Indian bond yields drop on rate cut expectations

Indian federal bond yields fell on Tuesday, shrugging off concerns over heavy government borrowing, after the finance minister said more steps would be taken to stimulate the economy.

Palaniappan Chidambaram also met the Reserve Bank of India (RBI) Governor Duvvuri Subbarao on Tuesday, bolstering expectations the monetary policy may be eased further. [ID:nBOM139236]

The benchmark 10-year bond yield ended at 7.46 percent, compared with Monday's close of 7.51 percent.

"There are strong expectations that the RBI may cut rates and this is helping sentiment," a dealer with a private sector bank said.

The 10-year yield initially rose to 7.64 percent as traders were wary of more government borrowing after Monday's announcement of a 90 billion rupees ($1.8 billion) bond auction on Friday.

The government's finances are strained due to increase in salaries of government employees, higher subsidies on fuel and fertilisers, waiver of farm loans as well as fall in tax revenues following a slowing economy.

The central bank will also sell 48.5 billion rupees of 10-year loans for state governments on Thursday.

The central bank has aggressively cut its rates over the past two months.

The repo rate has been cut by 150 basis points to 7.5 percent since October and the cash reserve ratio, the proportion of deposits that banks have to keep with the central bank, has been reduced by 350 basis points to 5.5 percent. ($1 = 49.7 rupees)

Yahoo Rises as Yang Exit Sparks Microsoft Speculation

Yahoo! Inc., owner of the second- largest U.S. Internet-search engine, rose as much as 17 percent in Nasdaq trading after Chief Executive Officer Jerry Yang agreed to step down, opening the door for a fresh Microsoft Corp. bid.

Yahoo, based in Sunnyvale, California, climbed $1.23 to $11.86 at 12:16 p.m. New York time in trading on the Nasdaq Stock Market. The gain was the largest in a month.

Before today, the company's market value had fallen by more than $20 billion since Yang took over last year as discussions with Microsoft failed, an ad partnership with Google Inc. collapsed and talks with Time Warner Inc.`s AOL stalled. Goldman Sachs Group Inc. said the resignation may fuel speculation of renewed talks with Microsoft or another suitor.

``The strategic necessity here is for this company to merge with Microsoft,'' Larry Haverty, a fund manager at Gamco Investors Inc. in Rye, New York, said in a Bloomberg Television interview. Gamco manages about $24 billion, including Yahoo shares. ``This is just unmitigated good news for the Yahoo shareholders.''

Microsoft and Yahoo trail Google, which controls more than 60 percent of the Internet-search market in the U.S. Microsoft has said that while it's open to a search-ad deal with Yahoo, it isn't interested in buying the company outright. Microsoft bid as much as $33 a share for Yahoo this year, and Yahoo now trades at less than a third of that value. Microsoft may end up paying between $15 and $18 for Yahoo, Haverty said.

CEO Candidates

Yahoo President Susan Decker is a candidate for Yang's job, said Brad Williams, a spokesman for Yahoo. Yang, 40, will stay on the board and remain CEO until Yahoo finds a replacement, Yahoo said yesterday. He took the top job at the 13-year-old Internet company in June 2007.

``He played one too many poker hands up there and got caught,'' said Pat Becker of Becker Capital Management in Portland, Oregon. His firm owns Microsoft shares but not Yahoo. ``Microsoft still believes that it needs scale'' in the online advertising business.

Microsoft spokesman Bill Cox declined to comment. The Redmond, Washington-based company will hold its annual meeting for shareholders tomorrow.

There isn't a timeframe on finding a replacement for Yang, Yahoo's Williams said. Yang had been in discussions with the board about seeking a replacement for ``some time.''

Chief Yahoo

After Yahoo finds a new CEO, Yang will return to the role of ``Chief Yahoo,'' a title shared with co-founder David Filo. Yang held that position, which involves overseeing corporate strategy, partnerships and recruiting, before former CEO Terry Semel departed last year.

Other potential CEO candidates include Jonathan Miller, the former chairman of AOL; Dan Rosensweig, once Yahoo's operations chief; and Meg Whitman the former chief of Internet auctioneer EBay Inc., UBS analyst Ben Schachter said in a report today.

Yahoo hired Heidrick & Struggles International Inc. to help find a new CEO. The task may not be an easy one, said Neil Sims, a managing director in the San Francisco office of Boyden, an executive search firm.

``Whoever would inherit that role would be taking a huge personal career risk because they're handed a company in crisis,'' Sims said. ``If you were going to rebuild a viable organization, that was the time in 2007 to recruit an accomplished executive.''

Google, based in Mountain View, California, abandoned an agreement to sell ads alongside Yahoo's search results this month after U.S. regulators threatened a lawsuit to block the partnership, saying it would give Google too much power.

Global Crisis

Yang's plan to reverse Yahoo's slowing sales growth and profit declines was hampered by the global economic crisis, which caused advertisers to cut back on Internet spending. Yahoo announced plans in October to cut at least 1,500 jobs and reduce the number of contractors as finance, travel, retail and automotive advertisers scaled back their spending.

Yang's departure ``may open the door for dialogue that might not be there otherwise,'' said Michael Cuggino, a portfolio manager at Pacific Heights Asset Management in San Francisco. ``It may allow for some new blood, some new energy for maximizing shareholder value.''

Dunlop stops production at Sahagunj

Pawan Ruia-controlled Dunlop India on Monday stopped its Sahagunj mother plant here, saying the global meltdown had affected operations of the ailing unit.

A company spokesman said there had been no retrenchment and the 1,172 workers continued to be on the company’s rolls although they would be paid a consolidated wage. The entire matter had been decided after discussions with the unions, the company said. The union representatives could not be contacted for their comments

While the Ambattur unit has been closed for long, the Sahagunj unit in Hooghly district was carrying on operations stabilising production, at about 40 tonnes against a capacity of 90 tonnes. The product-mix comprised OTR (off-the-road) tyres and truck tyres.

“The meltdown has affected Dunlop’s revival plans and the company would utilise this time to recast production and perhaps change the product-mix,” a company official said.

Group company Falcon Tyres, making two-wheeler tyres with its unit in Mysore, will carry on normal operations for now, sources said.

The management expects the resumption of the plant at an early date.

Sobha Developers hits 52-wk low on pledging 5.9% equity to Bank Sarasin

Sobha Developers shares hit a new 52-week low after the real estate developer pledged 4.3 million shares or about 5.9 percent of equity

to Bank Sarasin & Co, based in Switzerland.

The bank now holds 13.7 per cent in Sobha through pledged shares. According to media reports, Sobha Developers has pledged upto 24 per cent of equity in Bank Sarasin and Credit Suisse so far.

At 12:50 pm, the stock was down 1.97 per cent at Rs 89.65 after slipping to a 52-week low of Rs 87.15.

Government slaps 5% import duty on iron and steel

The government on Tuesday slapped a 5% import duty on specified iron and

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steel products and 20% duty on crude soyabean oil in a move aimed at safeguarding the interests of domestic industry.

While bringing cheer to the industry, the move is also expected to give a marginal relief to the government revenues as well. The government, which has cut indirect taxes to stimulate the economy in the budget and then later in the financial year including exempting crude oil from import duty has witnessed a downslide in its excise and customs duty collections. The collections declined by 5% in October, 2008.

The changes come into effect immediately, an official statement said adding that the refund based service tax exemtion scheme for exporters had also been simplified and the period to file refund claims extended to six months from present 60 days.

The decision to impose cutsoms duty on wide range of pig iron, semi-finished, flat and long category of products, comes in the backdrop of prices of these commodities declining in the international market in recent times. The import duty, however, falls short of industry expectations. They demanded a 15% duty on steel imports.

Domestic firms demanded protection against imports as steel prices dipped from a high level of Rs 45,000-50,000 per tonne to Rs 32,000-34,000 per tonne and there are apprehensions of cheaper imports from countries like China, Thailand and Ukraine that have built up huge inventories flooding India.
Similarly, 20% customs duty on soyabean oil has been imposed after intense lobbying by the soya processing industry, would lead to a marginal overall increase in the price table of vegetable oils in India. Most traders had already factored the duty into the prices they have been quoting over the last one week.

Even so, industry is hopeful it would improve margins of local soya processors, as well as give better price signals to farmers planning to sow rapeseed mustard and groundnut in the coming rabi season December onwards.

However, it is unlikely to have little impact on physical soyabean oil imports, which are negligible right now. Soya oil is anyway outpriced by palm oil, which remains the consumer's top choice. Currently, refined palm oil is selling in the wholesale markets at Rs 30/kg, while soya oil produced locally is available for Rs 41/kg.

At this price differential, palm oil is the consumer's favourite oil. This is one reason why processors were demanding a duty on palm oil so that it blunts competition for soya oil.

China's Oil Demand Contracts `Sharply' on Bank Crisis

China National Petroleum Corp., the nation's biggest oil producer, said fuel demand has contracted ``sharply'' since September because of the global credit crisis.

``As the impact of the financial crisis on China's economy deepens, the company's operations have also been affected adversely,'' the Beijing-based parent of PetroChina Co. said in a statement on its Web site on Nov. 15. Stockpiles of crude oil and oil products have risen ``significantly,'' it said.

China, whose economy expanded at a slower pace for the fifth straight quarter between July and September, risks a ``drastic decline,'' the Finance Ministry said on Nov. 13. The nation's fuel demand growth may ease to an average 4 percent in the next two to three months, Gong Jinshuang, an engineer at China National's research unit, said in October.

China Petroleum & Chemical Corp., Asia's biggest oil refiner, will reduce crude processing by 10 percent in November from July's record as the nation's economic slowdown cuts fuel demand, company officials, who declined to be named because of internal rules, said last week.

The country's processing volume reached a record 30.3 million tons in July and fell to 29.8 million in October, according to customs data.

China will invest the equivalent of almost a fifth of its 2007 gross domestic product by the end of 2010 to spur growth in the fourth-largest economy as the world heads toward a recession, the State Council, or Cabinet, said on Nov. 9.

The 4 trillion yuan ($586 billion) economic stimulus package will provide ``enormous'' market opportunities for petrochemicals products, China Petrochemical Corp., parent of China Petroleum, said in its in-house newsletter today.

``As some overseas energy companies are keen to sell assets because of the banking crisis, domestic companies including China Petrochemical may benefit from potential takeovers,'' the company said.

Indian Markets Down on Japan Recession News

Stocks opened on a flat note with a positive bias on Monday tracking Asian peers.

National Stock Exchange’s benchmark Nifty rose 13.15 points or 0.38% to 2823. Bombay Stock Exchange’s 30-share Sensex climbed 34.70 points to 9420 from Friday’s close.

Japan contracted at an annual pace of 0.4% in the July-September period after a declining an annualized 3.7% in the second quarter. Falling business investment is behind the latest drop in economic output. Japan's government has been anticipating economic challenges, and is trying to negotiate parliamentary approval of a $300 billion stimulus package, its second this year.

Stocks across the region fell after two Asian economies – Japan and Hong Kong – slid into recession and the Group of 20 nations delayed agreeing on specific measures to combat the global crisis. However, the Nikkei average rose 1% in thin trade as some investors rushed in to buy following an initial sell-off after data showed Japan's economy was in recession.

US stocks also slid on Friday after a record drop in retail sales last month increased fears that American consumers' reluctance to spend will push the economy into an even deeper downturn than currently expected.

The Dow Jones Industrial Average slid 337.94 points, or 3.82%, to end at 8,497.31, Standard & Poor's 500 Index fell 38 points, or 4.17%, to finish at 873.29 and the Nasdaq Composite Index lost 79.85 points, or 5%, to close at 1,516.85.

RBI stimulus for strapped credit market

A day after the G20 global leaders’ meet on tackling the financial crisis, the Reserve Bank of India took the lead among central banks in

moving to boost credit markets. The central bank removed the additional capital requirement placed on lending to real estate and provided an additional Rs 22,500 cr for cheap export refinance.

To boost dollar inflows, the RBI has allowed housing finance companies to borrow abroad and raised the ceiling on interest rates that banks could offer on non-resident deposits. The refinance facility aimed at encouraging banks to lend to mutual funds and finance companies has been extended to end March and corporates have been allowed to buy back foreign currency convertible bonds which are now quoting at dirt cheap rates.

A good part of the measures announced were demands by industry at their interaction at various levels with the government. In a statement issued here, the RBI said the higher risk weightage on real estate was introduced as a counter cyclical measure and was being rolled back keeping in mind the global macro economic situation. The measures come less than 24 hours after Federal Reserve chairman Ben Bernanke said that global policy makers would remain in close contact, monitor developments closely and stand ready to take additional steps.

According to measures announced on Saturday, banks can now offer Libor/swap rates plus 100 basis points on FCNR(B) rates as against the current ceiling of 25 basis points over Libor. Similarly, on NR(E)RA deposits the ceiling has been raised from Libor/swap rates plus 100 basis points to 175 basis.

For buy back of FCCBs, the RBI said it would consider proposals to prematurely buy back their FCCBs. The buy back should be financed by the company’s foreign currency resources held in India or abroad and/or out of fresh external commercial borrowing (ECB) raised in conformity with the current norms for ECBs. Proposals in this regard would be considered under the approval route. Extension of FCCBs would also be permitted at the current all-in cost for the relative maturity.

Given the likelihood of an export slowdown the RBI has decided to raise the eligible limit of export credit refinance for banks to 50% of the outstanding export credit eligible for refinance. This will provide additional liquidity support of around Rs 22,000 crore to the banks.

The rate of interest charged on the ECR facility will continue to be the prevailing repo rate under the LAF which is currently 7.5%. To ensure there is funding for employment intensive sectors, the RBI has decided to allocate to SIDBI and the NHB a sum of Rs 2,000 crore and Rs 1,000 crore, respectively.

Oil companies slash ATF prices

Amid falling international crude oil prices, state-run oil marketing companies (OMCs) on Saturday announced slashing of Aviation Turbine Fuel (ATF) prices by over 12 per cent, or Rs. 5,580 per kilolitre, in the first fortnight of the month.

However, there was little cheer for air travellers as airlines gave little indication of the passing on the benefit by reducing the prices of air tickets.

With this reduction, the ATF prices are now on a par with the levels that prevailed in September 2007.

The ATF price in Delhi was cut by Rs. 5,585.19 to Rs. 39,380.51 per kl with effect from midnight on Saturday, according to official sources. This is the fifth cut in ATF prices since August when the prices rose to an all-time high of Rs. 71,028.26 .

This is the third cut this month — the first was the monthly reduction, which was followed by a lowering of prices due to abolition of customs duty on the fuel.

Oil companies now fix rates every 15 days instead of the earlier practice of revising the prices based on the average oil price in the preceding month.

The ATF price in Mumbai will come down to Rs. 40,687.42 from Rs. 46,518.85 per kl.

The OMCs had reduced ATF prices to Rs. 48,656.59 on November 1 and then to Rs. 46,518.85 on November 4.

The airlines are maintaining they are studying the situation and will take a decision later.

The Finance Ministry recently abolished the 5 per cent import duty on ATF. The same day, Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited cut jet fuel prices in Delhi by Rs. 9,429.87 to Rs. 47,017.93 per kl, in line with the falling international oil prices.

OVL, partner strike more oil in Egypt

ONGC Videsh Ltd (OVL) and its partner IPR Red Sea Inc have made a second oil discovery in the North Ramadan Concession, Gulf of Suez, Egypt.

In a statement issued here, OVL, the overseas investment arm of ONGC said “The discovery in well North Ramadan-2 (NR-2) is the second oil discovery in this block.”

The discovery well is located on a separate fault block north of IPR’s first oil discovery, which produced approximately 3,000 bopd (barrels of oil per day) and 1.5 mmscfpd (million standard cubic feet per day) of gas during the testing phase.

According to the statement the tests of the second well reservoir produced up to 800 bopd of oil and 0.50 mmscfpd of gas.

Further analysis for development of the prospect is in progress, the statement said.

North Ramadan Concession Agreement was signed for petroleum exploration and exploitation in the Gulf of Suez, Egypt between the Arab Republic of Egypt and The Egyptian General Corporation as one part and consortium of OVL and IPR Red Sea Inc as the other part in 2005. The contract was effective from August 8, 2005.

OVL and IPR Red Sea Inc have 70 per cent and 30 per cent participating interest respectively in North Ramadan Concession.

ONGC Videsh and IPR are in the first phase of exploration in North Ramadan and have one remaining exploratory well to drill.

Stock Market FAQ's

How do you measure inflation?

Inflation is one of the biggest stories of recent weeks, and has received a great deal of attention from the media and politicians. At the same time, inflation is an economic problem that the average person meets on a daily basis in terms of higher prices, particularly of food products. How is inflation measured? In India, there are two broad measures of inflation - based on the consumer price index (CPI) and based on the wholesale price index (WPI). Of the two, the latter has a higher profile because it is measured every week. When you read about inflation rising to 7%, it is probably referring to inflation based on WPI. WPI is based on the wholesale prices of 435 items ranging from agricultural commodities like wheat, rice, groundnuts etc to manufactured products like steel, cement etc. A single index number is calculated based on those prices, and the inflation rate is calculated by comparing the most recent index number with that of a year ago. What is the government going to do about inflation? The government has taken some quick steps like trying to curb exports in sensitive commodities and reduce the cost of imports. The is done because exports reduce domestic supply adding to the pressure on prices . Therefore, the government has already banned the export of cement and non-basmati rice and may ban other commodity exports later. RBI has also taken action by raising rates, which will reduce liquidity and the total demand in the economy that will reduce the pressure on prices.

Top

What are P-Notes?

Participatory notes (P-Notes) are financial instruments used by hedge funds not registered with Sebi. * Hedge funds invest in Indian stocks through custodians in India * P-Notes are issued by registered FIIs to overseas investors who want to invest in India without registering How do P-Notes work? * India-based brokerages buy India-based securities and then issue P-Notes to foreign investors * Any dividends or capital gains collected from the underlying securities go back to the investors Why do FIIs use the Mauritius route? * India has a double taxation avoidance agreement (DTAA) with Mauritius * As per law, entities registered in Mauritius need not to be taxed in India * Capital gains from the sale of shares is taxable in the country of residence of the shareholder

Top

What is short selling?

When an investor goes long on an investment, it means the stock has been bought believing its price will rise in the future. Conversely, when an investor goes short, he is anticipating a decline in share price. Short selling is the selling of a stock that the seller doesn't own. More specifically, short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered. When you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. Sooner or later, you must 'close' the short by buying back the same number of shares and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money. Since you don't own the stock, you must pay the lender of the stock any dividends or rights declared during the course of the loan. If the stock splits during the course of your short, you'll owe twice the number of shares at half the price. Also, because you are being loaned the stock, you are buying on margin. In fact, you have to open a margin account to short stocks. There are two main motivations to short a stock. The most obvious reason to short is to profit from an overpriced stock or market. Sophisticated money managers short as an active investing strategy to hedge positions. This means they are protecting other long positions with offsetting short positions.

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What are SWFs?

A sovereign wealth fund (SWF) is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments. These are state savings which are invested for the purpose of investment returns. Some wealth funds are solely owned by Central banks. Most SWFs originate in foreign currency reserves. Traditional investment vehicles for SWFs have been debt instruments. There are 40 SWFs worldwide managing $ 3 trillion. NATURE AND PURPOSE > SWFs are typically created when govts have budgetary surpluses > SWFs are also created for economical or strategic reasons CONCERNS ON SWFs > Foreign investment by SWFs may create national security issues > Motives of SWFs could be to stifle competition > SWFs hold 2% of total assets traded worldwide SWFs MOVES > Govts of Singapore, Kuwait and Korea have provided $15 billion to Merril Lynch and Citigroup > China's SWF has invested $3 bn in Blackstone IPO WORLDS LARGEST SOVEREIGN FUNDS Abu Dhabi Investment Authority - $875 bn Govt Pension Fund of Norway - $350 bn Govt of Singapore Investment - $330 bn Kuwait Investment Authority - $250 bn China Investment Corp - $200 bn Temasek Holdings - $159bn Australian Govt Future Fund - $61.3bn Qatar Investment Authority - $50 bn DOES INDIA NEED AN SWF ? > The country’s forex reserves are at $315 billion along with a fiscal deficit > RBI governor say there is case for SWF in India > FM says no proposal for Sovereign Fund for India

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What is credit limit?

The 'Credit limit' is the maximum amount you can spend or borrow using your Credit Card in one billing cycle. This limit is based on various factors relating to your income. The credit limit can be changed on the basis of your payment and transaction history.

Top

How is the Sensex calculated?

The Sensex , an abbreviation of the BSE sensitive index, is a market capitalisation-weighted index of 30 stocks representing a sample of large, well-established and financially sound companies. It is the oldest index in India and has acquired a unique place in the collective consciousness of investors. The index is widely used to measure the performance of the Indian stock markets. Sensex is considered to be the pulse of the Indian stock markets as it represents the underlying universe of listed stocks on The Stock Exchange, Mumbai. Further, as the oldest index of the Indian stock market, it provides time series data over a fairly long period of time (since 1978-79). Sensex is not only scientifically designed but also based on globally accepted construction and review methodology. Sensex Calculation Methodology As per the methodology, the level of index at any point of time reflects the free-float market value of 30 component stocks relative to a base period. The market capitalisation of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalisation is further multiplied by the free-float factor to determine the free-float market capitalisation. The base period of Sensex is 1978-79, and the base value is 100 points. This is often indicated by the notation 1978-79=100. The calculation of Sensex involves dividing the free-float market capitalisation of 30 companies in the index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the Sensex. It keeps the index comparable over time and is the adjustment point for all index adjustments arising out of corporate actions, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate the Sensex every 15 seconds and disseminated in real time. Understanding Free-float Methodology Concept: Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalisation of a company for the purpose of index calculation and assigning weight to stocks in the index. Free-float market capitalisation is defined as that proportion of total shares issued by the company that are readily available for trading in the market. It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalisation of each company in a free-float index is reduced to the extent of its readily available shares in the market. In India, BSE pioneered the concept of free-float by launching BSE TECk in July 2001 and BANKEX in June 2003. While BSE TECk Index is a TMT benchmark, BANKEX is positioned as a benchmark for the banking sector stocks. Definition of Free-float: Shares held by investors that would not, in the normal course, come into the open market for trading are treated as 'Controlling/ Strategic Holdings', and hence not included in free-float. In specific, the following categories of holding are generally excluded from the definition of free-float: Holdings by founders/directors/ acquirers which has control element Holdings by persons/ bodies with "Controlling Interest" Government holding as promoter/acquirer Holdings through the FDI Route Strategic stakes by private corporate bodies/ individuals Equity held by associate/group companies (cross-holdings) Equity held by Employee Welfare Trusts Locked-in shares and shares which would not be sold in the open market in normal course. The remaining shareholders would fall under the free-float category.

Nifty Nov futures at 6-pt premium

Nifty November futures moved to a premium of 6 points from 1 point in the morning.

Active Calls
Levels OI Chng (in lakh) Premium (in Rs)
2900 7.6 131
3000 3.51 88

Active Puts
Levels OI Chng (in lakh) Premium (in Rs)
2800 1.91 139
2700 2.62 103


DLF
Stock ended down 8.4%
Ended at a discount of 1 point
Added 12.13 lakh shares in open interest

ICICI Bank
Stock ended down 7.2%
Ended at premium of 1 pt
Added 9.2 lakh shares in open interest

Sesa Goa
Stock ended up 2.5%
Ended at discount of 1 point
Added 15.84 lakh shares in open interest

Stock Tips: Accumulate Glenmark: Kotak

Kotak Securities has maintained its Accumulate rating on Glenmark Pharmaceuticals with a target price of Rs 557.

A report released on November 10 said: "We expect fully diluted EPS of Rs 31.1 and Rs 40.2 for FY09 and FY10, respectively, assuming US$ 70mn income from NCE out-licensing deals each in FY09 and FY10, respectively. The EPS from core business is expected to be Rs.23.3 in
FY09 and Rs.32.4 in FY10.

"The stock has witnessed sharp sell-off in last few trading session on the news of
suspension of further clinical trial by Eli Lilly on Osteoarthritis pain molecule
GRC-6211 and sharp correction in the overall markets.

"At current market price Rs.306, the stock is trading at 9.8x FY09 and 7.6x FY10
fully diluted earning estimates.

"We use Sum-Of-The-Parts method (SOTP) to value the stock, valuing the R&D
deals and the core generic business separately. We believe probability-adjusted
DCF is appropriate to calculate the option value from NCE compound as it captures
the reducing probability of success as the molecules progress on the clinical
path.

"We have valued the core business (excluding R&D income) at Rs 389 (earlier
Rs 359) attaching 12x price-to-earning multiple to FY10E fully diluted earning
and an option value IP Assets at Rs 168 (GRC 3886 at Rs 119 and GRC 8200 at
Rs 49). We have removed option value Rs 104 for GRC 6211 from our total NCE value. Hence, we arrived at target price of Rs 557.

"We believe that valuations are attractive and many potential catalysts still exist
in the stock viz, expected milestone payments, potential out-licensing deal for
GRC-3886 (Olgemilast) to European region and potential out-licensing deals for
GRC-8200 (Melogliptin) and other new molecules. We maintain ACCUMULATE."

Stock tips: Buy Gail: Prabhudas Lilladher

Prabhudas Lilladher has maintained its Buy rating on GAIL with a revised target price of Rs 295.

A report released on November 10 said: "Based on the sharp correction in Petchem prices and Petchem demand scenario, we have revised our estimates slightly downwards. Nevertheless, GAIL is quoting at attractive valuations of 7.8x FY10 EPS of Rs27.8 and 1.6x P/BV. We maintain BUY with a revised price target of Rs 295."

Stock Tips : ONGC to outperform: Khandwala

Khandwala Securities has assigned an Outperformer rating on ONGC with a target price of Rs 1,154.

A report released on October 31 said: "ONGC is one of the most undervalued companies and yet to receive its due attention. Lack of clarity in policy regarding under recoveries, declining production from its league fields and falling crude oil price, have resulted in recent negative sentiments hovering around the stock. Revised lower crude oil price has reduced our valuation for company as a whole. However we expect lower subsidy sharing burden to offset the impact of lower crude oil price significantly. We don’t see significant variation in cash earnings of the company. The resources in OVL, KG basin and other prospective blocks have huge potential upside. We assign OUTPERFORMER rating to the stock with revised target price of INR 1,154."

Stock Tip : Accumulate Bharti: PL

Prabhudas Lilladher has maintained its Accumulate rating on Bharti Airtel with a target price of Rs 838.

A report released on October 31 said: "Bharti Airtel Q2FY09 revenues were inline at Rs 90.2bn, a 6.3% QoQ growth but profitability came marginally below our expectations at Rs 20.4bn. Derivative and exchange fluctuation loss of Rs 5.8bn Vs Rs 1.48bn for Q1FY09 led to higher than anticipated interest expense. However, lower current tax due to 80-IA benefits and provision for deferred tax of Rs 3bn resulted in negative tax provision for the quarter.

"Intense competition and seasonality weak quarter hurt the pick up of minutes of use (MOU) which slided by 1.5% for the quarter to 526. Lower minutes coupled with tariff cuts across plans (to match competition price points) resulted in lower ARPU.

"Non-Voice revenues as a % of mobile revenues have now reached closed to 10%, which is quite impressive. Management has hinted that more than 60% of non-voice revenues comprised of services other than SMS, which is quite encouraging.

"Bharti Airtel has 60k towers as at end Q2FY09, out of which 35k towers shall be shifted to Indus. Management has indicated of listing the tower subsidiary i.e, both Indus and Bharti Infratel post FY10.

"We expect Bharti to report strong subscriber additions over the next 5-6 months and maintain its wireless leadership. There remain upside risk to our earnings estimate on account of derivative & foreign exchange fluctuation if the Re appreciates from the
current levels. Faster access to 3G spectrum shall be the key trigger in the foreseeable future.

"At the CMP of Rs 649, the stock is reasonably priced at a PER of 12.4x and at an EV/EBITDA of 7.5x FY10E earnings. Maintain Accumulate."

Stock tips: Buy Bharti Airtel: Sharekhan

Sharekhan has maintained its Buy rating on Bharti Airtel.

A report released on October 31 said: "Bharti Airtel’s Q2FY2009 results are in line with our estimates, though a foreign exchange (forex) loss during the quarter marred the bottom line growth. The consolidated revenues of Bharti Airtel grew by 6.3% quarter on quarter (qoq) and by 42.3% year on year (yoy) to Rs 9,020.3 crore in Q2FY2009. The revenues of the mobile business grew by 5.3% qoq whereas the revenues of the non-mobile business grew by 10.27% qoq.

"At the operating level, the operating profit margin declined by 50 basis points qoq to 41% from 41.5% in the previous quarter. The earnings before interest, tax, depreciation and amortisation (EBIDTA) margin contracted on account of a 16.8% sequential increase in the network operating cost to Rs 1,439.2 crore mainly due to penetration in rural areas. The operating profit stood at Rs3,699.3 crore, that is a growth of 5% on a quarterly basis.

"The net profit grew by a mere 1.1% qoq and by 26.8% yoy to Rs 2,046.3 crore due to a derivative and forex fluctuation loss of Rs 586.2 crore and a sequential increase in the depreciation charge by 15% to Rs 1,154.9 crore.

"In terms of operational highlights of the mobile business, the average realisation
per user (ARPU) declined by 5.4% qoq to Rs 331. However, the total minutes of usage marked a growth of 10.1% qoq to 11,583 crore minutes. In the non-mobile business, the ARPU increased by 0.8% to Rs 1,147.

"Bharti Airtel added 8.1 million subscribers during the quarter, taking its subscriber
base and overall market share to 77.48 million and 24.8%, respectively. The company has recently launched its direct-to-home services in 62 cities. It was also allocated spectrums in Tamil Nadu, Bihar and Karnataka during the quarter.

"We believe that the growth momentum in the company’s business would continue and the company will comfortably achieve our estimates.

"At the current market price, the stock is trading at 11.9x its FY2010E earnings and at an enterprise value/EBIDTA of 7.5x. We maintain our Buy recommendation on the stock and will review our price target in a detailed update shortly."

Wall St extends slide on economic worry

U.S. stocks tumbled for a fourth straight day on Thursday as investors dumped technology and financial shares following disappointing outlooks from bellwethers including Intel Corp, that added to fears about the extent of the global economic slump.

The slide threatened to push the S&P 500 through its Oct. 10 closing low, its lowest level in more than 5 years.

The Dow Jones industrial average slid 90.01 points, or 1.09 percent, to 8,192.65. The Standard & Poor's 500 Index tumbled 9.04 points, or 1.06 percent, to 843.26. The Nasdaq Composite Index plunged 35.49 points, or 2.37 percent, to 1,463.72.

Inflation falls to 8.98% for week ended November 1

India's wholesale price index rose 8.98% in the 12 months to November 1, sharply below the previous week's annual rise of 10.72
percent, government data showed on Thursday. Inflation slipped to single digit after 21 weeks.

Earlier a Reuters poll showed that the inflation rate was expected to have eased to around 10.4 per cent in early November. The median forecast of 11 economists was for a 10.37 per cent rise in the wholesale price index in the 12 months to November 1, compared with 10.72 per cent a week earlier.

Inflation, which was 9.32 per cent on May 31, had surged into double digits in the first week of June after a hike in retail fuel prices.

Last week's marginal increase in the wholesale price index (WPI)-based inflation was mainly due to upward movement of prices in primary articles, which has a weightage of 22% in the index.

Despite the marginal increase, however, economists expect the downward movement in inflation to continue. Their expectations are rooted in the prices of primary articles dropping after kharif produce enters the market. They also do not expect the liquidity infusion and the cut in interest rates to have any impact on inflation in short term.

"Inflation is expected to come down further due to the lower fuel and steel prices, largely all commodity prices were lower in that week," said Anjali Verma, economist with MF Global.

Data released on Wednesday showed industrial production recovered in September from its slowest pace in a decade as consumers spent for the festival season. But analysts said the rebound would be short-lived after the global credit crisis turned on India in October, paralysing money markets and pushing up firms' borrowing costs.

Industrial production rose 4.8 per cent in September from a year earlier, well above August's 1.4 per cent.

In early August, the inflation rate had hit 12.91 per cent, the highest reading since annual numbers in the current data series became available in April 1995.

Asian shares sink on global economy fears

Asian shares sank on Thursday to their lowest this month on uncertainty about whether the United States can succeed in its massive

banking rescue and a revenue warning from Intel Corp.

The Japanese yen retreated against the euro and the dollar after soaring on Wednesday on a flight-to-quality. Other Asian currencies fell, while Australia's central bank stepped in to support its tumbling Australian dollar.

Evaporating confidence in the global economy boosted regional bonds, while knocking down oil and metals such as platinum.

"It's pretty much weakness across the board," said Yutaka Miura, senior technical analyst for Shinko Securities in Japan.

"There is a renewed recognition of the weakness in the economy and corporate earnings," Miura said.

Asian shares followed Wall Street lower after the US Treasury on Wednesday backed away from using a $700 billion bailout fund to cleanse bank balance sheets of bad mortgage debt to focus on buying stakes in US banks and The shift in focus not only created uncertainty, but came as Europe reported more gloomy economic news, heightening fears of a global recession.

News that Intel Corp slashed its fourth-quarter revenue forecast, citing weak demand across the world for all its products added to the worries.

The MSCI index of Asian stocks outside Japan fell more than 4.5% to its lowest level since Oct. 30. Japan's Nikkei average dropped 5 per cent, with exporters such as Honda Motor hit amid concerns about the impact from a stronger yen. Other stock markets were also battered: South Korea, Australia, Hong Kong and Taiwan tumbled more than 4 per cent each, and Shanghai fell about 1%.

The US dollar edged up to around 95.57 yen as investors took profits on the yen's strong gains the previous session.

The euro also rebounded, rising to 119.15 yen up 0.3% from late US trade, after briefly falling as low as 117.65 yen on trading platform EBS earlier in Asian trade.

Traders said thin liquidity in the market was exaggerating price movements. Other Asian and Pacific currencies fared worse.

The battered Australian dollar edged up to $0.6410 after the central bank said it had intervened to support a sliding currency that fell to $0.6347 on Wednesday -- its lowest in two weeks. Regional government bonds gained from the volatility elsewhere, with Japan's December 10-year JGB futures up 0.45 point to 138.54, after climbing as high as 138.79.

Commodities dropped amid concern that sputtering economic growth would curb demand for everything from oil to grain and on widespread risk aversion. US crude futures fell 72 cents to $55.45, while platinum sank to $785.00 from its New York notional close of $810.

Honda's Civic Hybrid cheaper by Rs 8 lakh

Honda has slashed the price of its Civic Hybrid cars in India by an unprecedented Rs 8 lakh, as it looks to boost sales of
the environmentally-friendly sedan in an unfriendly economic environment.

After the price cut— the sharpest in Indian automobile history and introduced with immediate effect—the hybrid Civic will cost Rs 13.36 lakh compared to its launch price of Rs 21.5 lakh. This is also the first time in its decade-long presence in India that Honda, which is absorbing the full impact of the price cut, is resorting to a formal price cut to sell its cars.

Launched this June, the hybrid Civic had generated huge interest among customers, but its high price meant sales were few. The company had only managed to sell 60 cars till date. In contrast, the petrol version of the Civic, launched in India in July 2006, sold 5,236 units in the first seven months of the fiscal.

The company, which operates as Honda Siel Cars India (HSCI) in India, said the decision to cut the price was aimed at making eco-friendly cars more affordable. The Civic Hybrid is India’s first full hybrid vehicle. Its 1.3 litre petrol engine and an electric battery give it an average mileage of 20 kilometers per litre of petrol, making it the most fuel-efficient car in its category on Indian roads.

“We have taken a hit on the price to offer this eco-friendly technology to potential customers. There have been thousands of enquiries for the Hybrid, which had not culminated in actual sales,” Honda Siel v-p Jnaneshwar said.

Global stocks tumble as bad news stacks up

Asian stocks plunged Thursday, dragged down by heavy losses on Wall Street after the US government dropped a plan to buy up toxic mortgage
assets and new signs of recession emerged in Europe.

A profit warning from the biggest US consumer electronics retailer, Best Buy, also sapped confidence, which was already fragile following weeks of market turmoil sparked by a global credit crunch.

"The announcement by Best Buy fuelled worries over corporate earnings when consumers are heading to the year-end shopping season," said Motoki Ichikawa, investment information chief at SMBC Friend Securities.

Washington's U-turn on the financial bailout plan "also came out of the blue, discouraging investors," he said.
Stocks tumbled 5.1 percent in Tokyo by lunch as Hong Kong shares sank 6.5 percent in early trade. Seoul slumped 5.6 percent while Sydney was 4.1 percent in the red.

Markets around the region were mired in losses after Wall Street's Dow Jones Industrial Average sank 4.73 percent on Wednesday after a raft of gloomy corporate news and the shift in the bailout strategy.

"It looks like world markets will take another leg down in the next few days," Goldman Sachs JB Were senior sales trader Patrick Crabb in Melbourne told Dow Jones Newswires.

"We passed through the eye of the hurricane, and are now back feeling the full force of the storm."

Treasury Secretary Henry Paulson said the Wall Street bailout plan would be refocused on continued capital injections for ailing banks and possible steps to help the non-bank financial sector, such as car loans and credit cards.

"It is shocking to see the US government deciding not to use any of the 700 billion dollars on buying mortgage-related assets, which were the primary reason for the bailout package," Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong, wrote in a note to clients.

"Declining house prices and falling values of mortgage-related securities are the primary reason for the current crisis, and abandonment of attempts to tackle these problems head-on will prolong the recession."

Paulson ruled out using part of the 700-billion-dollar rescue package for the troubled auto sector, which has warned it will soon run out of cash. The White House refused to say whether US auto giants were too big to fail.

China meanwhile reported a sharp slowdown in industrial production growth -- the latest sign that the Asian economic powerhouse is losing steam.

Premier Wen Jiabao was quoted in the state media as saying the impact of the global financial woes on China's economy was "worse than expected."

European stock markets dropped on Wednesday, as the Bank of England said the British economy was likely in recession.
In Germany, the eurozone's largest economy, a panel of top economists warned that economic growth would grind to a halt in 2009.

The London FTSE 100 index fell 1.52 percent, the Paris CAC 40 fell 3.07 percent and the Frankfurt Dax dropped 2.96 percent.

Investors were turning their attention to a summit on the financial crisis that will bring together leaders of the Group of 20 industrialised and emerging nations from Friday in Washington.

Japan will offer at the meeting to lend up to about 100 billion dollars to the International Monetary Fund to help boost loans to emerging countries hit hard by the financial crisis, local media reports said.

Oil Falls to 21-Month Low on Forecasts of Lower Global Demand

Crude oil fell to a 21-month low on speculation that the International Energy Agency will cut its global demand estimate tomorrow and the U.S. will report that stockpiles gained.

The IEA is ``more than likely'' to lower its oil-demand forecast for next year in its next monthly oil report, according to Executive Director Nobuo Tanaka. The U.S. Energy Department cut its oil-demand and price forecasts today. A department report tomorrow may show that crude-oil supplies rose last week.

``It's hard to see what will stop this slide,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``It's more of the same. The market is moving on continuing economic concerns.''

Crude oil for December delivery fell $3.09, or 5.2 percent, to $56.24 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $55.94, the lowest since Jan. 31, 2007. Prices have tumbled 62 percent since reaching a record $147.27 on July 11.

The IEA, which coordinates energy policy in 28 developed countries, will cut its forecast for growth in global demand for a third month from 700,000 barrels a day in its monthly report tomorrow, according to four former analysts at the agency.

``People are already looking forward to tomorrow's IEA report, and it appears that the demand numbers will be revised dramatically downward,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Demand growth will probably be revised down from 700,000 barrels to about 300,000'' barrels a day.

Forecast Reduction

The U.S. government reduced its forecast for oil prices next year by 43 percent as the economic slowdown cuts energy demand. West Texas Intermediate crude oil, the U.S. benchmark, will average $63.50 in 2009, down from $112 estimated in October, the Energy Department said in its monthly Short-Term Energy Outlook, released today in Washington.

Global oil consumption will average 85.89 million barrels a day this year, up 80,000 barrels from 2007, according to the report. The estimate is down 250,000 barrels from the forecast a month ago. Demand will average 85.93 million barrels a day in 2009, down 990,000 barrels from last month's forecast.

The Organization of Petroleum Exporting Countries, which announced a 1.5 million barrel-a-day supply cut last month to stanch the price drop, may meet again before its next scheduled meeting in December if futures keep declining, Shokri Ghanem, Libya's top oil official, said. OPEC oil ministers and officials are currently holding talks by telephone, he said.

``If the IEA report tomorrow shows flat demand, you can be sure that OPEC will get together before the next scheduled meeting and make further cuts,'' Barakat said.

OPEC Options

OPEC President Chakib Khelil said the group may announce another output cut before its next planned meeting, Reuters reported. Members of the group produce more than 40 percent of the world's oil.

``If OPEC had wanted to make a statement, they should have made a cut of at least 3 million barrels,'' said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. ``Adherence to quotas is always questionable as well. They will have to make further cuts and say how they intend to make them.''

Prices of $80 a barrel are needed to make investment in new supply economic, the IEA's chief economist, Fatih Birol, said at a conference in London today.

``We are already seeing projects be canceled because of the fall in prices,'' Brodrick said. ``I wouldn't be surprised if we see prices surge above $100 again next year because of the canceled projects and a pickup of demand,''

Energy prices also dropped as falling global stock markets signaled that the economic slump may deepen. The Standard & Poor's 500 Index declined 32.25 points, or 3.6 percent, to 866.70. The Dow Jones Industrial Average fell 274.47, or 3.2 percent, to 8,419.49.

U.S. Stockpiles

U.S. crude-oil stockpiles probably increased 1 million barrels in the week ended Nov. 7 from 311.9 million the week before, according to the median of 13 analyst estimates before the Energy Department report.

The department is scheduled to release its weekly report tomorrow at 11 a.m. in Washington. The report is being delayed by a day because of yesterday's Veterans Day holiday.

Brent crude oil for December settlement declined $3.36, or 6 percent, to $52.35 a barrel on London's ICE Futures Europe exchange. Futures touched $52.08, the lowest since Jan. 19, 2007.

Slowdown looms as factory growth slips

The country’s factory output, or industrial production growth, accelerated in September, as companies moved to build up stocks ahead of the festival season, which usually sees an increase in demand, but India appears set for an economic slowdown with factory output growth almost halving in the first six months of 2008-09 (April to September) compared with the same period last year.

Data released by the Central Statistical Organisation on Wednesday showed that during the first half of the year, the Index of Industrial Production (IIP) grew 4.9% compared with 9.5% in the year-ago period. In September, however, factory output grew 4.8% year-on-year, recovering from a 10-year low of 1.4% during August.

In September, Indian auto makers raised production to meet anticipated demand ahead of the festival of Diwali in October, considered an auspicious time to make purchases. Sales of automobiles, however, declined 14.4% in October compared with a year ago, as high borrowing costs and an uncertain economic environment kept consumers away.

September was also the month in which the global credit crisis intensified.

“We think the large, negative global and domestic financial sector shocks will continue to slow activity across the board in capex (capital expenditure) plans, exports growth and consumption demand,” Tushar Poddar, vice-president (Asia Economics Research) at Goldman Sachs, said in a statement. Goldman Sachs has revised its GDP growth forecast for India in 2008-09 to 6.7% from 7.5% and for 2009-10 to 5.8% from 7%. “We expect industry to grow by 4% year-on-year in 2008-09 from 8.1% in 2007-08,” he said.

The global financial crisis is curbing industrial output across Asia as a slowdown in the US and Europe crimps demand for the region’s exports. Industrial production in China grew 11.4% in September, the slowest pace in six years. Output in South Korea declined for a third month in a row.

India’s exports grew 15% from a year earlier in September, the slowest pace in 18 months.

India’s central bank has cut a key interest rate by 1.5 percentage points from 9% to 7.5% and lowered the amount lenders must keep with it or in liquid investments, freeing up as much as Rs1.4 trillion to ease lending. It, however, has also had to shore up the rupee, which fell 9.1% in the quarter ended September, thereby sucking this money out of the system (when the Reserve Bank of India, or RBI, sells dollars it takes out an equivalent amount in rupees from the system).

“Production growth will remain subdued until next year,” said Dharmakriti Joshi, an economist at Crisil Ltd, the local unit of Standard and Poor’s. “Interest rates need to be lowered to give a real boost to demand.”

Some state-run banks reduced lending rates after finance minister P. Chidambaram asked them to do so. State Bank of India, the country’s largest lender, cut the rate it charges its best clients to 13% last week from 13.75%, the highest in a decade. ICICI Bank Ltd, the country’s largest private lender, hasn’t reduced its 17.25% charge.

The cost of funds “remains very high” even after RBI lowered policy rates, said Bimal Jalan, a former central bank governor. “We need to create conditions so that loans are available at interest rates at pre-crisis levels, as other sources of finance have dried up.”

Apart from declining sales of automobiles in October and slowing exports, data released by India’s department of revenue on Tuesday showed a decline in indirect tax collections during the month.

Crisil’s Joshi said he expects October factory turnout numbers to be worse, because IIP in that month was high last year (that means it would have to be even higher this year to show any growth). IIP grew 12.2% last October.

As Mint reported on 5 November, India’s chief statistician Pronab Sen had said that economic growth could slow down to 7% in the July-September quarter on account of lower-than-expected industrial growth.

Chidambaram, however, termed the monthly recovery in industrial output “encouraging”. “After the poor results reported for the month of August 2008, the quick estimates of IIP for the month of September 2008 are more encouraging. I say this even while I maintain that data collection must be improved and made more relevant, contemporary and universal,” he said.

The Department of Industrial Policy and Promotion, which collects a large part of the data used to calculate IIP, recently hired economy and corporate tracker, Centre for Monitoring Indian Economy, to help accelerate the launch of a new IIP that is expected to be more representative and reliable.

Manufacturing, which accounts for nearly 80% of IIP, grew 4.8% in September compared with 7.4% in the same month a year ago. The capital goods sector recovered sharply during September to grow at 18.8% compared with 20.9% during the same period last year. In August, the capital goods sector had grown by 1%. Consumer durables grew at 13.1% in September, ahead of the festival season.

On Wednesday, the rising possibility of weaker-than-anticipated economic growth pushed the Bombay Stock Exchange’s benchmark index, the Sensex, down 303.36 points, or 3.1%, to 9,536.33.

MathWorks sets up direct presence in India

MathWorks, a provider of software products for technical computing and model-based design, has launched its direct operation in India by opening an office in Bangalore. The Massachusetts-based privately-held company which had recorded a revenue in excess of $450 million in the last fiscal, had been so far operating in India through its partner, Crane Software.

The new office will have close to 30 professionals mainly in sales and support, apart from having a small team of software developers. MathWorks has also announced that Cranes will continue to be a distributor for the company in India, though in a limited way, serving some customers in the government and education sector.

“We find the market in India to be quite lucrative for our types of products. This is the reason why we decided to start our direct operation here to tap the huge opportunities available in this market,” said Kishore Rao, MD, MathWorks India.

In India, the company has over 300 customers in the commercial space including L&T, Continental and Airbus which are using MathWorks proprietary software products — Marlab and Simulink. Besides, leading academic institutions like the Indian Institute of Science in Bangalore, most of the IITs and regional engineering colleges are using MathWorks software products in India.

Globally, 60 per cent of MathWorks revenue comes from commercial space, followed by 30 per cent from education and 10 per cent from the government and defence sectors.

MathWorks employs 2,000 people globally, and has direct sales presence in 10 countries including Australia, France, Germany, Italy, UK and the US.

Nifty ends below 2800

Sustained selling pressure and no buying support saw equities close with heavy losses Wednesday but off day’s lows. Traders were cautious

to carry over fresh positions ahead of festive holiday on Thursday and inflation data.

Market opened with a gap-down trailing other Asian markets and continued to be subdued due to lack of conviction. Investors waited for data on industrial growth to take directional call.

Industrial output for September grew at 4.8 per cent, higher than 1.42 per cent in August but down from 7 per cent in September 2007. The main factor for decline in growth was the manufacturing sector, which grew just 4.8 per cent versus 7.45 per cent last year--clearly indicating effects of economic slowdown.


This resulted in a short-lived spike in the market followed by a sharp sell-off. Bombay Stock Exchange’s Sensex closed at 9,536.33, down 303.36 points or 3.08 per cent. The index touched an intra-day low of 9376.73 and low of 9376.73.

National Stock Exchange’s Nifty broke the support of 2800 and touched an intra-day low of 2794.95 before closing 3.07 per cent lower at 2848.45.

BSE Midcap Index fell 2.25 per cent and BSE Smallcap Index closed 1.92 per cent lower.

“Traders squared long positions and created fresh shorts. It’s a traders market and investors should wait till the third quarter results are out. We are likely to see new lows by January,” said Sarfaraz Vakil, associate vice president, India Infoline.

Biggest Sensex gainers were Tata Consultancy Services (1.04%) and Infosys Technologies (0.29%).

Losers comprised Jaiprakash Associates (-9.13%), DLF (-8.61%), ICICI Bank (-8.35%), Reliance Infstrastructure (-6.53%) and Hindalco Industries (-5.75%).

BSE Realty Index fell 7.34 per cent, BSE Bankex fell 4.38 per cent and BSE Metal Index closed 3.67 per cent lower.

“Realty stocks have fallen over 80 per cent from their highs and further downside looks limited. Investors with long-term perspective can buy scrips which are available at attractive valuations,” he added.

Traded volume was slightly better. As per the NSE website, 6135.79 lakh shares were traded against 5708.84 lakh shares on Tuesday. Market breadth was negative on the BSE with 1,701 losers and 818 gainers.

Market will remain shut Thursday on account of Guru Nanak Jayanti. Traders will eye inflation data which is forecast to have fallen to around 10.4 per cent for the week ended Oct 30.


Meanwhile, European markets were in the positive terrain after a weak opening. FTSE 100 was up 1.32 per cent, DAX 30 up 0.70 per cent and CAC 40 was up 0.92 per cent higher.

US stocks are also expected to open higher later Wednesday. Dow Jones stocks futures were up 0.44 per cent, S&P 500 stocks futures gained 0.63 per cent and Nasdaq stocks futures was up 0.18 per cent.

Rupee falls sharply as FIIs sell in equity market

The rupee fell by Rs 1.20 against the dollar, the sharpest single day fall in the recent past, on heavy dollar demand on Wednesday. Currency dealers said rupee came under pressure as FIIs sold heavily in the equity market.

This coupled with dollar demand from oil companies and foreign banks looking to make arbitrage gains, drove the rupee down for the second consecutive day.

The domestic currency opened weaker at 48.44 and fell further by around 90 paise to close at 49.30/32, as against the previous close of 48.10.

“Dollar demand from foreign institutional investors looking to exit the domestic equity indices, and oil importers are putting pressure on the rupee,” said Mr K. Harihar, Treasury Head, Development Credit Bank. There was sustained demand for the greenback from parties looking to book arbitrage profits due to the price differential, which is about 10-20 paise, in the spot and the non-deliverable forward (NDF) markets. The NDF market is an unofficial international market for trade in currencies. Banks that have a legal presence abroad buy dollars in the spot market and sell in the NDF market at higher rates. This is especially true for foreign banks, said a forex dealer.

As the New York markets were closed on Tuesday, there was hardly any fresh dollar supply, the dealer said.

The forward premiums also crashed with the 6-month ending at 2.49 per cent and the 12-month closing at 1.81 per cent.

RBI buyback triggers bond rally

Government bond prices ended sharply higher on Wednesday as sentiment improved after the Reserve Bank of India’s (RBI) offer to buy back Rs 10,000 crore of two gilts issued under the Market Stabilisation Scheme (MSS) was fully subscribed, dealers said.

RBI bought back Rs 5,000 crore each of 5.87 per cent, 2010 paper and 6.65 per cent, 2009 paper. The 10-year benchmark 8.24 per cent, 2018 paper closed at Rs 104.24 as against Rs 103.70 on Tuesday.

“The MSS bond buyback tender went through smoothly and RBI was able to buy back the entire amount it had offered. So, sentiment and liquidity view improved,” said N S Venkatesh, managing director and chief executive officer, IDBI Gilts.

The cut-offs for the MSS gilt buyback tender were near the market expectations, which also added to the buying.

RBI set a cut-off of Rs 98.92 at 2010 gilt tender as against the market estimate of Rs 98.95.

Similarly, the central bank bought back the 2010 paper at Rs 99.94 against the market estimate of Rs 99.97.

Earlier in the day, gilts had risen following comments from Petroleum and Natural Gas Minister Murli Deora that the government may consider a cut in domestic fuel prices once crude oil price steadies and the rupee stabilises against dollar.

“The government may line up some populist measures as inflation looks likely to subside and general elections draw closer,” said a dealer of a private bank.

But Prime Minister Manmohan Singh had on Tuesday ruled out any possibility of a fuel price cut. The sharp fall in global crude oil prices in the last few months has triggered the hope of a fuel price cut.

Gilts had pared gains towards afternoon because of the stronger-than-expected September industrial production growth figure of 4.8 per cent, lower from 7 per cent a year ago, but higher from the market estimate of 3.7 per cent.

Slowdown shows up in macro numbers

Macro indicators of the economy have started showing early signs of an industrial lump. Customs and excise collections for October 2008 have moved into negative territory for the first time in financial year 2008-09 , declining by 5% from October 2007.

While excise duty collections — a central tax levied on manufactured goods at the factory-gate level — dropped by 8.7%, customs duties — taxes levied on imported goods — fell by 0.9% in the month under review. However, service tax — a tax levied on services rendered —bucked the trend, growing at 18% in September.

Excise collections have shown a declining trend since September 2008, when it fell by 3.8%. The dip in customs and excise collections indicates a slowdown in industrial activity and trade. While excise tax exemptions in some states and sectors have contributed to the fall, withdrawal of import duties on some of the bulk products like crude oil has also led to the decline.

The central government had exempted certain states like Uttarakhand and Himachal Pradesh from excise levies in a bid to promote industrial activity. The government had removed customs duty on crude and reduced import duties on petroleum products like petrol and diesel to cushion fuel customers from the impact of spiralling crude oil prices globally.

The total indirect tax collections — excluding service tax — stood at Rs 18,664 crore against Rs 19,646 crore in October 2007.

In an early indication that India’s manufacturing sector is slowing down, excise duty collections were down to Rs 9,399 crore in October 2008 compared with Rs 10,293 crore in October 2007. Faced with the global liquidity crunch and falling demand, India Inc has been cutting production to stay afloat.

Sectors like steel and auto are among the major sectors which have seen a drop in demand. A finance ministry official said that sectors like cement, iron and steel had shown lower collections as per preliminary data.

The fall in excise collections could impact the government’s fiscal health. The finance ministry had targeted a collection of Rs 1,36,610 crore in excise duty in the current fiscal. Excise duty collections were required to grow by 9.3% to meet this target.

HSBC sees weak India industrial output, rate cuts

India's industrial output may continue to weaken in the coming months and further rate cuts could come at any point, HSBC said on Wednesday.

"Production growth looks set to weaken further as the full force of the developed world recession, the lagged effects of the previous rate rises and the domestic credit-crunch hit home," said Robert Prior-Wandesforde, an economist at HSBC.

"Indeed it is not impossible that we could see production growth turn negative for a month or two as companies work off inventories built in anticipation of a reasonable strong festival season which seems to have disappointed," he said.

Motor vehicle sales in particular were very poor, he said.

Industrial output rose 4.8 percent in September from a year earlier, above the previous month's upwardly revised 1.4 percent, data showed on Wednesday.

"The direction is clear and, unfortunately, increasingly likely to be associated with job losses," he said.

Prior-Wandesforde said the Reserve Bank of India could cut its repo rate, at which it lends to commercial banks, from 7.5 percent. It has been cut by 150 basis points in 2008.

HSBC also expects a cut in reverse repo rate, at which the central bank absorbs surplus cash from banks, from 6 percent.

SAIL may go for temporary production cut

Bloomberg reported that Steel Authority of India Limited may lower output as the global financial crisis cuts car and construction demand and commodity prices tumble.

Mr PK Rastogi secretary steel while attending a conference in the southern city of Hyderabad said that production of some of the products by Steel Authority may be cut temporarily as demand for long products and hot rolled coils in India has fallen. 

He did not give details about the size or timing of cuts.

SAIL produced a record 3.5 million metric tons of crude steel in the three months ended September 30th 2008.

Jet Airways denies report on Temasek talks

Jet Airways, India's largest private carrier, on Wednesday denied a newspaper report it would sell a 10 percent stake to Singapore state investor Temasek Holdings [TEM.UL] for 2.5 billion rupees ($50 million).

"With regard to this particular news item, we wish to clarify that it is not correct," Jet said in a statement to the stock exchange.

The Economic Times, citing unnamed sources, reported on Wednesday the airline was in advanced negotiations to sell the stake to Temasek.

Separately, a Jet executive said other reports of fund raising were also incorrect.

"Everything reported in the papers is false and incorrect," Saroj Datta, executive director at Jet Airways, told Reuters.

The Mint and Business Standard papers reported on Wednesday the airline was in talks with Abu Dhabi state-owned Mubadala Development Co for funding of 10 billion rupees.

Shares of Jet Airways closed down 2.14 percent at 184.80 rupees in a weak Mumbai market. 

Titan sees robust demand, expansion plans on track

Watches and jewellery maker Titan Industries Ltd sees firm consumer off-take across all segments and expects the wedding season to boost sales, a top official said.

The company's expansion plans are on track despite the concerns over slowing demand due to the current financial meltdown.

"In the jewellery business we want to be national by the end of the year and we want to open 80 stores by March and that plan has not changed," Bhaskar Bhat, managing director, told television channel NDTV Profit on Wednesday.

"Similarly in the watch business we are set to add 90 stores to the current 243," he added

However, Bhat admitted the trickle down effect from other sectors may hit Titan but said the company was prepared to meet those challenges.

Shares of the company traded up 0.6 percent at 907.35 each share in the Mumbai market.

Govt says Sept industrial output encouraging

 The Finance Minister Palaniappan Chidambaram said on Wednesday industrial output data for September was encouraging after August's poor result, but called for an improvement in data collection.

"I say this even while I maintain that data collection must be improved and made more relevant, contemporary and universal," a statement from the finance minister said.

India's industrial output rose 4.8 percent in September from a year earlier, data showed on Wednesday, above the previous month's upwardly revised 1.4 percent.

But analysts said annual expansion in October would probably drop as the global credit crisis raised borrowing costs for Indian firms.

The September figure was marginally above a forecast for growth of 4.7 percent in a Reuters poll of economists.

Sensex plunges on technical sell-off

Almost all the gains made in last two sessions were wiped out on Tuesday, as investors booked profits tracking the fall in global markets

and due to lack of buying support. Foreign funds and traders exited realty, metal and power stocks which had run up recently.

Equities opened lower trailing other Asian peers after euphoria over China’s stimulus package fizzled out. What began as technical profit booking soon turned into a sell-off as foreign funds pressed the sale button, said marketmen.

Benchmarks breached psychological technical supports but ended just off the day’s lows.

“Sensex reacted exactly from the ‘Bearish Engulfing’ pattern formed on Nov 5 when it fell almost 900 points from its day’s high of 10945. As seen from daily chart, Sensex has established a range bound movement between 9631 and 10945. If the negative trend continues, any move below support of 9631 would lead to 9321- 9258 and one can expect a bounce back. Overall trend would turn positive only above 10945. Sensex move above 10945 without moving much below 9258 level would indicate a bullish break out of the ‘Inverse Head and Shoulder’ pattern,” said Birendrakumar Singh, technical analyst at Religare Securities.

Bombay Stock Exchange’s Sensex tumbled 696.47 points or 6.61 per cent to end at 9,839.69. The 30-share index touched an intra-day low of 9,799.45 after opening at a high of 10,405.39.

National Stock Exchange’s Nifty ended at 2938.65, down 6.66 per cent or 209.6 points. The 50-share index hit a low of 2,919.45 from high of 3,147.20 in the day.

The cut was not so severe for secondline stocks. BSE Midcap and Smallcap indices ended 3.41 per cent and 2.51 per cent lower respectively.

Among frontline stocks, Jaiprakash Associates (-12.21%), Sterlite Industries (-11.03%), Tata Steel (-10.98%), Hindalco Industries (-10.18%), DLF (-10.15%) and BHEL (-9.65%) were the worst hit.

ITC, up 0.06 per cent, was the lone gainer in the 30-share index.

All the sectoral indices ended in the red. BSE Realty Index plunged 10.25 per cent, BSE Metal Index closed 8.42 per cent lower and BSE Power Index declined 7.70 per cent.

Though the markets are range bound and taking cues from the movement in Asian markets, improvement in industrial growth may provide some positive sentimental impact on Wednesday. Industrial growth is expected to have risen 5-7 per cent in September from the 13-year low of 1.3 per cent in August.

But drying volumes are a cause of concern for the market. Monday’s surge came on lower volumes. According to NSE website, total traded value today was Rs 8,821.63 crore, so far the lowest this month.

Market breadth on BSE was extremely weak with 1,766 declines against 759 advances.

Decline in US stocks futures were pointing to a low opening later Tuesday. Dow Jones stock futures were down 1.27 per cent, S&P 500 futures were 1.20 per cent lower and Nasdaq stocks futures fell 1.35 per cent.

ONGC to make offer to acquire Imperial in 28 days

Armed with all regulatory approvals from the Russian authorities, ONGC Videsh Ltd — the foreign arm of state-run Oil & Natural

Gas Corporation (ONGC) — is all set to make a "firm" offer to Imperial En-ergy's shareholders in the next 28 days. The Russian government paved way for the $2.58 billion acquisition on Tuesday, after it allowed OVL to own a company that holds oil and gas assets in Russia.

Accord-ing to the Russian law, a foreign government-owned company requires approval of the Russian authority before acquiring a ownership stake in a Russian entity. On Monday, the Russian Federal Anti-Monopoly Service (FAS) had already given OVL a clean chit from anti-monopoly regulations, the other mandatory pre-condition for making a formal offer.

"With this approval , OVL has fulfilled the both pre-conditions for making a formal offer. We have already informed the London Stock Exchange (LSE). We will post the offer (to the Imperial shareholders) within 28 days, from now," a senior official in the government, who didn't wish to be identified, told ET .

On September 5 this year, the company had announced that it had sought the Russian government's approval regarding the two manda-tory pre-conditions required to be met before making a formal acquisi-tion offer. While the first pre-conditions was related to the approval by the governmental commission of the Russian Federation with respect to restrictions on the ownership of a Russian entity by entities con-trolled by a foreign government. The other was related to the anti-monopoly regulations.

PF monopoly loss prompts SBI to demand higher fee

SBI is demanding a higher fee for collecting provident fund (PF) deposits. The move comes after the Employees Provident Fund

Organisation (EPFO) clipped the bank’s monopoly over the management of the Rs 30,000-crore EPFO corpus.

Currently, SBI charges Rs 1.50 on every Rs 1,000 deposited as monthly fee from EPFO subscribers. The bank now wants EPFO to hike this fee to Rs 5 per Rs 1,000 deposited, an issue that is likely to figure at the next financial and investment committee (FIC) meeting of EPFO. If SBI gets a green light, it would substantially raise the costs of collecting pension funds for the organisation.

The PF contributions of the four crore plus subscribers of EPFO are deposited by their respective employers in local branches of SBI. EPFO identifies one ‘link branch’ of SBI in a state from where the collected funds are remitted to the Organisation’s account. For such transactions, SBI charges Rs 1.50 on every Rs 1,000 deposited. In case an employer deposits money in a non-linked SBI branch, the bank charges a higher sum of Rs 2.50 per Rs 1,000 for remitting it to EPFO via the link branch. The bank now wants to raise it to Rs 5 on every Rs 1,000 deposit for both direct as well as such indirect transactions, a senior EPFO official told ET.

SBI also wants EPFO to pay it for all other additional services that it provided the organisation. At present, SBI is assisting the EPFO in its pilot project on online deposit of PF for a group of companies situated in Gurgaon. Besides, SBI has also made it clear that any extension or replication of the the project will come for a fee.

SBI currently has monopoly in collecting PF deposits for EPFO. Though, a proposal to enroll other public sector banks is under EPFO’s active consideration, it is yet to take a final call. As a part of this move, it has already initiated talks with other 10 nationalised banks.Enrollment of other nationalised banks would help EPFO bring down the its own collection expenses, the official said.

However, since multiple collection will also increase paperwork for EPFO, like cross-checking of details in cheques, the organisation is being cautious in its approach.

SKS Microfinance mops up Rs 366 cr

SKS Microfinance on Monday announced that it has raised $75 million (Rs 366 crore) from a host of investors including Sandstone Capital,

SKS investors, Kismet Capital and SVB India Capital Partners (an affiliate of Silicon Valley Bank).

This was the fourth round of fund raising by the Hyderabad-based micro-finance firm. Edelweiss Capital was the advisor to SKS. ET reported about the fund-raising in its online edition on Monday, a few hours before the announcement. SKS has provided micro-loans of Rs 4,729 crore to 3.3 million poor households across 18 states in 50,000 villages and urban slums of India. Its members have maintained a 99% repayment rate. The new equity investment will help SKS expand its reach to 8 million members over the next two years.

Vikram Akula, founder and CEO of SKS Microfinance, said: “The fact that this investment has come during the global economic meltdown is proof of the confidence that investors have in SKS.” In February, it had raised Rs 124 crore from UNITUS, Vinod Khosla, Infocom Ventures, SKS Capital, Sidbi, Tejas Ventures, Sequoia Capital, Yatish Trading, SVB India and Columbia Pacific.

Prior to that, it had collected Rs 53 crore in March 2007 and Rs 14 crore in March 2006. Last month, Swadhaar, a Mumbai-based micro-finance institution has raised $3 million from Michael and Susan Dell Foundation, Accion and Unit Equity Fund.

Ficci for bailout scheme to textile industry

Ficci today responded to the Prime Minister’s appeal not to resort to retrenchment in the face of the current economic meltdown by throwing the ball into the government’s court. It asked for a bailout package for the labour-intensive textile sector to head off massive job cuts.
Pointing out that growth of the textiles industry has come down from eight per cent in 2005-06 to merely 0.8 per cent in April-August 2008-09, Ficci warned of large-scale lay-offs if the government did not implement swiftly a special package for the industry.
It said that the profitability of Indian textiles industry fell by over 99 per cent in June 2008 quarter and investment in the current year (for April-July) dipped by 66 per cent compared to the year-ago period.
Therefore, a special package has become imperative to save the industry from the current economic crisis, Ficci argued. It also favoured moratorium for one year on term loans and increased drawback rates along with export credit at international rates for the textiles industry.
Extension of sunset clause for export oriented units (EOUs) for five years, release of pending funds of last year under Technology Upgradation Funds Scheme (TUFS) and reduction of excise duty on man-made fibres are some of its other demands. Under the sunset clause, EOUs are entitled for income tax exemptions for a period of 10 years that is expiring by March 2009.
The industry body contended that given the profitability position of textile industry currently, it would not be right to withdraw this benefit next year as a result of which tax for EOUs would be around 34 per cent after expiry of the benefit.
It also demanded imposition of 10 per cent import duty on man-made fibres; and sought seven per cent duty free scrips as a refund of state taxes.

Satyam to buy Motorola’s software unit in Malaysia

Satyam Computer Services has decided to acquire US mobile maker Motorola’s software development centre (SDC) in Malaysia.

Satyam will absorb the centre’s 128 employees and take over the units assets as part of the deal.

The acquisition is expected to create synergies and boost India’s fourth-largest software exporter’s competitiveness in Malaysia and Asia Pacific. However, Satyam officials declined to divulge financial details of the deal that is expected to be completed by December end.

The SDC is part of Motorola’s Home and Networks Mobility business and focuses on network management system development.
“This strategic acquisition will integrate and strengthen Satyam’s product engineering services to network equipment providers and operators in the areas of element management, mobile solutions, and access networks,” said Satyam Technology Infrastructure business unit head Nishith Mathur.

Motorola is an existing customer of Satyam. After recording $397-million loss in the third quarter last month, the mobile maker had announced that it would cut costs by $800 million next year. The new deal is part of the company’s decision to exit from non-core business.

Singapore tech help for CESC network

RPG Enterprises flagship CESC Ltd today inked a pact with Singapore Power to revamp its distribution network in Calcutta. The company will invest Rs 2,000 crore over the next 3-5 years to reduce accidental disruptions in electricity supply.

Under the one-year agreement, the Singapore firm will provide technological inputs to improve CESC’s distribution system.

CESC vice-chairman Sanjiv Goenka said the move was aimed at upgrading the company’s network to global standards. “It is an aspirational move. Don’t expect the outage (accidental disruptions) to reduce overnight,” Goenka said.

“It was not so difficult to increase the plant load factor (capacity utilisation). Here, you have to motivate 8,000 employees to work in a different fashion than they did. There are many external issues (power theft) to be tackled as well,” he said. The agreement with Singapore Power can be renewed after a year. “We will review our association then and decide on the next move,” Goenka said.

Ong Boon Hwee, chief operating officer of Singapore Power, and Sumantra Banerjee, managing director of CESC, were also present at the announcement of the deal here today. CESC will have to shell out Rs 6 crore to the Singapore firm.

Bharat Forge intends to form a Joint Venture with Alstom Group

Bharat Forge Limited (BFL), the second largest forging company in the World and part of Kalyani Group – a US $ 2.4 billion conglomerate, intends to setup a joint venture company with Europe-based Alstom Group, for manufacturing state-of-the-art supercritical power plant equipment in India.

Alstom is a global leader in power generation and rail infrastructure and sets the benchmark for innovative and environmentally friendly technologies. The firm provides turnkey integrated power plant solutions and associated services for a wide variety of energy sources, including hydro, gas, coal, nuclear energy.

The arrangement between Alstom and Bharat Forge involves setting up of two companies. The alliance would setup first JV Company for manufacturing of core turbine and generators while the other for manufacturing of all the auxiliaries.

The proposed Joint Venture will design, engineer, manufacture and deliver turbine and
Generator Island of 600-800 MW supercritical range with a total installed capacity of 5 GW per annum.

In addition, both the partners have also agreed to explore manufacturing of turbines and
generators in sub-critical range as well as for gas and nuclear applications.

In a press release, both companies jointly stated that they would disclose other information regarding proposed JV such as the manufacturing program, investment size and location, etc. only after getting necessary regulatory approvals in India and Europe.

Existing telecom operators may have to pay more for 3G

Existing telecom operators may have to pay more than the new players eyeing the 3G space, in the form of annual charge for the 3G spectrum. A committee chaired by Department of Telecommunications (DoT) Joint Secretary J S Deepak has recommended that an operator having 2G spectrum and 5 Mhz of 3G spectrum should pay an incremental 1 per cent more than the applicable slab rate for 2G spectrum.
The committee, which was set up to suggest annual spectrum charges for 3G, has recommended that due to the efficiency in capital expenditure and synergy in operations, operators having 2G spectrum and acquiring 5 Mhz of 3G spectrum should be charged at a higher rate.

GSM 2G operators get 4.4 MHz and CDMA players get 2.5 Mhz of start-up spectrum with their telecom licences, on which they have to pay an annual fees of 2 per cent of their aggregate gross revenue (AGR). For spectrum up to 6.2 Mhz, the operators have to pay 3 per cent of their AGR, while for spectrum up to 8 Mhz they have to pay 4 per cent of their revenues and so forth.

Therefore, for a stand-alone 3G operator, the rate will be equivalent to the 5 Mhz slab rate of 2G spectrum or 3 per cent of the AGR. But operators having both 2G and 3G spectrum will have to pay one per cent over and above the present 2G slab rate.

Recommendations of the committee will be discussed in the Telecom Commission meeting to be held tomorrow. The committee has, however, ruled out the possibility of segregation of 2G and 3G revenues, as proposed by GSM operators.

The committee has also taken into consideration the recent proposal of Union Minister for Communications and IT A Raja, which came after his meeting with Finance Minister P Chidambaram and Prime Minister Manmonhan Singh, to raise the existing annual charges for 2G spectrum.

During the meeting of two ministers, it was also decided that spectrum usage charges up to 8 MHz would be increased by 1 per cent of the AGR. Above 8 MHz, the charges would be increased by 2 per cent of AGR for each of the respective slabs. The proposal will be discussed by the Telecom Commission in its meeting. If approved, it will be effective from January 1, 2009.

In case these revised rates are levied, the committee recommends that the annual spectrum charges for an operator with both 2G and 3G spectrum be the same as the operator with only 3G spectrum. The one-year moratorium given to the operators with only 3G spectrum will not be applicable to operators with 2G and 3G spectrum.

The Telecom Commission will also deliberate on the contentious issue of the quantum of the one-time charge for spectrum above 6.2 MHz, in addition to the licence fees. The committee has proposed that the Spectrum Enhancement Charge would be computed on the basis of the entry fee for the service area divided by 6.2. The same would be updated on the basis of the prime lending rate of the State Bank of India. Raja had earlier indicated that this price could be set at Rs 4,000 crore.

If the move is approved by the commission, operators like Bharti Airtel, Vodafone and Idea Cellular, who posses spectrum above 6.2 Mhz, will have to submit the fees by March 31, 2009. In future, operators seeking spectrum beyond 6.2 Mhz will have to pay the charge at the time of allotment.

Slowdown hits steel sector

With the impact of the global financial crisis having slowed down economic growth all over the world, the Indian steel companies are also feeling the heat. Taking a cue from European steel giant Corus that has decided to cut production by 30 per cent, leading steel producers have decided to resort to production cuts following decline in demand for the commodity.

Many steel companies, including Sajjan Jindal-owned JSW, Essar Steel and Ispat Industries have announced various measures to counter the slowdown in demand and economy in an effort to prevent any further pile up of inventory. With prices softening over the last few weeks, companies are making every effort to clear the backlog which has gone up as buyers have withheld bulk orders anticipating a further correction in rates.

Integrated steel maker Jindal Steel and Power also said it was looking to bring down the cost of production and ease other input pressures on the company’s margin. According to company director (Finance), Sanjay Maru, the company was working on cost cutting measures among other measures in the present market conditions. However, Steel Authority of India Limited (SAIL) has decided against any such move and will continue to pursue its plans. The company has not cut production but led the industry in lowering prices. Steel prices have declined from the high of $1,250 a tonne in March-April this year to $500 a tonne, in the international market.

In line with the softening global trend, Indian firms have also reduced steel prices to about Rs. 32,000-36,000 a tonne from the high of Rs. 55,000 a tonne earlier this year. State-run Rashtriya Ispat Nigam had cut steel prices by a maximum margin of up to Rs. 8,500 a tonne.

SAIL, JSW Steel, Ispat Industries, Essar Steel also slashed rates in the range of Rs. 4,000-6,000 a tonne to ward off the threat of cheaper shipments from China and Ukraine. However, there has been no word on the issue from Tata Steel.

Export have contracted in October

It’s not official yet. But indications are exports in October will contract by 15 per cent, prompting the government to admit that the country may miss the $200-billion target set for this fiscal.

The decline will be the first in five years, and, according to director general of foreign trade R.S. Gujral, if petroleum products are excluded, the decline is steeper at 20 per cent.

Barring petroleum and a few other categories, exports fell across most segments, including engineering.

Labour-intensive industries — textiles, gems and jewellery, and handicraft — suffered huge reverses in October.

According to officials, more details will be available only in December, when the government comes out with official statistics for October. Between April and October this year, export growth dipped to 21.5 per cent from 30.9 per cent between April and September.

Gujral said India would miss the export target for this fiscal, given the slowdown in the global economy. He, however, hoped exports would surpass last year’s figure of $162 billion.

In a study released yesterday, industry chamber Assocham had said the country would miss the export target by 20 per cent. Besides the slowdown, the chamber felt high ocean freight rates and the government’s curb on certain items would hurt exports.

According to government data, trade deficit in April-September this fiscal was $59.7 billion. Research firm Dun and Bradstreet said deficit for the current fiscal was expected to be around $121 billion. “Financial measures such as a reduction in the cash reserve ratio, statutory liquidity ratio and the repo rate by the Reserve Bank of India, perhaps, have not yet benefited the small and medium exporters,” Gujral said.

With the impact of the global slowdown expected to last one more year, the government is working on measures to boost exports from labour-intensive industries as it wants to prevent large-scale layoffs.

“There are already buyers out there in the US markets who are facing credit squeeze, and the impact is all pervasive, from gems and jewellery to engineering goods. The only exception is petroleum, which is going to show about 10 per cent growth,” he said.

A high-powered committee set up by Prime Minister Manmohan Singh is reviewing the situation to come out with a policy response.

Officials said the government was planning to spend up to Rs 25,000 crore on infrastructure and rural employment guarantee programme to boost growth and create jobs for people who may be thrown out of work.

Ganesh Kumar Gupta, president of the Federation of Indian Export Organisations, said the government should intervene immediately to ensure liquidity.

Though the depreciation of the rupee has helped, exporters need more support such as reduction in the rate of interest for exports and a greater allocation to small and medium enterprises under the market development assistance programme.

NBFC loan sanctions down 50%

Loans given by non-bank finance companies (NBFCs) have dropped sharply in the past two months as they have been busy repaying their

short-term obligations to mutual funds (MFs). In a report released on Monday, credit rating firm Crisil has said the decline in disbursements was as high as 70% in one case, with the average at around 50% for NBFCs rated by it, pointing to the severity of the business shrinkage.

A Crisil analysis of 33 rated NBFCs accounting for almost 30% of the sector, indicated that most of these NBFCs, especially asset finance companies, have significantly slowed down disbursements due to a lack of funds.Average monthly disbursements during September and October are estimated to be half of the disbursements in August.

NBFCs’ share in the overall retail finance space has reduced over the past few years. This is largely because banks with cheaper access to funds are dominating this segment. They now account for more than two-thirds of retail finance disbursements, up from about 20% in 2002. This trend is not expected to reverse.

NBFCs’ balance sheets have a significant asset-liability mismatch; more than 50% of NBFCs’ borrowings have maturities
of less than one year, while most of the assets have tenures of about three years. Further, the dependence on MFs for short-term funding has been high: Crisil-rated NBFCs’ estimated borrowings from MFs have increased to more than 45 per cent of total borrowing as of September 30, 2008, from 30% as on March 31, 2006. Increasingly facing redemption pressures, Crisil has said that MFs are no longer lending to the NBFC sector, and are withdrawing their existing exposures as these mature.

The recent measures announced by the Reserve Bank of India (RBI), allowing NBFCs increased access to funding, is expected to ease their debt servicing pressures, but will not address the longer-term issue of business growth.

While the going has been difficult for the sector, CRISIL nevertheless sees NBFCs’ business and financial profiles generally stronger today than they were during the crisis of the late 1990s. In addition, many NBFCs have strong parentage, enhancing their credit strength. CRISIL believes that the NBFC business model will change over the long term, with a focus on product innovation, and a move towards the originate-and-sell model.

Sensex surges on China stimulus

The Bombay Stock Exchange sensitive index, Sensex, surged by over 570 points on Monday to regain the 10000-level on buying support sparked by strong global trends, bolstered by China’s multi-billion dollar stimulus plan for its economy.

The bellwether index closed higher by 571.87 points, or 5.74 per cent, at 10536.16 from 9964.29 against last Friday. The National Stock Exchange index Nifty also spurted by 175.25 points to 3148.25.

Marketmen said stocks moved to the positive zone on firm overseas trends which were bolstered by China’s stimulus plan and anticipation that governments elsewhere would follow suit.

Reliance Industriesrecorded handsome gains on reports that the company might slow work at the special economic zone because of global financial turmoil. The breadth of the market was attractive as 28 shares in the Sensex were higher and two recorded losses Metal segment index gained the most, by 562.50 points, or 10.92 per cent, at 5714.83 with sector majors Tata Steel, Jindal Steel and Sterlite Industries posting handsome gains. Capital goods sector was the second best performer by rising 483.02 points to 8118.43.

L&T consortium bags Mumbai monorail project

A consortium led by Larsen & Toubro (L&T) with Scomi Engineering Bhd, Malaysia, has bagged a Rs. 2,460-crore order from the Mumbai Metropolitan Region Development Authority (MMRDA) to implement the country’s first monorail system in Mumbai.

The project involves design, construction, installation, testing and commissioning and integrated testing, including train trial with initial operation and maintenance (O&M) from Gadge Maharaj Chowk (Jacob Circle) to Wadala (about 11 km) and Wadala to Chembur via Mahul (about 9 km) corridor on a lumpsum turnkey (LSTK) basis. The monorail will have 18 stations enroute and the project is to be completed in 30 months.

This will be the first monorail system in India and is expected to ease congestion in the highly crowded Jacob Circle, Wadala and Chembur area. It will provide interconnectivity to the existing suburban railway (Mahalaxmi and Lower Parel station of Western Railway, Currey Road, Dadar and Wadala station of Central Railway) and forthcoming Metro Rail as part of the multimodal transport system and on being commissioned is expected to ease congestion in the areas.

A modern urban transport system, the cars move on a single beam in an elevated corridor. The design makes it possible to execute the project on a fast-track as it requires a small footprint and facilitates implementation with minimal demolition of structures.

Other advantages include greater reliability, high manoeuvrability, lower cost and an eco-friendly design. It has sleek exteriors and its air-conditioned cars add to customer comfort.

Markets crash again on inflation news

The markets have drifted lower again, after showing smart recovery, due to news of an increase in the inflation numbers. It stood at 10.72% for the week ended October 25 as against 10.68% during the earlier week.

Reliance Industries, Bharti Airtel, Infosys, SBI, Tata Steel, Sterlite Industries, ONGC, HDFC Bank, ICICI Bank, HDFC, SAIL and Tata Motors are dragging the frontline indices.

The Nifty closed below 3000 mark and the Sensex slipped below 10,000 level. Metal stocks led this crash followed by oil, telecom, technology, banking and auto stocks. Midcap and small cap stocks were also under pressure.

Frontline indices had opened with huge gap down and remained weak till the afternoon. After 1:30 pm, indices had started recovery and was near to Wednesday's close, but more than expected increase in Inflation numbers pushed the markets sharply lower again.

The Sensex closed at 9746, down 373 points and the Nifty fell 102 points to 2,892, (provisional).

Inflation came in at 10.72% for the week ended October 25 as against 10.68% in previous week. This was more than expectations, as CNBC-TV18 was estimating inflation at 10.45%.

AOL advertising revenue falls while Google gains

AOL suffered another setback in its bid to become an advertising-focused company as online ad revenue dropped 6 percent during the third
quarter, while its chief rivals saw gains despite a weak economy.

The $33 million decline compared with the year-ago period, disclosed as parent company Time Warner Inc. released its earnings report on Wednesday, marked AOL's first drop since it began distancing itself in late 2004 from its roots as an Internet access provider. Ad revenue grew 41 percent in 2006 and 18 percent in 2007 and was flat the first half of 2008.

Google Inc earlier reported a 28 percent third-quarter gain in online advertising revenue, while Microsoft Corp saw a 15 percent jump. Even the struggling Yahoo Inc. had a small increase of 1.2 percent.

During a conference call, Time Warner executives said the $33 million decline reflected the loss of an exclusive partnership with Apollo Group Inc, which owns the for-profit University of Phoenix. Revenue from Apollo alone was down $55 million, offset by $29 million in gains from acquisitions.

The company also blamed general declines in online display advertising, something much of the industry has seen because of the economy. Time Warner had expected to begin seeing benefits in the third quarter from new technologies and a reorganization earlier this year to address missteps integrating $1 billion worth of corporate acquisitions into a single ``Platform-A.''

Analysts say it was too early to assess whether integration has succeeded. Chuck Richard, an analyst with Outsell Inc., said the Apollo loss ``masks any ability to make a strong judgment about ongoing stability or growth trends.''

Dave Hallerman, senior analyst at eMarketer, said Time Warner executives ``blamed Apollo in the last report and the one before that as well. Maybe it's true, but it's a theme.'' Company officials suggested the Apollo loss will weigh down revenue in the fourth quarter and, to a lesser degree, the first quarter of next year as well.

"The most significant year-over-year drag that it's going to have in the growth rates is really going to be in the fourth quarter," said John Martin, Time Warner's chief financial officer. "We did have some Apollo money in the first quarter of this year. But the numbers trail off pretty materially."

That means that starting in the second quarter of next year, AOL won't be comparing revenue with a year-ago period flush with Apollo dollars. AOL lost 634,000 Internet-access subscribers during the quarter, ending with 7.5 million, 72 percent fewer than the 26.7 million it had at its peak six years ago.

AOL's dial-up subscribers have been shifting to competing high-speed services, and the decline in paying subscribers has accelerated since AOL in 2006 began giving away features it once reserved for paying subscribers to boost its ad-supported Web sites.

Time Warner is working to split AOL's access and advertising businesses operationally by next year, a move that would make it easier to sell off one or both.

The company has been in continual discussions with both Yahoo and Microsoft over AOL's Web sites and ad operations, while rival access provider EarthLink Inc. is seen as a leading candidate for the remainder of AOL.

Time Warner CEO Jeffrey Bewkes declined comment on specific discussions but said the company was open to any "strategic opportunity to put AOL in a stronger position."

Referring to Wednesday's announcement that Google had pulled the plug on an advertising partnership with Yahoo in the face of antitrust concerns, Bewkes said: "the opportunities or possibilities remain open for this whole business to restructure itself."

Slowdown to last 15 months: Nasscom chief

The economic slowdown resulting from the global financial crisis is expected to last not more than 15 months. However, additional jobs will get created in India during the period, a senior official said. "This slowdown will last for another 12 to 15 months and yet we will add jobs," chairman of India's apex IT body Nasscom Ganesh Natarajan said.

He said only 200,000 jobs were created this year against the expected 270,000 jobs due to the slowdown.
"What this slowdown in effect means for India is that the domestic companies would be a little more watchful when they recruit. The next six months would be difficult for IT companies," he said.

"IT industry growth would be 22 percent as compared to last year's 29 percent. This seven percent drop is not because there is no demand. It only means that the demand is not being translated into business. India's economic growth could come down to seven percent yet opportunities will still be there," said Natarajan, who is also the Global CEO of Zensar.

He said serious work is being done through IT solutions and the global companies cannot afford to lose Indian services. "As far as IT or BPOs are concerned there is nothing to worry."On the global financial crisis which has hit the US extensively, Natarajan said: "The US companies went a bit extreme in outsourcing. However, the US will still maintain its global leadership."

To a question, he said the rupee will stabilise at 42 to 43 a dollar in a year or two though it could reach 56 before that.Natarajan was here Monday evening to deliver the convocation address at the 6th Convocation of Nirma University of Science and Technology.

Suzlon may face legal action if it buys Martifer stake in REpower

Suzlon Energy might face legal action from lenders if the company goes ahead with the acquisition of balance stake of Portuguese company Martifer in REpower Systems AG to gain access to the European markets.

On Tuesday, Suzlon and Martifer said they were negotiating a schedule for the wind energy major to buy 22.48 per cent stake of Matifier in Germany's REpower.

Suzlon shares closed 20.57 per cent higher at Rs 55.40 on BSE on the news.

Suzlon had agreed to complete the purchase of Martifer's stake in Repower for 270 million euros ($344 million) by Dec 15, 2008.

A source familiar with the development said, Suzlon is exploring options to sell its stake to private equity firms to raise funds for the REpower acquisition.

Analysts tracking Suzlon said if the Martifer sale cannot be pushed back, we expect Suzlon to breach its debt covenants, potentially resulting in legal action from its lenders.

Suzlon has debt equity ratio of 1:1 at present and as per the agreement with its lenders (debt covenant) it has to maintain this ratio. So if the company goes ahead with the deal, there is every possibility that it may exceed this ratio and will result in breach of the company's debt covenants, another analyst said.

“The punitive action might be in the form of high interest rates or recall of sanctioned loan,” he added.

Earlier, Suzlon decided not to try to exercise the domination and profit transfer agreement with REpower due to opposition from lenders who will be financing the next round of growth plans for REpower.

Suzlon had announced a $360 million rights issue to buy Martifer's stake in REpower. The issue was subsequently called off because of the poor response.

However, many analysts are also of the opinion that with Suzlon struggling to bag any orders in the last six months, next stage of growth at Suzlon would be powered by REpower. However, the company has to get the domination control of over 90 per cent in REpower to use its technology and which can only happen when the company picks up the 22 per cent stake of Martifier.

At present Suzlon has 66 percent stake in REpower which, according to German law, doesn't allow the company to exercise domination over a company.

Rupee appreciates 0.69% to Rs 48.62 vs USD

The Indian rupee rose to a three-week high of 48 per dollar on Tuesday, a move dealers said was on some inflows into the local stock market and an unwinding of long dollar positions by banks.

At 3:10 p.m. (0940 GMT), the partially convertible rupee was at 47.99/48.00 per dollar, its strongest since Oct. 14 and 1.3 percent stronger than 48.64/65 at Monday's close.

Dealers said there were some inflows coming into the stock market but most of the rupee's rally was helped by an unwinding of long dollar positions by banks on the back of easing in the non-deliverable forward rates.

One-month non-deliverable forward contracts PNDF were quoting at 48.28/38 per dollar, much below 51-52 levels seen last week.