Basic customs duty on jet fuel goes; IOC cuts price

But airlines hold out no promises on fare cuts.

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

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

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

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

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

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

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

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

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

Source: TheHinduBusinessLine

FII buying lifts markets

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: TheHinduBusinessLine

Credit crisis: Stocks and the long run

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

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

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

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

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

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

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

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

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

Source: EconomicTimes

US stores may post weakest October sales in 40 years

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: EconomicTimes

US protections would worsen crisis: Murdoch

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

deal with global financial crisis.

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

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

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

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

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

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

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

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

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

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

Source: EconomicTimes

The root cause of credit crisis is greed

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

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

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

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

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

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

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

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

Source: EconomicTimes

HOLD: RELIANCE CAPITAL LTD

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

Source: ndtvprofit