India has little room for China-style stimulus

NEW DELHI (Reuters) - India has little scope for a big bang fiscal stimulus package like China's $586 billion plan and will hope instead populist spending plans outlined earlier this year can help it ride out the global financial storm.

India's federal and state fiscal deficit is likely to top 7 percent of gross domestic product, one of the highest in the world, and the federal deficit is already projected to blow its 2.5 percent target, leaving the emerging giant with little leeway to ramp up spending, analysts said.

What limits India's fiscal firepower is off-budget liabilities, such as the government bonds issued to refineries to keep down retail oil prices, which economists say feed into the broader deficit and total about 5 percent of GDP.

"With the fiscal deficit all set to expand beyond the budgeted target for 2008/09 there is hardly any room for further fiscal stimulus to pump prime the economy," said D.K. Joshi, principal economist at ratings agency Crisil.

India has been striving to achieve the sort of double-digit growth that has made China the world's fastest-growing major economy, drawing inevitable comparisons on the performance of the two as they exert increasing influence in world trade.

While India lacks fiscal ammunition, China approved a new government spending package on Sunday equivalent to about 15 percent of its GDP to ride out the financial crisis.

One of the few nations that can still afford fiscal pump-priming, China's move comes amid mounting evidence that the United States, Japan, the euro area and other developed nations are in recession, putting greater onus on Asia's emerging giants to be a source of growth.

Policy makers globally are looking at fiscal stimulus as the next step to help their economies through the crisis following a barrage of bank bailouts to keep the financial system afloat and more lately cuts in interest rates.

ALREADY SPENDING

After growing into a $1 trillion economy, India is feeling the effect of the global turmoil in its lending and property markets.

Industries, particularly car makers, are being pinched by a slowdown in demand, which was already underway because of a rise in interest rates earlier this year to calm inflationary pressures.

Policy makers are ratcheting down their expectations for growth and now say it is likely to slow to 7 percent in the fiscal year to March 2009 from 9 percent in the previous year. China's economy grew 11.9 percent last year.

The official target for India's federal government fiscal deficit in 2008/09 stands at 2.5 percent of GDP and the finance minister has already said the government will overshoot that goal due to spending to tide over the impact of the financial crisis.

Spending outlined in the February budget went up more than 6 percent to 7.51 trillion rupees ($158 billion) in a package criticised by many as populist ahead of national elections in 2009.

The government asked parliament for an additional $21.7 billion last month to fund a scheme to waive farm debts and subsidies on food and fertilisers.

Analysts said at the time the sum was above their expectations and would result in higher borrowing, putting pressure on government finances and the fiscal deficit.

For now, India is relying on these projects, which also include a national job guarantee plan and an urban renewal mission, to keep the economy ticking over.

"It is not a need at the moment. Just because China has done it does not mean we will have to do it," said Suresh Tendulkar, Chairman of the Prime Minister's Economic Advisory Council.

"We will look at it if we need and it is going to be a tightrope between the fiscal situation and the need for doing whatever is required to be done," he told Reuters.

HINDSIGHT

Prime Minister Manmohan Singh, who as finance minister in the early 1990s set in motion economic liberalisation, said recently spending on education, health and other programmes would stand India in good stead in difficult times.

"Our expenditure proposals were criticised at the time in some quarters, but I am happy to note that it is now widely acknowledged that increased public expenditure is an important part of the solution," Singh told lawmakers.

But economists say India has a poor track record in ensuring projects get implemented, undermining their effectiveness as a source of economic stimulation, and nearly 35 percent of its spending still goes on subsidies and interest payments.

Corruption and bureaucracy are also obstacles to funds reaching their goal and projects starting or finishing on time, although the government has streamlined some of its approvals.

Source: Reuters

GM shares hit 62-year lows after broker downgrades

DETROIT (Reuters) - General Motors Corp shares tumbled as much as 31 percent to a 62-year low on Monday after analysts downgraded the automaker, citing cash levels that may fall below the minimum needed in the first quarter of 2009.

Analysts also warned that while government aid would decrease the risk of a bankruptcy for the No.1 U.S. automaker, any assistance would come at a significant cost to existing shareholders.

GM shares closed down $1 to $3.36 on the New York Stock Exchange, after falling to $3.02, its lowest level since 1946, earlier in the day.

Barclays cut GM to "underweight" from "equalweight" and lowered its price target for the stock to $1 from $4. It said GM is expected to end 2008 with $13.3 billion in cash and fall below its minimum the $11 billion to $14 billion in cash needs during the first quarter.

That would necessitate a government bailout, which is likely to "significantly dilute GM's equity," Barclays analyst Brian Johnson said in a research note.

Deutsche Bank cut GM to "sell" from "hold" and lowered its equity value to zero from $4, saying GM may not be able to fund its operations beyond December.

GM plans to trim production in North America through the first quarter of 2009 due to declining demand, idling as many as 5,500 hourly workers, GM said Monday in a filing with the U.S. Securities and Exchange Commission. It expects to record a charge of at least $300 million in the fourth quarter for the capacity reductions.

On Friday, GM and Ford Motor Co reported deeper-than-expected quarterly losses and said their rate of cash burn had accelerated, as an extended slump in car sales raised questions about the future of the U.S. auto industry.

GM announced additional steps to increase its liquidity on Friday, but said that even with those moves, liquidity would be at or near the minimum needed to operate its business through the rest of 2008 and would fall significantly short of the minimum needed during the first two quarters of next year.

Source: Reuters

Ambuja Cements an outperformer: Karvy

Karvy Stock Broking has rated Ambuja Cements as an outperformer with a target of Rs 72 in its November 10, 2008 research report. "Net sales grew by 7.8% yoy to Rs 13.8 billion mainly on the back of realizations growth of 7.2% to Rs 3622/tones. Despite 36.5% increase in other income, RPAT has gone down by 15.8% to Rs 2.50 billion due to higher provision for depreciation."

"At the current market price of Rs 58, the company is trading at PER multiple of 7.9x and EV/EBIDTA multiple of 4.5x on CY09E earnings. We have valued the company discount to historical trough of multiple and rate the company as an outperformer with price target of Rs 72," says Karvy Stock Broking's research report.

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

Source: Moneycontrol

Brokers bullish on HDFC, India Cement, IVRCL Infra

UBS has maintained neutral rating on Tata Steel, with price target Rs 300

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

India Infoline has kept buy rating on HDFC, with price target Rs 2012

India Infoline has kept reduce rating on Ultratech Cement, with price target Rs 404

Karvy has kept buy rating on India Cement, with price target Rs 115

I-Sec has kept buy rating on IVRCL Infra, with price target Rs 316

HSBC has downgraded Pantaloon Retail to neutral rating, with price target Rs 254

HSBC has downgraded Dabur to neutral rating, with price target Rs 94.5

Citi has upgrades Sun TV to buy rating, with price target Rs 185

B&K Sec has initiated coverage on GMDC with underperformer rating, with price target Rs 49

Source: Moneycontrol

Buy Aban Offshore, target of Rs 1295: Asit C. Mehta

Asit C. Mehta has maintained its buy rating on Aban Offshore with a target price of Rs 1295 in its November 7, 2008 research report. "During Q2 FY09, Aban Offshore Ltd. (AOL) witnessed strong revenue growth of 73% from Rs 4761.2 million in Q2 FY08 to Rs 8242.6 million in Q2 FY09. Considering the downward revision in estimates and outlook, we are lowering our P/E multiple from 6x to 3.5x. At current market price valuations looks attractive, we maintain Buy on “Aban Offshore Ltd.” for a target price of Rs 1295, which is equivalent to a forward P/E multiple of 3.5x to AOL’s FY10E EPS of Rs 370.2," says Asit C. Mehta's research report.

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

Source: Moneycontrol

Buy Mahindra & Mahindra, target of Rs 461: Angel

Angel Broking has maintained its buy rating on Mahindra and Mahindra with a target of Rs 461 in its October 29, 2008 research report. "For 2QFY2009, Mahindra and Mahindra (M&M) clocked Net Sales (after Octroi refund) of Rs 3,111 crore. Net Profit post factoring in Exchange loss and Exceptional items to the tune Rs 51.4 crore stood at Rs 175.4 crore, a decline 38.6% yoy. High Interest rates and reduced financing by banks and NBFCs continues to hurt the domestic Auto business. We believe financing is a major area of concern and will likely hurt demand."

"We believe that M&M’s Non-Automotive subsidiaries like Tech Mahindra, Mahindra Financial Services (MMFSL) and Mahindra Gesco may get impacted more and are at high risk. Sharp correction in the stock price makes stock attractive at current levels. Our SOTP Target Price for M&M works out to Rs 425 wherein its core business fetches Rs 276 and value of investments works out to Rs 185. We maintain a Buy on the stock, with a Revised Target Price of Rs 461 (Rs 660)," says Angel Broking's research report.

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

Source: Moneycontrol

Buy HUL, target of Rs 276: KRChoksey

KRChoksey Research has recommended a buy rating on Hindustan Unilever with a target of Rs 276 in its October 24, 2008 research report. "Net sales of the company grew by 19.7% y-o-y to Rs 4027.9 crore driven by 22.5% growth in FMCG –HPC business, 17.5% growth in FMCG – Foods business and underlying volume growth of 7%. We recommend a ‘BUY’ on this stock with target price of Rs 276, which represents an upside potential of 22%," says KRChoksey's research report.

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

Source: Moneycontrol

Buy Ranbaxy Labs, target of Rs 316: Angel

Angel Broking has maintained its buy rating on Ranbaxy Laboratories with a target of Rs 316 in its October 31, 2008 research report. "For the quarter, the company posted Net Sales of Rs 1,882 crore, registering a yoy growth of 14.7%. At current valuations, the stock trades at 15.6x CY2008E and 10.0x CY2009E earnings, a deep discount to its historical valuations."

"While the stock would remain lackluster in the near term, we believe that at current valuations, the stock discounts the concerns fairly well. Thus, we maintain our BUY recommendation on the stock with an 18-month revised SOTP Target Price of Rs 316 (Rs 410), wherein the core business is being valued at a P/Ex of 16x CY2009E core earnings (multiple lowered on back of lower visibility on the US business) giving it a fair value of Rs 218, Rs 24 for the non-core income and Rs 75 has been ascribed to NPV of the FTF opportunities available to the company," says Angel Broking's research report.

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

Source: Moneycontrol

Buy Bartronics India, target of Rs 155.5: Nirmal Bang

Nirmal Bang has maintained its buy rating on Bartronics India with a revised target price of Rs 155.5 in its November 6, 2008. "Sales witnessed strong growth of 136.9% y-o-y to Rs 160.7 crore in 2Q 09. At current levels the stock looks undervalued and holds strong potential for upside. We reiterate BUY rating on BIL. However, we are revising our target price to Rs 155.5 to factor in the slowdown of the economy in general and anticipated slowdown in the company’s US business," says Nirmal Bang's research report.

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

Source: Moneycontrol

Buy Bharti Airtel with target of Rs 1025: Emkay

Emkay Global Financial Services has maintained its buy rating on Bharti Airtel with price target of Rs 1025 in its November 3, 2008 research report. "Its Q2FY09 results were slightly below our estimates primarily due to higher than expected fall in the mobile ARPU (Q2FY09 ARPU came was at Rs 331 v/s our estimate of Rs 341). The net sales for the quarter grew by 6.3% QoQ to Rs 90.2 billion v/s our estimate of Rs 91.4 billion. Post Q2FY09 results we have reduced our ARPU estimates by 3.2% each and once again increased the subscriber estimates by 3% and 3.6% for FY09E and FY10E respectively. We maintain buy rating with revised price target of Rs 1025 (from Rs1168 earlier) based on DCF value of core business at Rs 906 per share and value of tower business at Rs 119 per share," says Emkay Global Financial Services' research report.

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

Source: Moneycontrol

Buy Corporation Bank; target Rs 310: Angel

Angel Broking has recommended a buy rating on Corporation Bank, with price target of Rs 310, in its report dated October 31, 2008. "We are positive on Corporation Bank due to its efficient operations reflected in low Operating expenses, as a % to average Assets, superior Asset quality and proactive investments in modern distribution and payment systems (relative to peers). However, the Bank’s relatively small size and scope of operations as well as urban focus that subjects it to greater competition from private banks, temper the growth outlook on the key competitive parameters of CASA and Fee Income."

"Further, on account of reduced sustainable RoAs due to the substantial NIM compression, anticipated continuation of Margin pressures and moderate growth outlook on NII and Fee Income front, we reduce our Target P/ABV multiple from 0.9x to 0.8x. Nonetheless, at the CMP, the stock is trading at attractive valuations of 3.0x FY2010E EPS of Rs 64.7 and 0.5x FY2010E Adjusted Book Value (ABV) of Rs 387.3. Hence, we maintain a Buy on the stock, with a revised Target Price of Rs 310 (Rs 337)," says Angel Broking's research report.

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

Source: Moneycontrol

Buy Divi's Labs; target Rs 1500: Motilal Oswal

Motilal Oswal has recommended a buy rating on Divis Laboratories, with price target of Rs 1500, in its report dated October 31, 2008. "We expects the company to deliver consistent RoCE of over 40% for the next two years. We expect pharmaceutical outsourcing to gain traction in coming years, with the top-5 players likely to gain a disproportionate share of the CRAMS business initially. We expect Divi’s to be one of the key beneficiaries of increased pharmaceutical outsourcing from India. The company’s existing relationships with innovator companies should help it to procure more MNC contracts. Based on our revised estimates, we expect 35% earnings CAGR for the FY08-10 period led by increased traction in the CRAMS business. Divi’s is currently valued at 14.4x FY09E and 11.1x FY10E core earnings. We reiterate Buy with a price target of Rs 1,500 (15x FY10E earnings) an upside of 37%," says Motilal Oswal's report.

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

Source: Moneycontrol

Buy Maharashtra Seamless, target of Rs 500: PINC

PINC Research has maintained its buy rating on Maharashtra Seamless with a target of Rs 500 in its October 27, 2008 research report. "Maharashtra Seamless Ltd. (MSL) reported revenues of Rs 6 billion for Q2FY09 (+56% YoY). This was driven by buoyant realisations of pipes, which spiked on account of jump in raw material prices. MSL’s strategy of focussing on sizeable and lucrative orders holds the promise of revenue growth and improved profitability in the near term."

"Given the robust demand scenario for seamless pipes over the next 3-4 years, MSL is poised to sharply improve its performance. However, volatile steel prices could dampen demand and curb profitability. Mindful of its cash hoard and high sensitivity to raw material prices, we maintain our ‘BUY’ recommendation but reduce our 18-month price target from Rs 520 to Rs 500," says PINC's research report.

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

Source: Moneycontrol

Buy Cranes Software; target Rs 106: Angel Broking

Angel Broking has maintained its buy rating on Cranes Software International, with price target of Rs 106, in its report dated October 31, 2008. "Going forward, we expect Cranes Software to clock a CAGR of 30.1% in Top-line and 24.2% in Bottom-line over FY2008-10E. This would be achieved even as we expect the company’s EBITDA Margins to remain under pressure. At the CMP, the stock is trading at 6.8x FY2010E EPS. We expect Cranes to continue to record strong growth on the back of new product launches, the tapping of newer verticals, expansion of the addressable market size, further possible acquisitions and future non-linear growth through commercialisation of investments in proprietary technologies such as Micro Electro-Mechanical Systems (MEMS). We maintain a Buy on the stock, with a revised Target Price of Rs 106 (Rs 154), implying a P/E of 8x FY2010E EPS," says Angel Broking's research report.

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

Source: Moneycontrol

Buy Sterlite Industries; target Rs 455: KRChoksey

KRChoksey Research has recommended a buy rating on Sterlite Industries, with price target of Rs 455, in its report dated October 24, 2008. "At the CMP of Rs 208,65, Sterlite is trading at 3x based on TTM EPS of Rs 67.5. We expect Sterlite to continue to be impacted by lower EBITDA margins due to fall in base metal prices. However, the highly integrated business models in all the commodities and huge cash balances (Standalone cash level : Rs 7800 crore). Hindustan zinc is completely debt free company with Rs 9395 crore cash which translates to Rs 220 per share. We recommend a BUY on the Stock with a target price of Rs 455 which is an upside potential of 118% from the CMP," says KRChoksey's research report.

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

Source: Moneycontrol

ICICI Home Finance offers 11.15% on fixed deposits

Mobilising deposits

Offer on for fixed deposits of 15, 20 and 30 months

For senior citizens the interest rate is higher at 11.5 per cent

ICICI Home Finance, the housing finance arm of the largest private sector bank in the country, on Monday announced a fixed deposit scheme offering 11.15 per cent interest a year, probably the highest deposit rate being offered by a housing finance company.

The new rate, introduced for a limited period, will be for fixed deposits of 15, 20 and 30 months.

HDFC, the country’s largest housing finance company, offers 10.9 per cent for deposits above Rs 1 lakh and 11 per cent for deposits above Rs 10 lakh for 15, 20 and 30-month tenor, under its premium deposit-annual income plan, according to its Web site.

The highest rate being offered by LIC Housing Finance, the other major housing finance company, is 9.50 per cent on its 3-year and 5-year term deposits.

This special offer will be valid up to November 30, said a company spokesperson. For senior citizens, the interest rate is higher at 11.5 per cent, a press release issued by the bank said.

The new scheme can be seen as an aggressive move by ICICI group to mobilise deposits to fund its loan book, said an analyst.

The higher deposit rate comes at a time when banks are under pressure to cut deposit rates to preserve their margins. Leading public sector banks have announced that they will cut deposit rates, after the Reserve Bank of India cut CRR and repo rates on November 1.

Following the RBI signalling a lower interest rate regime, several public sector banks have cut their lending rates, while private sector banks are adopting a wait and watch approach. Ms Chanda Kochhar, Joint Managing Director, ICICI Bank, had recently said that as the cost of deposits has not yet declined, the bank will watch the market situation and take a call later on reducing its lending rate.

Source: TheHinduBusinessLine

Trading terminals of 124 brokers disabled in October

Deactivation signifies lack of liquidity, say brokers.

The number of broker-member terminals deactivated by the NSE in October was more than double the deactivations in the previous month.

The stock market meltdown in October, coupled with liquidity pressures, has led to defaults in margin payments on the part of brokers, said market-men.

The trading terminals of 95 broker-members were deactivated in October in the futures and options segment and 29 deactivations occurred in the cash segment, a sharp increase from a month ago. In September, the terminals of 36 broker members were deactivated, whereas in August it was only 11.

There were 885 active trading members in the F&O segment and 984 in the cash segment on NSE in October.

Trading terminals are usually deactivated when the trading members of the exchanges are unable to meet their margin requirements.

In the case of the cash market segment, terminals of seven broker members were deactivated in September. This quadrupled in October to 28.

If there is a shortfall in margin payments, terminals are deactivated, said a member-broker at NSE.

Deactivation signifies lack of liquidity, he added.

While there are many kinds of margins that a broker is required to pay, under the mark-to-market payment the brokers have to pay additional margin depending on the fall in the market, said analysts.

The markets were extremely volatile in October, and for some brokers it was difficult to pay up the margin requirements as the market fell very steeply, said an analyst.

Sensex fell by more than 23 per cent in October, while the Nifty fell by more than 26 per cent during the same period.

When the pay-in and pay-out has not happened appropriately and the margins are insufficient to take care of the mark-to-market losses, the exchanges deactivate the trading terminals of those broker-members, said an official with a city based broking firm.

Basically, deactivations happen in the case of a mismatch between the pay-ins and pay-outs, according to brokers.

In the case of the cash market, the deactivations could be as a result of brokers not meeting their pay-in obligations fully, said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Market.

In other cases, some clients (of the brokers) might have highly leveraged positions, and in case of a failure on their part to pay the required margins, the brokers have to pay those margins, said a broker.

This constitutes improper risk management, he said.

With so many terminals shut in October, the F&O activity seems to have dropped if the figures of the total F&O turnover on the NSE are anything to go by, said market men.

The total F&O turnover, which was Rs 11,97,872 crore in September, fell by more than 21 per cent to Rs 9,41,646 crore in October.

In January’s market crash, terminals of 372 members of the 821 in the futures and options segment were deactivated for at least a day that month.

Source: TheHinduBusinessLine

‘We’ve spooked ourselves into thinking there is a slowdown’

Most of today’s problems in India have come as a result of sudden disappearance of liquidity; it is not that the demand has gone down.

For example, in the automobile sector, the main problem is non-availability of retail credit. Finance companies have virtually stopped auto and consumer loans. Even if the credit is available through some sources, it would come at a high cost. This has affected sales of auto manufacturers.

Normally, when a consumer sector like automobiles faces a slow down in offtake, it will also affect their input suppliers. Automobile manufacturers buy less steel and other raw materials. Demand for auto components will come down. This will have a cascading effect.

Today everyone talks about lack of liquidity; this in turn creates a lack of confidence. This lack of confidence has further aggravated the problem of liquidity.

Restore confidence


What has happened is that we have spooked ourselves into thinking that there is a slowdown. Look at any newspaper, any magazine or any TV channel; everyone is talking about the problem. Actually, we have no problem (as far as demand is concerned)…the problem is in other countries.

The problem here is lack of confidence. When everybody is talking about the problem, we tend to believe that there is a problem and act accordingly. According to me, this is a psychological thing. We have to first restore the confidence to stop this panic.

Demand depends on consumer aspirations. Latent demand has always been there in this country. The fundamentals of our economy are still in good shape. We have a very cost-competitive manufacturing system.

Yes, the level of consumer spending has come down. And this has affected demand.

To improve this, the cost of money should be brought down. Last four years, we had enjoyed unprecedented growth. One of the main contributing factors of this was the low cost of money. When the cost of money is lower, companies take up new projects. The very same projects would become unviable, when the cost of money goes up.

Improve liquidity levels


So what needs to be done is to make available enough liquidity at lower cost.

The RBI has done some very good thing. Last two-three week they have pumped in lot of money into the banking system. But, simultaneously an equal amount of money has gone out of the system. FIIs have taken out a large sum out of the country. Foreign exchange reserves have come down by more than $40 billion.

What the RBI has now done is to enable banks to have more elbow room. But the actual liquidity levels have not improved. And the cost of fund is still high.

Until a month ago, the RBI has been jacking up the rates to control inflation. The cost of money increased. And the inflation is still high. It is very important that the inflation should be brought down. Prices should not be allowed to go up, that will hurt the poor people.

Depreciating rupee


The monetary tool alone should not be used to tame inflation. Inflation should be controlled by increasing the supply of goods. Until a month ago, the RBI was trying to cut the money supply to control inflation.

Another major problem is the depreciating rupee. Our imports far exceed our exports. One may argue that a weaker rupee will help boost our exports. But our exports are a fraction of our imports. The deteriorating rupee, therefore, can create more internal problems than helping exports.

So steps need to be taken to improve liquidity, reduce cost of money, strengthen the rupee and restore confidence. Of these four factors, the most important is the last: restoring confidence. We are facing a serious crisis of confidence. We need to resolve this.

If steps are taken to address these issues, which are interrelated, the impact of the problem we are facing now, thanks to global factors, could be minimised.

Source: TheHinduBusinessLine

Hindustan Construction (Rs 58.8): Buy

Investors can buy Hindustan Construction Company at current levels with a short-term perspective. The stock bottomed at Rs 30.1 on October 27 after a protracted down trend. It had rebounded from this support in January 2005 too. Weekly candlestick chart patterns imply that a medium-term trough could have been formed at the recent trough at Rs 30.

Ten-day rate of change oscillator has moved firmly into the positive zone and the moving average convergence divergence oscillator too is signalling a buy. The implication is that the current up trend can sustain to take the stock higher. Our short-term target for the stock is Rs 68. Investors with a short-term horizon can purchase the stock with a stop at Rs 55.

Source: TheHinduBusinessLine

Inflation in Pakistan jumps to 25%; close to 30-year high

Petrol prices in Pakistan were cut by 6% on 1 November, the seventh change in eight months, after a decline in crude oil prices in the international market

Pakistan’s inflation accelerated to near a three decade high in October, placing further strains on a nation that the International Monetary Fund (IMF) says needs $10 billion (Rs47,300 crore) to avoid defaulting on its debt.

Consumer prices in the country soared 25% from a year earlier after gaining 23.9% in September, the Federal Bureau of Statistics said in Islamabad on Monday. Pakistan may have to raise interest rates to receive a bailout, if IMF insists on the same conditions it applied to loans for Iceland and Ukraine. Higher borrowing costs may not bring inflation down soon as other conditions attached to an IMF loan would likely include higher energy prices, economists said.

“The time when inflation actually starts to recede may be pushed forward further,” said Khalid Iqbal Siddiqui, head of research at InvestCapital Securities in Karachi. “Even though fuel prices are currently on the way down, there are other utilities whose prices are likely to be raised by the government, as per an agreement with the IMF.”

State Bank of Pakistan governor Shamshad Akhtar is struggling to bring inflation under control amid a blowout in the nation’s balance of payments and a 31% drop in the rupee this year, which has driven up import costs. The domestic currency reached a record low of 83.55 per dollar on 17 October.

The nation’s foreign exchange reserves have also shrunk to $3.71 billion on 25 October from $14.2 billion a year ago, raising concern that Pakistan will not be able to pay its $3 billion debt servicing costs due in the coming year.
Petrol prices in Pakistan were cut by 6% on 1 November, the seventh change in eight months, after a decline in crude oil prices in the international market.
Pakistan is expected to make a formal request for assistance to IMF this week, Business Recorder newspaper reported on Monday, without elaborating on where it obtained the information.

Conditions attached to an IMF loan would include an increase in the central bank’s benchmark interest rate to 15% from 13%, as well as a 31% rise in tariffs on electricity and other utilities, the newspaper reported.

Pakistan is also seeking funds from lenders such as the World Bank and the Asian Development Bank and donor countries included in the “Friends of Pakistan” group to help stabilize its economy. A meeting of the group, which includes the US, the UK, China and Saudi Arabia, is scheduled for this month in the United Arab Emirates.
The country’s credit rating was lowered by Standard and Poor’s (S&P) and Moody’s Investors Service in October on concern the nation won’t be able to pay its overseas debt because of eroding foreign reserves. The country ended its last IMF programme in 2004.

“Pakistan faces severe pressure from the external side, the fiscal side, the monetary side, economic growth and politics,” Elena Okorotchenko, head of Asian sovereign ratings at S&P, said in a 5 November interview in Singapore. “There are five angles in which we analyse a country’s ratings and Pakistan is negative on all counts.”

Meanwhile, data posted on the website of the Federal Bureau of Statistics showed the country’s trade deficit narrowed by 2.9% in October as exports rose faster than imports. The trade gap fell to $1.9 billion in the fourth month of the fiscal year that started on 1 July, from $2 billion a year ago.

Overseas sales climbed 10.2% to $1.52 billion, while imports surged 2.5% to $3.5 billion, according to the data.

The trade gap in the first four months ended 31 October widened 33.3% to $7.5 billion, from $5.6 billion a year ago.

Exports in the four months rose 16.6% to $6.7 billion and imports climbed 24.8% to $14.3 billion.

Source: Livemint

What next for US foreign policy?

The goals that the US could not attain by diplomatic means may be achieved by the falling price of oil

It now is highly likely that the US will face several quarters of negative growth to be followed by several years of low growth. Less and less are we hearing of V or U-shaped economic recoveries. The immediate future looks like an L: sharp contraction followed by not much in the way of a quick rebound.

Most of the current conversation is about the economic consequences of such a future, and what can and should be done domestically and internationally to soften the blows and speed recovery. But the world is not a series of silos. What happens in the economic realm will spill over into the political and strategic ones. Some of what results will add to the challenges confronting president Barack Obama.

Pressures to rein in federal spending are sure to grow. There is little that is easy to cut, given the need to meet entitlement obligations, pay interest on the $10 trillion debt and bail out states and cities unable to balance their budgets. What’s more, there is an emerging consensus on the need for yet another stimulus package.
Down the road, ballooning deficits will bring inflation and cause problems for the dollar. It is highly likely then that Congress will want to cut the defence and foreign aid budgets simply because there are so few other targets available to reduce federal spending. This will limit the availability of tools central to asserting US power and influence abroad.

There will be other policy consequences of recession. It will be more difficult to negotiate climate change issues as countries such as China and India will resist anything that could be an impediment to growth. High unemployment will make it tougher to build a majority at home for immigration reform.

The recession is sure to strengthen protectionism. This is a big setback, as trade offers the ideal non-inflationary stimulus. It is also a boon to developing countries, and one way to link countries in a web of dependencies that restrains nationalist impulses.

The combination of recession and no global trade accord will reduce US imports, in turn slowing growth in the world, increasing poverty and straining political stability in many countries. Many countries are already suffering from slower growth, lower stock values, scarce credit and reduced exports.

One other adverse consequence merits mention. The appeal of free markets is much diminished. The ability of US officials to preach persuasively on the virtues of market reform is all but gone. The backlash against markets will almost certainly go too far, with adverse results for economic recovery and democracy around the world.
We are already seeing increased anti-Americanism, the result of perceptions that the global economic slowdown had its roots in the US mortgage market. What we can expect is heightened state intervention, protectionism and mercantilism as governments look to enter into arrangements that guarantee preferential outcomes.

Still, most clouds have silver linings, and this one is no exception. Recession has caused a major decline in the price of oil, to roughly $70 a barrel from about $140. This is bad news for Iran, Venezuela and Russia—the so-called axis of diesel.
The most encouraging consequence of this change involves Iran. Iran has been closing in on the ability to enrich uranium on a large scale. The last thing the new US administration wants is to choose between living with a nuclear Iran and attacking Iran so it does not reach that point. Either path promises to be extraordinarily costly.

Up to now, diplomacy has produced little. The question is whether this could change. The reason it might is economic pressure. Financial sanctions, relatively easy for the mullahs to shrug off when oil was $140 per barrel, have real effect now that oil is only half that price. Adding to the pressure is an Iranian budget that is based on oil fetching some $90-95 per barrel. Inflation, unemployment and deficits are rising as dollar reserves are falling.

All of this could well make the Iranians more open to diplomacy that would limit, or better yet, end their independent uranium enrichment effort in exchange for economic relief. It might even lead the Iranians to examine some of their expensive support for Hamas, Hezbollah and Shiite militias in Iraq.

The slowdown also may bring good news closer home. Venezuela under Hugo Chávez has been carrying out an imperial foreign policy, supporting governments such as Cuba’s, Bolivia’s and Nicaragua’s. Chávez has also been systematically subverting Venezuelan democracy. Given an inflation rate of 35%, mounting debt and declining financial reserves, the question is whether he will be able to keep his hold on power if the price of oil remains where it now is for several years.

Developments in Russia may constitute another silver lining. A Russia resentful over its loss of status and territory has become a resurgent power. Oil and gas have become a source of wealth and influence. But it is feeling the pain—not just of falling energy prices but of a plummeting stock market that has come down two-thirds from its high and was closed by authorities more than a dozen times. Many Russians see what has happened as the result of the world’s negative reaction to their actions in Georgia. This has the potential to make Russia’s leaders think twice before intervening in Ukraine on behalf of ethnic Russians living in the Crimea.
Falling energy prices have one other benefit: They reduce the burden to importers everywhere, from the US (by reducing some pressure on the dollar) to poor countries that did not have the good luck to find oil or gas in their territory.

It would be unfortunate, though, if the reduction in energy prices took the wind out of the sails of the effort to reduce US energy consumption. Current levels of use leave the US vulnerable to supply interruptions and price increases. The temporary respite provided by lower energy prices should not be squandered so that we continue policies that made us vulnerable in the first place.

This all raises a larger point. To say there will be a recession followed by years of depressed growth leaves vague the questions of how deep and how prolonged. Little is inevitable. The treasury and the Federal Reserve have demonstrated that the US is not Japan; policy innovation is part of US political culture. The new president and Congress will have the opportunity to shape the dimensions of the “L” and to both offset and exploit its strategic consequences. Let’s hope they use it wisely.

Source: Livemint

How bad is the slowdown?

It will be tough for investors and businessmen to commit money to buy shares or fund new projects till there is more clarity on the extent of the slowdown and how long it will last

The Indian economy seems headed for its slowest growth rate in five years. But what should worry investors and businessmen even more is the pace at which growth forecasts have been slashed in recent weeks.

It will be tough for investors and businessmen to commit money to buy shares or fund new projects till there is more clarity on the extent of the slowdown and how long it will last. Even the most inveterate risk takers now have reason to pause and wonder.

Their timidity is likely to further harm economic growth, as every deferred investment and every postponed project further pulls down effective demand.
There are few trustworthy clues right now on the extent of the damage. Economists and policymakers across the world have been caught on the wrong foot over the past few months, as the worldwide economic slowdown has been far worse than they expected.

India is no exception, as growth forecasts are revised downwards in a hurry. The script goes something like this: “The Indian economy will surely grow at more than 8% this year; no, make that less than 8%; uh, 7% actually.”

Chairman of the Prime Minister’s economic advisory council Suresh Tendulkar said last week that he expects the economy to expand by 7% this year. The economists who advise Manmohan Singh had earlier estimated in August that the rate of economic growth would be around 7.7%. The Reserve Bank of India had said at the end of October that the economy will grow at between 7.5% and 8% this year.

Next year could be even worse. The International Monetary Fund (IMF) dramatically cut its growth forecast for Indian economic growth during calendar year 2009. The multilateral lender had said at the end of September that the Indian economy would expand 6.9% in 2009; around five weeks later it has shaved 0.6 percentage points off that forecast. IMF now believes the economy will grow 6.3% in calendar 2009.

These are unusual times and economic growth may slip further in the quarters ahead. That is cause for worry rather than panic. Mint has been of the view that India can sustain a growth rate of around 8% in the long term, given India’s savings rate.

There will be years when we grow faster, and years when we grow slower than this sustainable rate. We see no reason even now to doubt the long-term India growth story.

Source: Livemint

Global losses from crisis to reach $1.4 trillion: Goldman

Worldwide losses from the credit crisis will total $1.4 trillion, of which only $800 billion have been realized so far, Goldman Sachs U.S. chief economist Jan Hatzis said on Monday.

This means further pain ahead for both the banking sector and the economy as a whole, Hatzius said, adding that further fiscal stimulus will be needed to prevent an even deeper downturn.

"This calls for a large amount of economic stimulus," Hatzius told a financial industry conference.

Source: EconomicTimes

ICICI Home Finance introduces special offer on fixed deposits

ICICI Home Finance has launched a special offer on fixed deposits with an interest rate at 11.15 per cent per annum, payable annually on 15,
20 and 30 months fixed deposits.

It is also offering additional benefit of 0.35 per cent for senior citizens, a press release issued here on Monday said.

ICICI Home Finance is a 100 per cent subsidiary of ICICI Bank.

"In the present market, fixed deposit is one of the most attractive and safest investment options for customers," the release said.

These deposits come with AAA and MAAA ratings from leading credit agencies CARE and ICRA, respectively. These are the highest credit quality ratings and hence offer highest safety to its customers, the release said.

Source: EconomicTimes

GDP to grow 5.7 pc in 09/10 - Mogan Stanley

Morgan Stanley said on Monday it had cut its forecast for India's economic growth in the fiscal year starting April to 5.7 per cent from 6.5
per cent due to high cost of capital, falling consumer loan growth and reduced demand.

Morgan Stanley expects agriculture and allied sectors, which contribute around 20 per cent to GDP, to expand 3.1 per cent in fiscal 2009/10. Industry, accounting for a quarter of GDP, will grow 4.4 per cent, while services are forecast to rise by 7.2 per cent.

It forecast a 7.0 per cent expansion in the year to March 31, 2009, below the central bank's forecast of 7.5-8.0 per cent.

"Tight lending standards are likely to restrict consumer loan growth and private consumption spending. In addition, weaker global growth will also reflect in the form of a slowdown in external demand," Morgan Stanley economists said in a client note.

Asia's third-largest economy grew an annual average of 8.8 per cent in the past five years and Morgan Stanley said the economy accelerated much faster than the potential growth rate in the period due to large capital inflows.

But in the past few months India has seen net capital outflows coinciding with tight liquidity conditions in the domestic banking system that led to a "disruptive spike in the cost of capital".

"Our approximate estimates based on FX reserves trend indicate that over the last five months, India has actually seen net capital outflows of $5-10 billion," it said.

The rupee has weakened sharply since August, and so far in 2008 it has depreciated nearly 17 per cent. To temper the pace of its fall, the central bank has been selling dollars, squeezing domestic liquidity and pushing up borrowing costs.

The rupee hit an all-time low of 50.29 per dollar last month but closed at 47.35/37 on Monday.

The central bank has aggressively cut interest rates and banks' cash and bond reserve requirements in recent weeks to ease tight cash conditions and boost growth.

The main short-term lending rate has been cut by 150 basis points to 7.5 per cent in 2008 and the cash reserve ratio, the proportion of deposits that banks must keep with the central bank, is now down 350 basis points at 5.5 per cent.

Even so, Morgan Stanley said, higher lending standards and pressure on the rupee due to a widening balance of payment would keep interest rates high.

"We do not expect the banking system to cut the effective borrowing costs for consumers and corporate sector until the credit demand decelerates sharply and/or capital inflows revive meaningfully," the report said.

Source: EconomicTimes

AIG gets $150 bn govt bailout; posts huge loss

The government restructured its bailout of American International Group Inc, raising the package to a record $150 billion with easier terms, after a smaller rescue plan failed to stabilize the ailing insurance giant.

The U.S. Federal Reserve and the Treasury Department announced the new plan on Monday as AIG reported a record $24.47 billion third-quarter loss, largely from writedowns of investments.

AIG, once the world's largest insurer by market value, nearly collapsed after being forced to post large amounts of collateral related to exposure to complex derivatives known as credit default swaps. Many of these securities were linked to the performance of residential mortgages, and lost value as the U.S. housing downturn mushroomed into a global credit crisis.

"We cannot continue to hemorrhage cash in the two areas of securities lending and credit default swaps," Chief Executive Edward Liddy said on a conference call. "We need to stop that and we need to stop it now."

Under the new rescue plan, the government will get a $40 billion equity stake in AIG, spend as much as $30 billion on securities underlying the insurer's credit default swaps, and spend up to $22.5 billion to buy residential mortgage securities.

It will also reduce a previously announced credit line to $60 billion from $85 billion, and lower interest rates on borrowings. AIG will also accept curbs on executive pay, including a freeze of bonuses for its top 70 executives.

"The restructured bailout should give AIG the flexibility to sell assets in an orderly manner for closer to their intrinsic values rather than fire-sale prices," CreditSights Inc analyst Rob Haines wrote. "Moreover, we believe that it will help to restore confidence in AIG's global franchise."

In morning trading, AIG shares were up 37 cents, or 17.5 percent, at $2.48 on the New York Stock Exchange. The cost of protecting AIG debt against default declined, indicating that investors see less risk.

ONE-TIME EVENT

The $40 billion equity infusion comes from the $700 billion financial industry bailout package adopted by the government last month.

That package, known as the Troubled Asset Relief Plan, was originally intended for banks. AIG is the first company other than a bank to get money from it. TARP was created after the government on September 16 announced the original $85 billion bailout package for AIG.

"Today's action was a one-off event," Neel Kashkari, the Treasury Department's interim assistant secretary for financial stability, said at a conference in New York. "It is not the start of a new program."

AIG will issue to the government preferred shares carrying a 10 percent dividend. The government said its equity stake in the insurer would still be about 80 percent, making it the biggest beneficiary of the revised bailout.

The $60 billion credit line will mature in five years, and replace an $85 billion line scheduled to mature in two years. This could reduce the potential that AIG would have to quickly sell assets at depressed prices to help repay the government.

In addition, the Fed also slashed the interest rate on the credit line by 5.5 percentage points, to 3 percentage points above three-month Libor (London Interbank Offered Rate).

Liddy said the new terms "create a durable capital structure" that will allow AIG to sell assets and assure that taxpayers are repaid in full with interest.

The revised plan depends on the government being able to convince holders of securities underlying AIG credit default swaps to sell them to the government, likely at a discount.

"The biggest questions attached to these new vehicles are who is going to take how big of a haircut, and when," said Donald Light, an analyst at Celent LLC in San Francisco.

Struggling automakers General Motors Corp, Ford Motor Co and Chrysler LLC have also requested tens of billions of dollars in Treasury aid.

BIG QUARTERLY LOSS

AIG's $24.47 billion quarterly loss equated to $9.05 per share, compared with a profit of $3.09 billion, or $1.19 a share, a year earlier.

Revenue fell to $898 million from $29.8 billion, reflecting the writedowns. AIG also had $1.39 billion of catastrophe losses, primarily from Hurricanes Gustav and Ike.

Credit default swaps had led AIG to $18 billion of losses in the nine months ended June 30.

The cost of protecting $10 million of AIG debt against default for five years fell on Monday to $1.9 million up front plus $500,000 annually, according to Markit Intraday. The upfront payment was $4.9 million on Friday.

Source: EconomicTimes

L&T gets monorail order worth Rs2,460 cr

Engineering company Larsen and Toubro (L&T) on Mondat said it has received an order worth Rs2,460 crore from the Mumbai Metropolitan Regional Development Authority for implementing monorail system in the city.

The company has bagged the order along with Malaysian Scomi Engineering Bhd, L&T said in a filing to the Bombay Stock Exchange.

Monorail is a system where cars move on a single beam in an elevated corridor.
Scomi Engineering is monorail manufacturer, which offers urban transportation solutions by providing the latest monorail electro-mechanical systems and rolling stock, the filing said.

The project involves designing, construction, testing, installation and commissioning. The project is to be completed in a tight schedule of 30 months, it added.

Source: Livemint

Obama’s winning edge: a clear vision, execution and friends in right places

This column is not about why John McCain should have won. The election is over. And while we believe John McCain is a great American whose economic platform would have made better sense for business, especially in terms of free trade, tax policy and job creation, we look forward with hope to the presidency of Barack Obama. If his is an America for all people, as he has so passionately promised, then surely it will also serve the interests of the millions of hardworking small business owners and entrepreneurs who are so much a part of this country’s strength and future. But enough politics.

This column is about the lessons business leaders can learn from McCain’s loss and Obama’s win. Because even with the differences between running a campaign and running a company, three critical leadership principles overlap. And it was upon those principles that Obama’s decisive victory was built.

Start with the leadership principle that’s the granddaddy of them all: a clear, consistent vision. If you want to galvanize followers, you simply cannot keep changing your message. Nor can you confuse or scare people. McCain’s health care policy, for example, had a lot of merit. But his explanation of it was always confoundedly complex, and one of its provisions probably sounded downright scary to the 20 million people who thought they might lose their cherished employer-supported plans.

Meanwhile, Obama’s message was simple and aspirational. He talked about George Bush. He talked about change and hope, and health care for everyone. Over and over again, he painted a picture of America’s future that excited people into joining his cause. And so he set the perfect example of communication for business leaders: Stick to a limited number of points, repeat them relentlessly, and turn people onto your vision.
The next leadership principle should sound familiar: execution. In their seminal book by the same name, Larry Bossidy and Ram Charan made the case that execution isn’t the only thing a leader needs to get right, but without it, little else matters. This election proves their point.

In nearly two years of relentless blocking-and-tackling, Obama’s team made astonishingly few mistakes on the field. From the outset, his advisers were the best in class, and throughout the campaign his players were prepared, agile and where they needed to be. McCain’s team, hobbled by a less cohesive set of advisers and less money, just couldn’t compete with Obama’s well-oiled machine.

Another, and perhaps bigger, execution lesson from the election can be taken from Obama’s victory over Hillary Clinton in the primaries. Clinton thought she could win the old-fashioned way—by taking the big states of New York, Ohio, California and so on. Obama figured out a new and unexpected way—in the usually overlooked caucuses. The business analogue couldn’t be more apt. So often, companies think they’ve nailed execution by doing the same old “milk run” better and better. But true winning execution requires doing the old milk run perfectly AND finding new customers and opening new markets at the same time. You can’t just beat your competition by following the old rules; to grow, you have to invent a new game and beat them at it too.

Third and finally, this election teaches an important leadership lesson about the importance of having friends in high places. From the very beginning of the campaign, Obama appeared to have strong support from the media, which chose to downplay the controversies surrounding the candidate. Meanwhile, McCain took a regular beating. In the end, no one could argue that Obama’s media endorsement made a difference.

As a business leader, you cannot succeed without the endorsement of your board. Every time you try to usher in change, some people will resist. They may fight you openly in strategy meetings, through the media or with the subterfuge of internal palace intrigue. And you will need to make your case in all those venues. In the end, if your board has your back, it will make the difference between success and failure.

That’s why you need to start any leadership initiative with your high-level friends firmly by your side, convinced of the merits of your character and policies. But that’s not enough. If you want to keep your board as an ally, don’t surprise them. Think about McCain’s “gotcha” selection of Sarah Palin. Scrambling to catch up with the story, the media was not amused.

Surely pundits will scrutinize this election for years to come. But business leaders can learn its lessons right now. You may have winning ideas, but you need much more to win the game.

Source: Livemint

Lost Opportunity | How Apple got its strategy wrong

IPhone’s launch in India has been dubbed the biggest failure of a top-notch brand from a well regarded company in recent times. Two months after the dust over the launch and the subsequent wave of disappointment has settled, it’s time to take an objective look at what actually went wrong with iPhone in India, given that it has been a runaway success in most other markets it was launched in.

Unlike the initial argument that it was the steep price tag that queered the pitch for iPhone in India, many analysts, say there is more to the debacle than just the pricing. “Besides a very high price tag, one main reason behind iPhone’s failure in India is that there was a very weak link as far as consumer confidence was concerned,” says Anshul Gupta, senior research analyst, Gartner Inc., an information technology research and advisory firm.

Apple’s rivals in India, industry observers and analysts say that a flawed sales and distribution model and communication failure were the biggest reasons behind iPhone’s debacle. “A brand like Apple need not be told that an iconic product needs iconic advertising, a solid marketing push,” says Prathap Suthan, national creative director of advertising agency Cheil Communications India. “The company failed to strike a connect with Indian consumers. That, according to me, is their biggest failure and it may have repercussions for them in future as well. Whether they sold enough numbers or not is secondary.”

India not a priority market?

Selling huge numbers in India was not even Apple’s game plan, it seems. Around the time of its launch, the company had said it hoped to sell 10 million units globally by December, whereas in India, it would ship 100,000 phones by December 2009. Clearly, Apple wasn’t expecting big sales from the market.

Yet, what is surprising is that the company didn’t even manage to achieve this target. While Apple’s spokesperson in Singapore, Malini Mitra, refused to share any numbers, several people who track handset sales in the Indian market said the company had imported around 50,000 phones at the time of the launch but had only managed to sell around 11,000 units so far.

Analysts argue that by downplaying India, the world’s second largest and fastest growing telecom and handsets market, Apple may have missed not only a big opportunity to sell one of its blockbuster brands but also to lay the ground for its future products. “Around 120 million handsets are sold in India every year and, of these, almost 4% to 5% are smartphones. Nokia has around 60-70% share of this market,” says Gartner’s Gupta.

Source: Livemint

19 American banks go bust in ’08

Ravaged by the financial turmoil, the world’s largest economy, the US, has this year seen the failure of as many as 19 banks - exactly half the number of all publicly-listed banks in India.

According to the Federal Deposit Insurance Corporation, the US regulatory body, which is often appointed as the receiver for failed banks, the number of bank-failures in the past eight years has grown to 46 - which is more than the total of 38 banks listed on the Indian bourses.

Nearly half of the failures has been during the ongoing turmoil in the US financial market, with a total of 21 banks having failed since September last year and 19 since January this year, the FDIC data shows.

The current year has already seen the highest number of bank failures in the midst of the United States grappling with one of the worst economic crisis since the Great Depression of 1930s.

Prior to 2008, the highest number of bank collapses was recorded in 2002, when 11 such entities failed.

In India, there are a total of 38 banks listed on the stock exchange, which include 18 from the private sector and 20 from the public sector.

On Friday, Houston-based Franklin Bank SSB and Security Pacific Bank in Los Angeles became the latest bank failures in the US, forcing state authorities to take them under their control.

Since August 2008 as many as 12 banks have gone bust - a period when the current financial turbulence began to squeeze the economy.

They include Freedom Bank, Alpha Bank & Trust, Meridian Bank, Main Street Bank, Washington Mutual Bank, Ameribank, Silver State Bank, Integrity Bank, The Columbian Bank and Trust and First Priority Bank.

Before August this year, seven banks - First Heritage Bank, First National Bank of Nevada, IndyMac Bank, First Integrity Bank, ANB Financial, Hume Bank and Douglass National Bank - had collapsed.

Going by the FDIC data, there were no bank failures in 2005 and 2006. On the other hand, only two banks had failed in 2000, the lowest number in last eight years.
In 2007, just three banks failed in the country - Miami Valley Bank, NetBank and Metropolitan Savings Bank.

The fall of Washington Mutual, the country’s largest savings and loan entity, is one of the biggest bank failures this year. Better known as WaMu, its larger rival JPMorgan Chase agreed to acquire the entity in September.

JPMorgan bought deposits and branches of WaMu for about $1.9 billion, in a deal brokered by the Federal administration.

Going by the available data, Bank of Honolulu and National State Bank of Metropolis went bust in 2001.

Then next year, four banks collapsed - First Alliance Bank & Trust Company, The Malta National Bank, Superior Bank and Sinclair National Bank.
In 2003 and 2004, the number of banks which failed stood at seven. They are Southern Pacific Bank, The First National Bank of Blanchardville, Pulaski Savings Bank, Dollar Savings Bank, Guaranty National Bank of Tallahassee, Reliance Bank and Bank of Ephraim.

Source: Livemint

Reliance Infra buys back 16 lakh shares in less than 2 weeks

Reliance Infrastructure Ltd has bought back 16,00,000 equity shares of the company in less than two weeks, a statement said here.
The company, a part of the Anil Dhirubhai Ambani Group (ADAG), was earlier known as Reliance Energy Ltd.

Since the commencement of the buy back on 25 March, Reliance Infrastructure has so far bought back 72,60,000 equity shares aggregating Rs711 crore.
Shareholders of Reliance Infrastructure have approved buy back of equity shares of the company up to an aggregate amount of Rs2,000 crore, the release said.

Source: Livemint

Fresh hiring in IT to dip to 2 lakh: Nasscom

Fresh hiring in IT and ITeS industry is likely to slow down to 2 lakh this fiscal, while salary hike in the sector would be lower by 2.5% next year, IT industry body Nasscom said on Monday.

“This year, the new recruitments in IT sector are estimated to be two lakh this fiscal compared to 2.80 lakh people due to global recession,” Nasscom Chairman Ganesh Natarajan said.

However, he categorically said there would not be any job cuts at the industry level.
“There could be job cuts in one particular company. May be because its business model is not right or some other reasons, but overall the industry would not force any job cuts,” he asserted.

On being asked about what was the view of Nasscom on salary hike of employees for next year, he said “while considering the present conditions, the increments in salary packages would be 7.5% next year compared to 9% this year”.
“The growth in salary hike has come down from 13.5% last year to 9% this year and we hope it will further dip to 7.5% because the kind of recession we are going through as it is not cyclical rather a serious structural recession and it will stay for some time,“ Natarajan said.

IT industry in the country employs about 20 lakh persons directly.
However, Nasscom was of firm view that IT industry would continue to grow by 20 to 23% this year compared to 28% growth it attained last year. “We anticipate that we will be achieving $50 billion of IT exports and $13 billion of IT business from domestic market,” he said.

With several key markets such as USA showing sign of saturation, Nasscom asked industry to look for other markets for capitalising opportunities in diverse areas of mobile gaming, animation, utility services and new product developments.
“The industry should now look at East Europe, South Africa and Latin American countries where the growth opportunities are quite high,” he said.

Source: Livemint

TTML can touch Rs 21.50: Gujral

Technical Analyst, Ashwani Gujral is of the view that Tata Teleservices, TTML can touch Rs 21.50.

Gujral told CNBC-TV18, "TTML seem to be coming back; it got support around Rs 14-14.5 and probably could move to Rs 19 and then Rs 21.50. But people have to be clear that these are all trading plays and you get out when you get substantial profit."

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

Source: Moneycontrol

Bet on Reliance Infra: Vijay

Portfolio Manager, PN Vijay is of the view that one can bet on Reliance Infra.

Vijay told CNBC-TV18, "Nothing very fantastic in the mid-cap space because power is now just starting to get into people’s antennas. In the power utilities, I would rather go in for Reliance Infra, the old BSES, because I think the earnings visibility is very strong there and the EPC business appears to be becoming larger and larger share of the Reliance Infra cake. It has fallen so much just like all the other Reliance shares. So I would bet on a horse like that."

Disclosure: Analyst might have positions in the stocks/sectors discussed through their portfolio management accounts or through proprietary accounts.

Source: Moneycontrol

Suzlon Energy may slip to Rs 40-45: Gujral

Technical Analyst, Ashwani Gujral is of the opinion that in Suzlon Energy if Rs 60-63 gets broken then it gets back into Rs 40-45 regions.

Gujral told CNBC-TV18, "It’s very important for Suzlon to holds up Rs 60-63; if it can do that and consolidate here a bit then probably it can go up to Rs 81-90. But in case Rs 60-63 gets broken then it gets back into Rs 40-45 regions. In case the market continues, I think these beaten up stocks would move up a bit more. So it depends on how far the market is able to go."

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

Source: Moneycontrol

Buy NTPC with stoploss of Rs 130-135: Gujral

Technical Analyst, Ashwani Gujral is of the view that one can buy NTPC with stoploss of Rs 130-135.

Gujral told CNBC-TV18, "Reliance Infrastructure is showing a lot of bounce here, support is now around Rs 375. It’s forming sort of a bottoming out pattern where resistance could come in at Rs 500 probably then Rs 627."

He further added, "NTPC also has been very strong so anybody who wants to be in power can buy that with a stoploss around Rs 130-135 and its probably got room to about Rs 180-185 on the upside."

"There is a sharp bounce back in BHEL from lower levels and then some consolidation around Rs 1,400. So there you could move higher to about Rs 1,650. "

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

Source: Moneycontrol

Sell steel stocks on rally: Vijay

Portfolio Manager, PN Vijay is of the view that one should sell steel stocks on rallies.

Vijay told CNBC-TV18, "Steel is still very far out of the woods. It is still in a very weak global demand situation. The Chinese stimulus would help because its infrastructure spending that they have planned to do. However, conventional economic wisdom is that the commodity cycles take much longer to work themselves out because of the inertia in the system compared to financial and equity and exchange cycles. So steel is really sort of a sell on rally type of situation."

Disclosure: Analyst might have positions in the stocks/sectors discussed through their portfolio management accounts or through proprietary accounts.

Source: Moneycontrol

ONGC looks safest: Vijay

Portfolio Manager, PN Vijay is of the view that ONGC is looking best and the safest.

Vijay told CNBC-TV18, "ONGC seems the best and the safest. It did disappoint in the last quarter’s performance but their subsidy bill was so high and in a very strange way, ONGC was the single oil explorer-producer in the world showed flat earnings. Everybody else was dancing around with joy but it has gone down too much, it has got excellent value, it is way below its replacement cost and the risk in ONGC at this level is practically zero. So I would probably play safe and take a bit of ONGC which is also a very heavyweight in the index."

Disclosure: Analyst might have positions in the stocks/sectors discussed through their portfolio management accounts or through proprietary accounts.

Source: Moneycontrol

Buy Sesa Goa: Vijay

Portfolio Manager, PN Vijay is of the view that one can buy Sesa Goa.

Vijay told CNBC-TV18, "I would buy a metal ancillary like Sesa Goa because in this whole scenario one thing is clear that they are sitting on iron ore for which the global demand still exceeds supply. They have pricing pressures but on the other hand fixed rates are high percentage of their pricing and government seems to be wanting to be give stimulus for this through fiscal measures and P/E is unbelievably low.”

Disclosure: Analyst might have positions in the stocks/sectors discussed through their portfolio management accounts or through proprietary accounts.

Source: Moneycontrol

Sell Ashok Leyland above Rs 20: Bhambwani

Technical Analyst, Vijay Bhambwani is of the view that one can sell Ashok Leyland above Rs 20.

Bhambwani told CNBC-TV18, "Auto sector itself is down and you are likely to see a support at Rs 14 levels on Ashok Leyland. As long as it remains above Rs 14 the possibility of a slight upmove from here do remain a fair probability. On the upsides, the closer it approaches Rs 22-25 band the more significant will be the selling because of overrate supply. Investors who have trapped at higher levels will head for the exit route and that is what will cap the upmove. Anything above Rs 20 and I would suggest an exit from Ashok Leyland and investing into Tata Motors, which is relatively speaking a much better play. Even chartically it is showing a higher relative strength comparative vis-à-vis Ashok Leyland."

He further added, "One is better off whenever the markets start to move around in the upward direction in this sector in percentage terms where Ashok Leyland and Tata Motors on a relative comparative basis are concerned. So by all means hold on for now but beyond Rs 20 start thinking of an exit and switching to Tata Motors."

Source: Moneycontrol

Neyveli Lignite can test Rs 90: Gujral

Technical Analyst, Ashwani Gujral is of the view that above Rs 68 Neyveli Lignite Corporation can test Rs 90.

Gujral told CNBC-TV18, "Neyveli Lignite got support around Rs 56; if it can move above Rs 68 then levels of about Rs 90 are possible. These are historical levels for Neyveli Lignite and around these levels whenever people have bought they have made some money."

He further added, "Ashok Leyland is sort of breaking down. If it breaks down below Rs 16 then levels of even Rs 12 are possible. In case Rs 16 holds up then you could get a rally back up to about Rs 20 but people need to exit from this counter, this is not good for going long."

Source: Moneycontrol

Book some profits in Nalco at Rs 182-184: Bhambwani

Technical Analyst, Vijay Bhambwani is of the view that in Nalco trader should take some money off the table probably closer to Rs 182-184.

Bhambwani told CNBC-TV18, "Nalco has a minor resistance at Rs 177 and it is already trading above that. As far as metal stocks are concerned I over the last fortnight have been positive on them especially Hindalco in the same space because I do feel there are a lot of base metals are now being traded below their marginal and actual cost of production and that situation is completely out of whack. If you have a two-year timeframe, Nalco is a buy even at present levels."

He further added, "If you are a trader probably closer to Rs 182-184, you should be taking some money off the table. If you are not long and having felt like you have missed out a rally, you can very easily wait for a decline to Rs 162-165 levels before you start nibbling into it rather than commit all your funds at one go. An Rs 110 levels, which was the recent inflection point is where I think support has been established and activated. Unless and until that is really violated with good amount of force in terms of volumes and open interest, I think the worst is over for most of these stocks."

Source: Moneycontrol

Do not buy Nalco at current level: Madan

Ashu Madan, National Head of Religare is of the view that one shouldn't buy Nalco at current level.

Madan told CNBC-TV18, "One can buy Nalco but not at these levels because we have seen some run up in a couple of trading sessions and that is primarily on account of that metal space was badly bruised and battered and we have seen that kind of a bounce back across the sector. So probably that is one of the reasons why in the couple of trading sessions there has been a considerable bounce back."

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

Source: Moneycontrol

Take long position in ONGC: Madan

Ashu Madan, National Head of Religare is of the view that the risk reward would be much in favour of taking a long position in ONGC.

Madan told CNBC-TV18, "The major subsidy burden is already taken into stride in the first half considering the crude oil prices have fallen sharply the realizations will be much better. On top of that there has been a sharp correction in the stock price also. So it is a kind of not even a hold or buy from my side that at every sell off or every correction. If somebody is holding it or somebody wants to initiate a long position, the risk reward would be much in favour of taking a long position in ONGC."

Source: Moneycontrol

Power Grid has resistance at Rs 90-95: Bhambwani

Technical Analyst, Vijay Bhambwani is of the view that Power Grid has resistance at Rs 90-95.

Bhambwani told CNBC-TV18, "In Power Grid the worst is over at Rs 55 levels, which you saw recently and on the upsides, the first meaningful resistance will come at the Rs 90-95 band. Should you actually see a crossover with huge volumes above the Rs 95 levels with enhanced commitment from traders by way of expanded open interest will actually tell me that the stock intense to go more higher. In 2-2.5 years the stock has the potential to kind of double or a rally even more from the current levels provided the market situation is significantly better from here of which there is a fair bit of probability it will be. I think averaging at lower levels is also not a bad idea as a matter of fact if your budget permits please do average, start from the current levels, leave some more room for downward averaging and give it a shot wait for 2-2.5 years, you will be much better off from hereon."

Source: Moneycontrol

ONGC can test Rs 1065-1100: Bhambwani

Technical Analyst, Vijay Bhambwani is of the view that once ONGC crosses Rs 900 with very heavy volumes and open interest expansion then the stock would go all the way to Rs 1,065 or maybe Rs 1,100 over the next two quarters or so.

Bhambwani told CNBC-TV18, "In ONGC Rs 910-900 levels would be the first litmus test for the bulls. This is the kind of upside potential the stock has going forward from now. Once it crosses Rs 900 with very heavy volumes and open interest expansion, you would actually see a breakout and then the stock would go all the way to Rs 1,065 or maybe Rs 1,100 over the next two quarters or so."

He further added, "On the downside, unless and until Rs 540 level is taken out with huge amount of force, I would say the probability of an upmove is better than the probability of a decline from here. I think this is a stock, which you should have in your core portfolio. This sector itself is something that you should be bullish on from long-term point of view, the minimum timeframe of three years, and I advocate a hold for the absolute long-term."

Source: Moneycontrol

Hold Power Grid: Madan

Ashu Madan, National Head of Religare is of the view that one can hold Power Grid Corporation of India.

Madan told CNBC-TV18, "Power Grid is one of the better long-term plays. The reason why they were under pressure was because post its NSG thing and the way they were overbought in the post January fall we could rely that it was also one of the sector’s power. So somewhere the averaging out would not be a bad option because if you have to be in the market, you have to identify something to hold on and somebody who has an appetite for a long-term play with two-years plus, I think Power Grid gels with that kind of a theme. So I would recommend to hold it at this price."

He further added, "Time wise, definitely take long because price wise, I feel that it would have corrected to a large extent where there could be a stabilisation and consolidation phase but once whenever the next rally happens with a timeframe in stride, I think that from current levels, we can see 70-100% jump from the current levels with a timeframe."

Source: Moneycontrol

ESS DEE Aluminium has target of Rs 188: Kapadia

Ranjit Kapadia of Prabhudas Lilladher is of the view that ESS DEE Aluminium has target of Rs 188.

Kapadia told CNBC-TV18, "For ESS DEE Aluminium the metal cost is irrelevant because it is a pass through for the users and second thing, major customers for these are the pharma industry, which is as such doing very well and as we are aware that the new US President is likely to announce a USD 25 billion health care package very soon. So once that happens then the Indian Pharma industry will be most beneficial out of this because they are mostly present in the generic space. I am looking at a target of Rs 188 which gives a 30% upside from the current level."

Disclosure: Analyst holds the stock and also recommended to his clients.

Source: Moneycontrol

Welspun Gujarat can touch Rs 145-150: Bose

Technical Analyst, Rajat K Bose is of the view that Welspun Gujarat can touch Rs 145-150.

Bose told CNBC-TV18, "Welspun Gujarat has a potential to move up to something like Rs 145-150. Even a few days back it went up to that level and again coming down to consolidate, so my stoploss would be below Rs 118, which is about 10 points from the current levels and I am actually looking at a short-term target of Rs 145–150. Once it crosses that level, then we would actually be working for higher projections but as of now, Rs 150 suffices."

Disclosure: Analyst doesn't hold the above stock but have recommended to its clients.

Source: Moneycontrol

Hold TTML, says Bhambwani

Technical Analyst, Vijay Bhambwani is of the view that one can hold TTML.

Bhambwani told CNBC-TV18, "For TTML the Rs 12.50 mark is a very robust support at this point in time and even if it is taken out, the stock is likely to fall by a buck-buck and a half below that. On the upsides, the Rs 18-20 band is where immediate resistance will come in. I am not saying that this is be all and end all for the headroom upsides. But the way to make money from the stock is to kind of expand your timeframe and buy at lower levels. So by all means hold for a long-term, average at lower levels and kindly wait for 2-2.5 years."

Source: Moneycontrol

PSU Banks to out perform: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that PSU Banks are expected to out perform.

Sukhani told CNBC-TV18, "There are some sectors now that are clearly outperforming and will outperform after a correction if the uptrend continues but metals is not one of them. The sectors I am looking for out performance remain PSU banks and the large space called construction and infrastructure, so metals are in the lower end of the spectrum which will under perform. Today is an exceptional day; there is a sense of relief of buoyancy because of China package I do not think this is going to last. The charts are telling us there is a lot of pressure on the stocks and that pressure will show itself again."

Disclosure: It is safe to assume that analyst & his clients may have an investment interest in the stocks/sectors that have been spoken about.

Source: Moneycontrol

Do not trade in RNRL and Arvind Mills: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that one should not even think to trade in Reliance Natural Resources, RNRL and Arvind Mills.

Sukhani told CNBC-TV18, "I will not trade Arvind Mills; one cannot even look at the numbers and say this is Arvind Mills of that era. One will not touch Arvind Mills at all."

He further added, "For RNRL also - this is not the time to go for momentum stocks. There are trading opportunities and we should focus entirely on the blue chips. I do not think I would even think about trading RNRL or Arvind Mills, not now."

Disclosure: It is safe to assume that analyst & his clients may have an investment interest in the stocks/sectors that have been spoken about.

Source: Moneycontrol

Expect some upside in Tata Steel: A Dalal

Amit Dalal of Amit Nalin Securities feels that there will be some upside whether you buy a Tata Steel and Sterlite.

Dalal told CNBC-TV18, "I think both ferrous and nonferrous have participated and if you take something even like a Sterlite Industries, which is almost near cash valuations, definitely I think even a Nalco they all are distressed valuation purchases that one makes right now. One should not expect the metal or the underlying metal to give you a big rally and support the stock price rally going forward or suddenly a change in the whole structure of a demand and supply because finally we do know the reason why the prices of the metals have fallen is because there is a global shrinkage of demand and it has mainly come from the shrinkage of auto demand, which is a big factor for all metals be it aluminium, be it even ferrous metals. So there will be some upside whether you buy a Tata Steel or a Sterlite but one should be careful not to continue to buy at higher levels because there will be a correction once people realize that the underlying assets not going to follow through to the extent that one would like it to."

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

Source: Moneycontrol

Expect BHEL to outperform, says Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that BHEL is expected to outperform, while Reliance Infra is likely to under perform.

Sukhani told CNBC-TV18, "BHEL and Reliance Infra are not in the same category. BHEL is one of the blue chips; it’s in the capital goods section; Reliance Infra is something different. So I expect BHEL to outperform that’s relatively depending on what Nifty does and Reliance Infra is likely to under perform. So they have two different views."

Disclosure: It is safe to assume that analyst & his clients may have an investment interest in the stocks/sectors that have been spoken about.

Source: Moneycontrol

Stay away from ITC: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that one should stay away from ITC as it has been a non-performer in his view.

Sukhani told CNBC-TV18, "Suzlon Energy is one of favourite stocks; it is no longer visible on the chart, it has fallen so much. I would not buy it. These stocks have to stop falling, build a base, consolidate, breakout this entire process will take a months so there is no rush."

He further added, "ITC has been a non-performer in my view; it’s been in a trading range for many years like Hero Honda. So there is no investment buying here and there is no momentum, stay away from it."

Disclosure: It is safe to assume that analyst & his clients may have an investment interest in the stocks/sectors that have been spoken about.

Source: Moneycontrol

Reliance likely to underperform: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that Reliance Industries is likely to under perform irrespective of what its doing in the last three days, while ONGC should stay with the market and perform.

Sukhani told CNBC-TV18, "Reliance is likely to under perform irrespective of what its doing in the last three days, while ONGC should stay with the market and perform."

He further added, "I don’t think Bharti Airtel is moving out of the trading range, it is still locked in a range and it could take many years just inside that Rs 600 to Rs 1,000 band so, none of the three have the power and energy to take the market to even some higher levels."

Disclosure: It is safe to assume that analyst & his clients may have an investment interest in the stocks/sectors that have been spoken about.

Source: Moneycontrol

Fertilisers a better buying opportunity: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that Fertilisers are probably better buying opportunity.

Sukhani told CNBC-TV18, "Sugar stocks have literally fallen out of the chart so much more effort is required for these stocks to consolidate. This bear market is about waiting, patience, time so I would not touch sugar now."

He further added, "Fertilisers have been in this band for the last few weeks so they are probably better buying opportunity."

Source: Moneycontrol

China unveils $587-bn stimulus package: Impact analysis

China will unveil a USD 586 billion economic stimulus package by 2010, which will be spent on upgrading its infrastructure, land reforms and social welfare projects.

Commenting on the package, Martin Hayes of BaseMetals.com, said the Chinese stimulus package is just a short-term boost to the base metals. He added that the markets would ultimately fall below the marginal cost of production. “Packages of news, packages of potentially supportive developments are providing some short-term relief, triggering some short covering, and once that happens it gathers some pace.”

Hayes said that except for China the world was moving into global recessions, and that these factors would ultimately dictate the medium and longer-term direction of metal prices.

Daniel McCormack, Equity Strategist at Macquarie Securities, said the stimulus package has certainly been talked about in the weeks leading up to it and it’s hugely important. "The question is over the timing of it in terms of how quickly they can get the spending up and running," he added. However, the numbers they are talking about largely will have a material impact on demand particularly in the material space, that is for cement and steel stocks, and they are all up today, he added.

McCormack said the question mark really is how quickly they can get that up and running and he think other countries will also follow suit.

David Buick, Partner, BGC feels that investors and market participants are reviewing the Chinese fiscal stimulus package. “Markets are open somewhere between 2-3%. In London it’s a question really of the mining stocks rallying quite quickly on the back of positive outlook. Also, the fact that people who thought that either China or India would no longer have requirements for base metals were way short of the mark. They still have got a huge internal economic agenda which will need filling in the fullness of time,” he said.

Source: Moneycontrol

CAT on Nov 16; IIMs set to be richer by Rs 23 crore

Despite an unfolding global economic crisis, uncertainties about the pay-packets to be offered in the next placement season and the RC Bhargava Committee recommending a regulator to curtail their ‘autonomy’, at least one thing is clear to the seven Indian Institutes of Management (IIMs): the November 16 Common Admission Test (CAT) will make them richer by around Rs 23crore.

The seven IIMs in Ahmedabad, Bangalore, Kolkata, Lucknow, Kozhikode, Indore and Shillong could together make this profit from merely selling application forms, up from Rs 18 crore last year, thanks to an increase in the price of application forms sold in August this year, IIM sources told Business Line.

Last year, nearly 2.20 lakh students had appeared in the CAT and about 2,000 of them were finally selected. CAT is conducted by each of the seven IIMs in rotation to shortlist candidates for admission to the two-year postgraduate business management programmes these B-Schools run. This year, nearly 2.50 lakh students are expected to take this examination.

This examination is conducted at two dozen centres across India by the CAT Group, a body comprising admission committee chairpersons of each of the IIMs.

This year, it increased the cost of examination application forms for general category candidates by Rs 200—from Rs 1,100 to Rs 1,300 — and for those belonging to the scheduled castes (SCs) and scheduled tribes (STs) by Rs100 — from Rs 550 to Rs 650. The total earning by sale of these forms this year is expected to be nearly Rs 30 crore, as against Rs 24.2 crore last year.

On the other hand, the total expenses are said to have increased from Rs 6.2 crore in 2007 to Rs 7 crore now. Thus, the profit is likely to be nearly Rs 23 crore this year, which would be equally distributed among the IIMs after deducting the cost of organising CAT.

Interestingly, a substantial part of the cost of holding the CAT is fixed cost and does not increase with the increase in the number of candidates appearing for the test. IIMs claim income-tax exemption by stating that they are “not-for-profit public institutions”. According to sources, the IIMs were using the profit from the CAT to cover losses in other areas.

Source: TheHinduBusinessLine

Satyam trims hiring plans by a third

Though Satyam COmputer added 1,814 employees, including 221 trainees in the second quarter, the global economic slowdown seems to have had a telling effect on its hiring plans for 2008-09.

The company, which had originally planned to recruit 14,000-15,000 staff this financial year, has scaled down the figure and pegged it at 8,000-10,000, indicating a 33-per cent drop in the number.

“About 5,000 of them are already on our board, the balance would be added in the next two quarters,” Mr V. Srinivas, Chief Financial Officer, said at the news conference here on Friday. . However, the company could always “switch gears” to add more, if need be, he said.

No retrenchments


Mr B. Ramalinga Raju, Chairman, assured that the company would honour campus recruitment commitments already made.

Reacting to reports on retrenchment of 4,500 employees, he said the reports were baseless even as he said the company removed 250 under the Performance Improvement Plan. “It is based on a systematic performance assessment method to identify the bottom 5 per cent of the staff. They are generally kept on watch,” he said.

It employed 48,434 associates at the end of second quarter as against 41,423 in the comparable quarter last year, with an attrition rate of 12.27 per cent (13.89 per cent). The count, including its subsidiaries, is 52,865 as against 51,127 on March 31, 2008.

Lower utilisation


While the rate for onsite utilisation slipped to 96 per cent from 97.13 per cent, the figure for offshore utilisation slid to 76 per cent from 81.54 per cent. The domestic rate nosedived to 78.42 per cent from 96.61 per cent . The base for computing offshore and domestic utilisation has been increased to 2,120 hours from 1,884 hours per year for the fiscal ending March 2009.

Source: TheHinduBusinessLine

Satyam issues pink slips to 200 employees

‘It’s routine performance improvement procedure, not cost cutting’.

Satyam Computer Services, the fourth largest IT solutions and service provider, has reportedly given pink slips to 200 employees in various centres, a few weeks after the company announced its second quarter results.

While the company insists that the move follows the annual appraisal, which usually happens in July-September, and that it is in no way connected with the slowdown, employees say it actually is part of cost-cutting measures to reduce high-cost human resources.

“They are saying that they are continuing to recruit people. But the thing is they are replacing high-cost human resources with low-cost HR as part of the cost-cutting exercise,” a Satyam executive, who was shown the door recently, told Business Line.

Mr S.V. Krishnan, Global Head (Human Resources) of Satyam, denies this charge. “We reiterate that this is not unusual. This development follows the appraisal where the 5-10 per cent of staff in the bottom of the performance pyramid is identified for Performance Improvement Plan,” he said.

“They (those who are in that bracket) do know that they are in that list. While some of them exit themselves, we will sit and talk with others for their possible relocation. If they insist that they be accommodated in the local projects and continue to reject the proposals (for relocation), it could be a problem,” he said.

A Satyam staffer, however, argued that even performers were getting the pink slips. “I’ve proved myself in several important projects and got accolades from the higher-ups too. It was a complete surprise for me to hear that non-performance was the reason for my removal,” a former Satyam executive, on condition of anonymity, said.

When asked about the removal of some performers too, Mr Krishnan said, “We have been recruiting in thousands this year too. In that scenario, why would we remove experienced hands? Would that sound logical?”

The company, which had indicated early this fiscal that it would recruit 15,000, had scaled down the intake outlook to about 10,000 due to the slowdown.

Cutting cost

Asked whether the company was considering cuts in salaries and perks following the slowdown, he replied in the negative and said that the company had begun cutting down travel costs and expenditure on parties.

“This is where we doing some cost-cutting and not by removing people,” he asserted.

Source: TheHinduBusinessLine

‘Insiders’ take advantage of low stock prices

Management, promoter groups step in to buy in select companies.



BL Research Bureau If the frantic selling by foreign institutional investors in October has left you worried about how much lower valuations will go, here is a quantum of solace, for the month also saw many ‘insiders’ step in to buy stocks in their companies.

Enticed by the ‘attractive’ valuations after the market meltdown, insiders appear to have indulged in buying in select companies even as the markets hit successive new lows throughout last month. Be it large companies such as L&T, Suzlon Energy and Hindalco, or the mid and small-cap ones such as Edelweiss, Gitanjali Gems and IVRCL Infrastructure, buying by insiders has been quite significant.

Insiders, according to SEBI’s Regulations (Prohibition of Insider Trading), are those investors who are in the know of that company’s unpublished price-sensitive information.

While in the case of L&T, it was the company’s Chairman and Managing Director, Mr A.M Naik, who bought a substantial number of shares in end-October, it was the promoter group IGH Holdings that bought into Hindalco. Among other companies that saw a considerable buying interest by either the management or the promoter were CCL Products, Blue Bird, Gati, IPCA Labs and Patel Engineering.

In the case of Reliance Power, the insider buying of 6.15 crore shares by Reliance Infrastructure was matched by selling by another insider – AAA Project Ventures – an entity fully owned and controlled by Mr Anil Ambani.

That said, not all insiders have been on a buying spree. Companies such as ITC and Dabur India registered sale transactions by their respective CEOs, of a small portion of their holdings.

Insider transactions, which are required to be disclosed to the stock exchanges, assume significance in these markets, as stock prices have fallen to new lows.

The fact that company insiders see value in their shares despite all the talk of an economic slowdown underpins their optimistic view that prices may have bottomed out.

Source: TheHinduBusinessLine