236.68 crore for the reviewed period from 158.88 crore for the year-ago period.
For the six months ended September 30, 2008, it posted a net profit of Rs 18.40 crore, while it had a net profit of Rs 2025 crore in the same period last fiscal.
Shares of the company closed at Rs 73.60, down 5.64 per cent on the BSE.
The firm had clocked a net profit of Rs 18.51 crore in the same quarter last fiscal, Voltamp Transformers said in a filing with the Bombay Stock Exchange.
Net sales rose by 14.78 per cent at Rs 169.96 crore for the quarter under review from Rs 148.07 crore a year ago.
For six months ended September 30, the company reported a net profit of Rs 50.50 crore, a growth of 42.09 per cent over the corresponding year-ago period. It had a net profit of Rs 35.54 crore in the same period last fiscal.
The company's net sales rose to Rs 340.11 crore during six months from Rs 277.34 crore in the year-ago period.
Shares of the company were trading at Rs 405.05, down 3.24 per cent on the BSE.
**** Coromandel Fertilisers Q2 net up 71 pc at Rs 181 cr * Fertiliser and chemical manufacturer Coromandel Fertilisers Ltd today said its consolidated net profit for the its September quarter stood at Rs 181 crore, up by 71.56 per cent over the corresponding period a year ago.
The company had a consolidated net profit of Rs 105.5 crore in the same quarter last fiscal, Coromandel Fertilisers Ltd said in a filing to the Bombay Stock Exchange.
Its consolidated total income for the quarter rose to Rs 3,404.7 crore from Rs 1,802.7 crore for the year-ago period.
While net profit for the six months ended September 30, 2008 stood at Rs 374.8 crore, against Rs 131.2 crore for the same period last fiscal.
Shares of the company were trading at Rs 132.20, up 5.30 per cent in afternoon trade on the BSE.
Yes Bank Q2 net up 40 pc at Rs 64 cr * Private sector lender Yes Bank today said its net profit for the second quarter ended September 30 grew by 40.50 per cent at Rs 63.62 crore over the corresponding quarter last fiscal.
The bank registered a net profit of Rs 45.28 crore in the second quarter of FY'08, Yes Bank said in a filing with the Bombay Stock Exchange.
Total income for the quarter under review rose to Rs 569.93 crore from Rs 379.38 crore in the year-ago period.
"In the recent market environment, Yes Bank has preserved to ensure highest credit quality of assets while sustaining income and growth objectives," Yes Bank Managing Director and CEO Rana Kapoor said.
Shares of the company were trading at Rs 80.05, 0.44 per cent in afternoon trade on the BSE.
*** Blue Dart Express Q2 net dips 22 pc at Rs 13 cr * Courier and logistics major Blue Dart Express today said its net profit for the second quarter ended September 30 declined 22.08 per cent at Rs 13.58 crore over corresponding period last fiscal.
The firm registered a net profit of Rs 17.43 crore in the second quarter of FY'08, Blue Dart Express said in a filing with the BSE.
The company's net sales rose to Rs 262.84 crore in the quarter from Rs 207.30 crore in the same period a year ago.
For the six months ended September 30, Blue Dart Express reported a net profit of Rs 64.95 crore against Rs 50.99 crore in the corresponding period a year ago. Net sales of the firm rose to Rs 747.13 crore this fiscal from Rs 576.44 crore in the same period last year.
Shares of the company were trading at Rs 520, down 5.45 per cent in afternoon trade on the BSE.
Kirloskar Oil Q2 net dips 18 pc at Rs 27.3 cr * Kirloskar Oil Engines Ltd today said its net profit for the second quarter ended September 30 declined 18.75 per cent at Rs 27.3 crore over the corresponding period a year ago. The company had clocked a net profit of Rs 33.6 crore in the same quarter last fiscal, Kirloskar Oil Engines Ltd said in a filing with the Bombay Stock Exchange.
Net sales for the quarter under review rose to Rs 592 crore from Rs 543.5 crore for the corresponding period last fiscal.
For the six months ended September 30, 2008, the company posted a net profit of Rs 56.8 crore against a net profit of Rs 51 crore for the same period last year.
The company's net sales rose to Rs 1,157.8 crore for the reviewed period from Rs 1,035.1 crore for the same period last fiscal. Shares of the company were trading at Rs 55.50, down 1.16 per cent in afternoon trade on the BSE.
**** Sona Koyo Q2 net loss at Rs 7.32 cr * Steering gears and drive line components maker Sona Koyo Steering Systems today said its net loss for second quarter ended September 30 stood at Rs 7.32 crore, against a net profit of Rs 8.79 crore in the same period a year ago.
The firm's total income for the quarter under review rose to Rs 180.27 crore from Rs 166.30 crore in the second quarter of the previous fiscal, Sona Koyo Steering Systems Ltd said in a filing with the Bombay Stock Exchange.
For the six months ended September 30, the firm announced a net loss of Rs 8.96 crore, while net profit in the same period last fiscal stood at Rs 16.77 crore.
Shares of the company were trading at Rs 10.50, up 4.17 per cent on the BSE.
Bajaj Electricals Q2 net dips 7 pc at Rs 12 cr * Bajaj Electricals today said its net profit for the second quarter ended September 30 declined by 7.43 per cent at Rs 12.2 crore over the corresponding period last fiscal. The company had clocked a net profit of Rs 13.18 crore in the second quarter of fiscal 2008, Bajaj Electricals said in a filing with the Bombay Stock Exchange.
Net sales of the firm rose to Rs 378.57 crore in the quarter from Rs 304.28 crore in the same period a year ago.
For the six months ended September 30, the firm reported a net profit of Rs 22.22 crore, against Rs 20.96 crore in the corresponding period a year ago.
Bajaj Electricals' net sales rose to Rs 695.91 crore in the quarter under review from Rs 556.41 crore in the same period last year.
Shares of the company were trading at Rs 338.15, down 1.33 per cent in afternoon trade on the BSE.
*** Nippon Batteries Q2 net down 12 pc at Rs 4 cr * Nippon Batteries today said its net profit for the second quarter ended September 30 dipped by 11.95 per cent at Rs 3.83 crore over the corresponding quarter last fiscal.
The company had a net profit of Rs 4.35 crore in the second quarter FY'08, Nippon Batteries said in a filing with the BSE.
Total income for the quarter under review rose to Rs 73.09 crore from Rs 71.10 crore in the same period last year.
For the six months ended September 30, the company reported a net profit of Rs 7.55 crore, against Rs 8.56 crore in the corresponding period a year ago.
The firm's total income rose to Rs 143.10 crore in the second quarter from Rs 144.16 crore in the same period a year ago.
Shares of the company were trading at Rs 310, up 1.64 per cent in afternoon trade on the BSE.
Century Textiles Q2 net dips 57 pc at Rs 28 cr * B K Birla Group-controlled Century Textiles & Industries today said its net profit for second quarter ended September 30 declined 56.98 per cent at Rs 28.55 crore over the same period a year ago. The firm had a net profit of Rs 66.37 crore for Q2 of fiscal 2008, Century Textiles said in a filing with the BSE.
Its total income rose to Rs 872.11 crore in Q2 of current fiscal from Rs 784.95 crore in the same period last year.
For the six months ended September 30, Century Textiles reported a net profit of Rs 91.05 crore. It had clocked a net profit of Rs 170.48 in the same period last fiscal, and its total income rose to Rs 1,825.93 crore in the six-month period from Rs 1,631.92 crore in the same period in the last fiscal.
Shares of the company were trading at Rs 205.50, down 0.92 per cent on the BSE.
*** Tourism Finance Corp Q2 net at Rs 5 cr * Tourism Finance Corporation of India today said its net profit for the second quarter ended September 30 stood at Rs 4.90 crore, clocking more than a three-fold jump from the corresponding period year ago.
The company had a net profit of Rs 1.36 crore in Q2 of fiscal 2008, TFCI informed BSE.
Income from operations rose to Rs 18.24 crore in the quarter under review from Rs 12.52 crore in the same period a year ago.
For the six months ended September 30, the company posted a net profit of Rs 10.11 crore against Rs 2.96 crore in the corresponding period a year ago.
Income from operations rose to Rs 32.50 crore in the quarter under review from Rs 25.47 crore last year.
Shares of the company were trading at Rs 13.65, down 2.15 per cent in the afternoon trade on the BSE.
Bajaj Auto Finance Q2 net up 21 pc at Rs 4 cr * Consumer finance company Bajaj Auto Finance today said its net profit for the second quarter ended September 30 rose by 20.89 per cent at Rs 4.57 crore over the corresponding period a year ago. The company clocked a net profit of Rs 3.78 crore for second quarter FY'08, Bajaj Auto Finance said in a filing with the BSE.
Total income for the quarter rose to Rs 136.82 crore from Rs 123.10 crore in the same period a year ago.
For the six months ended September 30, Bajaj Auto Finance reported a net profit of Rs 7.58 crore against Rs 7.89 crore in the same period last year.
Total income rose to Rs 264.62 crore in the second quarter this fiscal from Rs 226.90 crore a year ago.
Shares of the company closed at Rs 70.30, down 2.02 per cent on the BSE.
*** GNFC Q2 net dips 34 pc at Rs 79 cr * Gujarat Narmada Valley Fertilisers today said its net profit for the second quarter ended September 30 dipped by 34.45 per cent at Rs 79.04 crore over the corresponding period a year ago.
The company posted a net profit of Rs 120.58 crore in Q2 of last fiscal, GNFC said in a filing with the BSE.
Net sales of the company rose to Rs 868.13 crore in the quarter under review, from Rs 1,141.18 crore in the same period a year ago.
For the six months ended September 30, the firm reported a net profit of Rs 107.31 crore against Rs 196.37 crore in the same period last fiscal.
Net sales of the company rose to Rs 1,405.96 crore from Rs 1714.83 crore in the same period a year ago.
Shares of the company were trading at Rs 54.55 crore, down 2.76 per cent on the BSE.
Shalimar Paints Q2 net up 1 pc at Rs 2 cr * Shalimar Paints today said its net profit for the second quarter ended September 30 rose 0.86 per cent at Rs 2.33 crore over the corresponding period a year ago. The company had a net profit of Rs 2.31 crore in Q2 of fiscal 2008, Shalimar Paints said in a filing with the Bombay Stock Exchange.
Net sales of the company rose to Rs 101.47 crore for the quarter under review from Rs 80.51 crore in the same period last fiscal.
Shares of the company closed at Rs 183.50,down 8.11 per cent on the BSE.
**** Jindal Saw Q2 net up 11 pc at Rs 100 cr * Jindal Saw today said its net profit for the second quarter ended September 30 grew by 11.11 per cent at Rs 100.08 crore over the corresponding period a year ago.
The firm had a net profit of Rs 90.07 crore in Q2 of last fiscal, Jindal Saw said in a filing with the BSE.
Total income of the firm rose to Rs 1,488.68 crore for the quarter under review from Rs 1,430.53 crore in the same period a year ago.
For the six months ended September 30, Jindal Saw posted a net profit of Rs 285.68 crore, a 17.86 per cent growth over the corresponding year-ago period. The company had clocked a net profit of Rs 242.37 crore in the same period last year.
Jindal Saw's total income decreased to Rs 3,463.33 crore during the six-month period from Rs 3,989.79 crore in the year-ago period.
Shares of the company closed at Rs 355.45, down 3.08 per cent on the BSE.
Bajaj Finserv Q2 net at Rs 12 cr * Bajaj Group financial services arm Bajaj Finserv today posted a consolidated net loss of Rs 11.87 crore for the second quarter ended September 30, while it had a net profit of Rs 47.73 crore in the corresponding quarter last fiscal.
Total income of the company rose to Rs 92.37 crore in the quarter under review from Rs 84.11 crore in the same period a year ago, Bajaj Finserv informed the Bombay Stock Exchange.
On a standalone basis, it posted a net profit of Rs 14.23 crore for the quarter ended September 30, while it clocked a net profit of Rs 16.6 crore in the same period a year ago.
Bajaj Finserv has significant presence in the insurance business through its 74 per cent holding in Bajaj Allianz Life Insurance, a 74 per cent holding in Bajaj Allianz General Insurance, and in retail financing through its 40.53 per cent holding in Bajaj Auto Finance.
Shares of the company closed at Rs 150, down 0.40 per cent on the BSE.
*** Neyveli Lignite Corp Q2 net dips 18 pc at Rs 188 cr * State-run Neyveli Lignite Corp today said its net profit for the second quarter dipped 18.46 per cent at Rs 188.39 crore over the corresponding period last fiscal.
The company posted a net profit of Rs 231.04 crore in the Q2 of FY 2008, Neyveli Lignite said in a filing with the BSE.
Its total income rose to Rs 818.31 crore for the September quarter from Rs 882.08 crore in the same period in FY 2008 .
For the six months ended September 30, the company has a net profit of Rs 474.22 crore, against Rs 512.41 crore in the corresponding year-ago period.
Total income rose to Rs 2,055.93 crore in the Q2 ended September 30 from Rs 1,808.01 crore in the year-ago period.
Shares of the company closed at Rs 62.50, down 2.50 per cent on the BSE.
* Hinduja Foundries, one of the largest suppliers of castings to automobile makers, today said its net profit for second quarter ended September 30 declined by 77.13 per cent at Rs 1.07 crore over the corresponding period a year ago. The company had a net profit of Rs 4.68 crore for the same quarter last fiscal, Hinduja Foundries Ltd said in a filing with the Bombay Stock Exchange.
Its net income rose to Rs 119.85 crore for Q2 of current fiscal from Rs 110.51 crore for the same quarter last year.
For the six months ended September 30, 2008, it posted a net profit of Rs 5.65 crore, while the company had a net profit of Rs 8.77 crore for the same quarter last fiscal.
Its net income rose to Rs 245.05 crore for the reviewed period from Rs 215.05 for the corresponding period last year.
Shares of the company closed at Rs 101.20, down 4.53 per cent on the BSE.
**** Greenply Industries Q2 net at Rs 11.14 cr * Plywood and laminate products maker Greenply Industries today posted a marginal growth in its net profit at Rs 11.44 crore for the second quarter ended September 30 over the corresponding period a year ago.
The company had a net profit of Rs 11.18 crore for the same quarter last fiscal, Greenply Industries Ltd said in a filing with the Bombay Stock Exchange.
Its net income rose to Rs 236.68 crore for the reviewed period from 158.88 crore for the year-ago period.
For the six months ended September 30, 2008, it posted a net profit of Rs 18.40 crore, while it had a net profit of Rs 2025 crore in the same period last fiscal.
Shares of the company closed at Rs 73.60, down 5.64 per cent on the BSE.
Thursday, October 16, 2008
Markets tumble as recession fears trump bailout
NEW YORK (Reuters) - Gloomy economic data and warnings from the U.S. Federal Reserve that hard times were still to come wiped out two days of relative optimism about the credit crisis and sent markets into free-fall on Wednesday.
In the worst one-day percentage declines since the stock market crash of 1987, the Dow Jones industrial average ended down 733 points or 7.87 percent, and the S&P 500 index lost 9 percent. The losses reversed Monday's record surges that had been sparked by optimism about bank bailouts.
Fed Chairman Ben Bernanke warned that credit market turmoil posed a "significant threat" to an already weak economy.
European shares shed 6 percent and U.S. crude fell more than $4 a barrel to a 13-month low of $74.54.
France, Germany and Britain called for leaders of the Group of Eight major industrialized countries to gather next month with the heads of emerging economies to consider a radical overhaul of the world's 60-year-old financial architecture.
The White House said G8 leaders were expected to meet this year on the worst financial crisis since the Great Depression.
The United States reported its biggest monthly decline in retail sales in more than three years, and Europe offered negative economic data and outlooks of its own.
Governments around the world have pledged $3.2 trillion in emergency measures, including taking stakes in banks to help them stabilize, rallying world markets on Monday.
Optimism quickly gave way to fears that major economies were headed for recession despite government intervention.
GLOOMY OUTLOOK FROM FED
"By restricting flows of credit to households, businesses, and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," Bernanke said.
Suggesting an openness to further interest-rate cuts, Bernanke said concerns about inflation were diminishing. He said it would take time to restore normal flows of credit.
Fed Vice Chairman Donald Kohn said latest readings on the U.S. economy have become more downbeat and the impact of a recent emergency interest rate cut had been "overwhelmed" by escalating mistrust among financial institutions unwilling to lend to one another.
The U.S. housing market has yet to hit bottom, and inventories of unsold homes are likely to remain elevated, Kohn said. It was probable the economy would remain "subpar" well into next year, gradually improving in late 2009 and 2010, he said.
As stocks around the world plunged and emerging markets were pummeled, the dollar and safe haven assets such as gold and short term U.S. treasuries rose.
"It looks like everything that's economically sensitive is getting hit pretty good," said Scott Vergin, portfolio manager at Thrivent Financial in Minneapolis, Minnesota.
"The thing is, how much has the credit crunch already impacted the real economy?" added Vergin. "That's what everyone's really worried about."
SUMMIT TO REFORM FINANCIAL SYSTEM
At a European Union summit in Brussels, British Prime Minister Gordon Brown led calls for an international summit and urged a rebuilding of the International Monetary Fund (IMF) as the keystone of global market regulation.
EU leaders called for a summit soon to revamp financial structures set up at the Bretton Woods conference in 1944.
Dutch Finance Minister Wouter Bos said a stronger role for the IMF was needed "in the absence of American leadership at the moment." French President Nicolas Sarkozy told the summit a "new form of capitalism" was needed.
The United States on Tuesday offered to take up to $250 billion worth of equity in its banks, an astonishing move in the home of free market capitalism.
U.S. President George W. Bush stressed that the move was temporary. "I'm confident in the long run this economy will come back," he told reporters.
The U.S. action followed an agreement by European leaders to undertake a 2.2 trillion euro ($3 trillion) rescue of European banking giants, which have been hit by a credit crisis brought on by defaulting mortgages in the United States.
SIGNS OF RECESSION
Signs of a looming recession abounded on Wednesday.
The U.S. government said retail sales dropped 1.2 percent in September, the biggest monthly decline in three years, and wholesale prices slipped 0.4 percent.
The Fed's Beige Book report said economic activity weakened across the United States in September as businesses revised capital investments and consumers curtailed spending.
U.S. bank JPMorgan Chase said third-quarter profit plunged 84 percent, while Wells Fargo & Co reported a 25 percent drop in earnings.
British unemployment rose to 5.7 percent, its highest level in eight years, according to government data. And German economic growth will only be slightly above zero in 2009, Finance Minister Peer Steinbrueck said.
The European Central Bank said it would allow banks to swap a larger range of their assets for central bank funds and offer extra U.S. dollar liquidity through foreign exchange swaps.
Southeast Asian nations, backed by $10 billion from the World Bank, were the latest to join the rescue effort, agreeing to create a multibillion fund to help banks.
Iceland, driven close to bankruptcy by the effects of frozen credit markets on its banks, cut interest rates a staggering 3.5 percentage points as its officials pursued help from Russia via a multibillion-euro loan.
The economy is dominating the U.S. presidential campaign, which sees a final debate between the candidates on Wednesday.
Democrat Barack Obama has accused Republicans of presiding over unfettered financial deregulation while John McCain has sought to regain his footing on economic issues after drawing criticism for saying U.S. fundamentals were strong.
In the worst one-day percentage declines since the stock market crash of 1987, the Dow Jones industrial average ended down 733 points or 7.87 percent, and the S&P 500 index lost 9 percent. The losses reversed Monday's record surges that had been sparked by optimism about bank bailouts.
Fed Chairman Ben Bernanke warned that credit market turmoil posed a "significant threat" to an already weak economy.
European shares shed 6 percent and U.S. crude fell more than $4 a barrel to a 13-month low of $74.54.
France, Germany and Britain called for leaders of the Group of Eight major industrialized countries to gather next month with the heads of emerging economies to consider a radical overhaul of the world's 60-year-old financial architecture.
The White House said G8 leaders were expected to meet this year on the worst financial crisis since the Great Depression.
The United States reported its biggest monthly decline in retail sales in more than three years, and Europe offered negative economic data and outlooks of its own.
Governments around the world have pledged $3.2 trillion in emergency measures, including taking stakes in banks to help them stabilize, rallying world markets on Monday.
Optimism quickly gave way to fears that major economies were headed for recession despite government intervention.
GLOOMY OUTLOOK FROM FED
"By restricting flows of credit to households, businesses, and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," Bernanke said.
Suggesting an openness to further interest-rate cuts, Bernanke said concerns about inflation were diminishing. He said it would take time to restore normal flows of credit.
Fed Vice Chairman Donald Kohn said latest readings on the U.S. economy have become more downbeat and the impact of a recent emergency interest rate cut had been "overwhelmed" by escalating mistrust among financial institutions unwilling to lend to one another.
The U.S. housing market has yet to hit bottom, and inventories of unsold homes are likely to remain elevated, Kohn said. It was probable the economy would remain "subpar" well into next year, gradually improving in late 2009 and 2010, he said.
As stocks around the world plunged and emerging markets were pummeled, the dollar and safe haven assets such as gold and short term U.S. treasuries rose.
"It looks like everything that's economically sensitive is getting hit pretty good," said Scott Vergin, portfolio manager at Thrivent Financial in Minneapolis, Minnesota.
"The thing is, how much has the credit crunch already impacted the real economy?" added Vergin. "That's what everyone's really worried about."
SUMMIT TO REFORM FINANCIAL SYSTEM
At a European Union summit in Brussels, British Prime Minister Gordon Brown led calls for an international summit and urged a rebuilding of the International Monetary Fund (IMF) as the keystone of global market regulation.
EU leaders called for a summit soon to revamp financial structures set up at the Bretton Woods conference in 1944.
Dutch Finance Minister Wouter Bos said a stronger role for the IMF was needed "in the absence of American leadership at the moment." French President Nicolas Sarkozy told the summit a "new form of capitalism" was needed.
The United States on Tuesday offered to take up to $250 billion worth of equity in its banks, an astonishing move in the home of free market capitalism.
U.S. President George W. Bush stressed that the move was temporary. "I'm confident in the long run this economy will come back," he told reporters.
The U.S. action followed an agreement by European leaders to undertake a 2.2 trillion euro ($3 trillion) rescue of European banking giants, which have been hit by a credit crisis brought on by defaulting mortgages in the United States.
SIGNS OF RECESSION
Signs of a looming recession abounded on Wednesday.
The U.S. government said retail sales dropped 1.2 percent in September, the biggest monthly decline in three years, and wholesale prices slipped 0.4 percent.
The Fed's Beige Book report said economic activity weakened across the United States in September as businesses revised capital investments and consumers curtailed spending.
U.S. bank JPMorgan Chase said third-quarter profit plunged 84 percent, while Wells Fargo & Co reported a 25 percent drop in earnings.
British unemployment rose to 5.7 percent, its highest level in eight years, according to government data. And German economic growth will only be slightly above zero in 2009, Finance Minister Peer Steinbrueck said.
The European Central Bank said it would allow banks to swap a larger range of their assets for central bank funds and offer extra U.S. dollar liquidity through foreign exchange swaps.
Southeast Asian nations, backed by $10 billion from the World Bank, were the latest to join the rescue effort, agreeing to create a multibillion fund to help banks.
Iceland, driven close to bankruptcy by the effects of frozen credit markets on its banks, cut interest rates a staggering 3.5 percentage points as its officials pursued help from Russia via a multibillion-euro loan.
The economy is dominating the U.S. presidential campaign, which sees a final debate between the candidates on Wednesday.
Democrat Barack Obama has accused Republicans of presiding over unfettered financial deregulation while John McCain has sought to regain his footing on economic issues after drawing criticism for saying U.S. fundamentals were strong.
RBI cuts CRR by 100 basis points
The Reserve Bank of India on Wednesday cut the Cash Reserve Ratio (CRR) further by 100 basis points to 6.5 per cent of NDTL with effect from the current reporting fortnight that began on October 11, 2008. This measure will release additional liquidity into the system of the order of Rs.40,000 crore.
On Tuesday, October 14, 2008, the RBI decided to conduct a special 14 day Repo at 9 per cent per annum for a notified amount of Rs 20,000 crore with a view to enabling banks to meet the liquidity requirements of mutual funds. Rs 3,500 crore of this facility was utilised by banks yesterday.
Further, the Reserve Bank announced this morning that this 14 day repo facility will now be conducted every day until further notice upto a cumulative amount of Rs 20,000 crore for the same purpose. Banks obtain liquidity from the Reserve Bank under the Liquidity Adjustment Facility (LAF) against the collateral of eligible securities that are in excess of their prescribed Statutory Liquidity Ratio (SLR).
It has been decided, purely as a temporary measure, that banks may avail of additional liquidity support exclusively for the purpose of meeting the liquidity requirements of mutual funds to the extent of up to 0.5 per cent of their NDTL. This additional liquidity support will terminate 14 days from the closure of this special term repo facility announced on October 14, 2008. This accommodation will be in addition to the temporary measure announced on September 16, 2008 permitting banks to avail of additional liquidity support to the extent of up to 1 per cent of their NDTL.
RBI instituted a mechanism of Special Market Operations (SMO) for public sector oil marketing companies in June-July 2008 taking into account the extraordinary situation then prevailing in the money and forex markets. RBI will institute a similar facility when oil bonds become available.
Under the Agricultural Debt Waiver and Debt Relief Scheme Government had agreed to provide to commercial banks, RRBs and co-operative credit institutions a sum of Rs.25,000 crore as the first instalment. At the request of the Government, RBI has agreed to provide the sum to the lending institutions immediately. This liquidity support will be provided by the Reserve Bank of India under Section 17(3b) and Section 17(4E) of RBI Act to scheduled banks and NABARD respectively.
Interest Rates on FCNR (B) Deposits
Currently, the interest rate ceiling on FCNR(B) deposits of all maturities has been fixed at Libor/Euribor/Swap rates for the corresponding maturities minus 25 basis points for the respective foreign currencies. In view of the prevailing market conditions, RBI has decided to increase, with immediate effect, the interest rate ceiling on FCNR (B) deposits by 50 basis points, i.e., to Libor/Euribor/Swap rates plus 25 basis points.
Interest Rate on NR(E) RA Deposits
Currently, the interest rate ceiling on NR(E) RA for one to three years maturity should not exceed the Libor/Euribor/Swap rates plus 50 basis points for US dollar of corresponding maturity. In view of the prevailing market conditions, RBI has decided to increase, with immediate effect, the interest rate ceiling on NR(E)RA deposits by 50 basis points, i.e., to Libor/Euribor/Swap rates plus 100 basis points.
Banks will be allowed to borrow funds from their overseas branches and correspondent banks up to a limit of 50 per cent of their unimpaired Tier I capital as at the close of the previous quarter or $10 million, whichever is higher, as against the existing limit of 25 per cent.
The above measures will be reviewed on a continuous basis in the light of the evolving liquidity conditions.
The Reserve Bank is monitoring developments in the financial markets closely and continuously and would respond swiftly and even pre-emptively to any adverse external developments impinging on domestic financial stability, price stability and inflation expectations. The Reserve Bank is committed to maintaining financial stability and active, and flexible liquidity management using all policy instruments is an integral part of this objective.
On Tuesday, October 14, 2008, the RBI decided to conduct a special 14 day Repo at 9 per cent per annum for a notified amount of Rs 20,000 crore with a view to enabling banks to meet the liquidity requirements of mutual funds. Rs 3,500 crore of this facility was utilised by banks yesterday.
Further, the Reserve Bank announced this morning that this 14 day repo facility will now be conducted every day until further notice upto a cumulative amount of Rs 20,000 crore for the same purpose. Banks obtain liquidity from the Reserve Bank under the Liquidity Adjustment Facility (LAF) against the collateral of eligible securities that are in excess of their prescribed Statutory Liquidity Ratio (SLR).
It has been decided, purely as a temporary measure, that banks may avail of additional liquidity support exclusively for the purpose of meeting the liquidity requirements of mutual funds to the extent of up to 0.5 per cent of their NDTL. This additional liquidity support will terminate 14 days from the closure of this special term repo facility announced on October 14, 2008. This accommodation will be in addition to the temporary measure announced on September 16, 2008 permitting banks to avail of additional liquidity support to the extent of up to 1 per cent of their NDTL.
RBI instituted a mechanism of Special Market Operations (SMO) for public sector oil marketing companies in June-July 2008 taking into account the extraordinary situation then prevailing in the money and forex markets. RBI will institute a similar facility when oil bonds become available.
Under the Agricultural Debt Waiver and Debt Relief Scheme Government had agreed to provide to commercial banks, RRBs and co-operative credit institutions a sum of Rs.25,000 crore as the first instalment. At the request of the Government, RBI has agreed to provide the sum to the lending institutions immediately. This liquidity support will be provided by the Reserve Bank of India under Section 17(3b) and Section 17(4E) of RBI Act to scheduled banks and NABARD respectively.
Interest Rates on FCNR (B) Deposits
Currently, the interest rate ceiling on FCNR(B) deposits of all maturities has been fixed at Libor/Euribor/Swap rates for the corresponding maturities minus 25 basis points for the respective foreign currencies. In view of the prevailing market conditions, RBI has decided to increase, with immediate effect, the interest rate ceiling on FCNR (B) deposits by 50 basis points, i.e., to Libor/Euribor/Swap rates plus 25 basis points.
Interest Rate on NR(E) RA Deposits
Currently, the interest rate ceiling on NR(E) RA for one to three years maturity should not exceed the Libor/Euribor/Swap rates plus 50 basis points for US dollar of corresponding maturity. In view of the prevailing market conditions, RBI has decided to increase, with immediate effect, the interest rate ceiling on NR(E)RA deposits by 50 basis points, i.e., to Libor/Euribor/Swap rates plus 100 basis points.
Banks will be allowed to borrow funds from their overseas branches and correspondent banks up to a limit of 50 per cent of their unimpaired Tier I capital as at the close of the previous quarter or $10 million, whichever is higher, as against the existing limit of 25 per cent.
The above measures will be reviewed on a continuous basis in the light of the evolving liquidity conditions.
The Reserve Bank is monitoring developments in the financial markets closely and continuously and would respond swiftly and even pre-emptively to any adverse external developments impinging on domestic financial stability, price stability and inflation expectations. The Reserve Bank is committed to maintaining financial stability and active, and flexible liquidity management using all policy instruments is an integral part of this objective.
Nifty stock futures fall 6 pc in Singapore
SINGAPORE: Nifty stock index futures fell 6 per cent in Singapore on Thursday, indicating a sharply lower market open as global markets reeled from recession worries.
By 0215 GMT, Nifty futures were down 200 points at 3,139. On Wednesday, India's 50-share NSE index fell 5.1 per cent to 3,388.4, while the main 30-share BSE index declined 5.9 per cent.
The MSCI index of Asia-Pacific shares outside of Japan traded 5.4 per cent lower on Thursday after downbeat US economic data spread fears of a deep global slowdown.
On Wednesday, India's central bank slashed its cash reserve requirement for banks for the second time in a week on Wednesday, releasing 400 billion rupees ($8.2 billion) into the banking system to boost money market liquidity.
By 0215 GMT, Nifty futures were down 200 points at 3,139. On Wednesday, India's 50-share NSE index fell 5.1 per cent to 3,388.4, while the main 30-share BSE index declined 5.9 per cent.
The MSCI index of Asia-Pacific shares outside of Japan traded 5.4 per cent lower on Thursday after downbeat US economic data spread fears of a deep global slowdown.
On Wednesday, India's central bank slashed its cash reserve requirement for banks for the second time in a week on Wednesday, releasing 400 billion rupees ($8.2 billion) into the banking system to boost money market liquidity.
Wednesday, October 15, 2008
Indian economy in danger, say three wise men of BJP
The BJP has held the UPA government responsible for the current liquidity crisis. Describing the crisis as “the UPA government’s own creation,” the BJP maintained that it was the government’s preference for monetary measures that is responsible for the crisis.
Going a step further, the BJP said that the Indian economy was in real danger and that finance minister P Chidambaram was misleading the country by stating that the fundamentals of the economy were strong. Warning that the finance minister’s regular reiteration of the Indian economy’s strong fundamentals was meaningless, senior BJP leaders Jaswant Singh, Yashwant Sinha and Arun Shourie drew attention to the fate of economies of southeast Asia, Brazil and Argentina as well as the western economies, which despite strong fundamentals now find themselves in deep crisis.
“If the government continues to fail in taking appropriate measures, India may face the situation of Brazil and Argentina. Our already vulnerable economy is now in real danger of being seriously destabilised. To go on chanting the lullaby, ‘our fundamentals are strong’, is worse than useless.
Nothing happened to the fundamentals of southeast Asian economies overnight, yet their currencies, their financial systems, and eventually their economies collapsed,” senior BJP leader Arun Shourie said. The BJP has argued that far from the fundamentals of the Indian economy being strong, these have been “decidedly weakened” by the UPA government. “What we have today is a crisis of confidence and trust: These cannot be restored by empty pep talk. They have to be restored by specific measures,” the BJP leaders said.
The BJP locates the cause of the current economic crisis in the country to the preference for monetary measures to tackle inflation. Former finance minister Yashwant Sinha said that the government ignored “the supply side, which was responsible for this inflation”. The party has called short-term responses to the liquidity crunch as well as longer term measures to strengthen the economy. Countering charges from the government, that the main Opposition party “only criticised without offering solutions”, the BJP put forth a 12 step programme to deal with the crisis.
The party’s contention is that the Indian economy, which was already facing a crisis arising out of the government’s mismanagement has now been “severely mauled” by the prevailing global financial crisis. Senior BJP leader Jaswant Singh said, “the global economic tsunami has hit India as well. There are global dynamics to the crisis but there are national challenges as well.
There is a problem of solvency of the national government and institutional solvency”. Countering finance minister p Chidambaram’s contention that a bailout like the West would resolve India’s liquidity crisis, Mr Sinha said that the current liquidity crisis has little to do with the global crisis “The stock market crisis is just one manifestation of it. Equally badly affected are the money market and the exchange market.
Sentiment is weak and loss of confidence is palpable. The violent fluctuations, noticed in these markets in the last couple of weeks, is the surest sign of the nervousness which has gripped these markets. It is the crisis in the real economy, however, which is the cause for more serious concern”, the former finance minister said.
The BJP maintained that the government’s mismanagement had already resulted in imbalances such as the high fiscal deficit, high current account deficit, elevated inflation levels, and a collapsing real estate sector. None of these, according to Mr Sinha, were the creation of the global crisis. Instead these are all the direct result of the “complacency and the cavalier attitude of the UPA government which slept on the wheel while the crisis was brewing”. The senior leader said that the government contributed to this problems by its acts of omission and commission.
Going a step further, the BJP said that the Indian economy was in real danger and that finance minister P Chidambaram was misleading the country by stating that the fundamentals of the economy were strong. Warning that the finance minister’s regular reiteration of the Indian economy’s strong fundamentals was meaningless, senior BJP leaders Jaswant Singh, Yashwant Sinha and Arun Shourie drew attention to the fate of economies of southeast Asia, Brazil and Argentina as well as the western economies, which despite strong fundamentals now find themselves in deep crisis.
“If the government continues to fail in taking appropriate measures, India may face the situation of Brazil and Argentina. Our already vulnerable economy is now in real danger of being seriously destabilised. To go on chanting the lullaby, ‘our fundamentals are strong’, is worse than useless.
Nothing happened to the fundamentals of southeast Asian economies overnight, yet their currencies, their financial systems, and eventually their economies collapsed,” senior BJP leader Arun Shourie said. The BJP has argued that far from the fundamentals of the Indian economy being strong, these have been “decidedly weakened” by the UPA government. “What we have today is a crisis of confidence and trust: These cannot be restored by empty pep talk. They have to be restored by specific measures,” the BJP leaders said.
The BJP locates the cause of the current economic crisis in the country to the preference for monetary measures to tackle inflation. Former finance minister Yashwant Sinha said that the government ignored “the supply side, which was responsible for this inflation”. The party has called short-term responses to the liquidity crunch as well as longer term measures to strengthen the economy. Countering charges from the government, that the main Opposition party “only criticised without offering solutions”, the BJP put forth a 12 step programme to deal with the crisis.
The party’s contention is that the Indian economy, which was already facing a crisis arising out of the government’s mismanagement has now been “severely mauled” by the prevailing global financial crisis. Senior BJP leader Jaswant Singh said, “the global economic tsunami has hit India as well. There are global dynamics to the crisis but there are national challenges as well.
There is a problem of solvency of the national government and institutional solvency”. Countering finance minister p Chidambaram’s contention that a bailout like the West would resolve India’s liquidity crisis, Mr Sinha said that the current liquidity crisis has little to do with the global crisis “The stock market crisis is just one manifestation of it. Equally badly affected are the money market and the exchange market.
Sentiment is weak and loss of confidence is palpable. The violent fluctuations, noticed in these markets in the last couple of weeks, is the surest sign of the nervousness which has gripped these markets. It is the crisis in the real economy, however, which is the cause for more serious concern”, the former finance minister said.
The BJP maintained that the government’s mismanagement had already resulted in imbalances such as the high fiscal deficit, high current account deficit, elevated inflation levels, and a collapsing real estate sector. None of these, according to Mr Sinha, were the creation of the global crisis. Instead these are all the direct result of the “complacency and the cavalier attitude of the UPA government which slept on the wheel while the crisis was brewing”. The senior leader said that the government contributed to this problems by its acts of omission and commission.
Friday, October 10, 2008
India's Central Bank Cuts Cash Reserve Ratio to 7.5%
India's central bank deepened a cut in the amount of cash lenders need to set aside as reserves to cushion Asia's third-largest economy from a global slowdown.
The Reserve Bank of India reduced the cash reserve ratio to 7.5 percent from 9 percent effective tomorrow. The measure will release 600 billion rupees ($12.2 billion) into the financial system, the bank said in a statement in Mumbai.
The move by Governor Duvvuri Subbarao comes after the Federal Reserve, the European Central Bank, the People's Bank of China and other monetary authorities slashed rates this week to avert a global recession. India's bonds rallied while the benchmark Sensitive index, which fell as much as 9.6 percent today, pared losses, after the announcement.
Today's cut extends the 50 basis point reduction in cash reserves the Reserve Bank announced on Oct. 6, the first reduction in five years.
The Reserve Bank of India reduced the cash reserve ratio to 7.5 percent from 9 percent effective tomorrow. The measure will release 600 billion rupees ($12.2 billion) into the financial system, the bank said in a statement in Mumbai.
The move by Governor Duvvuri Subbarao comes after the Federal Reserve, the European Central Bank, the People's Bank of China and other monetary authorities slashed rates this week to avert a global recession. India's bonds rallied while the benchmark Sensitive index, which fell as much as 9.6 percent today, pared losses, after the announcement.
Today's cut extends the 50 basis point reduction in cash reserves the Reserve Bank announced on Oct. 6, the first reduction in five years.
Stock funds lose $43 billion so far in Oct: TrimTabs
Investors pulled a net $43.3 billion from all equity mutual funds so far in October, extending the record outflows experienced during September, TrimTabs Investment Research said on Thursday.
Funds investing mostly in US stocks had a net outflow of $27.3 billion so far this month, while funds investing mostly in non-US stocks had an outflow of $16 billion. In September, stock funds suffered net outflows of $43.5 billion. In addition, bond funds had a net outflow of $8.8 billion so far in October, following net outflows of $8.1 billion the previous week.
"It is extremely unusual to see this drawdown, not only in stock funds but bond funds," Conrad Gann, TrimTabs' president and chief operating officer, said in an interview. "Investors are putting their money in savings accounts, insured checking deposits and any fund that has a 'Treasury sticker' on it -- anything else isn't being considered," he added.
In September, investors pulled a record $72 billion from U.S.-managed stock and bond mutual funds, as shareholders took $43.5 billion from stock funds last month and $28.8 billion from bond funds, according TrimTabs. TrimTabs, which reports exchange-traded fund activity separately, said that ETFs investing in US stocks had inflows of $4 billion in the latest week ending Wednesday, following inflows of $15 billion in the previous week.
TrimTabs is a research firm headquartered in Sausalito, California.
Funds investing mostly in US stocks had a net outflow of $27.3 billion so far this month, while funds investing mostly in non-US stocks had an outflow of $16 billion. In September, stock funds suffered net outflows of $43.5 billion. In addition, bond funds had a net outflow of $8.8 billion so far in October, following net outflows of $8.1 billion the previous week.
"It is extremely unusual to see this drawdown, not only in stock funds but bond funds," Conrad Gann, TrimTabs' president and chief operating officer, said in an interview. "Investors are putting their money in savings accounts, insured checking deposits and any fund that has a 'Treasury sticker' on it -- anything else isn't being considered," he added.
In September, investors pulled a record $72 billion from U.S.-managed stock and bond mutual funds, as shareholders took $43.5 billion from stock funds last month and $28.8 billion from bond funds, according TrimTabs. TrimTabs, which reports exchange-traded fund activity separately, said that ETFs investing in US stocks had inflows of $4 billion in the latest week ending Wednesday, following inflows of $15 billion in the previous week.
TrimTabs is a research firm headquartered in Sausalito, California.
Singapore, in Recession, Ends Currency Gain Policy
Singapore fell into the first recession since 2002 as manufacturing slumped, prompting the central bank to end a policy favoring gains in its currency in an effort to support the economy.
The Monetary Authority of Singapore, which relies on the currency rather than interest rates as its policy tool, said today it's shifting to a ``zero-percent appreciation'' stance. Gross domestic product contracted an annualized 6.3 percent in the third quarter from the previous three months, after shrinking a revised 5.7 percent between April and June.
A weaker Singapore dollar, which fell today, would help electronics exporters such as Venture Corp. and Chartered Semiconductor Manufacturing Ltd. by making their products cheaper overseas. Central banks around the world are loosening monetary policy and cutting interest rates as a worsening global credit crisis saps growth.
``The whole world has gone on an easing policy and Singapore is no different,'' said Song Seng Wun, an economist at CIMB-GK Securities Pte in Singapore. ``We are likely to face a prolonged period of slow growth or recession, maybe for the next two years. This downturn is unlike previous downturns.''
The Singapore currency slid 0.6 percent to 1.4769 against the U.S. dollar as at 11:01 a.m. local time.
The trade ministry said today the city's economy will grow about 3 percent in 2008 from a year earlier, slower than a previous estimate of as much as 5 percent. That would be the weakest pace in seven years.
Inflation Peaks
``Asian countries cannot avoid the impact of weakening U.S., European and Japanese economies,'' Singapore Prime Minister Lee Hsien Loong said today. ``We must prepare for a rough ride at least over the next year, and quite possibly longer.''
The Monetary Authority of Singapore's new policy is a reversal of its stance six months ago when it called for faster exchange-rate appreciation to damp inflation. The Singapore currency has dropped 8.1 percent against the U.S. dollar in that period. Singapore manages its dollar against an undisclosed basket of currencies.
Inflation, which reached a 26-year high earlier this year, has peaked, the central bank said. Consumer prices will increase between 6 percent and 7 percent this year, and gains will ease to between 2.5 percent and 3.5 percent in 2009, it predicted.
``Against the backdrop of a weakening external economic environment and continuing stresses in global financial markets, the growth of the Singapore economy is expected to remain below potential in the period ahead,'' the monetary authority said. ``Inflation is expected to trend down in 2009 as the global and domestic economies slow.''
Rate Cuts
The Federal Reserve, European Central Bank and four other central banks lowered interest rates on Oct. 8 in an emergency coordination that was followed in Asia by China, Taiwan and South Korea. Australia cut its key rate by one percentage point on Oct. 7, the most since a recession in 1992.
Singapore's $161 billion economy declined 0.5 percent last quarter from a year earlier, compared with a revised 2.3 percent gain between April and June.
Growth has deteriorated as a slump in export demand forced factories to cut production, tourist arrivals faltered and a real-estate boom ended.
The island's manufacturing industry, which accounts for a quarter of the economy, contracted 11.5 percent last quarter from a year earlier, compared with a revised 4.9 percent drop in the previous three months, according to today's report.
Exports Slump
Singapore's government expects exports to decline as much as 4 percent this year, and the island's shipments of electronics goods have fallen for 19 consecutive months. That's hurting profits at companies including Venture Corp., the city's biggest publicly traded electronics maker.
Services climbed 6.1 percent in the third quarter from a year earlier, slowing from a 7 percent pace in the previous three months. Singapore will probably miss a government target of 10.8 million visitors in 2008, the tourism board said on Sept. 23, after visitor arrivals dropped 7.7 percent in August.
``The financial services sector is likely to see slower growth in the coming months as the ongoing global financial crisis has heightened uncertainties for sentiment-sensitive segments such as stocks-trading and fund-management activities,'' the government said in today's report.
The construction industry grew 7.8 percent, easing from a revised rate of 19.8 percent in the previous quarter.
The annualized 6.3 percent economic contraction in the third quarter compares with the median forecast of 0.3 percent growth in a Bloomberg News survey. The figures today are computed from data for July and August. Revised numbers will be released next month.
The Monetary Authority of Singapore, which relies on the currency rather than interest rates as its policy tool, said today it's shifting to a ``zero-percent appreciation'' stance. Gross domestic product contracted an annualized 6.3 percent in the third quarter from the previous three months, after shrinking a revised 5.7 percent between April and June.
A weaker Singapore dollar, which fell today, would help electronics exporters such as Venture Corp. and Chartered Semiconductor Manufacturing Ltd. by making their products cheaper overseas. Central banks around the world are loosening monetary policy and cutting interest rates as a worsening global credit crisis saps growth.
``The whole world has gone on an easing policy and Singapore is no different,'' said Song Seng Wun, an economist at CIMB-GK Securities Pte in Singapore. ``We are likely to face a prolonged period of slow growth or recession, maybe for the next two years. This downturn is unlike previous downturns.''
The Singapore currency slid 0.6 percent to 1.4769 against the U.S. dollar as at 11:01 a.m. local time.
The trade ministry said today the city's economy will grow about 3 percent in 2008 from a year earlier, slower than a previous estimate of as much as 5 percent. That would be the weakest pace in seven years.
Inflation Peaks
``Asian countries cannot avoid the impact of weakening U.S., European and Japanese economies,'' Singapore Prime Minister Lee Hsien Loong said today. ``We must prepare for a rough ride at least over the next year, and quite possibly longer.''
The Monetary Authority of Singapore's new policy is a reversal of its stance six months ago when it called for faster exchange-rate appreciation to damp inflation. The Singapore currency has dropped 8.1 percent against the U.S. dollar in that period. Singapore manages its dollar against an undisclosed basket of currencies.
Inflation, which reached a 26-year high earlier this year, has peaked, the central bank said. Consumer prices will increase between 6 percent and 7 percent this year, and gains will ease to between 2.5 percent and 3.5 percent in 2009, it predicted.
``Against the backdrop of a weakening external economic environment and continuing stresses in global financial markets, the growth of the Singapore economy is expected to remain below potential in the period ahead,'' the monetary authority said. ``Inflation is expected to trend down in 2009 as the global and domestic economies slow.''
Rate Cuts
The Federal Reserve, European Central Bank and four other central banks lowered interest rates on Oct. 8 in an emergency coordination that was followed in Asia by China, Taiwan and South Korea. Australia cut its key rate by one percentage point on Oct. 7, the most since a recession in 1992.
Singapore's $161 billion economy declined 0.5 percent last quarter from a year earlier, compared with a revised 2.3 percent gain between April and June.
Growth has deteriorated as a slump in export demand forced factories to cut production, tourist arrivals faltered and a real-estate boom ended.
The island's manufacturing industry, which accounts for a quarter of the economy, contracted 11.5 percent last quarter from a year earlier, compared with a revised 4.9 percent drop in the previous three months, according to today's report.
Exports Slump
Singapore's government expects exports to decline as much as 4 percent this year, and the island's shipments of electronics goods have fallen for 19 consecutive months. That's hurting profits at companies including Venture Corp., the city's biggest publicly traded electronics maker.
Services climbed 6.1 percent in the third quarter from a year earlier, slowing from a 7 percent pace in the previous three months. Singapore will probably miss a government target of 10.8 million visitors in 2008, the tourism board said on Sept. 23, after visitor arrivals dropped 7.7 percent in August.
``The financial services sector is likely to see slower growth in the coming months as the ongoing global financial crisis has heightened uncertainties for sentiment-sensitive segments such as stocks-trading and fund-management activities,'' the government said in today's report.
The construction industry grew 7.8 percent, easing from a revised rate of 19.8 percent in the previous quarter.
The annualized 6.3 percent economic contraction in the third quarter compares with the median forecast of 0.3 percent growth in a Bloomberg News survey. The figures today are computed from data for July and August. Revised numbers will be released next month.
Nikkei dives more than 11%, eyeing biggest fall since '87 crash
The Nikkei average tumbled more than 11 percent on Friday, poised for its biggest one-day drop since the 1987 stock market crash, on fears of a global recession despite moves by global authorities to thaw frozen credit markets.
The stock sell-off led the Osaka Stock Exchange to trigger a circuit-breaker and briefly halt trade in the Nikkei futures. "No one is buying. Fundamentals don't matter any more and there's no explanation for such a plunge," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
"Fears about the US financial system have been rekindled. The US government is still debating whether it would inject money into financial institutions. It needs to act now even if that would be beyond the current law."
As of 0100 GMT, the benchmark Nikkei had recovered a little to be down 9.6 percent or 874.45 points at 8,283.04. If the fall is sustained until the end of Friday, it will surpass a 9.4 percent fall in the Nikkei earlier this week, which is the biggest fall since a 14.9 percent one-day slide during the 1987 stock market crash.
The broader Topix lost 7 percent to 841.98. The Dow Jones industrial average dropped 7.3 percent to 8,579.19 on Thursday, with bank and insurance stocks hammered again, as the previous day's coordinated global interest-rate cuts and myriad other official measures to unfreeze money markets did little to boost confidence in the financial sector.
The stock sell-off led the Osaka Stock Exchange to trigger a circuit-breaker and briefly halt trade in the Nikkei futures. "No one is buying. Fundamentals don't matter any more and there's no explanation for such a plunge," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
"Fears about the US financial system have been rekindled. The US government is still debating whether it would inject money into financial institutions. It needs to act now even if that would be beyond the current law."
As of 0100 GMT, the benchmark Nikkei had recovered a little to be down 9.6 percent or 874.45 points at 8,283.04. If the fall is sustained until the end of Friday, it will surpass a 9.4 percent fall in the Nikkei earlier this week, which is the biggest fall since a 14.9 percent one-day slide during the 1987 stock market crash.
The broader Topix lost 7 percent to 841.98. The Dow Jones industrial average dropped 7.3 percent to 8,579.19 on Thursday, with bank and insurance stocks hammered again, as the previous day's coordinated global interest-rate cuts and myriad other official measures to unfreeze money markets did little to boost confidence in the financial sector.
Wednesday, October 08, 2008
Investors lose $10 bn in US-listed Indian firms
Indian companies listed on the American bourses lost close to $10 billion during the past week, with IT bellwether Infosys witnessing the maximum erosion of about two billion dollars.
The 16 Indian firms listed on NYSE and Nasdaq saw their collective market capitalisation dip to $78.9 billion, from $88.7 billion at the beginning of the week.
The loss registered by the Indian American depository rates is mainly because of the meltdown at the US bourse and has been mostly in line with the broader market trends, analysts believe.
Among these firms, about half a dozen IT and ITeS firms together lost more than four billion dollars in their market value during the week.
However, Internet firm Sify Technologies posted a modest gain of about three million dollars.
While Wipro shed $1.69 billion, Satyam Computer Services saw a drop of $938 million in its valuation and Patni Computers witnessed a decline of $72 million.
Besides, ADRs of outsourcing firms Genpact, WNS and EXLService and that of Rediff.com dropped between 4-12 per cent during the week.
India's two largest private sector lenders -- ICICI Bank and HDFC Bank -- together saw their market cap plunging by nearly two billion dollars.
ICICI Bank dropped 8.6 per cent during the week, with the market capitalisation declining by $1.19 billion. HDFC Bank fell by six per cent, while its valuation decreased by $810 million.
Tata Motors lost $489 million, while Tata Communication shed $266 million during the week ended October 5.
The 16 Indian firms listed on NYSE and Nasdaq saw their collective market capitalisation dip to $78.9 billion, from $88.7 billion at the beginning of the week.
The loss registered by the Indian American depository rates is mainly because of the meltdown at the US bourse and has been mostly in line with the broader market trends, analysts believe.
Among these firms, about half a dozen IT and ITeS firms together lost more than four billion dollars in their market value during the week.
However, Internet firm Sify Technologies posted a modest gain of about three million dollars.
While Wipro shed $1.69 billion, Satyam Computer Services saw a drop of $938 million in its valuation and Patni Computers witnessed a decline of $72 million.
Besides, ADRs of outsourcing firms Genpact, WNS and EXLService and that of Rediff.com dropped between 4-12 per cent during the week.
India's two largest private sector lenders -- ICICI Bank and HDFC Bank -- together saw their market cap plunging by nearly two billion dollars.
ICICI Bank dropped 8.6 per cent during the week, with the market capitalisation declining by $1.19 billion. HDFC Bank fell by six per cent, while its valuation decreased by $810 million.
Tata Motors lost $489 million, while Tata Communication shed $266 million during the week ended October 5.
Tuesday, October 07, 2008
RBI cuts CRR 50 basis points to ease liquidity
In a move to ease liquidity and cool the markets, the Reserve Bank of India (RBI) announced an ad-hoc 50-basis-point reduction in the cash reserve ratio (CRR), or the proportion of deposits banks must keep with the central bank, from 9 per cent to 8.5 per cent.
The cut, the first such step by RBI Governor D Subbarao, will be effective from the fortnight starting October 11 and will release around Rs 20,000 crore into the system. This is the first CRR reduction since June 14, 2003, when it was lowered by 25 basis points to 2.50 per cent.
While bankers are not forecasting any immediate change in interest rates for borrowers, the flow of credit, which has nearly stopped in the last few weeks, is expected to improve. Deposit rates are also unlikely to fall.
“The move will release some tension in the market. But I do not expect any immediate cuts in lending rates. We will be very selective in disbursing funds. The first priority is to provide adequate resources to productive sectors, especially infrastructure and oil and fertiliser (which is more like working capital). The cut is a temporary measure and tight monetary policy is likely to continue because inflation is well above RBI’s comfort level,” said IDBI Bank Chairman & Managing Director Yogesh Agarwal.
“It’s too early to expect an impact on lending and borrowing rates,” said ICICI Bank Joint Managing Director and CFO Chanda Kochhar while adding that the bank was sanctioning and disbursing loans based on its lending parameters even during the tight liquidity situation in the last few weeks.
“It is a clear signal that the step is to cool down the market. For the last one week, nobody was extending credit for sanctioned limits and also not considering new proposals. This step should bring down rates in the inter-bank market,” added Andhra Bank Chairman and MD RS Reddy.
Reliance Capital CEO Sam Ghosh said there would be no major impact on consumers but the decision would reduce the huge blip in liquidity.
A senior State Bank of India executive said that RBI’s latest move might not ease liquidity tightness too much and another 50-basis-point reduction was expected in the monetary policy review on October 24.
“It is not enough given the huge demand for corporate credit. The move to cut CRR is more of an indication by the central bank that it will inject more liquidity to the system, if required. RBI may take more steps gradually if liquidity situation does not improve,” said Punjab National Bank Executive Director J M Garg.
“The regulators will watch every step. It is very tough to predict since the impact (of the moves) is multiple. There is an impact on inflation, liquidity and the growth rate,” added Kochhar.
Tight liquidity conditions in the market had seen banks use the liquidity adjustment facility to borrow around Rs 90,000 crore from RBI every day for the last few days. In the call money market, some banks had paid as much as 17 per cent to raise funds on Friday. Today, the rates cooled with the weighted average rate according to Clearing Corporation of India data 11.32 per cent.
Tight liquidity in the domestic and the international markets had prompted bankers to seek RBI intervention in the form of CRR reduction and a further relaxation in the statutory liquidity ratio (SLR), or the amount banks must mandatorily invest in government securities. Over the last fortnight, bankers had raised the issue with the RBI leadership at least twice.
The announcement of an ad-hoc CRR reduction follows RBI’s consultations with the government, sources said. The tight liquidity situation was one of the major issues discussed at last week’s meeting of the high-level committee on capital markets which has representatives from the central bank, the government and other financial sector regulators.
In a statement this evening, RBI said, “This measure is ad-hoc, temporary in nature and will be reviewed on a continuous basis in the light of the evolving liquidity conditions.”
On September 16, after the turmoil in the US increased, for banks in dire need of funds, RBI had announced several measures including a one percentage point relaxation in the SLR below the mandated 25 per cent level.
“Since then, there has been a sharp deterioration in the global financial environment with the number of troubled financial institutions rising, stock markets weakening and money markets strained. Central banks across the world have stepped up their liquidity operations, including coordinated actions, and some have banned/limited short selling of financial stocks. These new developments have impacted domestic money and forex markets with a marked increase in volatility and a sharp squeeze on market liquidity as reflected in the movements in overnight interest rates and the high recourse to the LAF,” RBI's statement said.
The RBI 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,” it added.
The cut, the first such step by RBI Governor D Subbarao, will be effective from the fortnight starting October 11 and will release around Rs 20,000 crore into the system. This is the first CRR reduction since June 14, 2003, when it was lowered by 25 basis points to 2.50 per cent.
While bankers are not forecasting any immediate change in interest rates for borrowers, the flow of credit, which has nearly stopped in the last few weeks, is expected to improve. Deposit rates are also unlikely to fall.
“The move will release some tension in the market. But I do not expect any immediate cuts in lending rates. We will be very selective in disbursing funds. The first priority is to provide adequate resources to productive sectors, especially infrastructure and oil and fertiliser (which is more like working capital). The cut is a temporary measure and tight monetary policy is likely to continue because inflation is well above RBI’s comfort level,” said IDBI Bank Chairman & Managing Director Yogesh Agarwal.
“It’s too early to expect an impact on lending and borrowing rates,” said ICICI Bank Joint Managing Director and CFO Chanda Kochhar while adding that the bank was sanctioning and disbursing loans based on its lending parameters even during the tight liquidity situation in the last few weeks.
“It is a clear signal that the step is to cool down the market. For the last one week, nobody was extending credit for sanctioned limits and also not considering new proposals. This step should bring down rates in the inter-bank market,” added Andhra Bank Chairman and MD RS Reddy.
Reliance Capital CEO Sam Ghosh said there would be no major impact on consumers but the decision would reduce the huge blip in liquidity.
A senior State Bank of India executive said that RBI’s latest move might not ease liquidity tightness too much and another 50-basis-point reduction was expected in the monetary policy review on October 24.
“It is not enough given the huge demand for corporate credit. The move to cut CRR is more of an indication by the central bank that it will inject more liquidity to the system, if required. RBI may take more steps gradually if liquidity situation does not improve,” said Punjab National Bank Executive Director J M Garg.
“The regulators will watch every step. It is very tough to predict since the impact (of the moves) is multiple. There is an impact on inflation, liquidity and the growth rate,” added Kochhar.
Tight liquidity conditions in the market had seen banks use the liquidity adjustment facility to borrow around Rs 90,000 crore from RBI every day for the last few days. In the call money market, some banks had paid as much as 17 per cent to raise funds on Friday. Today, the rates cooled with the weighted average rate according to Clearing Corporation of India data 11.32 per cent.
Tight liquidity in the domestic and the international markets had prompted bankers to seek RBI intervention in the form of CRR reduction and a further relaxation in the statutory liquidity ratio (SLR), or the amount banks must mandatorily invest in government securities. Over the last fortnight, bankers had raised the issue with the RBI leadership at least twice.
The announcement of an ad-hoc CRR reduction follows RBI’s consultations with the government, sources said. The tight liquidity situation was one of the major issues discussed at last week’s meeting of the high-level committee on capital markets which has representatives from the central bank, the government and other financial sector regulators.
In a statement this evening, RBI said, “This measure is ad-hoc, temporary in nature and will be reviewed on a continuous basis in the light of the evolving liquidity conditions.”
On September 16, after the turmoil in the US increased, for banks in dire need of funds, RBI had announced several measures including a one percentage point relaxation in the SLR below the mandated 25 per cent level.
“Since then, there has been a sharp deterioration in the global financial environment with the number of troubled financial institutions rising, stock markets weakening and money markets strained. Central banks across the world have stepped up their liquidity operations, including coordinated actions, and some have banned/limited short selling of financial stocks. These new developments have impacted domestic money and forex markets with a marked increase in volatility and a sharp squeeze on market liquidity as reflected in the movements in overnight interest rates and the high recourse to the LAF,” RBI's statement said.
The RBI 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,” it added.
Investor's wealth plunges below Rs 40 tn mark
With domestic market buckling under deepening global financial crisis, investor's wealth on Bombay Stock Exchange plunged below the Rs 40 lakh crore mark, while the Sensex slipped under the 12,000 level for the first time in two years.
Total market capitalisation of all the listed-companies on the BSE dropped below the Rs 40 lakh crore-mark to Rs 38,22,354.61 crore today, witnessing an erosion of Rs 2.39 lakh crore in a single day.
The 30-share Sensex closed at 11,801, the lowest level seen since 2006, plunging 724 points.
However, RBI has cut the Cash Reserve Ratio by 50 basis points and market regulator SEBI has removed restrictions of 40 per cent cap on Overseas Derivative Instruments (ODI). Analysts believe the moves would help the markets recover.
Among the Sensex shares, Sterlite Industries was the biggest loser with a fall of over 15 per cent, followed by Reliance Infrastructure which dropped nearly 14 per cent and Jaiprakash Associates which fell 13.57 per cent.
Total market capitalisation of Anil Agarwal-led Sterlite Industries settled at Rs 23,756.83 crore on the bourse.
As Anil Ambani-led Reliance Infrastructure dropped 13.93 per cent to close at Rs 638, its market capitalisation also took a plunge to Rs 14,698 crore. Reliance Communications also ended 9.95 per cent down at Rs 300.05, while its M-cap stood at Rs 61,931.
Besides, the country's most valued firm Reliance Industries today dropped 6.76 per cent to close at Rs 246.45, while its market cap stood at Rs 2,38,685.26.
Further, the market capitalisation of state-run ONGC stood at Rs 2,09,630.90, followed by NTPC at Rs 139,100.98 crore, telecom major Bharti Airtel (Rs 138,491.89 crore) and SBI (Rs 91,054.48 crore).
Total market capitalisation of all the listed-companies on the BSE dropped below the Rs 40 lakh crore-mark to Rs 38,22,354.61 crore today, witnessing an erosion of Rs 2.39 lakh crore in a single day.
The 30-share Sensex closed at 11,801, the lowest level seen since 2006, plunging 724 points.
However, RBI has cut the Cash Reserve Ratio by 50 basis points and market regulator SEBI has removed restrictions of 40 per cent cap on Overseas Derivative Instruments (ODI). Analysts believe the moves would help the markets recover.
Among the Sensex shares, Sterlite Industries was the biggest loser with a fall of over 15 per cent, followed by Reliance Infrastructure which dropped nearly 14 per cent and Jaiprakash Associates which fell 13.57 per cent.
Total market capitalisation of Anil Agarwal-led Sterlite Industries settled at Rs 23,756.83 crore on the bourse.
As Anil Ambani-led Reliance Infrastructure dropped 13.93 per cent to close at Rs 638, its market capitalisation also took a plunge to Rs 14,698 crore. Reliance Communications also ended 9.95 per cent down at Rs 300.05, while its M-cap stood at Rs 61,931.
Besides, the country's most valued firm Reliance Industries today dropped 6.76 per cent to close at Rs 246.45, while its market cap stood at Rs 2,38,685.26.
Further, the market capitalisation of state-run ONGC stood at Rs 2,09,630.90, followed by NTPC at Rs 139,100.98 crore, telecom major Bharti Airtel (Rs 138,491.89 crore) and SBI (Rs 91,054.48 crore).
Easier PN rule may not lead to fresh inflows
Foreign portfolio investors, who have pulled out close to $10 billion so far this year may have reasons to be happy with the easing of the curbs imposed on their investments through P-Notes. But they do not reckon that Monday’s SEBI move will open the floodgates for portfolio investment for a while.
Labelling the decision announced by SEBI today as cosmetic in terms of a trigger to step up portfolio flows, some of the FIIs said there were enough investment vehicles to take an exposure to Indian equities. In October 2007, SEBI had banned the fresh issue of P-Notes by FIIs to rein in the massive inflow of foreign funds into the Indian stock markets. The regulator had issued restrictions on FIIs and their sub-accounts, prohibiting them from issuing or renewing PNs with underlying as derivatives and directing them to unwind their positions within 18 months.
“The SEBI directive is a healthy move in the current market climate. It may help attract investors back to India, particularly, since India has outperformed other emerging markets in this correction. Today’s decision removes an impediment to accessing this market. But how soon this stimulates capital redirection is hard to say, given the uncertain and tenuous state of investor confidence. With rescue packages and bailouts in key global financial markets, these are likely to soak up any spare liquidity. It is a welcome move regardless,” says Stuart Smythe, ED, Head equity of Macquarie Securities (India).
At the imposition of restrictions last year (October 2007) P-Note holdings were estimated at $88 billion. Markets have corrected nearly 40%, which would put current holdings at $53 billion, of which almost $10 billion has been sales, leaving an estimated $43 billion. If one were to factor in Monday’s correction, the amount would have seen a further erosion of roughly 5.5%, said a senior official at a leading foreign broking house.
“This will not impact the inflow into the country. What we are facing is a global confidence crisis and the money is flowing to safest assets the markets can identify, like the dollar. This is the time for government to implement policies in infrastructure, thereby making India less reliant on foreign savings and more reliant on domestic savings. This would effectively mean that India’s growth is on track, irrespective of global developments. Investors are looking for safe economies where earnings are not at risk,” said Amit Bhartia, Partner, GMO (Grantham, Mayo, Van Otterloo & Co.), a global institutional money management firm.
SEBI’s decision to revise the rules marks a change from last year when India was battling inflows which had pushed the rupee to a new high against the dollar since 1998 and helped power the stock market to record highs. The FM had than said India would have to moderate inflows to avoid a stock market bubble. FIIs continue to be net sellers in the Indian equities markets, having sold more than $9 billion worth shares in the past nine months.
Net foreign portfolio investments for the similar period last year were more than $14 billion.
Labelling the decision announced by SEBI today as cosmetic in terms of a trigger to step up portfolio flows, some of the FIIs said there were enough investment vehicles to take an exposure to Indian equities. In October 2007, SEBI had banned the fresh issue of P-Notes by FIIs to rein in the massive inflow of foreign funds into the Indian stock markets. The regulator had issued restrictions on FIIs and their sub-accounts, prohibiting them from issuing or renewing PNs with underlying as derivatives and directing them to unwind their positions within 18 months.
“The SEBI directive is a healthy move in the current market climate. It may help attract investors back to India, particularly, since India has outperformed other emerging markets in this correction. Today’s decision removes an impediment to accessing this market. But how soon this stimulates capital redirection is hard to say, given the uncertain and tenuous state of investor confidence. With rescue packages and bailouts in key global financial markets, these are likely to soak up any spare liquidity. It is a welcome move regardless,” says Stuart Smythe, ED, Head equity of Macquarie Securities (India).
At the imposition of restrictions last year (October 2007) P-Note holdings were estimated at $88 billion. Markets have corrected nearly 40%, which would put current holdings at $53 billion, of which almost $10 billion has been sales, leaving an estimated $43 billion. If one were to factor in Monday’s correction, the amount would have seen a further erosion of roughly 5.5%, said a senior official at a leading foreign broking house.
“This will not impact the inflow into the country. What we are facing is a global confidence crisis and the money is flowing to safest assets the markets can identify, like the dollar. This is the time for government to implement policies in infrastructure, thereby making India less reliant on foreign savings and more reliant on domestic savings. This would effectively mean that India’s growth is on track, irrespective of global developments. Investors are looking for safe economies where earnings are not at risk,” said Amit Bhartia, Partner, GMO (Grantham, Mayo, Van Otterloo & Co.), a global institutional money management firm.
SEBI’s decision to revise the rules marks a change from last year when India was battling inflows which had pushed the rupee to a new high against the dollar since 1998 and helped power the stock market to record highs. The FM had than said India would have to moderate inflows to avoid a stock market bubble. FIIs continue to be net sellers in the Indian equities markets, having sold more than $9 billion worth shares in the past nine months.
Net foreign portfolio investments for the similar period last year were more than $14 billion.
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