India buys $20-bn US treasury bills in just 6 months

It's not just hedge funds and battered institutions that have rushed to pick up US government bonds, long considered the safest investment despite abysmal returns. These securities have also become irresistible to central banks of emerging markets such as India.
India has lent close to $20 billion to the US government over six months since the collapse of iconic investment bank Lehman Brothers.
According to the latest data shared by the US treasury department, India’s outstanding exposure to US government bonds rose from $18.3 billion in October ‘08 to $38.2 billion in March ‘09. The latest tranche of investment into treasuries has made India the fourth-largest creditor to the US after China, Japan and Russia during this period.
While India’s outstanding debt exposure to the US government pales in comparison with the top three investors, the $20 billion incremental investment is significant considering the low base prior to Lehman’s collapse.

India has now emerged among the top 15 lenders to the US, moving up by at least five notches over the period under review. Though corporates, banks and other financial institutions can subscribe to US treasury bonds, in the case of India, RBI accounts for a large chunk of the investments.
“Essentially, it’s an indicator of flight to safety by central banks. The general view among central banks is that the dollar may not depreciate much in the medium to long term,’’ Sailesh Jha, director, Asian Economic Research, Barclays Capital, told ET.

Via : ET

Lasting reforms needed to avoid crisis

A top UN body dealing with trade and development issues has recommended "deep and lasting" reforms to avoid a repetition of the current economic downturn.

United Nations Conference on Trade and Development (UNCTAD), during a two-day symposium in Geneva, also recommended that significant international efforts and funding be supplied "to stimulate developing-country economies and to support employment in those nations, and that steps be taken to stabilise currency-exchange rates."

The symposium on the global financial crisis began on May 18 and attended by around 360 UN experts, government officials and members of the public.

The speakers repeatedly said, "recent reports of economic improvement in industrialised countries should not be taken to mean that the downturn is over, and should not lead decision makers to ignore the profound and long-lasting effects on poor countries."

Other recommendations included a debt moratorium for heavily indebted developing countries so that they have more money available for stimulating their economies, and a global programme to preserve and protect jobs in developing nations.

Yash Birla moves into IT sector

The Rs 3,000-crore (Rs 30 billion) Yash Birla Group marked its foray into the IT sector with the acquisition of Mumbai-based Melstar Information Technologies. Listed on the Bombay Stock Exchange and National Stock Exchange, Melstar is a service provider of professional consulting and project services and solutions.

"The Melstar acquisition fits into the Group's ongoing thrust on growth and exploring new-age sectors like education, healthcare and IT. We see a strategic fit between the Yash Birla Group and Melstar vis-�-vis the directions that the Group has set for itself," said Yash Birla, chairman.

The group has interests in auto, textiles, engineering, chemical and power sectors, among others. "We think this is a good time to enter the IT sector. Melstar also has a US subsidiary, which gives us entry into this market as well," said PVR Murthy, CFO of YBG. The group is looking at further growth through acquisition, with the current focus on West Asian and South East Asian firms.

Subsequent to this acquisition, the board of directors of Melstar has been reconstituted with Yash Birla as chairman, Murthy and Anoj Menon as directors and SM Arora as managing director. Richard D'Souza has been appointed as the chief executive officer.

"We are in the process of making a detailed business plan. At this moment, I cannot comment on the details. But we are looking into areas like ERP, enterprise content, building practice in the telecom space and creating a position in the legal process outsourcing segment," said CEO D'Souza.

For the December quarter, Melstar's revenue was Rs 5.3 crore (Rs 53 million) and net profit was Rs 11 lakhs (Rs 1.1 million). For the year ended March 31, 2008, the company's revenue was Rs 15.8 crore (Rs 158 million), but had a net loss of Rs 1.3 crore (Rs 13 million). Melstar has about 400 people in India and 20 customers.

Aditya Birla Nuvo, headed by Yash's cousin, Kumar Mangalam Birla, entered IT in 2001 with the acquisition of PSI Data Systems. Later, the group's BPO arm, TransWorks -- now known as Aditya Birla Minacs -- acquired Canadian BPO firm Minacs in 2006.

Air India board mulls raising Rs 3,000 cr

National Aviation Company of India Ltd, which owns national carrier Air India, today discussed its plan for raising around Rs 3,000 crore (Rs 30 billion) to meet its working capital requirements, among others.

The board meeting of the state-owned airlines was also attended by Arvind Jadhav, for the first time since he took over as Nacil CMD after the sudden exit of erstwhile chairman Raghu Menon from the company.

However, sources in the company said no final decision could be taken as the issue would be discussed with the new government and the civil aviation ministry.

Air India has already raised a debt of Rs 14,600 crore (Rs 146 billion) which is being used to buy its fleet of new aircraft. Experts have been saying that more debt would put additional burden on the already overleveraged aviation companies.

According to a recent report by international aviation consultancy firm Centre for Asia Pacific Aviation, the three full service carriers -- Air India, Jet Airways [Get Quote] and Kingfisher -- have a total debt of $8 billion which is almost equal to the losses of the international airlines.

According to sources in the erstwhile civil aviation ministry, Air India has incurred losses of Rs 3,000 crore in 2008-09, which is more than double the losses it incurred the previous year. Its accumulated losses come to Rs 4,334 crore (Rs 43.34 billion).

Govt to simplify SEZ approval

The commerce ministry has initiated steps to reduce the time taken to develop special economic zones by simplifying procedures to get the tax-free industrial enclaves notified.

Developers will now be able to get their land classified as an SEZ at the initial stage of approval by submitting legal documents that prove land ownership.

With exports falling sharply in the last six months, faster development of SEZs is seen as one way of increasing overseas sales of Indian goods and services, an official said.

In the past, formal approval -- the first step in notifying an SEZ -- was based on a statement by a developer confirming possession of land. Actual documents proving ownership were not required at this level of approval.

Thereafter, the developer had to submit a series of documents including proof of ownership of land,  a non-encumbrance certificate and vacancy and contiguity certificates to get the zone notified. Now, all these documents will have to be submitted at the first stage.

Experts point out that the move will help serious zone developers since only firms that actually own the land will now apply. "This shows that the ministry is serious about taking the SEZ policy forward," said Tapan Sangal, senior manager, PricewaterhouseCoopers.

"This move will also ensure that investments flow in to the zones quickly. Moreover, the pace of job creation in the zones will also become faster," said L B Singhal, director general of Export Promotion Council on EoUs and SEZs.

Since 2006, about 550 SEZs have been given formal approval. But the commerce ministry was concerned that only 320 were notified. This was because many of the developers adopted a wait and watch policy in the wake of the global economic crisis.

TCS' Asia-Pacific biz to grow faster than overall company

India's largest IT firm, Tata Consultancy Services, believes that revenue growth from the Asia-Pacific region will be faster than the overall growth of the company.

This is despite the fact that the Apac market became a concern for the company after its fourth quarter results saw volatility in the region.

In an earlier interview, chief operating officer N Chandrasekaran had voiced this concern and said TCS was taking some measures. The impact was also evident on the overall revenue contribution, which fell to 4.7 per cent in FY09 from 5.2 per cent in FY08.

TCS' head for Apac, Girija Pandey, feels the region will continue to be volatile till they reach a certain level.

"We have a good pipeline and strong growth from verticals like BFSI (banking, finance, services & insurance) and telecom. While this year the growth rate might be a tad slower, we will still manage to grow," added Pandey.

Japan, China and Australia are the three big markets that constitute the Apac region, along with other geographies. Pandey says that a lot of Apac countries were directly hit by the global slowdown, as most of them are huge exporters to the US. And, like the US market, pricings have been under pressure.

TCS' Apac region, with a 6,000-employee base, has a revenue of $300 million (around Rs 1,440 crore). If India is added to the Apac region, which many MNCs do, then the revenue contribution will be 12-13 per cent. In case of most MNCs, it ranges between 12 per cent and 19 per cent.

A trend that has clearly emerged in this downturn has been larger IT budgets and for a longer period of time. Pandey says that in Apac, deal sizes generally range between $20-50 million.

"Also, these firms are increasingly looking at offshoring," he said. For instance, according to Pandey, Japanese firms are increasingly making an effort to understand the Indian offshore story, ". . .and this is clearly the indication of things to come." He also points out that Apac is a very different market.

"One, we cannot adopt the offshore development centre strategy, like in the US and the UK markets. These markets are not too aware of Indian IT firms, language is a huge issue and they prefer to work with local partners. So, the challenge is to build a brand. Similarly, when we sell solutions, it's project by project," said Pandey.

These are some challenges that have hampered ramp-up in regions like Japan, which is the second largest market in terms of IT spent.

Telcos go creative on VAS

The value-added services sector is expected to touch Rs 9,760 crore (Rs 97.6 billion)by end June.

Telecom operators in India appear to be gung-ho over the prospects of value-added services which help them to differentiate, add substantially to their margins while simultaneously be a precusor to third generation or 3G regime. The recent creative campaigns of majors like Vodafone (ZooZoos), Airtel (R Madhavan and Vidya Balan), Virgin Mobile (music download) and Aircel's (Internet applications) are a case in point.

VAS offerings provide telcos with a wider platform for communication. Sunzay Passari, VAS & devices head at Loop Mobile, says: "If you look at the current campaigns of telcos, there's focus on VAS. Strategically, it's VAS where telcos can differentiate themselves.

"Our advertising is more VAS-oriented. Around 60-70 per cent of our total ad budget goes into VAS advertising," says Passari. This year, VAS comprised 12.5 per cent of Loop's total revenue, and over 8 per cent came from non-SMS services. Passari says the share of VAS is increasing significantly.

The Internet and Mobile Association of India predicts that the VAS industry will touch Rs 9,760 crore by end of  June 2009, growing at 70 per cent. Music, caller ring back tones and wallpapers are the most consumed services. Over half of the music industry's Intellectual Property Rights comes from the mobile space.

Moreover, given the declining average revenue per user and increasing competition among operators as new players join in, there will be more focus on VAS.

For India's largest private telco, for instance, VAS will play an important role as Bharti Airtel moves towards achieving its target of adding another 100 million in just three years. The company has already crossed the 100-million subscriber mark. VAS accounts for around 10 per cent of Airtel's revenues (non-SMS would be around 6 per cent).

"As we move from plain generic communication to entertainment, VAS plays an important role. It acts as a productivity-enhancement and livelihood-enhancement tool. For instance, we have mandi prices for rural people on their mobiles, we give them weather information and also provide local job search facility on mobiles.

As SMS moves from English to vernacular languages, VAS revenue (both from SMS and non-SMS services) will only increase," says Raghunath Mandava, chief marketing officer, Airtel.

Harit Nagpal, director, new business and marketing at Vodafone Essar, has a slightly different take on this subject. "We can't go away from our core, network promotion. ZooZoos was to offer some variety. You have to have some variety in your campaign," he says.

VAS comprises around 10 per cent of its total revenue, and more than half of it comes from non-SMS services. For Vodafone, while there is no significant increase in VAS revenue share compared to the near-past, it has increased in value terms.

Prashant Singhal, telecom head at Ernst & Young, opines, "Though voice is the killer application, operators don't have to induce customers to use voice. That's why there's this focus on VAS. Moreover for new operators, VAS gives better revenue margins too."

A new operator will end up paying 60-75 paisa (20 paisa termination charge and 45-55 paisa carriage fee) on a national call while charging the customer only 1.50 paise. On the other hand, chances are that an old operator's call will terminate on its own subscriber (on account of penetration), which will save him both the charges. VAS gives telcos a margin of 60-80 per cent.

Aircel, which since its inception has used VAS as its strategy, says VAS has helped it project its brand as fresh. Gurdeep Singh, COO of Aircel, adds: "Last decade had seen enough of roll-out and affordability in telephony. Future of telephony is VAS.
Thus we have put VAS at the core of our strategy. VAS contributes 10 per cent of total revenue of Indian telcos, whereas in other countries it contributes between 15-30 per cent of total revenue. It's an underexploited area we are looking to tap." Singh refuses that margins are better in VAS.

Also the VAS shift is a precursor to 3G. On asking if it's a preparation in account to 3G, Passari responds, "As you add more and more subscribers and take into account the number of players entering the market, moving towards VAS is the only way. When 3G comes, definitely it will give immediate boost to those telcos which are well positioned in VAS. So, it's a mix of both." Singh of Aircel holds the same view.

Travelling? It's safer to carry plastic money

Business and leisure travellers find it safer to carry plastic money compared with thick wads of notes while on a trip, a survey done by global credit card firm Visa said.

"Forty-five per cent of those surveyed said they relied primarily on payment cards. But, of the 55 per cent who said they relied on cash as their primary method of payment while abroad, only four per cent actually thought cash was safe to carry," Visas Travel Smart survey said.

"Payment cards are certainly a safer option in many seasoned travellers' minds as they are not carrying thick wads of notes in their wallet or purse," Visa's South Asia country manager Uttam Nayak said.

The survey found that business travellers travel smart by relying less on cash and instead use a credit, debit or prepaid card.

"Business travellers are more likely to use electronic payment cards (59 per cent) over cash (41 per cent) as the primary payment method while overseas leisure travellers are more inclined to use cash (58 per cent) than cards (41 per cent)," Visa said.

Sixty-eight per cent business travellers consider automated teller machines for cash withdrawal compared with 63 per cent of leisure travellers, it said.

The most frequent places where people obtained cash were at ATMs and money changers at the airport and within cities on arrival, the survey said.

"Using cards to obtain cash on arrival and to settle payment overseas certainly cuts down the risk involved in carrying too much cash," Nayak said, adding the number of Visa ATM access locations has grown to more than 1.4 million globally in recent years.

Visa said younger travellers are more likely to pay electronically while overseas than older ones. Older respondents above 40 years of age are more likely to carry larger sums of cash than those between 18-39 years of age.

"Survey respondents said they withdrew an average amount of $1,120 in cash before heading overseas. Respondents from New Zealand withdraw the most cash for their trip ($1,516), followed by Australians ($1,441) and Indians ($ 1,431)," Visa said.

Stock markets' rise: A happy surprise!

The stock market's euphoric reaction to the Lok Sabha election results reflects the happy surprise at the outcome as well as the high expectations that have been placed on the new government.

The prime minister's comments so far suggest that he is aware of the burden of expectations; indeed, during the election campaign, he spoke somewhat uncharacteristically about a 100-day agenda.

As for his comments to the Congress Parliamentary Party on Tuesday evening, he did not mention China, but there could have been no doubt as to which country he had in mind when he talked of the rapid growth achieved by East Asian economies.

The shrinking of India's strategic space because of China's continued outpacing of India on multiple fronts is of prime concern, and should be used to unite the country behind an agenda for action.

The task begins with Cabinet formation. The 'game-change' achieved by the Congress getting over 200 seats is that it need not be held hostage by its alliance partners, as the last government was.

The party leadership has therefore done well to become "backmail-proof" by lining up what is said to be unconditional support from erstwhile allies who had strayed during the elections -- like the Samajwadi Party -- and others like the Bahujan Samaj Party.

With assured support from more than 300 out of 543 members, Manmohan Singh and Sonia Gandhi know that the government cannot be pulled down by a recalcitrant ally or even two.

They can afford therefore to be more demanding when it comes to both competence and probity in the choice of ministers, so that the scandals associated with telecommunications, various transport sectors and mining contracts are not repeated. Dr Singh is a man of integrity; he should not tolerate corruption, now that he has no need to.

The first important signal of whether the next five years will be different from the last five will come therefore on Friday, when the new council of ministers becomes known. If there is evidence of a genuine break with the past, it will boost confidence in the future; if not, the stock market and expectations in general could subside as quickly as they have erupted.

The next step will be to meet as well as manage expectations when it comes to short- and long-term initiatives. Much of the government's work has to do with continuity, but there is plenty of room for displaying energetic action in areas like education, capacity-building in infrastructure sectors, and national security.

There is a large fiscal agenda (managing the deficit, adopting by next year an integrated goods and services tax, and moving to a less archaic form of budgeting), a serious export downturn to address, and room for allowing the investing public to own shares in state-owned enterprises.

Climate change and water management are urgent issues that merit 'mission' status so as to cut through the bureaucratic clutter. Labour law has been shown to be ineffective when millions have lost their jobs with little or no compensation, and therefore needs review.

A comprehensive social security system needs to be constructed, based on a national identity card system, with entitlements reaching their targets with minimum waste and fuss. India's problems will not all be solved in the next five years, but this is a moment that provides an opportunity to start afresh. It should be seized.

New Rs 1,000 notes soon

The Reserve Bank of India will shortly issue Rs 1000 denomination banknotes with 'L' inset letter in both numbering panels in Mahatma Gandhi Series -- 2005 bearing the signature of Dr D Subbarao, Governor, said RBI release issued in Chandigarh.

Except for the change in the inset letter, the design of these notes to be issued now is similar in all respects to the banknotes in Mahatma Gandhi Series -- 2005, with additional or new security features issued on October 21,2005.

All banknotes in the denomination of Rs 1,000 in Mahatma Gandhi series issued by the Bank from the year 2000 will continue to be legal tender, it said.

Liquidity starts seeping back into India Inc

After a near six-month drought, India Inc is finding some takers for debt and equity issues

If trends over the past few weeks are anything to go by, banks are slowly shedding their aversion to financing new projects and foreign investors are heading back to India.

Though private and the foreign banks are yet to step up lending in a big way, public sector banks have started financing projects.

The result: Funding of over Rs 58,000 crore for large projects has been tied up in the last six weeks.

The list includes Indian Oil’s Paradip refinery (Rs 14,900 crore), State Bank of India’s loan to NTPC (Rs 8,500 crore), Krishnapattnam Port (Rs 3,000 crore), BGR Energy’s engineering, procurement and construction work (Rs 4,000 crore), SBI’s loans to Vodafone (Rs 10,000 crore) and the Anil Dhirubhai Ambani group’s three projects (Rs 14,500 crore for the Sasan Ultra Mega Power project, Rs 2,000 crore for Delhi Metro Express and around Rs 1,000 crore for transmission projects in the west).

“With interest rates falling, lenders are locking in deals at higher yields on the project finance side,” said Ravi Kapoor, Managing Director of Citigroup Global Markets.

Infrastructure developers aren’t the only ones finding it easier to raise resources; companies such as Tata Motors are finding takers, too. A banker associated with the Rs 4,200-crore debenture issue, said the auto major had placed its entire debt in a day.

Construction major J P Associates is also in the process of raising nearly Rs 4,000 crore from debentures.

Companies that failed to raise equity in the aftermath of the September crisis — when several global investment banks crumbled under the sub-prime loan crisis in the West — had to opt for non-convertible debentures to meet their funding requirements. Although this market remained strong, with companies raising funds at up to 12 per cent, participation was limited to state-owned Life Insurance Corporation.

Now, other banks are back in the market, said market participants. In April, companies collectively raised NCD issues worth Rs 25,000 crore.

There are signs that the equity market is looking up too. Overall, bankers estimated that over Rs 40,000 crore of rights, QIP and debenture issues are in the pipeline.

In the last six weeks, Unitech, DLF and Indiabulls — all real estate players — have together raised Rs 8,000 crore through qualified institutional placements (QIPs).

“The private placement by the three realty companies is an example of foreign investors willing to invest in a sector that was perceived to be the most risky,” said Enam Securities Vice-president Yogesh Kapoor.

He predicted that other sectors considered less risky will attract investment more easily from overseas investors.

“The underlying sentiment has changed dramatically. Indian stocks, which were punished severely in comparison to other emerging markets, provide attractive value propositions for investors,” Kapoor added.

Also, the election mandate that returned a less fragmented government at the Centre is expected to facilitate the reform process, so some state-owned companies will enter the capital market, which will increase the supply of good quality papers, Kapoor said.

Some constraints, however, remain. “On the equity side, companies with good assets and a good track record on returns to shareholders are able to raise funds now. But the gate is not so widely open that anyone can get through,” said Gagan Banga, director, Indiabulls Real Estate, which raised Rs 2,585 through a QIP issue on Tuesday.

Also, he said the cost of debt remains high “We have seen sentiments improve for the short-term but we have not found a solution for the medium to long term,” Banga said.

Indiabulls Power Services is looking to raise around Rs 5,200 crore of debt to achieve financial closure for its upcoming thermal power plant. It has already raised its equity contribution of Rs 800 crore.

Though Banga did not name any projects, funds for Sasan were tied up at 12.5 per cent, while SBI’s five-year loan to Vodafone will cost 13.25 per cent during the first two years.

Going forward, however, things are likely to improve. “Investment in infrastructure projects will pick up substantially shortly. It was expected to start early this year but got caught in the election process. The National Highway Authority of India had stopped the award of new projects owing to the election code of conduct, but it is expected to start soon. This time, the response is going to be overwhelming as most of the projects have been redesigned,” said India Infrastructure Finance Company Chairman and Managing Director, S S Kohli.

He added that benign interest rates will also make infrastructure projects more economically viable. “With enough liquidity in the system, there will be no paucity of resources,” he predicted.

According to government estimates, infrastructure projects worth nearly Rs 46,000 crore will be awarded in the coming months.

“The pipeline of projects, from sectors like power and gas, to raise funds is strong. In the current financial year, we expect to arrange around Rs 100,000 crore for infrastructure projects,” said A P Verma, managing director & CEO of SBI Caps, which was associated with the Tata Motors and Sasan fund-raising.

Though companies are still under pressure and demand remains subdued, the sentiment, bankers said, has changed because the worst seems to be over, at least in the domestic market.

“The mood was really down in the last quarter of 2008. By mid-January, it had started improving and by March there was clear visibility of the mood changing,” ICICI Bank Chairman K V Kamath told Business Standard in a recent interview.

Although overseas fund-raising remains tough, given the high credit spreads, domestically banks are flush with funds, which can be gauged from the fact that for nearly six weeks now, they have been consistently parking around Rs 125,000 crore on a daily basis through the Reserve Bank of India’s reverse repo window.

MCX & NCDEX to re-launch wheat futures today

The country’s two largest commodity futures trading platforms, the Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (NCDEX), are launching six monthly wheat futures contracts from tomorrow. The third, the National Multi Commodity Exchange (NMCE), is planning to introduce contracts of this most sensitive commodity next week.

The development assumes significance as the commodity will be available to hedgers and speculators for a fair price discovery after two years. Commodity brokers are jubilant with the launch, which they feel will help raise the daily turnover at the NCDEX that was falling dramatically.

The commodity was banned from trading in February 2007 on demand from the Left parties, the then allies of the Congress-led United Progressive Alliance (UPA) government, to check inflation. The commodity has 1.38 per cent weight in the wholesale price index. Wheat was one of the most active commodities on the NCDEX at the time of the suspension.

The three national commodity exchanges have already got mandatory approval from the regulator, the Forward Markets Commission (FMC).

Confirming the launch, Joseph Massey, MD and CEO of MCX, said the exchange would launch six compulsory delivery contracts to begin with. Delivery centres have been restricted up to the radius of 50 km from the municipal limits.

An NCDEX official said the contracts would entail trading units of 10 tonnes and tick size of 20 paise. Contracts would be deliverable from warehouses based in New Delhi, Ahmedabad, Bareilly, Indore, Itarsi, Kanpur, Sirsa and a couple of other centres in Gujarat and Madhya Pradesh.

“We are not in a hurry. We will launch wheat contracts with the old contract specifications,” said Anil Mishra, CEO of Ahmedabad-based NMCE.

The government lifted the over two-year-old ban on wheat futures last week, allowing exchanges to apply fresh for approval.

“The launch is a positive step that will revive trading sentiment in the agri-commodity basket. But the commodity will take some time to reach the daily average turnover of Rs 1,500 crore, the level at which it was suspended from trading,” said Naveen Mathur, associate director, Commodities & Currencies.

India’s food ministry has forecast 2009 wheat output at 77.78 million tonnes as compared with 78.57 million tonnes in 2008 and 78.4 million tonnes in 2007. However, the country continues to retain the export ban, which analysts believe will be lifted soon.

Despite India being in a comfortable position with a buffer stock of about 23 million tonnes, the fear of suspension of the commodity from the futures platform would continue to dog the market participants, Mathur said.

With better equity outlook, firms line up to raise funds

With the stock markets registering some spectacular rises, many Indian companies are once again looking at raising money by selling equity. Some firms, like Unitech and DLF, have already raised money through block trades.

Sources now believe that the next few months can see more companies raising money through qualified institutional placements (QIPs) and private equity.

“Equity markets have opened up in the last few weeks. A lot of companies are raising money. Moreover, investment bankers are running around with proposals to raise money,” said the CEO of a Mumbai-based company.

The success of the Unitech and DLF block deals have encouraged other companies to jump onto the bandwagon.

A couple of QIPs are also in the works (one by a Mumbai real estate firm; others like GMR Infrastructure and Sobha Developers are waiting for shareholders’ approvals).

A few other companies, like Adani Power, which had deferred their IPOs last year, are dusting their prospectus now.

“QIPs will be faster. Many real estate and infrastructure companies don’t mind diluting stakes at current market prices,” said A Murugappan, executive director, ICICI Securities.

Investment bankers say that Indian companies have raised over $2.5 billion in a month and, globally, companies have raised $16 billion equity in the last few months. Indiabulls Real Estate (Ibrel) has raised $550 million (Rs 2,585 crore) by selling shares at a discount to overseas investors, including TPG Capital and Fidelity. It sold shares at Rs 185, which was 6 per cent lower than Monday’s price of Rs 197.50.

Murugappan said investors were not sure earlier about the economy’s prospects. Now both foreign as well as Indian investors believe the worst is behind us.

“Foreign investors believe India is not as badly placed as the rest, as it will grow at 5-6 per cent. With a stable government and the infrastructure push, growth could be more than 6 per cent,” Murugappan said.

Investors believe Indian companies will do well, and hence, have started buying in the secondary market. Foreign institutional investors (FIIs) have bought stocks worth Rs 17,310 crore in April and till date in May, according to regulator Sebi. Investment bankers say the next few months can see many QIP deals led by FIIs. Domestic mutual funds and insurance companies, who are sitting on huge amounts of cash, can also invest in these issues.

Investment bankers say the FIIs who are keen on investing in Indian companies are from either the far East or from the United States and include names like Fidelity, Prudential and Capital International, among others.

“These investors are long-only funds, who have a medium-term outlook, and may include domestic institutions like mutual funds and insurance companies,” said an investment banker.

What’s changed for investors to start investing? Two or three things. Investors are willing to take a call on equity, the world has become clearer, and the recent rally in the Indian stock markets have improved valuations. Investment bankers say FIIs have money to deploy and find India and China attractive.

“Capital was available, but people were not willing to take a call on equity. Today, the world has become clearer and many believe the worst is over. There’s growth in India. The view investors are taking is that if the market is going to go back to the earlier level, there’s value in entering at this level,” said the head of mergers and acquisitions (M&A) at a leading conglomerate.

GMR Infrastructure CFO A Subba Rao also says investors are loosening their purse-strings as they believe the worst is over.

“The US banks’ stress tests are over. There’s reason for confidence that they cannot go wrong from here,” said Rao. Valuations have become reasonable, with many stocks rising by 50-100 per cent in the current rally. Bankers say the investor sentiment has improved on the institutional side, too.

Rao feels the market is ripe for QIP deals, and companies will take approvals from shareholders. GMR itself has convened a shareholders’ meeting on June 9 to take approval for raising money by selling equity.

“We will see many companies raising money through QIPs, unless the market condition suddenly deteriorates,” said Rao.

Ramesh Srinivasan, COO, Kotak Investment Banking, says QIPs will happen first, as they are faster to close. A QIP deal can be closed in a month, as it does not require regulatory approvals, while a public offering can take months. Some companies can raise money from private equity funds but they will be highly selective.

The equity drive is also driven by a need for equity. Two years ago, many companies had drawn up big expansion plans when the cashflows were good and the market was robust.

“They focused on ensuring that projects were robust, while debt was available. Today, many Indian companies have issues around equity as the avenues have become limited,” explained the M&A head with a conglomerate.

“You need equity, otherwise you cannot close a project, as banks are not willing to lend beyond a gearing,” said Kotak’s Murugappan.

Take power projects. Earlier, banks were comfortable with a debt-equity ratio of 80:20; today they may not be willing to extend debt beyond 70 per cent. Indian companies are struggling with equity also because cash accruals have fallen sharply. Cash profits of the BSE 200 companies fell 13.26 per cent for the year ended March 2009, excluding finance and oil firms.

New Petro minister to look at freeing retail prices

Decontrolling the prices of petroleum products will be one of the key issues the new petroleum minister will have to address, according to the ministry's bureaucrats who have drawn up a list of priority items.

"Freeing prices of sensitive petroleum products to ensure financial health of oil marketing companies is one of the key issues that would be looked at by the new minister. However, some kind of ceiling in crude oil price may be put in place, beyond which the government would intervene in the interest of consumers," said an official.

A final decision on these would, of course be taken by the new Union cabinet.

The bottomlines of three OMCs -- Indian Oil, Hindustan Petroleum and Bharat Petroleum - have been in the red on account of subsidised sales of petrol, diesel, kerosene oil and liquefied petroleum gas. Notably, the Indian basket of imported crude oil touched a peak of $142 a barrel in last July.

IOC, the largest of the three, made a net loss of Rs 3,673.4 crore (Rs 36.73 billion) in the nine months ending December 31, HPCL  Rs 4,529.1 crore (Rs 45.29 billion) and BPCL  Rs 2,892 crore (Rs 28.92 billion), respectively. As a result of last year's spike in oil prices, the three companies are expected to close 2008-09 with total under-recoveries of Rs 103,908 crore (Rs 1,039.08 billion).

For most other areas like energy security, trans-national pipelines and oil exploration and production, the theme would be "continuity", according to R S Pandey, secretary in the ministry.

Two trans-national gas pipelines being pursued by the ministry are Iran-Pakistan-India and Turkmenistan-Afghanistan-Pakistan-India. The main reasons behind the slow development in both are the security issues and political uncertainty in the transit nations. Since both projects require huge investments, the concerns need to be adequately addressed.

Other areas of importance for the new minister would be expanding exploration and acquisition in oil and gas overseas to ensure energy security.

On the domestic front, checking adulteration in petroleum products and diversion of LPG cylinders would require attention of the new minister, officials said. These are all long-pending issues.

R-Power bags four hydel projects

Projects worth over Rs 18,000 cr

Anil Ambani-promoted Reliance Power (R-Power) has bagged four hydroelectric power projects of 2,520- Mw capacity worth over Rs 18,000 crore from the Arunachal Pradesh government through a competitive bidding process.

With this, the company is set to become the second-largest hydropower project developer in India with 4,620 Mw of hydro projects under its belt, said a company official.

State-run National Hydroelectric Power Corporation (NHPC) is the largest hydropower generator in the country with 5,177 Mw of installed capacity and another 6,000 Mw of projects in the pipeline.

The bidding parameters for these projects were the amount of free power that the developer would offer to the state as well as the upfront premium it was willing to pay.

Bidders in the fray for the four projects of 1,200 Mw Kalai-II, 500 Mw Emni, 420 Mw Amulin and 400 Mw Mihudon included players such as Jaiprakash Hydro Power, L&T and Athena Energy, said sources.

“We have bagged four new hydro projects for generating 2,520 Mw and will implement all these projects during the 12th Plan period from 2012 to 2017. These are Run-off-River (RoR) projects which can take off within 6-7 years and construction expenses will be less when compared with reservoir-type hydro projects,” said a Reliance Power spokesperson.

In RoR projects, there is no need for storing the water in dams, which are very expensive to construct. While the Kalai-II project is in Lohit River, rest of the three projects are in River Mithun.

R-Power is currently implementing three hydro projects worth 2,100 Mw – 1,000 Mw Siyom and 700 Mw Tato-II in Arunachal Pradesh and another 400 Mw Urting Sobla in Uttranachal.

R-Power is also in talks with Canada-based Hydro-Queubec, one of the largest hydro power specialists in the world, to explore joint venture and technical support opportunities for its mega hydro power foray, said sources.

Private power producers such as Jaiprakash Hydro-Power Ltd (JHPL), Bhilwara Energy and Tata Power also own and operate hydro power projects in the country and in neighbouring Nepal.

Jaiprakash Hydro-Power Ltd (JHPL), a part of the Jaypee Group, owns and operates the 300 Mw Baspa-II Hydroelectric Project at Kinnaur in Himachal Pradesh and is working on the second phase of 300 Mw.

Bhilwara Energy is targeting to develop 3,000 Mw of hydro power by 2015 through 11 small and medium scale projects in Nepal, Arunachal Pradesh and Himachal Pradesh.

Tata Power, which currently generates 447 Mw of power from hydroelectric projects, is also looking to add another 1,000 Mw from projects in Nepal, Bhutan and India.

In the run-off river type of hydroelectric power plants, the cascading water of the river is diverted through a tunnel and is used to run the turbines for generation of electricity.

The RoR projects in Arunachal Pradesh were planned after analysing the rainfall and water availability for the last 100 years, elaborated officials.

The Build, Own, Operate and Transfer (BOOT) projects will be implemented by separate shell companies formed for the purpose, said sources.

They added that R-Power has started preliminary work for the Siyom and Tato projects in Arunachal and one of the projects may reach financial closure in a few months.

How to get I-T refunds faster

During 2007, the then Finance Minister P. Chidambaram launched an innovative scheme called as Refund banker Scheme. It was first introduced in New Delhi and Patna. Since then, the scheme has been extended to other cities in India. Here, we take a look at the Refund Banker Scheme, its pros and cons. 

What is Refund Banker Scheme?

A refund banker is a scheme, in which a particular bank has been sanctioned to issue refunds on behalf of the income tax department. The State Bank of India [Get Quote] is the authorised banker of this scheme. The refunds are issued in the form of cheques/drafts or Electronic Clearing service (ECS).

Why was the scheme introduced?

The aim of launching this scheme was to speed up the refund process. After taking over as the Finance Minister, Chidambaram has been trying to make the refund process more transparent and quicker. With introduction of this scheme IT refunds will be dispatched by the bank within 3 days of receiving refund intimation from the income tax department.

How will it benefit me?

If you are an individual, you will get your refunds quicker. In case, you have opted for ECS mode of payment, you can get the credit in your bank account within 24 hours. If you are a corporate, you cannot avail of this facility. But in case, if the scheme is extended to corporates, faster refund means more cash to use for business purpose or cash for investment purposes.

How will it change the refund process?

With the launch of refund banker system, the finance minister has already clarified his intention of speeding up the refund process. So you can expect your refund very quickly, unlike the olden days, when it would take years to get your refund. Also, there are plans to extend this scheme to other banks, besides SBI. Once it happens, the refund process will speed up further.

How is the process speeded up?

Once your refund is approved by the income tax department, your refund details are sent to the SBI. Under this scheme, the cash management department of SBI processes the refund, within 3 days of receiving your details.
After this, they prepare your cheque/draft and dispatch it to your address.
If you want to speed up the process further, you can opt for ECS, as you don't have to wait for the cheque to arrive and again for it to clear. Only after your payment is disbursed, will the bank claim the amount refunded from the income tax. This will also help in doing away with the government bureaucracy, thus speeding up the refund process.

Are there any drawbacks of the scheme?

Yes, there are a few drawbacks of this scheme. For one, you may close the bank account, which you have given to the income tax for claiming the refund. If that happens, the onus of updating your details lies on you. Moreover, your address may change before you receive your refund.
So it becomes imperative you keep the income tax department updated on your change in status. Also there can be mistakes in printing your name and/or account number on the cheque/draft. In case of ECS, your amount may get transferred to the wrong account number.

Refund Banker Scheme is a very good scheme. Yet it is imperative for the income tax department as well as SBI to follow the scheme very meticulously, to prevent any misuse of the scheme.

Reliance Infra's achieved financial closure of the western region project

Reliance Infrastructure (R-Infra) has achieved financial closure of the Western Region System Strengthening (WRSS-II) power transmission project and a consortium of banks led by State Bank of India will fund about Rs 970 crore as debt for the project.

The Rs 1,385-crore project, with a debt-to-equity ratio of 70:30, would be funded by major banks and financial institutions, including India Infrastructure Finance Company Ltd, Vijaya Bank, State Bank of Hyderabad, South Indian Bank, United Bank, Andhra Bank and Bank of Maharashtra, said company officials. R-Infra will offer the 30 per cent equity of about Rs 415 crore.

The executives claimed it was the first time an independent private power transmission utility in the country achieved financial closure within less than three months of implementing the power transmission agreement (PTA). The banks offered to fund about Rs 1,200 crore, which is more than the required debt amount.

The WRSS-II is to upgrade the power transmission network to flow upto 4000 mw of power from power surplus Eastern and North - Eastern regions to Western region and facilitate overcoming the grim power situation in Western India. R-Infra had won two projects - B and C, through international competitive bidding, by offering at a levelised tariff rate of Rs170 crore per year for a period of 22 years from the commercial operation date of the projects.

Reliance Power Transmission Limited (RPTL), a wholly-owned subsidiary of RInfra, will set up nine 400 KV double circuit transmission lines covering 1,035 Km in Maharashtra and 483 Km in Gujarat and Madhya Pradesh under the two projects. Projects A and D of WRSS are being developed by Power Grid Corporation India (PGCIL) in association with power utilities, which involve setting up of 14 transmission lines and 20 sub-stations, said sources.

“We hope to complete and commission the projects by December 31, 2010 and is awaiting clearance from the Ministry of Power as per Section 164, which is required to start work by a licensee in transmission,” said a spokesperson for RPTL.

He said the company has already manufactured about 400 towers for implementing the project and about 20-30 people are working for the WRSS. Two project offices have been started at Pune and Gandhinagar.

Reliance Infrastructure, the parent company of RPTL will act as the engineering, procurement and construction (EPC) contractor for the project. In a joint venture, R-Infra and Power Grid Corporation of India are setting up the grid lines for the Rs800 crore Parbati and Koldam hydel projects in Himachal Pradesh.

The official said RPTL has also qualified for bidding in three projects worth over Rs5500 crore, which include the North Paranpur Transmission System and Talchar-II of Rural Electrification Corporation (REC) and Northern Inter-regional Connection Grid of the Power Finance Corporation (PFC).

Recently RPTL had signed power transmission agreements with the Maharashtra State Electricity Distribution Company Limited, (MSETCL), Madhya Pradesh Power Trading Company Limited (MPPTCL), Gujarat Urja Vikas Nigam Limited (GUVNL), Chhattisgarh State Power Distribution Co. Limited (CSPDCL), Madhya Pradesh Audyogik Kendra Vikas Nigam Limited (MPAKVNL), Electricity Department, Govt. of Goa; Electricity Department, Administration of Daman & Diu and the Electricity Department, Administration of Dadra and Nagar Haveli.

Banks' net interest margins dip in Q4

Public sector banks do far better than private ones.

The fourth quarter results of Indian banks indicate pressure on margins due to continued high cost of deposits, decline in lending and low interest rate products floated mostly by public sector banks (PSBs).

The banks reduced their prime lending rates by 50-150 basis points (bps) from the peak levels seen in October, while deposit rates were lower by up to 100 basis points.

Deposits grew by 9 per cent in the fourth quarter, compared to a 37.8 per cent decline in lending. No wonder interest income of the 33 private and public sector banks studied here rose by 23.7 per cent while interest on borrowing increased at higher pace of 27.9 per cent.

But, the high cost of borrowings resulted in a 14 per cent rise in net interest margins, the slowest growth in the past four quarters.

A weak incremental credit-deposit ratio (47.7 per cent as against 83.7 per cent a year earlier) and a larger proportion of funds parked in the low-yield reverse repo mechanism have compressed net interest income (NII). This also led to a sequential drop in net interest margins (NIM) of the banks.

However, declining provisions for non-performing assets and treasury income helped banks to post a net profit growth of 29.7 per cent, compared to 41.7 per cent in the third quarter.

On non-interest income, the fee income of the banks surged up by 35 per cent due to the distribution of various corporate and third-party products.

The treasury operations of banks also benefited from softening of the interest rate, as the RBI reduced cash reserve ratio (CRR), repo and reverse repo rates.

Non-tax provisions and contingencies declined by 2.46 per cent to Rs 7,405 crore in the quarter ended March 2009 and accounted for 32.3 per cent of NII.

What makes the fourth-quarter performance noteworthy is the performance of public-sector banks, which have done much better than their private-sector counterparts on a cumulative basis.

The net profits of public-sector banks surged by almost 40 per cent, compared with only two per cent growth reported by private banks.

Four banks — Dhanalakshmi, Bank of Baroda, IndusInd and Vijaya — have more than doubled their net profits.

State-run Oriental Bank of Commerce posted a net profit of Rs 196.8 crore in the quarter ended March 31, while it had incurred a net loss Rs 99.4 crore in the same quarter a year earlier. India’s largest private sector lender, ICICI Bank, reported a 35.3 per cent fall in its net profit.

Central Bank of India, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and Union Bank of India also reported a decline in net profit during the quarter.

Via : BS

Banks may cut lending rates: Finmin

In what would augur well for the industry facing slowdown, the Finance Ministry on Wednesday expressed hope that banks will bring down their lending rates.

"We are very clear in our mind that the economic environment clearly points towards southward movement of the lending rates. Banks are aware of that and we expect them to move in that direction," Finance Secretary Ashok Chawla said.

Chawla, however, said that it was up to the banks to take a call on the timing and quantum of rate cuts. "How much and when precisely (banks will cut rates) is the decision that banks have to take," he said.

With industrial output contracting, industry is demanding cheaper cost of funds, including lending rates of banks.

In March this year, industry chambers met Prime Minister Manmohan Singh and expressed concern over high lending rates even when inflation had reached near-zero level.

Around a month after the meeting, the Reserve Bank cut its lending and borrowing rates, or repo rate and reverse repo rate respectively, by 25 basis points, signaling reduction in lending rates by banks.

Industry was complaining that private sector banks are not cutting lending rates, but top private lender ICICI Bank was first to cut its lending rate by 50 basis points followed by other banks.

Mutual funds sidelines in current rally

Mutual funds, flush with cash, are busy booking profits instead of investing in this rising market. While foreign institutional investors have pumped in Rs 1,012 crore in the last two days, when the market moved up from 12, 000 to above 14,000, mutual funds have pulled out Rs 1,720.60 crore, according to data from the Securities and Exchange Board of India.

Some fund managers said the market could come down later, which would allow them to re-enter at a later date.

Despite some mutual funds’ cash levels as high as 25 per cent, they are unwilling to deploy it. Reliance mutual fund’s cash level is the highest (26.89 per cent). JP Morgan mutual fund’s cash level is 25.54 per cent while JM Financial is keeping 19.43 per cent of its corpus as cash.

The result is lagging returns of equity funds when compared with Sensex. On a three-month basis, equity funds have posted 46.12 per cent returns while Sensex has given returns of 58.16 per cent.

With close to Rs 17,000 crore lying idle with mutual funds, experts say the retail investors have lost out. “Even the euphoria has not been able to bring them back. The money may eventually be deployed but they have missed the intial part of the rally”, said a distributor.

“There has been a sharp run-up in valuations, which are looking ahead of fundamentals in many stocks. Fund houses have been keeping high cash to hedge against uncertainty. Some amount of it could be showing as underlying for their exposure in derivatives”, said Navneet Munot, chief investment officer, SBI mutual fund.

“Mutual funds booked heavy profits yesterday as they had bought when the markets were falling. Probably, they are expecting the sentiment to cool off. Some redemptions would also have come”, said a broker.

“It is true that fresh inflows had dried up. But now, with the revival of the sentiment, people have started to look at equity. The spillover effect of buoyancy in sentiment will be reflected in collections by equity funds. Fund managers who have been waiting in the wings will probably like to invest now”, said another distributor.

GOLD to be attractive again in 6 months

Investors, speculators, hedgers and consumers who sold their gold stocks to partly set off losses in the financial markets will start replenishing within six to eight months, says Ajay Mitra, managing director - Indian sub-continent, World Gold Council.

Gold offtake slowed in the first quarter of 2009 due to the global financial crisis. In January, say market participants, India imported 20 tonnes of gold. With global financial markets worsening since, imports in February and March remained almost nil.

The financial markets have started recovering and so has the rupee against the US dollar. This means investors in the equity market will started using a part of their investment or income for gold as an asset class which may rescue them, like last year, at a time of financial crisis.

Gold is bought today with three purposes; as a hedge against inflation, as an asset and to store value to cash on at a time of financial difficulty. According to Mitra, investors of the stock market rescued themselves partly by selling gold holdings. As a consequence, used gold sales increased substantially in the first quarter of the current calendar year.

"The global financial crisis was the only factor which hurt consumers' sentiment badly and not prices, which is evident from the gold sales on the occasion of Akshaya Tritiya," said Mitra.

On Akshaya Tritiya, April 27, considered the most auspicious day for buying gold, despite the price being 30 per cent higher than on the same day last year, sales were Rs 7,280 crore (Rs 72.8 billion), against Rs 6,359 cr (Rs 63.59 billion) on the day in 2008. However, sales were 45 tonnes, cpmpared to 48.9 tonnes last year.

Standard gold on the day was quoted at Rs 14,830 per 10 g in Mumbai.

Once consumer demand picks up, scrap sales will be addressed. Scrap sales since December 2008 had surged to an estimated 500 kg a day against 100 kg in normal circumstances.

Meanwhile, the sector requires three major policy initiatives from the government which may boost consumers' morale, Mitra said. The government should liberalise credit for exporters even for short periods, traders should be allowed to use their gold holding with banks, which they are barred from doing, and non-banking finance companies and co-operative banks should be permitted to retail gold.

If these initiatives are facilitated, gold sales will recover to the normal level, he added.

India's gold sales were 402 tonnes in 2008, a decline of 47 per cent from last year. In the first quarter of 2009, gold sales are likely to take another big hit, due to less consumer spending on luxury goods, including jewellery items.

During the first quarter of 2008, gold sales in India declined by 50 per cent, at 102.1 tonnes from 202.2 tonnes in the comparable period last year.

IPOs have underperformed, despite the rally

The shares of companies that mobilised funds in 2007, including through initial public offers (IPOs), have underperformed the markets in the current rally. The stock prices of 148 companies that brought out IPOs have gained 64 per cent on an average compared with the 72 per cent rise in Sensex between March 9, 2009, and May 20, 2009.

Except construction, engineering and information technology firms, most companies that have listed in the last two years via IPOs have underperformed the equity market. Of the 148 companies, as many as 121 are trading below their issue prices. These 148 collectively raised Rs 58,703 crore from the public and have eroded 15 per cent of the wealth. Their current combined value is Rs 49,952 crore.

The BS IPO meter, which tracks newly-listed stocks, rose 61 per cent from 205.63 on March 9, 2009, to 330.31 on Wednesday. It is, however, still down 51 per cent from its all-time high of 671.48 reached on January 7, 2008.

Of the 148 companies, 55 have outperformed the Sensex and gained more than 75 per cent during the period. Thirty-eight of gained 50-75 per cent, 38 rose in the range of 25-50 per cent and 15 between 10-25 per cent.

The market value of the remaining six, Akruti Nirman, Glory Polyfilms, Spice Communications and Edserv Softsytems, has declined below the levels seen on March 9, 2009. In the current year, only Edserv Softsytems mobilised Rs 24 crore at the issue price of Rs 60 per share. It is trading at Rs 23.70 on the Bombay Stock Exchange.

Even though the market price of most real estate and infrastructure firms which launched their IPOs have more than doubled from their March 9, 2009, levels, they are still trading below their issue price. The list includes DLF, HDIL, IVR Prime Urban, Supreme Infrastructure, Puravankara Projects and Tanla Solutions.

DLF, the real estate major, appreciated 156 per cent from Rs 138.69 on March 9, 2009, to Rs 354.80 on the BSE on Wednesday. The company, which raised Rs 9,188 crore via a public issue at a price of Rs 525 per share, is trading at 32 per cent below its issue price.

Reliance Power, which raised around Rs 11,700 crore through a public issue, has appreciated 88 per cent during the period, from Rs 92.05 to Rs 172.80, but the stock is trading 39 per cent below the offer price of Rs 281.25 (adjusted after bonus shares) on the BSE.

Future Capital, Maytas Infra, Pearl Fashion, IVR Prime Urban, Omaxe and Vishal Retail are among the other companies that brought out their IPOs in the last two years and have declined over 75 per cent from the issue price.

World steel output falls 24% in Apr but INDIA bucks the trend

World steel production fell nearly 24 per cent in April, reflecting the recessionary pressure in the West, but India bucked the trend recording about three per cent growth in output of the key industrial intermediary.

The global crude steel output plunged to 89 million tonnes in April as countries such as China, Germany, Japan and the US slipped into a negative terrain amid slackening demand, data released by the World Steel Association said today.

Indian companies, however, managed to sail through the crisis and produced 4.25 million tonnes of steel as against 4.13 million tonnes in the corresponding month last year, according to data of Steel Ministry's Joint Plant Committee.

Steel Secretary P K Rastogi attributed the increase in April produce to robust demand from consuming sectors as also clearing of inventories by steel companies.

"They (companies) have cleared their inventories and are producing more. It is a good sign for the sector," he said.

Contrary to the growth registered by India, major steel-- producing nations such as China, Japan, Germany, Turkey and the US saw the output declining by up to 53 per cent.

The US saw a maximum 53.4 per cent dip in steel output at 3.9 million tonnes followed by Germany and Japan, which reported 53.1 and 43.6 per cent dip, respectively.

In the first four months of 2009, global steel output fell 22.7 per cent to 354 million tonnes. Asia's contribution to it also dipped by 9.5 per cent to 231 million tonnes.

Foreign investors lapped up $553 million, 10% in Indiabulls Real Estate

Foreign investors are aggressively renewing their interest in the Indian real estate sector. Overseas investors such as Fidelity, HSBC, TPG and Moor Capital on Monday lapped up the entire $553-million (Rs 2,656 crore) share sale issue of Indiabulls Real Estate (Ibrel).

Overseas investors bid for thrice the shares offered by Ibrel, as the outlook for the Indian real estate sector seemed to be improving. HSBC and Fidelity added to their existing stake in the company, while TPG and Moor Capital joined other investors.

While US-based Fidelity bought $50 million (Rs 240 crore) worth of shares, the UK's HSBC and private equity major TPG bought $300 million (Rs 1,440 crore) and $200 million (Rs 960 crore) worth of shares, respectively, investment banking sources said.

Ibrel received subscription worth $2 billion (Rs 9,400 crore) from investors when it opened the issue on Monday. It sold 143.59 million shares at Rs 185 a share to investors, the company told the Bombay Stock Exchange today. The issue price was 6 per cent lower than Monday's price of Rs 197.50.

The promoters have diluted their stake in the company by 10 per cent, bringing it down to 16 per cent now. Foreign institutional investors hold 37.14 per cent, as on March 31, of which HSBC and its entities own 8.28 per cent and Fidelity owns 1.94 per cent.

Foreign investors are lapping up stocks of Indian property developers in share sales. The BSE Realty Index, which tracks property stocks, went up 53 per cent in the past month. In mid-April, Unitech Ltd, the country's second-biggest real estate developer, raised $325 million (Rs 1,625 crore) from selling new shares to investors such as HSBC, Prudential, Och-Zif, Orient Global and Sandstone Capital in a qualified institutional placement. Last week, the promoters of DLF, the country's largest property developer, sold a 9.9 per cent stake to investors from Capital International, HSBC, Fidelity, Euro Pacific Growth Fund and Copthall Mauritius Investment for Rs 3,860 crore.

"FIIs are interested in those stocks which are under-owned and bullish on sectors such as real estate, banking and infrastructure, which will grow on stability," said Gagan Banga, Indiabulls director.

According to S Subramanian, head of Investment Banking at Enam Securities, nearly $1 billion (Rs 5,000 crore) of institutional money is expected to be invested in Indian equities in the next six months, of which $500 million (Rs 2,500 crore) is expected to flow into realty stocks.

"Investors have different risk appetite and, accordingly, companies are appreciated. Our strategy is that we want to raise capital from long-term investors, as against short-term funds," said Banga.

Analysts said foreign investors were bullish about Indian stocks, especially in the backdrop of signs of a stable government and likely reforms that are expected to follow.

"FIIs believe in the long-term Indian story. Since valuations were low, they wanted to invest in and capitalise later. Real estate stocks will be re-rated once more money comes in and debt levels reduce," said an analyst from a Mumbai-based brokerage, who did not wish to be identified.

When it comes to TRPs, IPL's whipping boys KKR score high

Despite plummeting to the bottom of the teams’ ranking table in the current edition of Indian Premier League (IPL 2) tournament currently underway in South Africa, Indian television viewers have not deserted the Kolkata Knight Riders (KKR) team.

The Shah Rukh Khan-owned IPL team has won only two out of the 13 games each team has played so far. But, when it comes to television rating points, KKR is placed fourth – close behind the teams of Chennai, Delhi and Bangalore – on the basis of average viewership ratings.

In fact, peak ratings of KKR matches on SET MAX channel are among the highest at around 6 per cent of the universe of cable viewers above the age of 15 years, says an analysis of the viewership data provided by overnight ratings agency Audience Measurement and Analytics Ltd (aMap).

This, according to media experts, is due the close matches KKR has been involved in with other teams, with the results of most of them being decided only in the last over – mostly against KKR.

The team’s average match ratings of 3.3 per cent is more than the television ratings of 3.2 generated by the 52 matches played so far in IPL 2. According to aMap data, KKR’s average television ratings for the 12 matches it played (one match was cancelled due to rains) stands at 3.3 per cent, marginally behind the average ratings generated during the matches of Bangalore (3.5) and Delhi (3.7).

The average match ratings of Chennai Super Kings, captained by MS Dhoni, is the highest at 4.2 even as it looks at securing a place in the semi-finals of IPL 2. Last year, the Chennai IPL team was the runner-up after getting defeated by Shane Warne’s Rajasthan Royals.

Half of the KKR matches have managed to get an average ratings of around 4, which is considered very high by media planners, especially for the age group of 15-plus, which is the target demographic for most of KKR’s sponsors. KKR has got sponsors like Reebok, Nokia, Star Plus and Sprite, among others.

“From an advertiser’s point of view, we have got a lot of mileage and media space for the right and wrong reasons. The fact that it has managed to attract television viewership and on-ground support from spectators speaks a lot about the brand KKR,” says a source representing one of the sponsors of KKR team.

At the end of the first edition of the IPL tournament last year, KKR was one of only two teams that were cash-positive. But it has been struggling this year – even before the tournament started.

First, it changed its captain Sourav Ganguly with Brendon McCullum, the New Zealand batsman-wicketkeeper. Then some of its key players, like West Indian batsmen Chris Gayle and Ganguly himself struggled with their batting, which accounted for some of the losses in close encounters with other teams, according to cricket experts.

Pre Session Commentary - May 21 2009

Today domestic markets are likely to open negative amidst weak global cues. The US markets closed in red due to FOMC’s outlook of the economy which shows contraction in the real GDP during the current fiscal along with trough path for the housing sector. The bottom-line stocks may once again steel the charm of the day form the heavy weights. Further the UPA government formation to go with the swearing tomorrow would hardly affect the market sentiments today as traders are cautious in taking fresh positions.
On Wednesday, the domestic markets closed in red. The session started with a timid trade amidst lack of any cues from other Asian markets which were trading mixed. As the trading session progressed the markets started plunging in red exuding profit booking and cautiousness. A firm trend in London Metal Exchange (LME) thrust local market indices like CD, Metal and Auto that closed with huge gains of 9.69%, 5.22% and 4.70% respectively. On the other hand Bankex, Oil & Gas and Teck suffered losses of 2.45%, 2.09% and 1.33% respectively. The bottom line stocks for the second consecutive day outshined the benchmark indices by clocking remarkable gains of 6.03% and 8.86% respectively. We expect the markets to be trading negative.
The BSE Sensex closed low by 241.37 points at 14,060.66 and NSE Nifty ended with loss of 48.15 points at 4,270.30. BSE Mid Caps and Small Caps closed with gains of 265.95 points and 424.04 points at 4,673.77 and 5,208.18 respectively. The BSE Sensex touched intraday high of 14,405.51 and intraday low of 13,976.49.
On Wednesday, the US stock markets closed in red. The fragile outlook of the FOMC meeting suggested that the real GDP will face a contraction this year. The housing sector is also facing a trough situation amidst the downturn in economy. Sectors like financial and consumer finance companies were shattered during the day’s trade. Though Bank of America exuded some strength after announcing that it has raised $13.5 billion through share offering, the banking stocks could not resist the selling pressure. Consumer finance companies were under huge pressure after the Senate’s approval and House of Representatives approved a bill to make stringent changes for the credit card industry. Dow Component Hewlett Packard generated in-line earnings for the last quarter and has a upside outlook for the current fiscal. However the stock ended with a loss of 0.7%. The US light crude oil futures for July closed higher by 3.3% at $62.01 per barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average (DJIA) declined by 52.81 points to close at 8,422.04. The NASDAQ Composite (RIXF) index fell by 6.70 points to close at 1,727.84 and the S&P 500 (SPX) closed low by 4.66 points at 903.47.
Today major stock markets in Asia are trading negative. Hang Seng is trading low by 208.16 points at 17,267.68 followed by Shanghai Composite which is low by 29.97 points at 2,621.44. Japan''s Nikkei is low by 123.06 points at 9,221.58, Strait Times is low by 19.59 points at 2,249.65. Seoul Composite fell by 17.78 points at 1,417.92 respectively.
Indian ADRs ended mostly lower. In technology sector, Infosys ended down by 2.45% along with Wipro by 0.72%. Further, Satyam lost 0.44% while Patni Computers gained 2.27%. In banking sector ICICI Bank and HDFC Bank dropped by 2.77% and 1.63% respectively. In telecommunication sector Tata Communication decreased by 0.57% whereas MTNL advanced by 3.20%. Sterlite Industries increased by 1.52%.
The FIIs on Wednesday stood as net buyers in equity and debt. Gross equity purchased stood at Rs 12,578.90 Crore and gross debt purchased stood at Rs 44.40 Crore, while the gross equity sold stood at Rs 7,534.10 Crore and gross debt sold stood at Rs. 28.80 Crore. Therefore, the net investment of equity and debt reported were Rs 5,044.80 Crore and Rs 15.70 Crore respectively.
On Wednesday, the partially convertible rupee ended at 47.47/48 per dollar, 0.6 percent stronger than previous close at 47.75/77. Rupee continued gaining strength for the fourth consecutive day due to anticipations of more foreign capital inflow as the UPA government is expected to sworn in on May 22, 2009.
On BSE, total number of shares traded were 81.15 Crore and total turnover stood at Rs 8,415.09 Crore. On NSE, total number of shares traded was 159.89 Crore and total turnover was Rs 28,398.75 Crore.
Top traded volumes on NSE Nifty – Unitech with 108221028 shares, Suzlon Energy with 59918605 shares, DLF 27738945 shares, Reliance Comm with 26408897 shares followed by Tata Steel with 24893214 shares.
On NSE Future and Options, total number of contracts traded in index futures was 813193 with a total turnover of Rs 16,919.57 Crore. Along with this total number of contracts traded in stock futures were 529735 with a total turnover of Rs 26,987.93 Crore. Total numbers of contracts for index options were 1189773 with a total turnover of Rs 25,002 Crore and total numbers of contracts for stock options were 32442 and notional turnover was Rs 1,661.38 Crore.
Today, Nifty would have a support at 4,189 and resistance at 4,245 and BSE Sensex has support at 13,650 and resistance at 13,920.

KRBL

We recommend a buy in KRBL from a short-term trading perspective. It is apparent from the charts of KRBL that it was on an intermediate-term downtrend between late July 2008 and early March 2009, from Rs 150 to Rs 42. However, the stock reversed direction, after finding support around Rs 42. Since early March the stock has been on a medium-term uptrend, forming higher peaks and higher troughs. In mid-April, the stock conclusively penetrated the intermediate-term down trendline as well as the 50-day moving average. On May 20, the stock decisively broke out of its significant resistance at Rs 70 by advancing 10 per cent. We notice that there is an increase in volume over the past two trading sessions. The daily relative strength index (RSI) is featuring in the bullish zone and the weekly RSI is heading towards this zone. We are bullish on the stock from a short-term horizon. We expect the stock’s up-move to continue until it hits our price target of Rs 85 in the near future. Traders with short-term trading perspective can buy the stock while maintaining a stop-loss at Rs 72.
via BL

Slide may continue

The south-bound trend in the market is likely to continue on the back of a weak global indices. However raise in FIIs may help the market sentiment. Among the key domestic indices, the Nifty may test 4240 on the downside while on the upside the index could test higher levels of 4310, while the Sensex could test higher levels of 14200 and has a likely support at 13900.
US indices faltered erasing earlier gains, as the Federal Reserve's dour economic outlook curbed optimism about the health of U.S. banks. While the Dow Jones dropped 53 points to close at 8422, the Nasdaq ended 7 points lower at 1728.
Barring few select floats, most of the Indian ADRs posted loss on the US bourses. Infosys, Satyam, Wipro, Tata Motors, ICICI Bank, HDFC Bank and VSNL lost nearly 0.57-3% each, Among the select gainers Rediff gained the most and moved up over 9% while MTNL and Patni Computers ended with decent gains.
Crude oil prices inched lower, with the Nymex light crude oil for July delivery moved up by $1.94 at $62.04 a barrel and in the commodity segment, the Comex gold for June 09 series gained $10.70 to settle at $937.40 an ounce.
Daily trend of FII/MF investment in equities
On May 19 2009, FIIs were net buyers of stocks to the tune of Rs5045 crore (purchases worth Rs12579 crore and sales of Rs7534 crore) while domestic mutual funds were net sellers of stocks to the tune of Rs619 crore (purchases worth Rs7975 crore and sales of Rs8594 crore).

A weak finish to a strong start for US stocks

Minutes of last FOMC meeting take a toll on stocks
US stocks ended modestly lower on Wednesday, 20 May, 2009. US stocks managed a very strong start on Wednesday, 20 May, 2009. But by noon, stocks gave up most of their gains and were trading flat and at the end, they registered losses. It was the financial sector that gave market a solid start in the morning. But with lack of any specific news, the sector failed to continue with its momentum. Earning reports from Target and H-P checked in line with expectations. But losses picked up momentum after last Federal Open Market Committee's meeting minutes hit the wires.
Weakness in the financial sector was the main reason behind today's loss. The sector failed to lend any substantial support to the market in the course of the day. But the same sector had managed to make market make a strong start earlier.
The Dow Jones Industrial Average ended lower by 52.8 points at 8,422. The Nasdaq Composite Index, ended lower by 6.7 points at 1,727. S&P 500 ended lower by 4.6 points at 903.7. Market had opened 101 points higher earlier during the day.
Strength in the financial sector was the main reason behind today's strong open. Bank of America concluded its previously announced common stock offering, which brought in nearly $13.5 billion through the issuance of stock carrying an average price of $10.77 per share. This boosted stocks.
Home improvement retailer, Target announced its latest earnings results ahead of the opening bell today. The company reported better-than-expected earnings this morning.
In other earnings news, Hewlett-Packard posted in-line second quarter earnings and an in-line forecast for its third fiscal quarter. HP also reaffirmed an upside outlook for fiscal 2009. But the stock failed to drive the tech sector higher. Deere announced better-than-expected earnings.
The minutes from the April FOMC meeting indicated today that participants project a contraction for real GDP this year, and that committee members believe the near-term economic outlook has weakened relative to the projections made in January. However, a recovery in sales and production is still expected to begin in the second half of this year.
Crude oil prices ended higher on Wednesday, 20 May, 2009 after energy department's weekly inventory report showed more than expected drop in crude inventories for last week. The subdued dollar also led to rising crude price. On Wednesday, crude-oil futures for light sweet crude for June delivery closed at $62.04/barrel (higher by $1.94 or 3.2%) on the New York Mercantile Exchange. It was the highest level for crude in six months.
EIA reported today that crude inventories decreased by 2.1 million barrels in the week ended 15 May, 2009. Market was expecting a decline of 1.5 million barrels. Despite the decline, crude inventories, at 368.5 million barrels, were still above the upper boundary of the average range for this time of year. Refineries, meanwhile, operated at 81.8% of their operable capacity last week, slightly higher than a week ago.
In the currency market on Wednesday, the U.S. dollar index, fell more than 1%. The dollar dropped against euro for the third straight session.
Earnings and economic reports will be in focus tomorrow. Among economic report, weekly jobless claims data are due at 8:30 AM ET tomorrow morning. Leading economic indicators for April are due at 10:00 AM ET, as is the Philadelphia Fed Index.

Market may extend losses

The key benchmark indices may extend yesterday (20 May 2009)'s losses as investors may resort to profit booking after the recent solid surge. The weak global cues may further weigh on the sentiment.
Asian stocks retreated today, dragging the MSCI Asia Pacific Index from a seven-month high, as the stronger yen diminished earnings prospects in Japan and the U.S. Federal Reserve projected a deeper recession. Key benchmark indices in China, Hong Kong, Japan, Singapore, South Korea and Taiwan fell by between 0.05% to 1.61%.
Singapore's economy shrank less than initially estimated in the quarter ended March 2009, signaling the nation may be past the worst of its deepest recession since 1965. Singapore's gross domestic product declined 14.6% in quarter ended March 2009 over quarter ended March 2008 after shrinking 16.4% between October and December 2008.
The US markets ended lower on Wednesday 20 May 2009 as banking and technology stocks pulled back and comments from the US Federal Reserve dampened the market's optimism.At the closing bell, the Dow Jones Industrial Average shed 52.81 points or 0.62%, to 8,422.04. The S&P 500 lost 4.66 points or 0.51%, to 903.47 and the Nasdaq Composite fell 6.70 points or 0.39%, to 1,727.84. In fresh quarterly forecasts, the Fed projected the US economy would contract between 1.3 % and 2 % this year, with the unemployment rate rising to between 9.2 % and 9.6 %.
Minutes of the Fed's 28-29 April 2009 meeting released yesterday showed some policy makers said “a further increase” in the total amount of asset purchases may be needed to speed a U.S. economic recovery. Fed governors and district-bank presidents foresaw a deeper contraction this year and a weaker recovery next year.
Back home, inflation data for the year through 9 May 2009 will be announced by the government today. Inflation based on the wholesale price index rose 0.48% in the year through 2 May 2009, lower than previous week's annual rise of 0.7%
In the political news, the Congress party-led coalition has the support of 322 lawmakers, Prime Minister-elect Manmohan Singh said on Wednesday, giving it a clear majority in a new government. Singh and Congress party chief Sonia Gandhi met President Pratibha Patil to seek approval to form a new government. President Pratibha Devisingh Patil on Wednesday appointed Manmohan Singh Prime Minister and invited him to name his Council of Ministers.
The invitation to form the government came after Dr. Singh and Congress president Sonia Gandhi staked claim with letters of support from 274 members of the 15th Lok Sabha. In addition, the Bahujan Samaj Party, the Samajwadi Party and the Rashtriya Janata Dal sent letters of support for a Manmohan Singh-led government directly to the President, taking the support base to 322.
Dr Singh, the 76-year-old economist-turned-politician, will be sworn in as Prime Minster of India for the second term on Friday 22 May 2009, a day after the 18th death anniversary of Rajiv Gandhi. Dr Singh was renominated as Congress Parliamentary Party leader on Tuesday (19 May 2009).
Meanwhile, as per media reports key government departments have drawn up a slew of proposals to populate an ambitious reform agenda for the first 100 days of Dr Singh's second term as the PM, aimed at giving economic growth a leg-up. PM has already prepared the broad contours of an economic revival plan to be taken up soon after the new government is formed, reports suggest While recommendations to revive growth and ease the credit squeeze are likely to find a place in the plan, tax proposals are expected to be taken up as budget recommendations. The telecom ministry has prioritised the much delayed auction of 3G airwaves and WiMAX spectrum. It has also prioritised introduction of a new spectrum policy.
The petroleum ministry is aiming for increased domestic output and a targetted-delivery system for the poor
The new government is also likely to pursue disinvestment of state-run undertakings, reports suggest. The disinvestment department under the finance ministry is reportedly working on expanding the list of companies in which the government could reduce its stake. Among these are Power Grid Corporation, Cochin Shipyard, and Rashtriya Ispat Nigam.
The Congress-led UPA defied predictions of a tight election and was only about 11 seats short of an majority from the 543 seats at stake in the recently concluded Lok Sabha election. Congress' alliance took 261 seats, sweeping aside its nearest rival, the bloc led by the Hindu-nationalist Bharatiya Janata Party (BJP), which won only 159 combined. Congress, which alone won 205 seats, needs a handful of partners to reach the 272 seats needed to take power, and is expected to seek the support of more smaller parties or independents.
Financial sector reforms are likely to get a push in the coming days, which were relegated to the back seat due to persistent opposition from the Left parties.
Meanwhile, the stock market will keep a close eye on the allocation of portfolios in the new government. It remains to be seen who gets the key ministries viz. power, transport and education sectors likely to be decided at the crucial UPA meet scheduled to be held in New Delhi today. Analysts say growth in these three sectors are key for India to achieve strong economic growth. If those seen as strong performers are given charge of these three ministries, the market may extend gains.
As per reports, Congress's strong showing in election means reformers will almost certainly be named to key ministerial portfolios viz. finance, trade, defence and foreign affairs. The ministers should be named this week. Fresh reformist faces may also join the cabinet for the first time, including Rahul Gandhi, heir to the powerful Gandhi dynasty and seen as pushing a new generation of leaders into the Congress.
Among the contenders for the post of the finance minister are C Rangarajan, an economic adviser to the prime minister, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, Trade Minister Kamal Nath, and External Affairs Minister Pranab Mukherjee. As per market talks, P Chidambaram could retain his home portfolio.
This week so far, The BSE 30-share Sensex lost 241.37 points or 1.69% to 14,060.66 on Wednesday 20 May 2009 on profit taking. The BSE Sensex had crawled up marginally on Tuesday, 19 May 2009 extending gains for the second straight day after Indian stocks had witnessed a historic rally on Monday, 18 May 2009, when the key indices viz. the Sensex and the Nifty surged more than 17% each on hopes a new stable government will be able to push reforms.
The Sensex has risen 4413.35 points or 45.74% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has surged 5,900.26 points or 72.3%.
Foreign funds turned sellers after buying aggressively in Indian stocks. As per the provisional figures on NSE, the foreign institutional investors (FIIs) sold shares worth a net Rs 985.53 crore on Wednesday, 20 May 2009 and domestic funds bought shares worth Rs 4.99 crore. FII inflow in May 2009 totaled Rs 15,368.80 crore (till 19 May 2009) while their inflow in calendar year 2009 totaled Rs 15,725.30 crore.

Daily News Roundup - May 21 2009

Reliance Industries has received the government go-ahead to sign agreements with firms supplying the much-needed gas to households and car owners in major cities. (ET)
ONGC and Oil India provide support of Rs9.4bn in form of subsidy. (BL)
Tata Steel rules out stake sale in Teesside plant. (FE)
Bharti-Wal-Mart will open its first cash and carry store in India in Amristar, Punjab next week. (BS)
Bharti Airtel plans to open 1600 Airtel service centres in Tamil Nadu by end of this month followed by another 4000 such centres by end of March ‘10. (FE)
PGCIL is in talks with atleast 4 US companies to jointly bid for transmission contracts there. (Mint)
Grupo Mexico has bid US$1.6bn for Asarco to counter Sterlite’s offer. (BS)
TCS expects its Asia-Pacific business to grow faster than the overall company. (BS)
Tata Motors is understood to have begun refunding dealers across the country for unsold Nano booking forms. (ET)
Tata Motors has raised Rs42bn through the issue of secured non-convertible debentures (NCD) in the local market. (ET)
Punjab National Bank to sell 26% stake in housing finance arm to Dawnay Day. (BL)
Reliance Power has bagged 4 hydro power projects of 2.5GW capacity worth over Rs180bn. (BS)
Reliance Infrastructure has achieved the financial closure of the Western Region System Strengthening power transmission project and a consortium of banks led by SBI will fund Rs9.7bn as debt. (BS)
Grasim puts its RMC investments plans at rest. (FE)
Sobha Developers and Mumbai-based HDIL are considering raising funds through QIP. (ET)
Aditya Birla Group may sell a stake in its loss-making retail venture to private equity firms Warburg Pincus, KKR and Goldman Sachs. (ET)
Tech Mahindra eyes 50% stake of VGE in Satyam’s JV. (FE)
Unitech has sold an office space in Saket, New Delhi, for Rs5bn as part of a plan to raise money. (BS)
Telenor hikes stake in Unitech Wireless to 49%. (BL)
HCL Technologies has entered into outsourcing services engagement with MTV Networks. (BS)
Jain Irrigation bags Rs650mn order from Balh Valley Medium Irrigation project in Himachal Pradesh. (BL)
Pfizer Inc has inked pact with Claris Lifesciences to market off patent injectibles. (BS)
Government plans to divest 10% in BSNL once the new minister assumes office. (BS)
BSNL may reject Huawei’s bid for the GSM line order for the western telecom circles. (BS)
KS Oil to get Rs4.5bn funding from PE investors, GDR and promoter funding for development, expansion and acquisition of agricultural assets in South East Asia. (BL)
Surya Roshni to complete its Rs6bn expansion by fiscal end. (BL)
Prolec GE announced that it has enhanced its stake in Indo Tech Transformers to 74.35%. (BL)
Texmaco bags 3,455 wagon orders from Railways. (BL)
Swan Telecom is set to outsource its IT and backoffice functions to Tech Mahindra and will award a network equipment deal to Ericsson. (ET)
NHPC, MMTC, BSNL and Oil India are some of the public sector firms that may be upgraded to navratna status ahead of their IPOs. (ET)
MTNL executives have called off their strike. (BS)
Merck board has approved Rs1.6bn buyback offer. (BS)
Air India board plans to raise Rs30bn to meet its working capital requirements among others. (BS)
MMRDA has invited pre-qualification bids for construction of the tallest building with 101 floors. (BS)
Commerce ministry has initiated steps to reduce the time taken to develop SEZ’s by simplifying procedures to get tax free industrial enclaves notified. (BS)
India may scrap the ban on rice exports after record harvest and increased stockpiles. (BS)
Monsoon has set over the Andaman Sea and part of south Bay of Bengal, right on schedule. (BS)
The new petroleum minister plans to freeing retail petroleum prices and set up transnational gas pipelines. (BS)
India’s import of sensitive products rose by 27.7% in fiscal ended March ’09. (FE)
Banks have lent Rs58.8bn to companies, individuals and other businesses during the fortnight ended May 8, according to the latest figures released by the RBI. (ET)
Demand for gold in India declined by a whopping 83% to 17.7 tons in the January-March period from the year-ago period. (ET)
A government panel is opposing a safeguard measure aimed at preventing owners of new telecom licences from making windfall profits. (ET)

Drizzles and fizzles on the Street!

I think it's how someone becomes good at anything. You practice when nobody's watching - in the heat of the summer or even when its drizzling out.

The streets of Mumbai saw some drizzling even as the heat in the market appears to be slowly fizzling. Though the convincing win for the UPA has been greeted with cheers, the road to recovery will not be a smooth one. It will take some doing for the new regime to engineer the economic turnaround. A good monsoon will surely help with it will need some heavy rain of reforms in the UPA’s new reign.

Global economic conditions remain precarious. The Fed expects a full recovery in the US to be 5-6 years away. Singapore’s economy shrank by 10% in the first quarter. Japan’s economy contracted at a record pace of 15.2% in Q1. The yen has risen to a two-month high against the dollar on speculation that a recession in the US is far from over.

Today, we expect another cautious opening and sideways trading in the key indices. Though the broader market was on fire, one should be wary of the rally in the small-and mid-caps.

Key Results Today: Bajaj Auto, Bajaj Holding, Federal Bank, Gammon Infra, Inox, IRB Infra, Nitin Fire, Unichem Labs and Varun Shipping.

FIIs were net sellers in the cash segment on Wednesday at Rs9.85bn while the local institutions were net buyers of Rs49.9mn. In the F&O segment, the foreign funds were net sellers at Rs34.6bn. On Tuesday, FIIs were net buyers at Rs50.45bn in the cash segment. Mutual Funds were net sellers at Rs17.2bn on the same day.

US stocks ended lower on Wednesday, erasing earlier gains on the back of the Federal Reserve's grim economic. The Dow Jones Industrial Average fell about 50 points, or 0.6%, after gaining more than 100 points early in the session. The S&P 500 index fell 0.5% while the Nasdaq Composite lost 0.4%.

Stocks surged in early trading after Bank of America's $13.5 billion stock sale raised bets that the financial sector is stabilising. Energy stocks also rallied as oil prices rose to a 6-month high. But the market slumped in the final hour of trading after the Fed reduced its growth targets and raised unemployment expectations. The central bank also said it expects a recovery in sales and production to begin during the second half of the year.

Still, the overall tone remains relatively bullish. The CBOE Volatility Index, or VIX, which is considered a gauge of investor fear, fell further after ending at its lowest level since September on Tuesday. The VIX added 0.8% to 29.03. The gauge slipped below 30 for the first time in eight months a day earlier. It was at 25.66 on Sept. 12, the session before Lehman Brothers Holdings Inc. filed for bankruptcy.

According to the minutes from its last policy meeting, the Fed said it expects 2009 GDP to shrink between 1.3% and 2%. That compares with January's projection for a decline between 0.5% and 1.3%. The Fed's staff now expects the unemployment rate to rise to between 9.2% and 9.6%. In January, the jobless rate was forecast to rise to between 8.5% and 8.8%, but the unemployment rate topped that in April, hitting 8.9%. But the Fed also pointed to signs the pace of the recession is easing.

Treasury Secretary Tim Geithner told the Senate Banking Committee that stress-tested banks have set out to raise $56 billion to plug holes in their books. Geithner also said there are "encouraging signs the financial system is starting to heal." But he warned that "we're only beginning to lay the foundation for economic recovery."

After the close on Tuesday, Bank of America said it has raised $13.47 billion through a sale of stocks. The bank has issued 1.25 billion shares since Friday at an average price of $10.77. BofA, whose shares rose more than 2%, needs to raise $33.9 billion to meet the government's stress test requirements.

Congress passed a bill that imposes greater restrictions on the credit card industry for raising fees and interest rates. The approval came despite strong objections by banking industry advocates, who say it could result in tightened credit to Americans.

Separately, President Obama said the financial markets have improved recently, but he cautioned that unemployment will remain elevated for some time. The president's remarks came during a public meeting of his special economic advisory group, which is led by former Fed chief Paul Volcker.

Also, the Senate's Special Committee on Aging heard testimony that the agency that guarantees the nation's corporate pensions, the Pension Benefit Guaranty Corp., posted a record $33.5 billion deficit in the first half of the current fiscal year.

Retailer Target reported that first-quarter profit fell to 69 cents per share, a 7% decline from 75 cents a year earlier. The results topped analyst expectations of 60 cents per share. Target shares rose more than 2%.

Late on Tuesday, PC maker Hewlett-Packard (HP) reported quarterly results that were in line with Wall Street's estimates. The company also said it would cut 6,400 jobs, or 2% of its workforce. HP shares fell 5%.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.19% from 3.24% on Tuesday.

Crude prices rose to a six-month high, settling up $1.94 to $62.04 a barrel, after the government said US supplies of crude oil and gasoline fell more than expected last week. It was the first settlement above $60 for the active-month contract since Nov. 10; Wednesday was the first day that the July contract was the active month.

The dollar slipped versus major international currencies including the euro, the yen and the British pound.

COMEX gold for June delivery rose $10.70 to settle at $937.40 an ounce.

After an overwhelming rally post the Lok Sabha election results, bulls finally took a breather. The slide could be attributed to offloading witnessed in the index heavyweights like DLF, BHEL, ICICI Bank, Bharti Airtel, Sun Pharma and HDFC.

On the other hand, the BSE Mid-Cap index rose 6% and the BSE Small-Cap index surged 8.8%.

Finally, the Sensex slipped 241 points or 1.6% to close at 14,060 after touching a high of 14,406 and a low of 13,976. The index had opened at 14,230 against the previous close of 14,302. The NSE Nifty declined 48 points or 1.1% to shut shop at 4,270.

Among the BSE Sectoral indices BSE Consumer Durable index was the top gainer gaining 9.6%, followed by the BSE Metal index up 5.2%, BSE Auto index up 5%, BSE PSU index up 3% and BSE Pharma index gaining 2%.

On the other hand, the BSE Bankex index was the top loser declining 2.5% and BSE Oil & Gas index down 2%.

Shares of Tata Motors rose over 19% to Rs367 after reports stated that a credit ratings company said the company was planning to sell Rs42bn of debentures. The company plans to issue the debentures in four tranches aiming to refinance a bridge loan taken to buy Jaguar and Land Rover and SBI has guaranteed the debt, added reports.

Shares of Tata Steel rallied by over 13% to Rs371 after reports stated that the company has secured a Rs20bn loan from LIC, aiding the company make additional equity infusions into its UK subsidiary. The scrip touched an intra-day high of Rs378 and a low of Rs324 and recorded volumes of over 8.7mn shares on BSE.

Shares of Airline companies surged to higher altitudes as the operational costs for the domestic airlines’ could drop by as much as 8%, if the dollar continues to depreciate against the rupee. Almost one-third of their operational expenses are denominated in US dollars.

Reports also stated that the civil minister suggested the formation of a civil aviation policy, allowing foreign airlines to acquire up to 49% stake in domestic carriers.

Stocks like Kingfisher Airlines sky rocketed by over 27% to Rs56, Jet Airways rallied by over 14% to Rs278, Spice Jet shot up by over 18% to Rs18.6.

Shares of M&M surged by over 8% to Rs678 after reports stated that the Strike at the company’s Nashik plant has been called off, and it would re-start normal production in 2 days. The scrip touched an intra-day high of Rs684 and a low of Rs603 and recorded volumes of over 0.2mn shares on BSE.

The frenzy of Monday quickly dissipated and the benchmarks ended in the red led by selling in the heavyweights. Markets might further consolidate as traders and investors would be cautious after an overwhelming rally.