Friday, 31 October 2008

Basic customs duty on jet fuel goes; IOC cuts price

But airlines hold out no promises on fare cuts.

The basic customs duty of five per cent on aviation turbine fuel (ATF) has been completely removed. The sale price of ATF has also been reduced by 15-17 per cent across the four metros.

This will help bring down costs of domestic airlines. In the near term, it will reduce their losses. In the medium term it may lead to fare reductions. This is primarily because fuel constitutes 45-50 per cent of the operating cost of most domestic airlines.

On Friday, Indian Oil announced that ATF will cost Rs 47.01 a litre in Delhi, down from Rs 56.44 a litre the previous month. Similarly, domestic airlines refuelling in Chennai will now pay Rs 51.89 a litre as against Rs 62.05 the previous month.

Citing various reasons including the rising cost of aviation turbine fuel, the full-service airlines levy a fuel surcharge of Rs 2,400 for sectors less than 750 km and Rs 3,100 for longer flights. Low-cost airlines charge Rs 2,250 and Rs 2,900 as fuel surcharge for short- and long-haul flights respectively.

‘neutralised benefits’
But, despite the Government announcements, the industry held out no promises of cutting fares or reducing surcharges immediately.

“Despite the drop in fuel prices, the cost equation remains largely the same as earlier. Oil prices are down but dollar-linked costs have shot through the roof. The depreciation of the rupee by 20 per cent has neutralised many benefits that airlines may have reaped,” a senior airline official said.

Airlines have to pay in foreign exchange for the aircraft that they either lease or buy and to the foreign cockpit crew and senior airline staff that they hire.

The industry feels that the real benefit to them and, therefore, to passengers, will be available when ‘declared good’ status is given to ATF. This will help airlines uplift ATF at a fixed sales tax rate of 4 per cent throughout the country. At the moment, sales tax varies from 4 to 29 per cent.

The Government has already come forward to help the domestic airlines. Late last month, it was decided that the sector will get six months to clear more than Rs 2,900 crore previously owed to the domestic oil companies. In addition, domestic airlines will get a 90-day grace period for clearing their current fuel bill.

Source: TheHinduBusinessLine

FII buying lifts markets

Sensex up 744 points; overseas rate cuts lead to rally.

Stocks rose on Friday as foreign institutional investors turned net buyers after a straight fortnight of fierce selling.

FIIs were net buyers of Indian equities for Rs 1,237 crore on Friday, while domestic institutions were net sellers for Rs 116 crore.

The Sensex was up 743.55 points or 8.22 per cent to close at 9788.06, and the broader Nifty was up seven per cent at 2,885.6.

The domestic market was also catching up with world markets, which looked up on Thursday when markets were closed here, said analysts.

On Thursday, the Hang Seng had gained 12.8 per cent, Nikkei 9.9 per cent, Nasdaq 2.4 per cent, the Dow 2.1 per cent and the FTSE 1.1 per cent.

“The major reason for the rally was the rate cut that happened in the US followed by interest rate cuts in China, Taiwan, Hong Kong and Bank of Japan. Another reason for the rally was the domestic inflation level, which came down to 10.68 per cent,” said Mr Alex Mathew, Head of Research at Geojit Financial Services.

The overseas rate cuts led to an anticipation of a rate cut here by the RBI as well, he said.

The market breadth was positive as 1,577 scrips on the BSE advanced and 916 declined. Among the sectoral indices, the BSE Metal, Oil and Gas, Bankex and Teck indices surged the most today, gaining between six and 10 per cent.

Mahindra & Mahindra, Housing Development Finance Corporation, Jaiprakash Associates and ICICI Bank were the top gainers , rising between 15 per cent and 23 per cent. Ranbaxy and TCS were the only Sensex scrips which ended in the red.

“There was good amount of profit booking by the domestic institutions today, which is why the markets slightly dipped in the afternoon,” said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets.

Good buying on the first day of derivatives contracts, too, gave stocks a boost, said marketmen. NSE’s F&O segment saw a total of 28.2 lakh contracts today and a total turnover of Rs 36,959 crore.

The proposal to increase the FDI cap in private sector insurance companies from 26 per cent to 49 per cent also added to the positive sentiment, said Ms Gandhi.

The rupee gained by about 20 paise tracking the domestic equity market. The high call rates also aided the rupee, said a forex dealer with a private bank.

“There was inter-bank dollar selling as high call rates made it difficult for market participants to be long on the dollar,” he said.

Source: TheHinduBusinessLine

Credit crisis: Stocks and the long run

After the second 40% decline in America’s Standard & Poor’s composite index of common stocks in a decade, global investors are shell-shocked. Funds invested, and reinvested, in the S&P composite from 1998-2008 have yielded a real return of zero: the dividends earned on the portfolio have been just enough to offset inflation.

Not since 1982 has a decade passed at the end of which investors would have been better off had they placed their money in corporate or United States treasury bonds rather than in a diversified portfolio of stocks.

So investors are wondering: will future decades be like the past decade? If so, shouldn’t investments in equities be shunned? The answer is almost surely no. At a time horizon of a decade or two, the past performance of stocks and bonds is neither a reliable guarantee nor a good guide to future results.

Periods like 1998-2008, in which stocks do relatively badly, are preceded by periods, like 1978-88 and 1988-98, in which they do relatively well, and are in all likelihood followed by similar periods.

Do the math. At the moment, the yield-to-maturity of the 10-year US treasury bond is 3.76%. Subtract 2.5% for inflation, and you get a benchmark expected real return of 1.26%. Meanwhile, the earnings yield on the stocks that make up the S&P composite is fluctuating around 6%: that is how much money the corporations that underpin the stocks are making for their shareholders.

Some of that money will be paid out in dividends, some be used to buy back stock — thus concentrating the equity and raising the value of the stock that is not bought back. Some will be reinvested to boost the company’s capital stock.

You can argue that the corporate executives have expertise and knowledge that allows them to commit the funds they control to higher-return projects than are available in the stock market. Or you can argue that they are corrupt empire-builders who dissipate a portion of the shareholders’ money that they control.

The sensible guess is that these two factors cancel each other out. Thus, the expected fundamental real return on diversified US stock portfolios right now is in the range of 6% to 7%.

The expected market return is that amount plus or minus expected changes in valuation ratios: will stocks return more as price-earnings (P/E) ratios rise, or return less as PE ratios fall? Once again, the sensible guess is that these two factors more or less cancel each other out. Compare the 6% to 7% real return on stocks to a 1.25% real return on bonds.

Source: EconomicTimes

US stores may post weakest October sales in 40 years

After slashing their spending in September as the financial meltdown intensified, shoppers went into full retreat in October, spooked by rising layoffs and shriveling retirement funds.

Retailers reporting October sales data for established stores next week expect to see the weakest performance for that month since at least 1969 _ in many cases percentage declines in the mid-teens _ and are frantically cutting prices even more to pull in shoppers.

``Consumers just stopped shopping,'' said Michael P. Niemira, chief economist at the International Council of Shopping Centers.

That is only raising more worries about the holiday season and the financial health of the industry, which has seen a string of liquidations from Mervyns LLC to Linens 'N Things. Men's Wearhouse Inc. is slashing prices on all leather jackets and selected sweaters by 50 percent, while Saks Fifth Avenue is cutting some women's fashions by 40 percent.

Kmart, a division of Sears Holdings Corp., is giving shoppers for the first time a jump-start on Black Friday deals, starting this Sunday. Kmart, which said it had planned the deals before September, will be offering weekly savings of 25 percent to 50 percent on 15 home electronics items through Nov. 23. Meanwhile, J.C. Penney Co. is already cutting prices on its tree ornaments.

Stifel Nicolaus & Co. analyst Richard Jaffe describes many of the discounts as ``unplanned and extreme.''

With the economy expected to deteriorate, the goal is to get consumers into the stores as early as possible to spend on holiday gifts, while trying to clear out fall merchandise piling up. While shoppers are expected to buy for their children this holiday season, they may not buy much else, and economists say spending will remain weak at least through early 2009.

The good news is that gas prices have receded in recent weeks, but there's not much else to cheer about as Americans feel the pain from the financial meltdown, from tightening credit to mounting layoffs. Job security is a key factor in consumers' ability to spend.

Carmen Velez, 49, from the Bronx, says worries about being let go from her job as a home health care aid has meant doing away with her $75 monthly clothing splurges at J.C. Penney and other nonessential purchases. She says the family she works for may not be able to afford to keep her employed.

``If I lose my job, then I can't pay my rent,'' said Velez. ``Now, I am saving every penny.''

She said she will buy some holiday gifts for her two grandchildren, but that's about it.

After posting a lackluster 1 percent gain in same-store sales in September, according to the ICSC-Goldman Sachs index, many analysts expected October's performance to be weak, but not this bad. Niemira estimates that same-store sales will fall 0.5 percent, the weakest October performance since at least 1969, when the index began. Excluding Wal-Mart Stores Inc.'s figures, that number could be down as much as 3 percent, according to Niemira.

But even discounters and warehouse clubs, which are expected to fare better, are seeing their sales slow.

Source: EconomicTimes

US protections would worsen crisis: Murdoch

Media mogul Rupert Murdoch says the next US president must resist the temptation to introduce more protectionist trade policies to try to

deal with global financial crisis.

The News Corp. chairman and chief executive said imposing new US tariffs on Chinese imports could set off a trade battle that would worsen the slowdown in the global economy.

``For the past three or four years, some Democrats have been threatening to do things like put on extra tariffs (against Chinese imports) if they don't change their currency,'' Murdoch was quoted as saying in an interview published Saturday.

``If it happened, it could set off retaliatory action which would certainly damage the world economy seriously,'' he told The Weekend Australian, one of the papers he owns in his birth country.

Murdoch, whose News Corp. owns Twentieth Century Fox, Fox News Channel, Dow Jones & Co. and MySpace as well as a stable of newspapers in Australia and Britain, said he was not sure that Barack Obama would implement protectionist measures mooted by some Democrats if he were elected president next week.

The newspaper did not cite Murdoch as endorsing either presidential candidate, Obama or his Republican rival John McCain.

Murdoch warned that a rise in protectionism in the United States ``could add to all sorts of tensions in the world financial system and the world trading system and eventually all the way down to employment.''

``I am not saying all these things are going to happen, but we are living in a dangerous period,'' he said.

Murdoch, who is now an American citizen based in New York, regularly visits Australia to visit family and check on his businesses here. On his current visit, he is due to give a series of lectures on the future direction of Australia, and will reportedly give a dissertation on the future of the newspaper industry.

He said politicians had limited power to fix the global financial crisis, but their actions could worsen it.

``To some extent it is beyond the power of politicians,'' he said. ``You are going to find that the politicians are very limited in what they can do: they can make it worse but they can't stop it.''

Source: EconomicTimes

The root cause of credit crisis is greed

Governments are trying to bail out failed big businesses with the taxpayers’ money in what is being referred to as capitalist socialism. Will the damage-control exercise work? Why are those in governance reluctant to acknowledge that at the root of the crisis is greed that is throwing all caution to the winds?

Talk of correction in markets is always in monetary terms; there is no mention of the need for spiritual solutions. Are moneycentric bailouts a stable solution to problems born of greed? It might be interesting and instructive here to recollect the story of Shumbha’s battle with Durga in the Markandeya Purana.

In the Vedantic context , the term ‘Idam’ refers to ‘This’ and ‘Tat’ to ‘That’ . The physical world is This. What lies beyond the This is That. The This owes its existence to That. The essence of spiritual corruption is when This seeks to exclude That and Dharma begins to decline and conditions ripen for the That to incarnate Itself to reset the cosmic balance. This in a nutshell is the course of cosmic evolution. The Shumbha-Durga battle is one among countless instances of the fall and rise of the spiritual quotient.

Shumbha and his brother Nishumbha were mighty rulers who had conquered all, including the gods. Having acquired so much power, they assumed that their success was due to their physical prowess; no thought was given to the need for Divine Grace. The dispossessed gods invoked Devi, the power of That, to overcome the brothers intoxicated with power to restore cosmic equilibrium.

Devi assumed the form of a bewitching beauty and seated herself atop a hill. She was seen by the servants of Shumbha who duly reported her presence to him. Shumbha sent a messenger to Devi, inviting her to become his queen because he was, he claimed, lord of everything excellent in creation. Devi replied that it was not so easy to attain her; she would have to be won in battle.

Shumbha, infatuated by bounteous This, felt it was kid’s play for him to win her. He sent out Dhumralochana to fetch her by diplomacy or force. But the warrior was easily slain by Devi. Herein was signal enough for Shumbha to mend himself. But he disregarded That and trusted the strength of his physical resources. He sent two generals, Chanda and Munda, with a large army. They were soon routed. Rather than respecting That, more of This was mobilised by Shumbha. A larger army with the selfproliferating Raktabija was sent. Even he was annihilated. Nishumbha was then deployed. He too fell.

Shumbha finally arrived and threw all his remaining resources into the battle, only to lose his life and all. Why? Because he over-trusted This. He totally disregarded That. When Devi had effortlessly vanquished his generals and army, Shumbha still failed to appreciate that herein was a hopeless contest between the That and the This. He persisted with reinforcing his army, rather like adding numerous zeroes to a zero.

In the imagery used in the poem, this was like throwing hay into the fire to douse it! When the hay got consumed at once, more hay was thrown in. Why did Shumbha not recognise the absurdity of the exertion? Why did he not recognise the need for spiritual insight? The Purana says that it was so because he was overwhelmed by Mahamaya , the Great Illusion. Is that perhaps what ails global business today?

Source: EconomicTimes


I advice the investor to hold the stock with a stoploss of Rs 500. The stocks has corrected significantly in the last one month.: Mandar Jamsandekar : Director: Precision Technicals

Source: ndtvprofit


I suggest the investors to buy the stock in a staggered fashion. Once the commodity cycle turns, the company will give good results. : Ashish Kapur: CEO: Invest Shoppe

Source: ndtvprofit

Suzlon Energy faces tough times

The plans of Tulsi Tanti, Chairman and MD of new age alternative energy company Suzlon Energy, are falling apart like his wind turbine blades. After losing management control in Germany's Repower, the next casualty is the company’s capex plans. They have been slashed by Rs 669 crores for the fiscal, stalling the company's new tower manufacturing facility.

However, Tanti said," We think there is a lot of tower manufacturers already, so don't think there is any need now."

Poor addition of orders have also added to Tanti's woes, as the order book contracted by around Rs 1000 crores to Rs 15,000 crores, with the European market contributing to the slowdown.

Apart from lack of orders and credit crunch, what is also hitting Suzlon is the mark to market losses of Rs 197 crores on account of FCCB and forward forex contracts loss of Rs 33 crore.

Source: ndtvprofit

PNB cuts benchmark rate by 50 bps

Leading PSU bank Punjab National Bank cut its prime lending rate by 50 bps, following a reduction in RBI’s repo rate. The move would be effective from December 1.

The bank also said that its second-quarter net profit jumped to Rs 707 crore, from Rs.538.4 crore a year earlier. The bank said that its net interest income for the second quarter jumped to Rs 1,712 crore, from Rs1,291.45 crore in the year earlier.

The bank’s stock rose to Rs 427 on Friday’s intraday trading, up over 6 per cent.

Source: ndtvprofit

What’s wrong with the rights offerings?

The issues of ‘rights offerings’ have been in the news for quite some time now. With some companies recalling their rights issues and putting their future growth in jeopardy, a few others have promoters who are capturing a majority of their own stock, at a low price.

India’s top conglomerates, Tata Motors and Hindalco, who effected mega mergers and acquisitions (M&As), continue to face a money crunch. In the recent rights issues, both promoters ended up picking a lot of their own shares as investors stayed away.

The Tata Motors promoters put over Rs 3000 crore in the Rs 4145 crore rights offering.

That's 72 per cent of the offer, more than double of what had been underwritten by JM Financial for this issue. The company also revamped its financing pattern several times. The latest was the calling off of the overseas issue offering.

Moreover, the resource crunch indicates that coupled with a downturn in the sector and rising costs it has led to a slowing on planned capex.

Even, Hindalco that declared strong earnings on higher sales, on Friday came out to defend its right issue.

Although the Hindalco issue has failed, the management on Friday said they had a loan of a billion dollars tied up from banks and would meet the residual $1 billion needed to repay its $3.03 billion bridge loan through treasury liquidation.

Besides these two resources seeking corporates, there might be several others planning rights issues.

Malvinder Singh promoted Religare enterprises, launched a rights issue to raise Rs 1800 crore, but even before the investors could consider it, the promoters said upfront that any unsubscribed amount would be picked up by the promoters.

With the markets under pressure, the companies going for right issue are certainly being bold, but the bigger question is whether this is the promoters’ way of just capturing their own stock for much less?

Source: ndtvprofit

See 10-15% spike in current rally: Alchemy Capital

KN Vaidyanathan, CEO, Alchemy Capital, said bear market corrections will be sharp, swift, and short-lived. "Now, we are clearly in a bear market. We are going to go through this sharp swift short-lived correction largely driven by an extremely oversold market covering up on the back of good news coming into the market globally and in India. I think the rally may continue for another 10-15%. But I don't think this is a turnaround for the market, this is just a spike back in this bear market."

According to Vaidyanathan, the last low would be around the level at which one could hope to see some consolidation in markets

Source: Moneycontrol

Buy tele, banking stocks; stay away from IT: ABN Amro

Jignesh Shah, Head Equity Analyst, ABN Amro Private Banking India feels Bharti’s results were in-line with his estimates. He is bullish on the telecom as he sees a growth path in that sector.

Shah is positive on the banking sector as well. “The numbers have been better than expected within the banking sector. Going forward growth will continue.”

Shah however, is not confident about the IT space due to its exposure to the US and European markets that are witnessing a slowdown

Source: Moneycontrol

Expect banking to outperform in one year: Lotus India

Ajay Bagga, CEO, Lotus India AMC is bullish on banks. "Indian banks will recover faster as they are strongly capitalised. Overall, the trend is positive for banks and over the next one year there should be a strong performance in terms of stock prices from the banking sector."

According to Bagga, the bounceback is welcome but not convincing.

E Matthew, Director, Matthew Easow Fiscal Services, feels the pullback rally should play on more because after a long time the markets are seeing a positive weekly closing.

"In the short- to medium-term the trend change can happen only if the Nifty is above 2,950 and ultimately stay above 3,050 for a couple of weeks. That would give a signal that the trend is changing at least for the short- to medium-term. The short-term pullback is not yet over, and through some short covering and maybe a lack of selling could hold towards the 3,250 zone hopefully in the coming two-weeks."

Source: Moneycontrol

No meltdown job cuts, assure Tata Consultancy, Infosys

Two of India's top information technology (IT) majors Tata Consultancy Services and Infosys Technologies Ltd have assured the Karnataka government that they will not retrench any of their employees in the wake of the global financial crisis, a top state government official said Thursday.

TCS and Infosys have clarified that they would not lay off any of their employees and their future recruitments would continue, Ashok Kumar C Manoli, principal secretary for information technology, biotechnology and science and technology of the Karnataka state government told reporters here Thursday.

The impact of the financial crisis on the IT sector was not alarming but the state government was keeping a close watch on the situation, he said.

Karnataka generates 36 percent of India's IT revenue.

"As far as the past six months were concerned, the growth rate in the IT industry remained stagnant at 28 percent but we will be able to get a clearer picture by the end of the year," Manoli said.

According to figures available with Software Technology Parks of India (STPI), Karnataka, the state registered Rs.150 billion IT exports in the first two quarters of 2008 as against Rs.130 billion the previous year.

"If we see the figures, the trend is positive. But yes, the global recession will have some effect on IT and business process outsourcing (BPO) companies. But the figures are yet to come out. So we are waiting and watching the situation carefully," said R Rajalakshmi, director of STPI, Karnataka.

"Urgent measures need to be taken by the industry itself, including cost cutting. The annual IT conclave starting here Nov 6 will deliberate on the strength and weaknesses of the industry and models to redesign its entire working," said Manoli.

Manoli along with Karnataka IT and BT minister Katta Subramanya Naidu were talking to the media on the 11th edition of 'Bangalore IT.Biz', an annual event.

The conclave will bring together IT industry leaders to discuss the impact of the financial crisis on the IT sector and what steps need to be taken to tackle the situation.

"Top IT companies from around the globe will be participating in the meeting. This is an ideal time for companies, policy makers and industry bodies to introspect and find out a solution to overcome the economic slowdown. And, more importantly set strategies for the future," Manoli said.

Source: EconomicTimes

Oil prices plummet under $60 a barrel

Oil prices plunged under 60 dollars per barrel in London this week, while other commodities rose as traders tracked recession worries, volatile equities and the demand outlook for raw materials.

The price of oil has more than halved since scaling record heights above 147 dollars in July.

Oil prices dived to 17-month lows on global recession fears, hitting 59.02 dollars in London and 61.30 dollars in New York on Monday before clawing back some lost ground.

"Oil markets seem to be pricing in a deep and long recession that will derail oil demand growth this year and next," wrote UBS economist Jan Stuart in a research note to clients.

"Even though we still think that the credit crunch is exaggerating the real shift in oil demand trends, we have no way to know."

UBS also slashed its forecasts for average Brent oil prices to 60 dollars in 2009 and 75 dollars in 2010 from previous estimates of 105 and 116 dollars respectively.

Oil prices sank this week after data showed that the American economy -- the biggest consumer of energy in the world -- contracted at a 0.3 percent annualized pace in the third quarter as a global credit crunch saw consumers and businesses cut back on spending.

Source: EconomicTimes

IIM-B ranked as best B-school in Central Asia

Indian Institute of Management Bangalore (IIM-B) has been ranked as the best business school in Central Asia by a Paris based agency whic
h evaluates B-schools world wide.

The IIMB has been announced as best business school in covering in Central Asia covering Central and South Asia and the Middle-East by Eduniversal said IIMB Director Prof Pankaj Chandra at the 35th foundation day function today. The award would be presented during the Eduniversal World Convention scheduled to be held in Paris on November four and five.

"IIM-B has also been ranked amongst the top 27 business schools in the world from a list of 1,000," he said.

The award recognises the three best institutions within each of the nine Eduniversal geographical zones - Africa, Middle East, Eastern Europe, Western Europe, Latin America, Northern America, Central Asia, Far Eastern Asia and Oceania.

The deans of the 1,000 best B-schools from 153 countries have ranked IIM-B as the best business school in the Central Asia Zone, with a recommendation rate of 398 per thousand, followed by IIM-A (379) and IIM-C (321), classified under "internationally known".

According to IIM-B, Eduniversal selection endorses its international reputation and influence, defined as the capacity of a business school to make a student valuable and thus to improve their employability in domestic and international spheres.

The process of selection involved a global mapping system, meeting the criteria universality and the international reputation of each academic institution.

Source: EconomicTimes

Forex kitty shrinks by USD 15-billion

Forex reserves fell by a whopping USD 15.4-billion for the week ended October 24 to USD 258.415 billion as compared to USD 273.886 billion in
the previous week, the biggest fall in over eight years.

The reserves had fallen by USD 118-million for the week ended October 17 and by USD 9.937-billion in the preceedings week.

The fall in reserves comprised a USD 15.467 billion decline in the foreign currency assets (FCA)during the period, which fell to USD 249.394-billion from USD 264.861 billion in the previous week, Reserve Bank said in its weekly report on Friday.

FCAs expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies such as the Euro, Sterling and Yen held in reserves.

During the week, the gold reserves stood unchanged at USD 8.565-billion while country's special drawing rights climbed USD 5 million to USD 9-million, the RBI data said.

India's reserve position in the International Monetary Fund (IMF) further fell by USD 9-million during the week to to USD 447-million from USD 456 million in the previous week, the RBI said.

Source: EconomicTimes

UK clears Lloyds TSB takeover of HBOS

British Business Secretary Peter Mandelson gave the go-ahead to Lloyds TSB's takeover of rival bank HBOS Plc on Friday despite concerns abou
t the merger's impact on competition. "I am satisfied that on balance the public interest is best served by allowing this merger to proceed without a reference to the Competition Commission," Mandelson said in a statement. HBOS welcomed the decision and said it was a "major milestone".

"This deal is very much on track," HBOS spokesman Shane O'Riordain said. Mandelson disregarded the advice of the Office of Fair Trading (OFT), which concluded after a month-long review that further investigation of the deal by the Competition Commission, Britain's competition watchdog, was warranted.

The OFT said in its report to Mandelson that the merger was likely to substantially reduce competition in the British market for mortgages, current accounts and banking services for small businesses. Lloyds TSB announced last month it was rescuing HBOS, Britain's biggest mortgage lender, which had been hit by a deepening global financial crisis and concerns about its exposure to a weakening housing market.

The deal was only made possible because the government said it was prepared to waive the usual competition rules because of the turmoil in financial markets. The deal would create a banking giant controlling about a quarter of British current accounts and 28 percent of home loans, which would normally have raised a competition red flag.


The government changed the law to allow it to override competition law in the interest of maintaining the stability of the British financial system. In its report to Mandelson, the OFT concluded: "Any relevant customer benefits in relation to the (takeover) do not outweigh the substantial lessening of competition." Mandelson decided against a referral to the Competition Commission, ruling that the possible anti-competitive effects of the takeover identified by the OFT were outweighed by the public interest in preserving the stability of Britain's financial system.

"I recognise that there are some concerns about the possible effects of the merger on competition," Mandelson said. "I am asking the Office of Fair Trading to continue to keep the relevant markets under review in order to protect the interests of UK consumers and the British economy," he said.

Mandelson also took into account representations from the Bank of England, Financial Services Authority and the Treasury as well as submissions from other interested parties. Lloyds has said it expects to complete its takeover of HBOS and a capital raising by January, after giving shareholders a vote on both in the third week of November. Lloyds cut its offer price after the bailout and is now offering 0.605 of its shares per HBOS share, down from 0.833 originally.

Source: EconomicTimes

US stocks jump to add to week's large gains

Wall Street bolted higher on Friday as investors looked to extend the week's big gains, even after a report that showed worried consumers
are cutting back on their spending. The major market indexes each rose more than 1.5 percent, including the Dow Jones industrial average, which jumped 200 points.

The Commerce Department said personal spending fell by 0.3 percent last month, as expected, the biggest decline since June 2004. Combined with flat readings in both July and August, it led to the worst quarterly performance in 28 years.

But Wall Street's reaction to the data was far from frantic. Given this week's readings on flagging consumer confidence and shrinking gross domestic product, investors have largely discounted the fact that Americans are fearful about the economy and their shrinking investment portfolios.

October has been the worst month for the market in 21 years — and many stocks are looking like bargains right now. Heading into the session, the Standard & Poor's 500 index was down 18.2 percent for October; the index fell 21.8 percent in October 1987.

Before committing to a direction, the market is going to want to put the presidential election next week behind it and focus on the October employment report due next Friday — which should provide some insight into how long and how severe the economic downturn could be.

The market is "settling into a little bit of a holding pattern" ahead of the election and jobs report, said Craig Peckham, market strategist at Jefferies & Co. "The fear level has clearly subsided, but there's still a pervasive tone of unease."

In early afternoon trading, the Dow rose 198.24, or 2.16 percent, to 9,378.93.

Broader stock indicators also advanced. The S&P 500 index rose 22.98, or 2.41 percent, to 977.07, while the Nasdaq composite index rose 32.93, or 1.94 percent, to 1,731.45.

The Russell 2000 index of smaller companies rose 19.07, or 3.71 percent, to 533.25.

Source: EconomicTimes

S&P affirms rating on India

Rating agency S&P has confirmed its ratings on India, saying economic prospects of the country remain strong and GDP growth could be near 7 per cent.

The agency has affirmed “BBB” long-term rating and “A3” short term rating.

Describing the correction in oil prices as a key trigger, S&P said it will ease the fiscal deficit.

Raising hopes of another rate cut, the rating agency said there is a need to supply adequate liquidity into financial system. It expects the Reserve Bank of India to ease liquidity norms further.

On rupee fall, it said FII outflow is leading to downward pressure on rupee.

Source: ndtvprofit

Nagarjuna Construction up 45% in 4 days on good Q2 numbers

Meanwhile, the BSE Sensex was up 800.53 points, or 8.85%, to 9,845.04.

On BSE, 5.96 lakh shares were traded in the counter. The stock had an average daily volume of 4.94 lakh shares in the past one quarter.

The stock hit a high of Rs 66.50 and a low of Rs 58 so far during the day. The stock has a 52-week high of Rs 372.80 on 3 January 2008 and a 52-week low of Rs 40.50 on 27 October 2008.

The stock has risen 45.2% from a recent low of Rs 43.30 on 24 October 2008, boosted by good quarterly performance. The company announced the results during trading hours on Monday, 27 October 2008, when the stock surged 12.59% to Rs 48.75.

The mid-cap stock had underperformed the market over the past one month till 29 October 2008, declining 40.32% as compared to the Sensex’s decline of 28.19%. It had also underperformed the market in the past one quarter, declining 56.65% as compared to the Sensex’s decline of 34.42%.

The company’s current equity is Rs 45.76 crore. Face value per share is Rs 2.

The current price of Rs 62.90 discounts the company’s Q2 September 2008 annualized EPS of Rs 7.39, by a PE multiple of 8.51.

Nagarjuna Construction Company (NCC)’s net profit rose 25.7% to Rs 42.30 crore on 55.9% increase in net sales to Rs 1055.82 crore in Q2 September 2008 over Q2 September 2007.

Nagarjuna Construction Company is engaged in constructing industrial and commercial buildings, roads, bridges, underground drainage and sewerage, stadiums, flyovers, multi-store and duplex apartments, farm and private houses.

Source: ndtvprofit

Sensex smiles at end of Black October

Ending one of the worst months in its history, the Sensex closed 743 points higher on account of short covering and positive Q2 earnings of some frontline companies.

The broader benchmark Nifty also rallied nearly 7 per cent to end at 2885 levels.

“ The markets markets have rallied almost 25 per cent from their lows and they may carry the momentum in the next few trading sessions also,” said Mitesh Thakkar, an investment advisor.

On the BSE, metal index led the gainers, surging 10.2 per cent. Prominent gainers in the pack were JSW Steel, Sterlite Industries and Jindal Steel and Power. JSW Steel jumped over 32 per cent to end at Rs 304.

Other major gainers among the sectoral indices were oil and gas, banking and technology stocks.

The oil and gas index on the BSE rose 9.1 per cent. RIL, Aban Offshore and Essar Oil were the prominent gainers in the pack.

The banking index gained 7.2 per cent while the technology index jumped 6.6 per cent.

Among the Sensex scrips, Mahindra & Mahindra was the biggest gainer, up over 23 per cent. Other major gainers were Housing Development Finance, JP Associates and ICICI Bank, up more than 15 per cent each.

Sensex heavyweight RIL, surged 13.8 per cent on reports the company could fetch higher selling price for gas.

RCom, also spiked in the last minutes of trade to end 13.76 per cent higher after its Q2 results were announced. The company’s net profit stood at Rs 1531 crore v/s Rs 1512 in the previous quarter.

Hindalco also jumped 13.2 per cent after net profits of the company rose 12.04% to Rs 719.95 crore in Q2 September 2008 over Q2 September 2007.

“Apart from positive Q2 results, the sharp upmove in frontline stocks is also on account of tremendous short covering,” said Rajesh Jain, Director & CEO, Pranav Securities.
Pharma major Ranbaxy slumped nearly 2 per cent. According to news reports, Daiichi, the Japanese company that acquired Ranbaxy, said it will provide new forecast in January after reassessing Ranbaxy’s value.

The midcap index on the BSE ended 3.4 per cent higher. Core Projects and Tech was the top gainer in the group, up nearly 39 per cent.

The small cap index also gained 2.5 per cent to end at 3765 levels. Bannari Amman Sugars, rising 19.9 per cent was the top gainer in this space.

Asian markets were mixed on Friday as Japanese stocks fell despite the first rate cut in seven years while shares in India soared to catch up with the global market rally after a holiday there.

Investors were also digesting data overnight that confirmed the U.S. economy — a major export market — had contracted in the third quarter.

Tokyo's Nikkei 225 index sank 5 percent to 8,576.98 after the Bank of Japan cut its key interest rate from 0.5 percent to 0.3 percent. Investors who wanted a full quarter-point cut viewed the step as half-hearted.

South Korea's market extended the previous session's 12 percent rally with the Korea Composite Stock Price Index gaining 2.6 percent to 1,113.06. Australia's key index climbed out of negative territory to close 0.4 percent higher.

Hong Kong's Hang Seng slid as the afternoon progressed, falling 3.7 percent to 13,801.72 after vaulting 12.8 percent Thursday. Smaller Asian markets such as the Philippines and Taiwan both rose 4 percent or more, while Jakarta's main index shot up 5.9 percent.

Japanese stocks were modestly lower for much of the day after jumping nearly 10 percent on Thursday on expectations of a rate cut by the central bank.

Source: ndtvprofit

IMF might approve rescue package for Pakistan by Nov 15

The IMF might approve a rescue package for financially crunched Pakistan by November 15, two days before a meeting of the 'Friends of Paki
stan' group to help the country overcome the economic crisis.

International Monetary Fund and Pakistani officials yesterday concluded negotiations in Dubai on a proposed macro-economic stabilisation programme for the country. The talks, which began on October 21, focused on a policy framework for a possible rescue package for Pakistan.

Pakistan will now send a letter of intent and a memorandum of an economic and financial programme technical jargon for a formal request for help to the IMF in a week, the Dawn Newspaper reported.

After the request is received, the IMF will put it before its executive board, which is expected to take another week to reach a decision.

The IMF might approve the rescue package by November 15, two days before the meeting of the Friends of Pakistan forum, the report said.

The Friends of Pakistan, which includes the US, UN, European Union, UAE and China, was formed last month during President Asif Ali Zardari's visit to New York.

Prime Minister Yousuf Raza Gilani, currently in Turkey on an official visit, told reporters that Pakistan is discussing terms and conditions for an IMF package but he was hopeful that the country would not have to turn to the world body if it received aid from the Friends of Pakistan.

With its foreign exchange reserves dwindling rapidly, Pakistan needs to raise billions of dollars to meet foreign debt payments and to pay for imports. Pakistan has been reluctant to go to the IMF but experts now believe the country may have no other option.

Source: EconomicTimes

American Express to cut 7,000 jobs

In a stark acknowledgment of the tough times ahead in the credit card industry, American Express Co. said Thursday that it plans to cut 7,000 jobs, or about 10 percent of its worldwide work force, in an effort to slash costs by $1.8 billion in 2009.

The New York-based credit card issuer said it is also suspending management level salary increases next year and instituting a hiring freeze.

The job cuts will be across various business units, but will primarily focus on management positions, the company said.

Additionally, American Express said it plans to scale back investments in technology and marketing and business development, and streamline costs associated with some rewards programs. The company also expects to cut expenses for consulting and other professional services, travel and entertainment and general overhead.

As a result, American Express plans to take a restructuring charge of between $240 million and $290 million in the fourth quarter.

The company has been gearing up for a big restructuring for some time, first announcing in July that it planned to reduce overall costs and staffing levels, and take a related charge during the second half of the year.

"We've been engaged for the past few months in an intensive, companywide review of priorities and staffing levels," said Kenneth I. Chenault, chairman and chief executive, in a statement. "The re-engineering program we announced today will help us to manage through one of the most challenging economic environments we've seen in many decades. It will also put us in position to ramp up investment spending as economic conditions improve so that we can take advantage of the substantial opportunities that will be available to us over the medium to long term."

Last week, American Express reported a better-than-expected 24 percent decline in third-quarter profit. But the report echoed recent results from JPMorgan Chase & Co., Citigroup Inc. and Capital One Financial Corp. showing that the credit card environment is worsening as cardholders have trouble paying off debt and pull back their spending.

Even a company like American Express, which prides itself on catering to a more well-heeled clientele, is not immune.

Source: EconomicTimes

World's second largest miner slashes production

c tons as demand for steel crumbles amid a global economic crisis.

Brazil's Vale said steel companies across the globe have cut production by about 20 per cent in 2008.

The company will keep a ferroalloy plant in France idled until April, and a plant in Norway will extend its furnace maintenance until June. The two extended closures will result in a production cut of 600,000 metric tons of manganese ore and 90,000 metric tons of ferroalloy.

Vale said that beginning Saturday, it will shut down some of its Minas Gerais mines that carry a higher cost with lower quality output. Employees will take "collective vacations," Vale said.

"We strongly believe this decision, made at this point of time, will contribute to minimize risks of much larger future costs to our shareholders, employees and the communities where we operate," Vale said in a statement.

The global industrial production slowdown has led to a drop in demand for base metals such as nickel and aluminum, which is already reflected in declining prices and rising inventories.

Vale said two pellet plants representing about 20 percent of the company's total nominal capacity will be shut down for maintenance, and its manganese ore and ferroalloy operations in Brazil will be shuttered from December through January.

Source: EconomicTimes

Exports likely to get affected by slump in US economy

Finance Minister P. Chidambaram on Friday said that the slump in the US growth rate might affect the Indian exports, but the impact would
be lesser compared to the Chinese economy.

Addressing a news conference here, Chidambaram said that slow growth rate of the developed countries would have an indirect impact on the Indian economy as it is more domestically oriented.

"If the growth in developed countries slows down it will have an indirect impact on India but the Indian Economy is a domestic consumption investment driven economy. Exports play a significant role but not as much as they do in China. We have not been able to estimate the impacts on export," he added.

Experts say that the Chinese economy would have to face the repercussions of the American consumers lowering their spending owing to the current recessionary trends.

Though the affect would be felt by the Indian economy also, but the affect would be lesser than that on the Chinese economy, which has been depending heavily on the export shipments to the United States to gain momentum.

The US trade deficit with China hit a record 256.2 billion dollars in 2007.

Source: EconomicTimes

Domestic Banks Face Rising Bad Debts, Funding Squeeze

Domestic banks may be relatively sheltered from the direct impact of the global credit turmoil, but they are fighting rising loan defaults amid a liq
uidity crunch that can hit profits. Leading private sector bank ICICI Bank has so far borne the brunt of investor concerns about its exposure to the financial crisis, repeatedly stressing it is solvent and deposits are safe since Lehman Brothers filed for bankruptcy protection in mid-September.

While bad debts are expected to rise in coming months, the government has declared Indian banks to be safe. In September, the Reserve Bank of India (RBI) put out a statement saying ICICI was well capitalised as customers in some parts of the country queued up to withdraw deposits. But ICICI’s shares have still lost 70% of their value so far this year as investors fear the worst.

“If a bank faces a liquidity crunch, it is serious trouble. Some of the overseas institutions fell, not because they did not have assets, but because they did not have liquidity to fund the assets,” said AK Purwar, former chairman of State Bank of India (SBI), the country’s largest bank. “In India, despite the mandatory requirements, it has happened so many times before.”

On Monday, top lender SBI is expected to post a 16% profit rise on solid loan growth, while ICICI is likely to report that its earnings slipped for the second consecutive quarter. But all eyes will be on ICICI’s exposure to bonds linked to Lehman and other soured credit.

The Indian banking system is dominated by government-run banks — they account for about 70% of assets and liabilities — and all banks have to hold nearly one-third of their deposits in government bonds and as cash reserves with the central bank. Since 1969, India has not allowed a bank to collapse, merging at least two dozen troubled lenders with stronger, mostly state-run banks, according to the RBI. And Indian banks’ total exposure to failed Western banks amounted to $1 billion, a fraction of their total loan book of $510 billion as of end-September, according to central bank data.

“Indian banks do face headwinds, though it is not a worrying or dire situation now,” said Ritesh Maheswari, senior director of Asia Financial Institutions Ratings at Standard & Poor’s in Singapore. “But if the credit crisis is prolonged, it can have limited liquidity constraints on Indian banks and many others in the region will also face similar issues.”


Indian banks had outstanding loans of Rs 25.4 trillion ($510 billion) and total deposits of Rs 34.4 trillion ($690 billion) at end-September, according to central bank data. In the three fiscal years ended March ’08, banks’ lending grew at annual rates of around 30%. That has slowed to around 25%, but still remains above the central bank’s preferred rate of 20% in FY09 (April/March).

Retail loans, mortgages, credit cards, auto and consumer durable loans, which were among the fastest-growing segments, are now likely to be major risk areas as bad debts are expected to rise to 4% of advances by March ’09, said rating agency Crisil, a unit of Standard & Poor’s. Loans for housing and stock investments also mushroomed in recent years, helped by booming economic growth. But interest rates have risen, the stock market has plunged by more than half this year and the property market has turned down.

Five banking analysts expect net new bad loans at Indian banks to grow on average by close to 3% in the current financial year and next, leading to higher provisions, lower profits and less money to lend. In a September report, Morgan Stanley and Oliver Wyman forecast defaults will peak over the next 12-24 months and overall provisioning costs will more than triple to Rs 75,000 crore from Rs 20,000 crore in ’08.

ICICI Bank and Axis Bank were among the most leveraged Asian banks that were exposed to a turn in the credit cycle, Morgan Stanley said in a separate report last month. “Korea, Australia and India are at top of the heap. These are countries where economic slowdown can have a big impact on asset quality and hence, earnings at banks,” the report said. Analysts rank state-run banks with a strong deposit base and second-biggest private-sector bank HDFC Bank among the best suited to weather the storm.


A lack of liquidity has forced some banks to borrow at interest rates of 20% or more and frozen local money markets, prompting policy makers to unveil a slew of measures to boost lending activities. The central bank has slashed reserve requirements, cut interest rates and pumped extra cash into markets to keep credit flowing. Analysts say with the global credit markets virtually shut for local firms, the scramble for bank credit will rise, pushing up interest rates and worsen banks’ asset quality.

V Leeladhar, deputy governor at the RBI, said it was difficult to categorically give all banks a clean bill of health during such times, but he added that domestic banks were mostly well equipped to face the fallout of the global crisis. “I think nobody will be able to give you a certificate saying which banks are sound at such a time because we don’t know which bank will be affected next,” he said earlier this month. “Today it could be a strong bank, but tomorrow it could be bought down to its knees.”

Source: EconomicTimes

Balanced MFs also trip in market whirlpool

If you were one of those who invested in balanced mutual funds three months ago thinking that it was an ideal mix of sustainable returns and sure-shot safety, you may be disappointed.

Balanced funds, as the name suggests are a class of mutual funds that aim at allocating the total assets with a mix of debt as well as equity instruments. In what has been one of the most volatile periods on the Indian bourses, the last three months have shown that even balanced funds are not fully equipped to safeguard your investments in a falling market.

In the period between July 27 and October 27, the average balanced fund is down around 30% - quite a drastic fall given the investment objective of balanced funds which claim to marry returns 'at relatively moderate levels of risks.'

Schemes such as ING Balanced, ICICI Prudential Balanced, Baroda Pioneer Balance and JM Balanced are the worst performers based on their three month record.

While most of the funds have invested in equities as per their stated band, many informed investors have asked the question whether such flexible investment band should be permitted or not.

"Even seasoned fund managers are suspectible to pursue investments in high-return stocks. The flexible investment pattern of a fund investing around 50-75 % in equities comes handy during boom times and delivered solid returns also. But the ongoing downturn in the stock markets has clearly caught them on the wrong foot," said a senior official at an asset management company.

The average 3-month returns of balanced funds (negative 30%) is not quite away from the 36% average fall witnessed by equity diversified fund in the same period, data shows. Industry observers blame the equity exposure levels, which although is less than the stated maximum allocation for these type of funds, but still relatively high.

"The latest numbers indicate that the average equity exposure in these balanced funds is around 66%. The allocation to debt instruments, if possibly more, could have really made returns look much more brighter. Most of the funds are run by experienced professionals but this shows that even people with a lot of expertise have misread the stock markets," said a mutual fund analyst.

The allocation to debt by the average balanced fund stands at less than 20%. But schemes such as DSP Merrill Lynch Balanced Fund and Franklin Templeton India Balanced Fund, which have debt allocations of close to 35% figure in the top performing schemes.

Source: EconomicTimes

UK consumer confidence falls

Consumer confidence in Britain dropped close to its lowest level in more than three decades in October as the financial crisis deterred Briti
sh shoppers, according to a survey out on Friday.

The GfK NOP survey of about 2,000 people interviewed between Oct. 3-19 showed that consumer confidence fell in October to near the lowest levels it has recorded since it began in 1974.

The international market research firm said that consumer willingness to make major purchases fell to its absolute lowest level on record, with those surveyed widely agreeing that now is a bad time to buy expensive items like furniture and electrical goods.

``The turmoil surrounding the banking world and subsequent turbulence in the financial markets is making for an uncertain time,'' said Rachel Joy, a consumer confidence expert at GfK NOP. ``Consumers are not at all confident about buying major purchases as rising food and energy bills leave them increasingly worried about keeping up with payments.''

Consumer spending accounts for around 65 percent of Britain's total gross domestic product, according to Global Insight, a London-based economic research group.

As a result, the profound fall in consumer confidence is further evidence, following the official news earlier this month that Britain's economy contracted by 0.5 percent last quarter, that the country is heading for a recession, technically defined as two or more quarters of shrinking national income.

Source: EconomicTimes

Buying home gets tougher

Get ready to pay as much as 40% of the house price upfront if you are planning to buy one on a bank loan. Banks have started increasing the margin money, or down payment, required for taking a home loan after the stress in the real estate market.

The aim is to ensure that even if prices drop sharply, the remaining value of the house is enough to cover the loan, should the borrower default.

Source: EconomicTimes

IATA to stop issuing tickets of 16 airlines from tomorrow

The IATA Agents Association of India will not be issuing tickets of 16 airlines, including Air India, Jet Airways, Kingfisher and Air France from tomorrow in protest against the proposed move by airlines to stop paying commission to travel agencies for sale of tickets.

Various airlines had sent notices to the travel agencies, stating that they would not pay the commission from November 1, Biji Eapen, IATA President said while addressing a convention here on Friday.

MPs – K Chandran Pillai and P C Thomas have extended full support to the IATA agents.

Eapen said nearly one lakh travel agencies are facing the threat of closure, affecting about 10 lakh employees.

The agencies receive five per cent commission on the sale of tickets.

Over 90 per cent of the airlines tickets are sold through the travel agents.

Source: EconomicTimes

Beaten down, US consumers burrow deeper

Beaten down and watching their wealth shrink, Americans are cutting back sharply on their spending, trimming it in September by the larg
est amount in four years.

The Commerce Department reported on Friday that consumer spending dropped by 0.3 per cent in September, the biggest setback since June 2004. It followed two months in which spending was flat and left activity for the quarterly falling by the biggest amount in 28 years.

The weakness in consumer spending, which accounts for two-thirds of total economic activity, dragged the overall economy down in the third quarter. The gross domestic product, the broadest measure of economic health, also fell by 0.3 per cent in the third quarter, the strongest signal yet that the country has fallen into a recession.

Many economists believe that economic activity will fall even more sharply in the current quarter, meeting the classic definition of a recession as at least two consecutive quarters of declining GDP.

In a separate report, the Labor Department on Friday said the wages and benefits of US workers rose by a moderate 0.7 per cent in the third quarter, the same increase as in the previous two quarters. The report provided more evidence that the weak economy is keeping a lid on wage pressures.

One of the biggest problems saddling the country is damage from the housing market's collapse. Mounting foreclosures, falling home prices and soured mortgage investments are taking their toll on both individuals and businesses alike.

Federal Reserve Chairman Ben Bernanke, who is scheduled to speak via satellite Friday at a Berkeley, Calif., conference on the mortgage meltdown, is likely to call on government officials and lawmakers to keep working on ways to provide more relief.

The Bush administration is considering a plan that would help around 3 million struggling homeowners avoid foreclosure by having the government guarantee billions of dollars worth of distressed mortgages. The plan also could include loan modifications that would lower interest rates for a five-year period.

Fallout from the housing meltdown has spurred the worst global credit and financial crisis in more than a half century. To combat the problems, the government has taken a number of bold steps. The Treasury Department is pouring $250 billion into banks in return for partial ownership and the Fed this week started buying mounds of debt from companies. It also slashed interest rates to 1 per cent, a level seen only once before in the last half century.

All the grim news comes just days before the nation picks the next president. Either Democrat Barack Obama or Republican John McCain will inherit a deeply troubled economy and a record-high budget deficit that could cramp spending plans.

"I think it's very, very important not to hold out the prospect of silver bullets that will correct these crises," Lawrence Summers, a Treasury secretary in the Clinton administration, said in Boston on Thursday.

"One of the difficulties has been there's been a succession of silver bullets that turned out to be hollow," he said. "So I think one just has to be really careful and sober about recognizing there are very serious risks in the situation ... and that the process of improvement will take time."

Source: EconomicTimes

Nifty may rally upto 2775: Angel

According to Angel Broking's Market Outlook report, if Nifty trades above 2703 during the first half-an-hour of trade then we may witness a further rally up to 2775.

Angel Broking's Market Outlook report:

The trend deciding level for the day is 2703/9079. NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 2775/9263. However, if NIFTY trades below 2703/9079 for the first half-an-hour of trade then it may correct up to 2626–2554/8860-8675.

Source: Moneycontrol

Buy SBI, target of Rs 1559: Karvy

Karvy Stock Broking has maintained its buy rating on State Bank of India (SBI) with a target price of Rs 1559 in its October 31, 2008 research report. "In 2QFY09, State Bank of India's net interest income grew by 45% (Y/Y) to Rs 54.5 billion much higher than our estimates (of Rs 45.6 billion) mainly due to much higher credit growth and higher yield on advances. SBI's net profit reported 40% jump (Y/Y) to Rs 2.6 billion growth due to reversal in investment depreciation. We reiterate BUY rating with a price target of Rs 1559," says Karvy's research report.

Disclaimer: The views and investment tips expressed by investment experts on are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Source: Moneycontrol

Brokers bullish on SBI, Cairn India, Glaxo Pharma

Goldman Sachs has kept sell rating on ONGC, with price target Rs 625

Sharekhan has kept buy rating on SBI, with price target Rs 1801

CLSA has kept buy rating on SBI, with price target Rs 1650

CLSA has kept buy rating on Cairn India, with price target Rs 290

Motilal Oswal Sec has kept buy rating on Glaxo Pharma, with price target Rs 1392

Motilal Oswal Sec has kept buy rating on ICICI Bank, with price target Rs 581

Kotak Institution has kept reduce on NTPC, with price target Rs 160

Kotak Institution has upgraded SBI to buy rating, with price target Rs 1600

Kotak Institution has kept buy rating on Tata Power, with price target Rs 1275

Emkay has kept buy rating on Bank Of India, with price target Rs 340

Citi has kept sell rating on Tata Tele, with price target Rs 12

Citi has kept buy rating on M&M, with price target Rs 447

Source: Moneycontrol

Tata Steel has target of Rs 247-254: N Pillai

Neppolian Pillai of Modern Shares & Stock Brokers is of the view that Tata Steel has target of Rs 247-254.

Pillai told CNBC-TV18, "The 50-month average for Reliance is about Rs 1,325-1,450 in the cluster of simple and exponential moving average. So I think every rally is going to be registered there, Rs 1,450 is going to be the top for me in Reliance. So if you have already missed the move from Rs 980 to Rs 1,350 you have got absolutely no business going and buying that stock at this level, the last Rs 100 can come and go and your gain going to be again kept hanging in the stock. I think eventually after this averages are tested, I think Reliance will collapse to about Rs 875 because that was the target what I had in mind but it recovered Rs 100 above from their, Rs 980 itself. I think Rs 1,500 that is the maximum for the stock and after that you are going to see Rs 500-600 collapse coming in."

He further added, "Tata Steel went below 50-month at about Rs 440 and in the recent carnage it went below even the 200-month average. People say that the bull market is broken once the 200- day averages are broken; Tata Steel had gone and broken 200-month at about Rs 207. So I think every rally is just going to be a retracement rally. On the upside you could have a target of about Rs 247-254 but you have got to trade this stock you can not be investing in this stock."

"ITC will come down to about Rs 125; it came to about Rs 138 this time around. On the upside I think Rs 172-180 is the maximum what I have seen in this stock."

Disclosure: It is safe to assume that analyst and his clients may have an investment interest in the above stock/sector.

Source: Moneycontrol

Suzlon Energy may slip to Rs 17: N Pillai

Neppolian Pillai of Modern Shares & Stock Brokers is of the view that on the downside Suzlon Energy will go up to about Rs 17.

Pillai told CNBC-TV18, "Suzlon Energy by going below Rs 50, it signal a major danger signal that it is going to collapse further. The figures what I have on the downside you may not be liking to hear that, it will go up to about Rs 17 eventually on the downside. The upside if it comes to about Rs 61 to Rs 70 range, I think there will be a tremendous amount of resistance there and it is not going to go beyond that. So every rally will have to be sold into this stock. The technical picture for the stock is so bad that eventually it is going to go close to about the Rs 20-17 levels."

Disclosure: It is safe to assume that analyst and his clients may have an investment interest in the above stock/sector.

Source: Moneycontrol

Hindalco Industries may rally upto Rs 70: N Pillai

Neppolian Pillai of Modern Shares & Stock Brokers is of the view that on the upside Hindalco could rally up to is about Rs 70.

Pillai told CNBC-TV18, "Hindalco is in metal cycle. It has completely turned for it to now revert on the upside; I think we are easily aware by about 12-18 months. So all these stocks be it a Sterlite Industries or a Hindalco or even a Tata Steel, I think they are going to feel the burn completely in the next 12 months. But for the time being at around the Rs 40 level Hindalco has taken support. On the upside, I think maximum it could rally up to is about Rs 70. Eventually, it is going to go towards the Rs 25 kind of levels."

Disclosure: It is safe to assume that analyst and his clients may have an investment interest in the above stock/sector.

Source: Moneycontrol

Exit Reliance Industries: VK Sharma

VK Sharma of Anagram Stock Broking is of the view that traders need to get out from Reliance Industries.

Sharma told CNBC-TV18, "I don’t see any fundamental reason why Reliance should be up 45% from the lows that we have seen in the current rally in October. When the stock runs up 43% from the bottom, by all means traders need to get out. Some other kind of buying might have happened at the counter, which I don’t think the people were looking at in terms of making trading profits should now look at the stock and those traders who are still there, they need to be nibble footed. Go on and trade the stock as long as your stoploss is not triggered and keep increasing stoploss going forward."

Source: Moneycontrol

Satyam, Infosys can do well: Mohoni

Technical Analyst, Deepak Mohoni is of the view that technology now is getting interesting. It was pretty weak but if you look at the last two-three weeks, technology stocks are substantially up from their lows. If this develops into a bit of an intermediate uptrend, Satyam, Infosys could do pretty well.

Mohoni told CNBC-TV18, "Technology now is getting interesting. It was pretty weak but if you look at the last two-three weeks, technology stocks are substantially up from their lows and Satyam is one of those stocks that is doing quite well in this rally, Satyam and Infosys in particular. If this develops into a bit of an intermediate uptrend, Satyam, Infosys could do pretty well."

Source: Moneycontrol

Expect strong performance from banking stks: Bagga

Ajay Bagga, CEO of Lotus Asset Management is of the view that there over the next one year one should see strong performance in terms of stock prices from the banking sector.

Bagga told CNBC-TV18, "We foresee two things happening which are very favorable to banks; there will be a monetary policy easing in terms of repo rate cuts, there will be reduction in CRR rates to inject liquidity back into the market both are extremely positive for the banks. The banking sell off was overdone, our fund managers were overweight on banking throughout the last six odd months maintaining throughout the sell off that Indian banks did not deserve the kind of beating that they were getting and that’s being borne our banks will recover faster, they are strongly capitalised in India. But for few banks which have huge capital market linkage or where merchant banking revenues formed a large part, the banks that are core banks, we are seeing good strength. There could be one quarter a bit of a correction specially October you could see some come off for the banks because of the interest rate moves but overall we think the trend is positive for banks and over the next one year we should see strong performance in terms of stock prices from the banking sector."

Disclosure: It is safe to assume that analyst and his clients may have an investment interest in the above stock/sector.

Source: Moneycontrol

See India's GDP growth at 5-6% next year: Jim Walker

Jim Walker, Managing Director, Asianomics, said India’s gross domestic product (GDP) growth is seen at 5-6% next year. China’s GDP growth, he added would be lesser than that of India at 4-5%. Japan’s would be a drag, Walker said, while overall, Asia would see a 2-3% growth.

The US GDP de-growth may turn out to be much more significant [than what is now projected], Walker said.

Source: Moneycontrol

China Inc's profit surge comes to a screeching halt

China's listed companies, after delivering robust earnings growth every quarter for two years, are seeing profits start to shrink as the g
lobal financial crisis hits more severely than many had expected.

Slumping demand and falling prices have hit Chinese industries from steel to automobiles to airlines, and the highly profitable financial sector, while largely insulated from the worst of the global credit crisis, will see its bottom line eroded by a slowing economy and a deflating property market.

"The impact of the global financial crisis on China's real economy and corporate operations has just begun to make itself clear," said Zheng Weigang, head of research at Shanghai Securities.

"Many industries, such as steel and chemicals, have seen their sales prices nearing their cost points," he said.
"November and December will see several major sectors fall into losses, boding ill for corporate earnings growth in the fourth quarter and next year."

In the third-quarter earnings reporting season that ended on Friday, the 1,600-plus firms listed on the Shanghai and Shenzhen stock exchanges posted a 20 per cent drop in net profit from the second quarter, according to calculations by state media. Year-on-year comparisons for the quarter were not available.

For the first nine months of the year, net profit was up 7.1 per cent year-on-year at 782 billion yuan ($114 billion), slowing sharply from 16 per cent growth in the first half, the calculations showed.

Worse news lies ahead. SHRINKING MARGINS Analysts estimate that more than half of China's listed firms have already seen their profit margins drop in the third quarter from the same period of last year.

That means the only way they could sustain earnings growth is by selling more products -- a tough task as global recession crimps exports and China's slowing economic growth dampens domestic demand.

Among 10 analysts, economists and fund managers polled by Reuters this week, all but one forecast flat to weaker earnings for listed firms in the current quarter compared with a year earlier, while for next year they projected declines ranging from 2 to 10 per cent.

"Earnings growth is certain to be negative in 2009, but the extent of the decline should still be in single digits, with the first half expected to be worse than the second half," said Wu Haijun, Shanghai principal at Power Pacific Corp of Canada, a foreign investor in Chinese stocks.

Earnings at financial firms, the primary engine of China's profit growth accounting for some 40 per cent of the total at all listed companies, slowed significantly after powering total increases of 43 per cent in 2007 and 67 per cent in 2006.

The country's biggest insurer, China Life, posted a drop of more than 70 per cent in third-quarter net profit, as its investment income sank with the stock market. China's benchmark Shanghai Composite Index has dropped more than 70 per cent over the past year.

Growth in the combined net profit of 14 listed banks slowed to 50 per cent year-on-year in the third quarter from more than 70 per cent in the first half.

"Weak markets are pushing savers to put their money in longer-term deposits, raising banks' costs," said Wu Yonggang, senior banking analyst at Guotai Junan Securities in Shanghai.

"Also, banks' ability to secure profitable lending rates has been weakened greatly as poor profits at industrial companies has hurt demand for loans."

SILVER LINING Airlines and metals, which once accounted for more than 10 per cent of total corporate earnings, are faring even worse.

China's top three airlines all posted losses for the third quarter while analysts said the steel and aluminium sectors would fall into the red in the fourth quarter.

There are some silver linings, however, amid the gloom. Refining giants PetroChina and Sinopec Corp, which account for 20 per cent of all of China's corporate earnings, posted better-than-expected third-quarter results and analysts are upbeat about their prospects, as a retreat in oil prices bolsters their refining margins.

"We are surely not saying the stock market is bottoming out right now, given the poor global financial conditions," said senior analyst Ren Chengde at Galaxy Securities in Shanghai.

"But China's policy shift to focus on growth may prevent a meltdown in key sectors such as property."

China's central bank cut interest rates this week for the third time in just six weeks, while regulators have taken a series of steps to bolster asset prices, including lowering minimum payments for housing mortgages and raising export tax rebates for sectors such as textiles.

In addition, the stock market is now valued at a record low of 14 times historical earnings, so even panic selling should be limited in the near term, analysts said.

Source: EconomicTimes

Emerging economies to be next victims in crisis: IMF chief

Emerging economies will be the next to topple in the global financial crisis, the head of the International Monetary Fund Dominique Strauss-K
ahn wrote in article published here on Friday.

Emerging countries are facing additional problems, Strauss-Kahn wrote in a guest commentary for the daily Der Standard.

Their economies "aren't just facing falling exports and tumbling confidence," he said.

"They're the latest victims of a financial crisis that started in the United States and spread to Europe and is now moving beyond Europe's borders."

Ironically, the measures taken in highly industrialised countries to resolve the crisis -- such as banking bailouts -- "make it more attractive for investors to recall their money back home.

But it is precisely that which is making life so difficult for the emerging countries," Strauss-Kahn argued.

In order to support their financial systems and overall economic demand, emerging countries also needed to take similar measures.

"But the newly acquired prosperity of many of these countries relies on access to global capital. And when this suddenly dries up, it deals a heavy blow to those countries and brings with it very major challenges, which they can't overcome on their own," the IMF chief wrote.

Highly developed countries must be prepared to take over the responsibility of financing the measures "in proportions never seen before," he said.

The alternative, Strauss-Kahn warned, would be widespread payment default, protectionism and banking controls.

"That will set not only these countries, but the entire world economy back years," he argued.

Source: EconomicTimes

Is the US bailout working?

When the U.S. government announced an emergency plan to buy bad loans and other troubled assets from banks and financial institutions, it
was hailed as the best solution to tackle paralyzed credit markets.

Nearly a month later, the plan remains under wraps and money managers say it could have a fundamental flaw -- only a handful of the biggest investors are qualified to run the program.

When the plan won congressional approval on October 3, days after it was initially rejected, the Treasury Department said the program could be up and running within a few weeks.

It was designed as the core part of a $700 billion rescue package as it would root out toxic assets from the system, eliminating a key area of uncertainty for investors about when U.S. and global credit markets would be cleaned out and resume normal functioning.

But so far, no asset managers have been announced, suggesting that the government is running into difficulty in finding the most appropriate money managers for the job.

In order to compete for the contracts to buy and sell mortgage-backed securities (MBS) under the plan, companies must oversee at least $100 billion in U.S. dollar-denominated, fixed-income assets for clients.

Some investors say the $100 billion requirement shuts out many managers with decades of experience in MBS.

"The managers who have the assets under management to meet the minimum requirement have mostly proven to be incompetent in mortgage-backed securities," said Jeffrey Gundlach, chief investment officer of TCW Group in Los Angeles.

For example, Western Asset Core Bond's fund (WATFX) is down 13.25 percent this year, lagging the Lehman Brothers Aggregate index by 11.73 percentage points, according to data by Morningstar. Western Asset oversees $624 billion in fixed income assets.

Tad Rivelle, chief investment officer at Metropolitan West Asset Management in Los Angeles, which has $26 billion in fixed-income assets, added: "Why should we be deprived of the opportunity to participate? Perhaps we can be involved on a smaller scale. We manage multi-billion dollar portfolios. We have a $6 billion mutual fund...we can manage $6 billion."

For its part, TCW invests $130 billion in total assets, but only about $80 billion of that is in fixed-income, which disqualifies the company as a contender to help with the Troubled Asset Relief Program, known as TARP.

Gundlach is widely regarded as one of the best MBS specialists in the United States and has the record to back it up: his TCW Total Return fund (TGLMX) is the only one of its class to show any positive return this year in the intermediate-term bond category, which has been pummeled by the meltdown in corporate debt and MBS.

The major challenge for whomever manages the TARP will be to determine how much the Treasury would pay for the troubled mortgage assets, most of which have no or thin markets and are otherwise difficult to price because of their opaqueness and complexity.

"The logic of putting this minimum requirement parameter in place makes sense at a superficial level and certainly makes the weeding-out process easier. But it is excluding some managers with the most appropriate and proven skill sets," said Gundlach.

A Treasury spokeswoman had no immediate comment.

Source: EconomicTimes

Sensex closes 9% higher; Nifty above 2900

Equities surged in the last half an hour of trade to end on a higher note Friday. Aggressive buying was seen in frontline stocks while midcap and smallcap stocks underperformed.

Bombay Stock Exchange’s Sensex closed at 9,851.92, up 8.93 per cent or 807.41 points. The index touched an intra-day high of 9870.42 and a low of 9361.66.

National Stock Exchange’s Nifty ended at 2907.45, up 7.8 per cent or 210 points. The broader index touched a high of 2,921.35 and a low of 2,696.30.

BSE Midcap index was up 1.42 per cent and BSE Smallcap Index gained 1.40 per cent.

Mahindra & Mahindra (23.97%), Reliance Communications (19.66%), HDFC (17.64%), ICICI Bank (16.93%), and Jaiprakash Associates (15.49%) were the top gainers.

Ranbaxy Laboratories (-1.85%) and TCS (-1.57%) were the only losers.

Market breadth was positive on the BSE with 1580 gainers and 918 losers.

(All figures are provisional)

Source: EconomicTimes

Index stocks hit in October mayhem offer good long-term potential

Frontline stocks that have been beaten down badly in the October mayhem may offer good long-term potential for investors willing to stick their necks out and buy them at attractive valuations, analysts and equity experts say.

Many of these stocks such as Bharti Airtel, BHEL, Hindustan Unilever, are fundamentally strong companies with sound management in fast-growing areas of the company, they add.

"We like stocks like RIL, Bharti Airtel, HDFC Bank, BHEL and GAIL. Though the downside risk is linked to the market, these companies have solid business fundamentals. They are leaders in their respective businesses and have the ability to deliver," Rajat Rajgarhia, head, institutional research, Motilal Oswal.

"All the banks in the Sensex like SBI, ICICI Bank, HDFC bank, IT stocks such as Infosys and RIL have fallen significantly and have the least downside risk," says Dipen Shah, vice president, private client group of Kotak Securities.

For example, Bharti Airtel has lost 38% in the last one year and is trading at 11 times FY10 estimated earnings. This is below its historic price to earnings multiple band of 14-24 times. But the outlook for the business is robust as the company has highest earnings visibility in the sector and there are new growth drivers such as 3G spectrum and tower business, said a recent report by Motilal Oswal.

On the other hand, BHEL is down by 55% in a year trading at 10 times FY10 estimated earnings but provides strong business visibility with order book to sales ratio of more than 3 times. It is also a leading player catering to the power and industrial machinery. Risk-reward ratio is favourable and any further corrections in the above stocks will be unwarranted, some experts add.

Though Indian equity markets have gained more than 10%, the markets may be far from bottoming out. The gains could be an aberration and markets could see some correction before stabilising. "Market gains this week was just a technical bounce back following several recent positive developments," says Mr Shah. He expects markets to correct and touch the 7,800-8,000 levels in the short term.

"There is a high probability of markets seeing further lows of 6500-7000 as US problems are still not over, Dow Jones has still not seen last of its fall and FII (foreign institutional investors) selling in global markets especially in the emerging market like ours has still not ended," adds Amar Ambani, vice-president-equities, India Infoline.

However, some feel that stocks are now almost close to the bottom. "If liquidity infusion in the global markets and also in India continues and international markets stabilise (which is likely after few more weeks), our markets could see second round of re-rating," adds Sandeep Shenoy, strategist, PINC Research.

Some of the stocks preferred by the above-mentioned experts:

** HUL: (-17% in six months) (-5% in one year). Diversified and interest rate non-sensitive businesses is the main reason for the interest in the stock.

Source: EconomicTimes

Realty faces reality: 15-20% correction by Q1 2009

The real estate bubble has finally burst! The sector that was in the limelight a year ago is simply coming apart. Severe cash crunch with bank loans drying up, sales plunging, demand falling and stock market crashing have compounded the worries for real estate companies.

The real estate sector in India has grown 30-35 per cent in the last five years, reflecting the rapidly-increasing demand for office, commercial and industrial space, as well as bigger homes now considered within the range of India's prospering working class.

But the economic juggernaut has been slowing since earlier this year due to double-digit inflation, a severe liquidity crunch as fallout of the US sub-prime crisis, and now, the possibility of economic activity shrinking as part of a global slowdown. The country's growth estimates of 9 per cent at the beginning of the year have been revised to well below 7 per cent, and the effect is directly visible on the realty sector. The BSE Realty Index has already witnessed 82 per cent fall from October 2007.

“People are concerned about cash provisions and where real estate companies will get money from. People are exiting at any price because there are no buyers for realty stocks. Investors are now shifting from net asset value-based valuation to cash flows of the company. Real estate stocks have been correcting mainly because developers have not reduced home prices despite a slowdown in sales,” said Sandeep Acharya, analyst with Spark Advisory.

Developers are now hitting upon novel marketing strategies, absolutely unheard of in the sector, to woo reluctant flat buyers. Offers ranging from 'Buy 1 flat, get another free', 'Drive to your new dream home in your dream car' clearly show the desperation among real estate players.

A clear move to shore up the sagging morale of prospective buyers, property developers have even come forward to pay pre-EMI interest on part-money disbursed on the housing loan taken by a flat buyer. Local builders such as Mantri Synergy, Jains Sunderbans, ETA Rosedale and Hirco Palace Gardens have come out with such schemes to attract buyers.

Most of the real estate companies take debt at project level, which typically range from 2-4 years. This implies that every year, close to 30-40 per cent of the total debt becomes due for repayment. Hence, real estate companies need to monetize the project timely to be able to repay the debt on time.

“Due to the slowdown in the sector, this cycle has come under pressure, as property transactions have dried up considerably - delaying the monetization of assets. Due to the ongoing credit tightness, banks are unwilling to extend or refinance old loans and are imposing several new covenants on the developers. At the same time, financing for new projects is becoming more stringent with clauses for exclusive use for stated projects as a result, servicing of bullet repayments falling due in 2008 remains a key challenge,” said Motilal Oswal Securities in a report.

The credit crisis across the globe has taken the sheen off large property firms, with DLF and Unitech, two of India's leading real estate companies, seeing their market cap eroding almost completely and their fund raising plans being hit.

Source: EconomicTimes

DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.