T stocks end weak on fear of US outsourcing slowing

Despite a positive rally in the market after Reserve Bank of India moved to ease liquidity in the financial system, frontline IT stocks including Infosys, Satyam and HCL, on Monday, ended the session in red on worries over increasing possibility of Barack Obama becoming the next US president.

IT stocks witnessed a downward pressure on speculation that if Obama wins the US presidential election, the outsourcing business of the country will be curtailed and the direct impact will be on IT sector, brokers said.

Amid persisting global financial crisis, volatile rupee has also raised concern for the IT sector as most of the companies are export dependent and a major business share comes from US, said a senior official of a leading foreign broking firm.

Reports of further widening Satyam-World Bank scam also pulled down Satyam Computer shares, which fell nearly 2 per cent to close at Rs 300 Infosys was down 1.06 per cent at Rs 1367 and HCL Technologies closed marginally down at Rs 172.25. However, TCS and Wipro managed to end with a positive gap at Rs 549 and Rs 276.25, respectively.

The Sensex surged by nearly 550 points to close above 10K level after the RBI announced rate cuts last week.

The apex bank cut the cash reserve ratio to 5.5 per cent and statutory liquidity ratio by 1 per cent to 24 per cent and 50 basis points cut in repo rate to 7.5 per cent under liquidity adjustment facility.

Source: EconomicTimes

Sensex, Nifty end at day's high

Fresh buying in the last one hour of trade saw indices close towards day’s high on Monday. Rate cut by the Reserve Bank of India provided much needed momentum to capital goods, power, realty and banking stocks. All the sectoral indices ended in the green.

Bombay Stock Exchange’s Sensex closed at 10,358.75, up 5.83 per cent or 570.69 points. The index touched an intra-day high of 10,363.31 and a low of 10,112.66.

National Stock Exchange’s Nifty ended at 3057.15, up 5.95 per cent or 171.55 points. The 50-share index hit a high of 3062.05 and a low of 2885.40.

BSE Midcap Index ended 4.89 per cent higher and BSE Smallcap closed 4.47 per cent up.

Amongst the sectoral indices, BSE Capital Goods Index surged 9.18 per cent, BSE Realty Index jumped 8.15 per cent and BSE Power Index surged 7.68 per cent.

Reliance Infrstructure (20.39 per cent) Jaiprakash Associates (18.02 per cent), DLF (15.73 per cent), Ranbaxy Laboratories (14.34 per cent) and State Bank of India (14.02 per cent) were the top Sensex gainers.

Satyam Computers (- 1.56 per cent) and Infosys Technologies (-1.06 per cent) were the top losers.

Market breadth was positive on the BSE with 1968 advances and 634 declines.

(All the figures are provisional)

Source: EconomicTimes

Global investors pull out $480 mn from India funds in October

Global investors have pulled out a whopping over 480 million dollars from India-focused funds last month, with as much as 120 million doll
ars flowing out in the last week, amid the meltdown in the equity markets.

India-focused funds have witnessed the highest outflows among all the Asian funds in the last four weeks, followed by China funds, which saw redemptions of over 286 million dollars, as per data compiled by global fund tracking firm EPFR.

India-focused country funds saw an outflow of 119.7 million dollars in the last week of October, while for the past four weeks the toll has been as much as 482.2 million dollars, according to the data.

However, so far this year, the total redemptions from India-dedicated funds have been the second highest, of over two billion dollars, while China-focused funds have witnessed the highest outflows of 2.8 billion dollars in 2008 so far.

The Indian benchmark index Sensex dropped over 3,000 points from over 13,000 to below 10,000 in October, while China's Shanghai SE Composite Index had fallen from over 2,100 to below 1,700 in the last month.

Asian equity funds excluding Japan extended their losing streak to the eighth week in a row and recorded net outflows of USD one billion in October. In the last week of October they suffered an outflow of over 386 million dollars.

"Risk aversion and fears of softer US demand dominated hopes of developed market rate cuts during late October, with trade-dependent Asian markets being hit particularly hard," the EPFR report stated.

Source: EconomicTimes

RBI move may extend rally; all eyes on global cues

The sooner-than-expected measures by the Reserve Bank of India (RBI) to ease the money-supply crunch, including an interest rate cut, may ena
ble the bulls to stretch Friday’s rally into early next week. But as the week progresses, the domestic investors will look for directional cues from US and European markets.

The US market rose nearly 2% on Friday, as investors cheered JP Morgan Chase’s measures to stem the crash in America’s housing market. The Fed slashed the benchmark interest rates last week and indicated additional cuts to revive the economy, prompting other central banks to trim the rates in a co-ordinated manner. Equities across the world rallied strongly as a result. Investors in Indian equities took a special note of the decline in inflation, triggering hopes of interest rate cuts, and the Standard & Poor’s (S&P) statement that India’s investment-grade credit ratings is safe.

Investors expected RBI to cut rates next week, with the overnight inter-bank lending or call rates rising to a 19-month high of roughly 20%. “We expect more upsides in stocks early next week, as the much-needed interest rate cut was earlier than anticipated,” said Mirae Asset Global Investments senior fund manager Gopal Agrawal. “For any rally to sustain, it is important that there are no fresh issues in global markets and economies,” he added.

The liquidity-injecting measures initiated by several countries last week, following the free fall in equities to four-year lows, has improved investor sentiment world-wide. “In the past few days, we’ve received more requests for stock screens than usual. This may mark a shift in sentiment, from the relentless selling of recent weeks to finding buy ideas,” said UBS Securities in a report on Asian equities. Analysts are, however, unsure whether the bear market is nearing an end. Global investors remain averse to risky assets. Moreover, the credit crunch threatens to jeopardize the growth plans of companies in developing economies such as India. “We continue to believe that investors are underestimating the impact of the credit crunch on countries having current account deficits,” Nomura International Asia and emerging markets analyst Sean Darby said. Driven by high oil prices in recent years, India has a large current account deficit and this shows the extent to which a country’s consumption exceeds its production.

Source: EconomicTimes

Global crisis impacts India; do everything to push growth:PM

Prime Minister Manmohan Singh today said the global crisis had impacted corporates, banks and investor sentiment, but assured that the banking system and deposits were safe and the government would take more steps to protect economic growth.

"A crisis of this magnitude was bound to affect our economy and it has. International credit has shrunk with adverse effects on our corporates and banks. Global uncertainty is also tending to dampen investor sentiment," he said during a meeting with India Inc to review the state of the economy in the face of the global meltdown.

He asked industry to refrain from any "knee-jerk" reaction such as large-scale layoffs, which might lead to a negative spiral, and said "industry must bear in mind its societal obligations in coping with the effects of this global crisis", which the Prime Minister felt "is now likely to be more severe and prolonged".

"Our first priority was to protect the Indian financial system from possible loss of confidence or contagion effect ... the situation is abnormal and we need to be constantly on the alert. The situation is being watched on a day to day basis and more steps will be taken if required."

The meeting was attended, among others, by Ratan Tata, Mukesh Ambani, K V Kamath, Shashi Ruia, Deepak Parekh, K P Singh, where Finance Minister P Chidambaram, RBI Governor D Subbarao and Planning Commission Deputy Chairman Montek Singh Ahluwalia represented the government.

Singh said additional liquidity and reduction in repo rate will help to "provide credit at reasonable rates".

He said, "The government will take necessary monetary and fiscal policy measures on the domestic front to protect our growth rates," adding that India will also seek reform of international financial institutions to prevent recurrence of such crisis.

The Prime Minister said that Indian "banks are well regulated and also well capitalised. I think we have successfully conveyed to our people that our banking system, both in the public and private sector, is safe, and the government stands behind it and that no one should fear for the safety of bank deposits."

Detailing the several measures taken to infuse liquidity into the system to ensure adequate flow of credit, he said, "I believe these steps have made a substantial difference. We recognize that the situation is abnormal and we need to be constantly on the alert. The situation is being watched on a day-to-day basis and more steps will be taken if required."

Singh exuded confidence that the country's financial system would be stable and function well following recent measures, while adding that the negative impact on the real economy needs to be minimised.

"The public sector banks have been instructed to ensure that they act counter cyclically in this situation to counter the general erosion of confidence," he said.

Source: EconomicTimes

British banks Lloyds and HBOS raising $28 billion in new capital

British banks Lloyds and HBOS said on Monday that they are raising 17 billion pounds ($27.7 billion) of new capital, backed by the government
, and confirmed that Lloyds is going ahead with its planned takeover of HBOS.

Lloyds TSB Group PLC said it will try to raise 4.5 billion pounds ($7.3 billion) from investors in a share offering, while HBOS PLC is looking for 8.5 billion pounds ($13.8 billion) worth of investor money, the banks said in a statement.

However, if private investors do not buy the shares, the British government has guaranteed that it will _ on the condition that Lloyds takes over HBOS, on the terms agreed to in October.

The government has also agreed to buy a total of 4 billion pounds ($6.5 billion) worth of preference shares in the two banks on the same condition.

Monday's statement allowed Lloyds and HBOS to confirm that the merger, which has been plagued by market doubts, is indeed going ahead.

``The acquisition of HBOS represents a compelling opportunity to accelerate Lloyds TSB's strategy and create the U.K.'s leading financial services group,'' the banks' statement said.

It added the name of the new company would be Lloyds Banking Group PLC.

In separate statements Monday, both Lloyds and HBOS also published their third quarter earnings reports, which revealed that both suffered sharp falls in profits during the third quarter as a result of the ongoing market turmoil and mounting bad debts.

Lloyds said it had sustained a ``substantial'' fall in pretax profits for the first nine months of the year, with before-tax profit in its wholesale and international banking division dropping 270 million pounds ($438 million) during the third quarter compared to a year earlier.

HBOS said writedowns will reduce its 2008 profit by 5.2 billion pounds ($8.4 billion) and cut reserves by 3.8 billion pounds ($6.2 billion).

The losses are evidence that both banks need the government money, which they will only receive if the takeover is completed.

The planned merger would also result in important cost savings for the banks. Lloyds said Monday its takeover of HBOS would save it over 1.5 billion pounds ($2.5 billion) a year _ more than previously estimated.

Lloyds did not say how many jobs would be cut following the takeover.

Source: EconomicTimes

South Korea unveils 14 trln won economy package

South Korea unveiled on Monday an economic stimulus package worth at least 14 trillion won ($10.98 billion) to help assure a soft landing in
Asia's fourth-largest economy in the face of a looming global recession.

The Finance Ministry said it would expand fiscal spending by 11 trillion won in 2009 and offer additional tax cuts totalling 3 trillion won. It also said it would sharply raise the size of bond sales to fund intervention in the foreign exchange market and offer a state guarantee on foreign-currency deposits at local financial institutions.

Source: EconomicTimes