Wednesday, 5 November 2008

Sell Indiabulls Real between Rs 171-180: Mathew

Technical Analyst, E Mathew is of the view that one can sell Indiabulls Real Estate between Rs 171-180.

Mathew told CNBC-TV18, "Indiabulls Real Estate would be a clear-cut sell on rally though, I would say that there is still some more steam left and since the stock has been hammered down so much, this pullback rally could give you a target of somewhere between Rs 171-180. I would change my view that this something more than a pullback rally, if the stock is able to sustain above that huge resistance, which is there at roundabout Rs 190. If and only if the stock is able to sustain consistently above Rs 190 for a couple of weeks, then only would I change my view. Otherwise my clear-cut view in this is, sell at higher levels especially in resistance zone between Rs 171-180."

Disclosure: Analysts associate company has sold out of the money Nifty calls.

Source: Moneycontrol

Buy SBI at every dip: Madan

Ashu Madan of Religare is of the view that one can buy SBI at every dip.

Madan told CNBC-TV18, "All the banks have shown resilience and I think during the course of downfall also, all those compulsive investors who were pasturing for something to invest, I think PSU banks was the only thing which was being recommended by most of us. So one can trade these banks with a positive bias. But at the same time once you see a meaningful recovery, like we have seen in SBI from Rs 2,400-2,500 close to Rs 3,200, so that is the time because State Bank of India within the PSU space falls into a momentum category to some extent being a frontliners. So one has to keep trading and keep entering at lower levels, so even if you hold it for a medium to longer-term still not a bad option and you will get lot of trading opportunities to make money. So all in all I would say that at every dip kind of a buy."

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

Source: Moneycontrol

Reliance has resistance at Rs 1480-1500: Mathew

Technical Analyst, E Mathew is of the view that Reliance Industries has resistance at Rs 1480-1500.

Mathew told CNBC-TV18, "Reliance Industries has seen a magnificent rally and one can’t expect that everyday this stock is going to go up especially when you consider that we are now into a trading range and Reliance of course is a stock, which has a lot of bearing on the Nifty. One must realize that major resistance in Reliance is around that Rs 1,480-1,500 zone, which I don’t think is going to be very easy for the stock to overcome."

He further added, "Having said that I do feel that at lower levels, the Nifty may build a base and again an attempt maybe made by the Nifty to go up to 3,400 possibly. In that case, I am sure Reliance would also participate but even at that particular juncture, I really have my doubts whether it would be able to take out that huge supply zone, which exists between Rs 1,480-1,500. In fact for all those who have been lucky enough to get into a trading call in Reliance, I think that is certainly an area for to come out of all the trading positions."

Disclosure: Analysts associate company has sold out of the money Nifty calls.

Source: Moneycontrol

Below Rs 270, Satyam may slip Rs 50-60: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that below Rs 270, Satyam may slip Rs 50-60.

Sukhani told CNBC-TV18, "IT stocks are now literally giving the signs of an impending crash. In Satyam below Rs 270 there is a freefall, which could take it down by 50-60 points and similar patterns are available in more or less degrees in the other majors. The smaller ones are not giving this pattern because they were beaten down much more. Maybe there are niche opportunities there but the larger IT stocks are saying okay, a little more downside support will be broken and then we will go in for a freefall."

Disclosure: Analyst has delta neutral positions in Nifty and investments in shares.

Source: Moneycontrol

Exit Suzlon Energy on big moves: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that one can buy Suzlon Energy for a momentum play but remember to exit whenever another big move happens.

Sukhani told CNBC-TV18, "For anyone who is looking to just buy for a momentum play, you go and buy Suzlon Energy but remember to exit whenever another big move happens. For investors, there is no base building yet and for traders who are not prepared to take that high risk, I do not think Suzlon is offering any opportunities. The charts are not giving any buy signal."
Disclosure: Analyst has delta neutral positions in Nifty and investments in shares.

Source: Moneycontrol

Apple boosts its payroll by 48 per cent in 2008

Apple Inc boosted the number of workers on its payroll by 48 per cent in the 2008 fiscal year, a period that saw robust iPod sales and the stagger

ingly successful launch of a new iPhone.

In a Securities and Exchange filing Wednesday, company said it employed 32,000 full-time workers and 3,100 temporary employees and contractors as of Sept 27.

In fiscal 2007, Apple claimed 21,600 full-time employees and 2,100 temporary and contract workers. The increase was reported early Wednesday by technology blog

Eight thousand of those people went to work in Apple's retail segment, which opened 50 new stores in 2008, according to the filing. Apple spokesman Steve Dowling would not say what divisions hired the remaining 3,400 new workers.

Research and development expenses in 2008 also jumped from the year before. Apple said it spent $1.1. billion, a 40 percent increase from 2007.

Cupertino, California-based Apple said in October that its 2008 earnings climbed 38 percent to $4.83 billion. People snapped up 6.9 million iPhone 3Gs during its first full quarter on the market.

Source: EconomicTimes

Indo-US relationship is very important for Obama: Saran

Describing the US election outcome as "a generation change", Former Foreign Secretary Shyam Saran on Wednesday said the Indo-US relatio

nship is very important to US president-elect Barack Obama.

"He had written a very nice letter to Prime Minister Manmohan Singh in September saying he would vote in favour of the Indo-US nuclear agreement and assured his full support to it," the PM's special envoy Saran said today in an interview to NDTV.

Attaching great importance to the Indo-US relationship Obama said he would like to work together with India on various other shared interests as the President of the US, Saran said.

Obama talked about not only shared values but also about shared interests, he added.

"At least the sentiments expressed in that letter make me believe that infact this presidency would be another interesting and a very positive chapter in Indo-US relations," Saran said.

Source: EconomicTimes

India Inc sees a global crisis manager in new prez

India Inc sees the election of Barack Obama as an opportunity for the US to regain moral leadership and use that power to comprehensiv

ely address not just the global financial crisis, but the environmental and political crises as well.

While some business leaders are concerned about Mr Obama’s promises to keep jobs in America, finance minister P Chidambaram said the Indian software and information technology-enabled services industry should not worry over Obama’s policies on outsourcing. “Once he is in office, he will realise that this is an inter-connected world and countries have to work together,“ the minister said. Mr Chidambaram said that he was speaking as an individual and not for the Indian government.

“I do believe he understands that the global financial crisis cannot be resolved by building ‘fortress America’ and that protectionist and inward-looking policies will only hurt the United States in the long run. He will inevitably understand and respect the strategic potential of his country’s relationship with India, and work to strengthen it,” said Mahindra Group vice-chairman and managing director Anand Mahindra.

For industry bodies, the biggest expectation would be the reversal of the decline of the US economy. “He has talked about pumping in $50 billion and allowing tax breaks to the middle class. The revival of the US economy is critical not only to us, but the global economy as well,” said Ficci president Rajeev Chandrasekhar.

CII director-general Chandrajit Banerjee said India and the US can work together on each and every one of these challenges. “The bilateral agenda is enormous and the potential for cooperation is limitless,” he said.

But the Federation of Indian Export Organisations (Fieo) cautioned against a possible increase in protectionist measures. Fieo President Ganesh Kumar Gupta said that if US increases agriculture subsidies as stated by Mr Obama, it will give a jolt to agro exports from India and other developing countries.

Fieo has also expressed apprehensions that the US may tighten protectionist measures which may hamper exports to the US, albeit marginally. But Ficci president said that our exporters should be prepared to take advantage of this coming resurgence of US demand and the government must ensure that our exporters are enabled for this coming opportunity he added.

In respect of policies related to climate change, Nobel laureate Dr RK Pachauri said that Obama has not only been very clear in emphasising the need for the US to engage in global solutions to meet climate change challenges, but also in respect of bringing about a major shift in US energy policy. “It would help greatly if the new president were to announce a coherent and forward looking policy soon after he takes office,” he said .

Source: EconomicTimes

America decides: Barack Hussein Obama is 44th president

Hh made history by becoming the first African-American President to occupy the White House, Barack Hussein Obama made his first promise: a puppy f

or his daughters. That’s one commitment that will perhaps be the easiest to keep.

The challenge of marrying symbolism with substance should strengthen his perseverance, as he has to seek both peace and prosperity.

How much his win meant for the millions of Afro-Americans, who watched him address the nation at midnight after the results were announced, was best reflected in the reticent face of Reverend Jesse Jackson whose mixed feelings of anguish, remorse and finally joy were submerged by a uncontrolled deluge of tears. Not all. For the millions of whites, Hispanics and Asians, it was a rekindling of hope for improvement in the nation’s long-troubled racial relations.

Even as his victory over Republican Senator John McCain (349-163) is awash with superlatives: overwhelming, momentous and monumental, Obama’s tasks ahead are also of the extreme kind. To begin with, he has to salvage the ravaged financial system, the American and the global economy. Restoring America’s lost moral standing in the world, particularly in the Middle East and the Muslim world in general, is another challenge. On this, Obama started on the right note by quoting Abraham Lincoln in his victory speech: “We are not enemies, but friends... Though passion may have strained, it must not break our bonds of affection.” This also was directed as much towards his own countrymen as it was to listeners the world over.

Where will he make a beginning? Perhaps, by first shutting down the notorious prisons at Guantanamo Bay. Perhaps, by speeding up the pullout from Iraq and trying to hasten the nation-building process in Afghanistan. Perhaps, by winning back the friendship of European nations. And perhaps, by bringing about a drastic change in the structure and composition of America’s bankrupt financial institutions.

India, like other nations, is keenly watching Obama’s next moves. The US President-elect sees India as a strategic partner. What New Delhi may not appreciate is Obama toying with the idea of intervening in Kashmir and sending Bill Clinton as an envoy. Indian industry looks askance at his stated dislike for outsourcing of jobs, but is confident that commercial logic would ultimately prevail and that India’s IT-enabled industry would thrive even under the new dispensation.

Obama’s voting record on protection does not augur well for speedy progress on trade liberalisation under WTO’s Doha round of negotiations. Nor is New Delhi comfortable with Obama’s intent to ratify the Comprehensive Test Ban Treaty. However, a US that is more open and democratic within and willing to engage with the wider world, rather than imperiously expecting it to follow its lead, would help an emerging power like India, as it seeks to redefine its own role in the global order.

Obama clearly has plenty on his plate. There are enough indications that he has already identified key members of his Cabinet. His long-time friend from Chicago, Representative Rahm Emanuel, is tipped to be the next White House chief of staff. Reports also indicate that Obama may ask defence secretary Robert M Gates to continue till the complete withdrawal of troops from Iraq. But the big question is who will be the next treasury secretary? There is speculation that Clinton-era treasury secretaries Lawrence H Summers or Robert E Rubin may be asked to take on their former role.

It promises to be a tightrope walk for Obama. Even though he has se-cured the mandate, he will have to find the money to deliver his promises. And, his choice of a puppy for Sasha and Malia could provide an important pointer to his future decisions: whether it will be a rare ‘goldendoodle’, a hypoallergenic hybrid of a golden retriever and a standard poodle, or just an ordinary breed.

Source: EconomicTimes

Pakistan may have reasons to worry

Even though the financial crisis will be the main focus of the Democratic administration, US President-elect Barack Obama’s immediate a

ttention on the foreign policy front will be taken up by the war on Iraq and Afghanistan.

In numerous remarks on the war in Afghanistan, Mr Obama has said that the root of global terror lies in Pakistan and that the US under his leadership will not spare any efforts in ensuring that the problem is fixed. In one interview he went a step further saying that the US `` should probably try to facilitate a better understanding between Pakistan and India’’ and try to resolve the Kashmir crisis.

Recent reports suggest that former US President Bill Clinton could even be sent as a US Kashmir emissary.
Though his Kashmir comments have been restricted to one interview, he has consistently made the point that Pakistan needs to be convinced that militants and not India is the key problem.

``If we can get them to refocus on that, then that is going to be critical to our success not just in stabilising Pakistan but also in finishing the job in Afghanistan,” Mr Obama said. This could signal a change of the US approach to Kashmir.

Mr Obama’s remark on the US facilitating a resolution to the Kashmir issue has already caused ripples in different quarters in India. `` When he talks of facilitating he is not going to be objective. He will push an agenda. The US might become more intrusive and interventionaist,’’ said Bharat Karnad, Bharat Karnad, security analyst at the Center for Policy Research.

And New Delhi will not accept any third party intervention in what it considers a bilateral matter. At the moment the composite dialogue process has been moving ahead at its own speed. While incremental progress has been made in areas of trade and commerce, there has been little movement on issues like Kashmir and terrorism.

India has continued to maintain that dialogue can only take place in an atmosphere of peace and tranquility. But with Pakistan facing a series of terror attacks, fears are growing that the sub contitnent will only see further outbreaks of terror activity.

If his remarks on Kashmir have raised eyebrows here, his remarks on Pakistan have led to outraged reaction from the Pakistani establishment. He supports the Bush administration’s policy of hot pursuit of terrorists into Pakistani soil and has said that if Islamabad is ``unable or unwilling’’ to take militants out, then the US should go after the targets into Pakistan.

``Now you’ve got a fledgling democratic government (in Pakistan). We have to support their efforts to democratise. That means, by the way, not just providing military aid, it means helping them to provide concrete solutions to the poverty and lack of education that exists in Pakistan. So I want to increase non-military aid to Pakistan,” he told CNN. He has also voiced concern about the stability of the Zardari government and reports that Al Qaeda was targetting the new government.

This is being seen in some quarters as a sign that the Obama presidency will take Pakistan to task. ``On Pakistan he has made successive statements and he seeks to impose far greater accountability and he has taken a much harsher line then McCain,’’ said Ajai Sahni, executive director of the Institute for Conflict Management.

Source: EconomicTimes

Financial crisis: Mittal to create wealth for shareholders

Steel tycoon Lakshmi Mittal today asked investors not to be perturbed by the fall in valuation of ArcelorMittal saying he is the large

Modern Moguls
st stakeholder and is interested in creating more wealth for shareholders.

"I am the largest shareholder and I am interested in creating more wealth for shareholders," India born Mittal told reporters over phone from Luxembourg when asked if he was worried about the shareholders as market capitalisation of the conglomerate had come down from $150 billion five month ago to $30 billion now.

In the process, Mittal's own wealth has come down by over $50 billion to less than $15 billion.

"Today the world is in a very difficult financial crisis. We are facing challenges... Our focus today is to look after the company, to look after the shareholders. We are taking lot of initiatives within the organisation (including related to cutting production)," he said elaborating on the reasons for the decline in valuation of the company.

However, he was confident of regaining the pristine glory and capture the valuation that the company lost during the year and said, "I think whole of my management team would have that in mind and they are working towards creating more value."

Mittal said the company had reported strong quarterly results and the focus was on the fourth quarter but conceded that net profit was hit by some accounting related one-time items such as provisions for pensions.

During the third quarter ending September, 2008, the company announced a higher sale of 35.2 billion dollars and net income of 3.8 billion dollars.

On net profit, Mittal said, "There are some one-time items because of the accounting that is bringing down our net profits. For example, we provided for pension, liability for which did not come under the US GAAP (accounting norms)... we are within the guidance."

Mittal clarified that the EBITDA (operational earnings) for the quarter was in line with the guidance for 8.5 billion dollars.

"We are in line with the guidance which we gave... we are very happy about our this quarter results... Due to the financial crisis, we are experiencing bad economic time. The demands are soft. All the economies whether developed or developing are getting affected by the financial crisis," he said.

On the course ahead, he said, "We remain optimistic about the industry's medium-term growth prospects but it is appropriate to pause our growth strategy until we have a more settled economic outlook."

At the same time, he said the company has taken measures to ensure that it was well adapted to the current environment.

"Our focus remains on cost leadership and service to customers. The current period of de-stocking requires that we made appropriate production cuts to rebalance supply and demand. We are also accelerating efforts to pay down the debt," he said.

With a diversified business model, strong cash-flow and cost leadership position, ArcelorMittal was well placed to weather the current economic challenges.

Source: EconomicTimes

British law firms outsource to India in a big way

Britain's biggest law firms are outsourcing jobs related to conveyancing, accident claims and due diligence investigations to India to cut


Thousands of Indian lawyers and fresh law graduates have reportedly been employed by British firms for a fraction of the cost if the work were done in Britain.

Clifford Chance, reputed to be world's largest law firm, has set up its own offshore centre in New Delhi. Eversheds, another leading UK law firm, has confirmed it was making use of India-based legal resource centres.

Several other legal companies have expressed an interest in outsourcing hundreds of millions of pounds worth of high-volume work, a report in 'The Independent' said.

"The often negative image of call-centres is increasingly being replaced by more accurate perceptions of the quality of legal work available from professionals in India," it said.

Nearly 80,000 English-speaking law graudates pass out from Indian institutions every year. Young Indian lawyers are considered very competent and also Indian legal system is largely based on English law.

CPA Global, a legal process outsourcing company (LPO), said that more than 30 law firms and company legal departments were in talks to use its legal support base in India, which employs 450 graduates and lawyers.

CPA is one of the biggest providers of LPO services in India and counts Microsoft among its clients.

The downward pressure on legal costs in the economic downturn had forced the once-conservative legal profession to consider radical means for delivering legal services to clients who wanted fees to be fixed, rather than billed at an hourly rate, the LPO company said.

Indian firms have responded by offering US and UK law firms litigation support and compliance work at around 100 different legal outsourcing centres, the report said.

Source: EconomicTimes

Recession in US is good news for LPOs in India

At least one section of industry isn’t unhappy about the meltdown. The recession in the US is good news for the $200-250 million legal

process outsourcing (LPO) industry in India.

While outsourcing of litigation work from the US and Europe has increased considerably, what is interesting is new forms of businesses like risk management, corporate compliance and know-your-customer (KYC) guidance work from a number of global corporates that have come up.

Companies like Pangea3, UnitedLex and CPA Global consider risk management and compliance a high growth area. UnitedLex’ risk team in India has seen a five-fold growth in the last six months. This is prompting them to hire at a time when other sectors are either freezing recruitments or are firing.

“Regardless of the extent of recession, the regulatory environment will only become more strict so companies will need to comply,” says the co-CEO of Pangea3, Sanjay Kamlani. The LPO setup a new risk management and assurance group recently and this work is already 15% of Pangea3’s overall business.

In today’s scenario, companies want to know their risk profile so that they can disclose and be transparent in order to comply with regulations.

“We are working with a large heavy-machinery manufacturer in the US to understand the risk associated with the thousands of contracts they have with their vendors and suppliers,” says UnitedLex chief solution provider Ajay Agrawal.

With more of this kind of work coming in, they have scaled up their operations and have gone from 98 to 330 employees in India.

CPA Global’s India country head Bhaskar Bagchi says that the industry has been growing at a very fast pace and the current economic situation is a catalyst for even faster growth as corporates start to put pressure on the billing rates of international law firms.

“Huge amount of work related to the recession is in the dialogue stage for us,” he adds. The company is in the process of taking its headcount up from the current 450 to 1,200 by July.

Mr Kamlani feels that as work on the $700-billion troubled asset relief programme (TARP) with which the US treasury department plans to purchase distressed assets, especially mortgage-backed securities from the country’s banks starts, Indian LPOs could see a could see a lot more business. Mr Agrawal says, “This is a Y2K kind of an opportunity for us.”

Source: EconomicTimes

India's IT industry welcomes Obama

The Indian software industry is looking forward to work with US president-elect Barack Obama and his administration to spur i

nnovation, foster economic growth and develop skilled workforce to create jobs in both countries for mutual benefit.

Hailing Obama's historic victory in Tuesday's elections, the Indian software industry body NASSCOM said it was important for India and the US to find ways to partner and boost economies of the two nations in the wake of the global economic meltdown.

"Specifically, we support expanding the H1B visa programme so that skilled workers can help companies lead the way on innovation and contribute additional jobs and economic growth in the US," Nasscom said in a statement in Bangalore Wednesday.

"We hope the economic and diplomatic goals outlined by Obama during the campaign will be achieved during his tenure as the president," Nasscom said, but did not comment on his controversial remarks against outsourcing IT jobs to Indian firms at the expense of American workforce.

Obama has said during his election campaign the US needed to stop giving tax breaks to companies that ship jobs away and instead extend incentives to those that invest in the country. Finance Minister P Chidambaram allayed fears of the Indian IT industry over Obama's pronounced polices on outsourcing.

"I am very confident India-US relations will only grow stronger and stronger. He will be a change agent," Chidamabram told reporters after Obama was declared elected as the 44th president of the US.

Speaking in his personal capacity on Obama's victory, Chidambaram maintained the Indian software and IT-related industry should not be worried over the president-elect's views on outsourcing.

"A comment here or a comment there on outsourcing should not bother us," he said when asked for his response to the promises by Obama to look into the issue of Americans purportedly losing jobs to countries like India due to outsourcing.

"Once he is in office, he will realise that this is an inter-connected world and countries have to work together," Chidambaram added. Leading IT firm Infosys Technologies Ltd chairman and chief mentor N.R. Narayana Murthy termed Obama's win as a victory of "compassionate capitalism" over laissez-faire capitalism.

"Today is an extraordinary day. The US has voted for compassionate capitalism over laissez faire capitalism. Besides, this election has shown that meritocracy matters most," Narayana Murthy said in a statement from India's tech hub.

Laissez faire is an economic theory which advocates for minimum government interference in market.

"We believe president-elect Obama to be a pragmatic leader who understands that American industry needs to be competitive not just in America but in third (world) countries as well. This election has also proved that the internet is a powerful medium for raising funds," Narayana Murthy added.

International Data Corporation (India) executive director Kapil Dev Singh said though politics and business issues were related at the policy level, they would not affect individual business decisions, especially in the US.

"America is known to advocate free market principles and individual choice. Many US corporations tap new resource or demand new markets. Off-shoring and outsourcing are a business decision for them," Singh said in a statement.

The IDC official did not think policies of the ensuing Obama administration would have any effect on the prospects of individual business choice. IT software services and solutions' firm Collabera president Mohan Sekhar said Obama's win symbolized the changing expectations of people worldwide.

"It's been a vote for inclusive growth, economic stability and security in the US. I hope Indian voters will also vote for the same priorities during upcoming general elections," Sekhar noted. The head honcho, however, did not think Obama's election would have any impact on the Indian IT industry, given the state of maturity.

Source: EconomicTimes

1 lakh skilled jobs to be generated in 5 years

Major sectors in the state such as real estate, automobile, power and telecom would generate direct and indirect employment opportunities

for over one lakh skilled and unskilled workers in three to five years from now, industry body, Associated Chambers of Commerce and Industry of India (ASSOCHAM), said on Wednesday.

ASSOCHAM President Sajjan Jindal told reporters after a meeting of the Managing Committee of the body that companies had already promised to invest Rs 49,078 crore in Tamil Nadu over the next few years.

While real estate topped the investments with Rs 17,131 crore from major developers such as Rakindo and Mahindra World City, automotive investments touched Rs 3,510 crore, he said pointing out at Ford's plans for a small car production facility and an enegine manufacturing unit in Maraimalai Nagar near Chennai by three years and others.

The power sector saw private companies announcing investments to the tune of Rs.2,200 crore, he said.

On the current global meltdown, Jindal said ASSOCHAM was confident the country would be able to clock eight per cent growth rate since services and agriculture sectors contributed "greatly to the project growth rate".

Jindal expressed confidence that the Reserve Bank of India would further relax its monetary policy to ease the liquidity problem and expressed hope that rising inflation will come down in the next few months.

Source: EconomicTimes

Global broadband prices down 20 per cent in 2008

Prices for residential high-speed Internet service are down 20 per cent globally from the start of the year, according to a British rese

arch firm.

The biggest price drop is for DSL broadband over phone lines, with the average monthly price falling from nearly $67 in the first quarter to $53 in the third, according to the analyst firm, Point Topic.

However, little of the decrease has happened in the U.S., where prices have been largely stable and are already lower than the global average. Americans are paying $16 per megabit per second of download speed, far lower than the $46 average in the Middle East and Africa.

However, DSL is cheaper in Europe, and cheaper still in Asia-Pacific, where people are paying $3.80 per megabit.

Cable Internet service used to be cheaper in the U.S. than in Europe, for the same speed. But that situation has reversed, as European operators have raised their speeds while lowering prices. US operators have also raised their speeds, but have kept prices the same, Point Topic said.

Point Topic said broadband by optical fiber, represented in the US mainly by Verizon Communications Inc.'s FiOS service, is actually the cheapest option, if you take into account how fast it is. Total monthly charges are the highest, however, and the price drop from last year was lower than for cable or DSL.

Source: EconomicTimes

Indian market better off than Asian peers, BRIC

Even though bears have minced domestic markets considerably, has the decline in commodity or energy prices helped the domestic stock mark

et perform better than its Asian peers and other BRIC constituents? While crude prices tumbled by around 60% since its July 11 peak and a 40-50 % correction has set in metals and agro-commodities, the Indian stock market has fallen by 27% from mid-July - which is much less than its Asian and BRIC peers, analysis shows. Equity markets in other comparable Asian countries such as Korea (-29 %), Taiwan (-32 %), Japan (-35 %), Hong Kong (-37 %) and Singapore (-39 %) have sharply fallen even as the commodities' tide turned.

India's appeal to foreign investors becomes clearer when we put the performance of the other BRIC nations such as Brazil, Russia and China in perspective . From July, Russian markets have shed 65% of their values while China (-40 %) and commodity-centric Brazil (- 38%) has also been hard-hit .

Crude and other commodities raced towards their peaks in the first half of 2008 which indirectly resulted in stock prices tumbling as inputs became costlier. Corporate growth was said to be affected which led to investors dumping shares of companies in c o n s u m p t i o n - d r ive n economies like India, since demand-led earnings was likely to be lower in a scenario of higher prices. The decline in commodity or energy prices seen as a positive for the Indian economy, has also aided in putting brakes to the slide in share prices of Indian firms.

"India imports about 85% of its oil requirements and hence, the drop in prices augurs well for the trade and current account deficits. On the other hand, we are one of the few economies driven by domestic consumption and investment , unlike other regional economies which are dependent on exports. This makes us relatively insulated to global slowdown," Sukumar Rajah, chief investment officer (Equity) of Franklin Templeton Investments India said.

While the increased risk premium globally has resulted in more safe haven buying and flows out of emerging markets, the Indian stock market's relative outperformance could be perceived as better-placed than its peers. Fund-tracker EPFR has said that equity funds in emerging markets have lost around a tenth of their value as fears of a global recession have hardened, despite commodity prices falling like nine pins.

Helped by the fall in commodity prices, inflation is easing . And earnings reported by Indian companies have not been as bad as feared. "There are also more positive than negative surprises (41+ve, 30-ve , and 17 in-line ), though our analysts continue to wield their hatchets on earnings (40 downgrades, 11 upgrades - yes, still happening)," Citigroup Global market analyst said.

Source: EconomicTimes

Over half of 1,600 stocks trading below book value

The stock market crash is defying all conventional wisdom of valuations. Despite the relief rally over last few days, a large no of companies are

Companies trading below book value.
still trading below their book value which means their market capitalisation is less than their net worth.

Put simply, if you could buy these companies at their existing share price and sell their assets in the open market, you could rake in some neat profit. As per an ETIG analysis of actively traded stocks more than half of the companies are trading at prices which are less than their book value.

The study looked at 1,600 actively traded stocks with market cap of more than Rs 20 crore, to focus on firms with a reasonable size. The analysis shows that as many as 873 stocks, or 55%, closed below their book value, as on Monday November 3, 2008. Out of this, 345 companies are trading at less than 50% of their book value.

The list includes stocks such as Tata Steel, Cairn, Hindustan Zinc, Hindalco, MTNL, Videocon Industries, Central Bank of India and Allahabad Bank, in the Rs 1,000 crore plus market-cap range. Among the relatively smaller firms who had lower price compared to their book value were Raymond, Parsvnath, Bajaj Hindusthan, Vardhman Textiles , and Bajaj Auto Finance.

This essentially means that, hypothetically , if you buy the complete equity of these stocks and sell the assets in the market, the realisation would be significantly higher than the price paid to buy the shares. However, this is still a conjectural scenario, as such buy-outs would have to follow the norms of a takeover which requires an open offer based on recent historical prices. Further, only a part of the shares are actually traded and it is not possible to buy the complete holding from the market.

Among the sectors, construction and textiles are the worst hit. Out of 100 companies with more than Rs 20 crore market-cap in the construction sector, 54 are trading below their book value. Similarly, for textiles, 75 out of 96 companies are trading below their book value. Besides construction and textiles, metals had 94 such companies whereas non financial services sector account for about 150 companies trading below their book value.

One interesting trend visible in the data is that there more small and mid cap firms which are trading below their book value and as the marketcap increases, the number of such companies decreases. For instance, three out of every four companies with market cap less than Rs 100 crore are trading below their book value while among the companies with market cap of Rs 1,000-10 ,000 crore bracket, one in five companies have such a low price.

These companies have combined market-cap equal to only 64% of their total net worth. If we exclude companies with marketcap of more than Rs 1,000 crore, which have slightly better pricebook value ratio, combined market-cap falls further to just 54% of their total net worth. So if you have cash worth Rs 110,000 crore, you can acquire companies with total book value of Rs 205,000 crore.

Source: EconomicTimes

US FIIs to route investment if Obama hikes tax rate

US stocks may have lost their sheen with Indian investors after the global financial crisis. But Indian investors who pick up st

ocks of US companies when the market revives have nothing to fear, if president elect Barack Obama goes ahead with his plan to hike capital gains tax in the US.

The proposed move will make no difference to these investors. US residents including FIIs and expats will, however, have a higher tax burden if they earn profits from selling shares of US companies. The tax outgo will be more even on profits made from sale of shares listed on the Indian bourses and other exchanges as well.

Currently, individuals and corporations in the US pay a 15% tax on long term capital gains when they sell assets, including shares after holding them for more than a year. Short term capital gains, on assets held for less than a year, are taxed at a higher rate, depending on tax bracket of the investor.

The preferential tax rate on long term capital gains was meant to make investments in shares and other capital assets attractive for investors. In the run-up to the presidential elections, Obama had signalled his intention to create a new “top up capital gains rate of 20%”. Some reports, however, say the capital gains tax rate could be hiked to 28%.

According to a senior Indian revenue department official, US based FIIs may find it more attractive to route their investments from tax havens such as Cyprus or Cayman Islands if the capital gains tax is hiked.

“It is the prerogative of every country to use tax as a tool to gear its economy. Today, investors have many options. At a time when most of the Asian countries are reducing their tax rates, a higher tax rate in the home country would compel the taxable investors in the US to look for tax deferral structures overseas, said Shefali Goradia, partner BMR Advisors.

A hike in capital gains tax, irrespective of the quantum, will not impact Indian investors offloading US stocks when the market revives, says Sudhir Kapadia, partner, Ernst and Young. This is because US does not tax non-residents on capital gains accruing from sale of US stocks. Indians can invest up to $2 lakh a year in assets overseas.

The US, on the other hand, levies a tax on the worldwide income of its residents no matter where they stay. A hike in the capital gains tax rate may hence trigger FIIs to route their investments from tax havens or low tax jurisdictions. US-based FIIs investing in shares listed on Indian bourses are exempt from paying long term capital gains tax. But they have to pay a short term capital gains of 15%.

US investors, in turn, can get a tax credit in the US under the Indo US Double Taxation Treaty. If the investor earns, say $100 as long-term capital gains, he would end up having $85 after paying tax in the US.

His capital gains are being taxed at 15% in the US now. But if US hikes capital gains tax rate, the investor would have to pay a higher tax on his global income. In effect, tax burden would rise for the ultimate investor in the US.

Source: EconomicTimes

Goldman begins to cut 3,200 jobs globally

Goldman Sachs Group Inc has begun notifying about 3,200 employees globally that they have lost their jobs, as the world's biggest invest

ment bank slashes expenses to ride out the financial crisis, a person familiar with the situation said Wednesday.

The job cuts, which were first reported last month, are a reflection of the ongoing downturn in the credit and lending markets that triggered massive losses for banks around the world. Goldman Sachs had been considered the strongest investment bank on Wall Street, and earlier this year had expected its payrolls to expand.

Positions will be cut across Goldman's offices globally and among various business lines, and will bring the company's staffing to 2006 and 2007 levels, the person said. He spoke on condition of anonymity because the company hasn't publicly disclosed details of the plan.

According to CapitalIQ, Goldman has more than 37,000 employees across its operations.

There also have been reports that Goldman's army of bankers might see their bonuses cut in half this year. Difficulties at the firm demonstrate that even the industry's most powerful player is not immune to fallout from the unprecedented financial turmoil.

On Monday, Merrill Lynch analyst Guy Moszkowski predicted that Goldman would report a loss for the fourth quarter, its first since going public in 1999. The stock market's plunge has created a brutal atmosphere for some of Goldman's once high-flying businesses, such as private equity and proprietary trading.

During its fiscal third quarter, which ended Aug 31, the company's profit fell 71 percent, but that performance was still better than many of its competitors, which have reported quarterly losses throughout much of the year.

But, September was considered one of the worst months during the credit crisis as banks essentially stopped lending money to each other for fear loans would not be repaid. Problems intensified when Lehman filed for bankruptcy and the government loaned insurer American International Group Inc $85 billion to help it remain in business.

"The short-term outlook for the company is poor,'' said Richard X Bove, an analyst with Ladenburg Thalmann. ``I have had a 'Sell' recommendation on this stock most of the past few years. The reason is that the market did not seem to understand the risks in this company. Those risks are now being made clear.''

Last month, as Merrill Lynch & Co hastily sold itself to Bank of America Corp, Goldman and fellow independent investment bank Morgan Stanley received approval to become bank holding companies. Former rival Bear Stearns was snapped up at a steep discount by JPMorgan Chase & Co in March.

Goldman and Morgan Stanley made the change to bank holding companies as investors worried the stand-alone investment bank model may no longer be viable. The new status allows Goldman to grow a large deposit base to help fund its operations, while providing permanent access to borrow money from the Federal Reserve. Before changing its status, Goldman only had temporary access to that lending option.

But it also opens Goldman up to increased regulatory scrutiny, which could force it to scale back some of its more leveraged and aggressive business units.

Goldman also struck a deal with billionaire investor Warren Buffett to sell preferred and common stock to Buffett's Berkshire Hathaway Inc. As part of the deal, Buffett planned to invest at least $5 billion in fresh capital to help Goldman and could double that investment to $10 billion. At the same time, Goldman issued common stock to raise an additional $5 billion through a public offering.

Shares of Goldman fell $7.57, or 7.8 percent, to close earlier at $87.43. A year ago, the stock traded at a 52-week high of $240.05.

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.