India Investment Ideaz

What to do in this painful market ?

2007-08-16T16:03:00.000-05:00

I am writing this note amidst the turmoil in the US Market and its consequent effect on Global Markets. Amazing is the global integration which is existing in the current operation of financial market. Few of the veterans had experienced it during Asian Crisis where Long Term Capital Management got busted but the impact was seen less in the Indian Market because of the fact that India was still going through some transformational changes in terms of investment cycles.

Everything started with Sub Prime Mortgages. You would think why there are repercussions of the same in financial market. Financial instruments created in last one decade allow you to leverage a financial institution to a large extent. It’s like me lending you money backed by Assets. I, in turn, go with an instrument called mortgaged security to the market and ask for money so that I can run my business by lending more. This was leveraged to such an extend that the ripple effect of the same is found in Timbaktu too.

Where do we go from here?

Last week, there was fear that large financial institutions would be impacted to a large extent. But it was not believable. There was good analysis provided by a writer in Yahoo Finance who mentioned that the mortgage market is miniscule to impact the financial market. And I guess he was right to a large extent. There are mortgages of the nature of Jumbo, Sub Prime etc. The impact was from the Sub Prime Mortgages where housing loans were provided to a category of Ninja Borrowers. NINJA here means NO INCOME, NO JOB and NO ASSET. If you try to logical think over it, it would be really a small market out of the large pool of asset based mortgages.

Well, I would think that this should settle down soon, now that the biggest Mortgage Lender – Countrywide Financials looks as troubled and there would be someone to bail them out or it would get busted.

Where do we go from here as far as Emerging Markets, especially India, are concerned?

There would a bounce back early next week but there would be one more pain day in the market globally. The Indian Market should settle somewhere between 13500 – 14000. I am not God to accurately predict that but this is my gut feeling based on the emotional play in the market. Moreover, India is fundamentally going through an investment phase where the money has been borrowed a@ LIBOR + 1 % in case of most of the big corporate. So, there is no dearth of money for the Corporate. Fundamentally, the profit growth can be somewhere between 15 % -18 % for the next 5 years and if it holds true, it can really a good steady market growth for the next 5 years where market can go to 25000 too.

So, hold on to your investments and let this emotional play settle down and enjoy the Bull Run in the market.

Instl biz attracts global brokerages, local firms on toes

2007-06-06T11:51:00.001-05:00

Look out for Indiainfoline, Prime Securities and Emkay.

There is a war brewing on the . The entry of foreign firms in the institutional broking business may put domestic brokers on the backfoot, reports CNBC-TV 18.

It is a business that is too important to ignore or resist any longer. Rs 200 crore every day is the giant institutional broking market for you and what with unprecedented foreign and domestic mutual funds flow.

The lure of this lucre is undeniable. And that is why after exiting his institutional broking joint venture with Morgan Stanley, Nimesh Kampani told CNBC TV18 he was willing to rent an institutional broker until he rebuilt his business.

Nimesh Kampani, Chairman, JM Financial, said "If you can not build it you can always rent it. If I have a corporate client, I can say I do not wanna lose you. I want to work with you and will rent someone in the time being. I could rent Morgan Stanley, CLSA, UBS, Credit Suisse; I could say this deal work with me."

Not just rent, a few months later Kampani was also looking to acquire. Rumour mills pointed at a deal with institutional broking house - SSKI. Nothing has happened yet but SSKI is surely up for sale. And, it should attract bees like honey. After all leading global players like Goldman Sachs, Credit Suisse , Lehman Brothers and BNP Paribas are taking quick steps to launch their institutional business in India.

Frederic Amoudru, Chief Executive and Country Manager, BNP Paribas, says "Clearly, we want to have a strong focus on institutional business. In East Asia we have good franchise and we are big. We want to replicate that in India using our strong connection and deep penetration with FII clients across the region."

As more foreign institutions leverage that 'connection' they could to eat into the business of many domestic brokers who focus on trading shares for the institutional clients.

A precursor to consolidation some would say, but yet others believe that with the pie getting bigger everyone can join the party.

V Gopinath, MD, SBICAP Securities, says "It is a function of the Sensex. But I would say a 30%-35% growth can be taken for granted."

But there is no denying that smaller Indian brokerages could lose foreign clients to the new foreign brokers in town. All this competition is also telling on margins. That is why many domestic brokers are fast adding more products and services like realty advisory and cross border transacting to their portfolio. After all how long can you depend on the Dalal Street.

Timing the Market

2007-05-13T03:42:00.000-05:00

People often glibly issue warnings against "timing the market" without thinking about the underlying assumptions. What is "timing the market"? It is usually taken to mean buying (selling) when you think a share is due for immediate appreciation/depreciation. However, we all buy (sell) only when we expect gains inside a time frame we consider acceptable. And time frames can be very flexible.

To a day-trader, "immediate" is the next 15 minutes. For a position-trader, it could mean within the same derivative settlement -that may be several weeks. For a medium-term investor, it is a deal that incurs short-term capital gains – that is, within the same year. For a long-term investor, it may mean a full business cycle– that could be several years.

The flexibility of time frames is partly personal convenience. You find it most convenient to oversee your investments on a weekly or monthly basis. So, you choose a month or week as your time frame.

But there is also a sound mathematical reason why investment time frames are flexible. Share prices are fractal. Like other fractal quantities, they fluctuate indistinguishably across different time frames.

The easiest way to understand this is to examine price trends across different time frames. Say you take printouts of 5-minute bars, daily bars, weekly bars and monthly bars. Now black out the price values and timestamps. It's impossible to say which time-series represents what periodicity. This is typical fractal behaviour. Another example is a map of a physical location such as a coastline. If you don't know the scale, the same map could represent a continental coastline or five metres of beach.

The fractal nature of share prices means that, if you pick the right direction, across your chosen time frame, you make money. It doesn't matter what time frame you choose; you must pick the right direction. That means, you have to "time the market", whatever your chosen time frame.

This is where investment philosophy breaks into several different schools. The "random walkers" say it doesn't matter what shares you pick, across what time frames. If the market is efficient, your return will be random. If you're lucky you will make lots of money and if you're unlucky, you'll lose a lot.

The value investors say that if you buy sound businesses cheap over long time frames, you beat the street. The technical analysts believe that if you study the specifics of price movements, and buy or sell when you can decode the trends, you beat the street.

All three schools boast spectacular successes. All three schools also boast spectacular failures. Any system which offers you personal comfort is more likely to work for you. There is another question where market philosophies differ. Let's say a stock is down across a given time frame but the underlying business isn't bankrupt. Should you buy or sell?

The random walkers would suggest tossing a coin – previous price should not influence future trends according to them. The value investors say buy. The business is sound; you're getting it cheap. The technical analysts say that you shouldn't buy until a trendreversal. In fact, you should sell to make profits on the downturn.

Both the value investment school and technical analysts have some logic on their side; both methods can work or fail. If the value-investor has misjudged the fundamentals, he loses. The technical analyst will, at the least, forego profits and he may lose heavily if he shorts at the wrong moment.

After all that philosophising, consider a specific case – the universe of Indian stocks, minus the 300 largest. Over the past year, this "sub-300" set has underperformed bigger stocks. Over the past three years, it has outperformed. And, this universe contains many sound businesses.

Pick the right ones and you're buying them cheap. Of course, they may lose some more ground so long as the current trend continues. But if you pick the right ones and then mix in a rough 2:1 ratio with bigger stocks, you're creating a low-risk portfolio with a decent upside. But it may take another three years or longer to generate good returns.

Can you do this and thus, time the market over a period of about three years? DSPML is betting that it can, by launching a new Micro Cap closed end fund which will aim to do precisely this. The Micro Cap Fund will turn open-ended three years later so that is the effective minimum time frame. I like the concept because just one ten-bagger will balance off several mediocre picks. And the sub-300 universe is a good place to look for ten-baggers.

DSPML Micro Cap Details:
Type of scheme: Close-ended equity scheme
NFO closes: May 25, 2007
Minimum investment: Rs 10,000
Cost per unit: Rs 10
Entry load: Nil during NFO
Exit load : 0%-4% (if held for more than 36 months or sold within 12 months of allotment)
Mandate: Stocks that are not part of the top 300 by market capitalisation will constitute 65%-100% of portfolio. Stocks in the top 300 will be allocated 0%-35% of portfolio.

Is this a Global Mania and if so when will this Global Mania End?

2007-05-05T18:47:00.000-05:00

We all have a lot of money invested in the markets globally in one way, shape or form. Either we are working for companies that are dependent on the global players, or are invested in the stocks of the global companies, or are trading partners of these companies that trade across borders. Either way, we are 'invested' in them, and therefore dependent on the growth of their trade......

Is the Indian, Australian, Chinese, Hong Kong, Argentina, Brazil etc emerging markets going to continue it's growth and stock market mania or will 2007 show a topping formation that will take it all stumbling down. Neither of these markets when looked inside-out have any great reasoning to do so (i.e. future view is very bright), but it might not be any single country or market that will correct, but, it will be one feeding the other. We often call it a domino effect. As I was traveling from US to Asia in Apr'2006, I noticed this phenomenan.....So, if you have done homework to see how 2006 corrections started, and what happened, you will soon see that it was 'more' a correction of 'excesses' than a correction with logic, that started from one country, and was bleeding over to another, as if in a spiralling wave downward! If we have the same thing happen in 2007, we are starting at higher level across the board on all markets.

If you dip into the historical accounts of financial manias in classics like Extraordinary Popular Delusions and the Madness of Crowds, or even more contemporary accounts like Devil Take The Hindmost: A History of Financial Speculation , you are struck by one thing. The collective psychology of financial manias remain remarkably similar, no matter the time or place. The French were right: Plus ca change, plus ces't la meme chose. "The more things change, the more they stay the same." There are various forums analyzing and debating this same point. But, very few want to heed this advice, cause we are trained to be 'wanting to be on the train, rather than being left behind at the station' (smile now if you agree!!!!!).

Look at the Chinese markets.....It has been on a rocketing move and the mania in China's mainland has as much in common with the Tulipmania of the 17th century, as it does with the Internet boom of the late 1990s and early 2000's. In particular, the run-up of the Shanghai index is remarkably similar to the recent meteoric rise and collapse of the Arab markets -- down 70% since February 2006. Both took root in a country that had little or no experience with a stock market. And, a "this time it's different" atmosphere pervaded, a set of new fangled heroes drew in millions of unsuspecting small investors, and those who came late to the party ended up suffering devastating losses after the inevitable crash. Like the Arab markets, the Shanghai market is closed to foreign investors. But as the 9% drop in the Shanghai index on Feb. 27 shows, unlike the collapse in the Middle East, the impact of the Shanghai swoon can be felt all the way to Wall Street.

Even the biggest China Bulls around admit that China is in a bubble. The Shanghai Composite Index is now approaching 4,000 -- a rise of nearly 40% so far this year after a 130% increase in 2006. The Shanghai and Shenzhen exchanges now have a market cap of about 15 trillion yuan ($1.8 trillion). While that doesn't make it a big market globally -- the New York Stock Exchange had a total capitalization of $26.5 trillion as of Dec. 31 -- China's market places second in Asia, behind Japan, after surpassing Hong Kong just last month.

Every stock market rise leads to a level of pride not experienced before for the current investors (notice, I did not say happiness), but every stock market correction of any magnitude ends in tears -- as has every other mania in history.

With all the 'deeply engrained cultures from centuries', nothing prepares mankind in China or India or Hong Kong to handle the oncoming correction.....

You may call me bearish after all of the above, but, I am also waiting for that 'eternal' signal when I feel I will come out and side-step the correction with my investments in the US, India, China, and other Emerging markets. But, will I? More importantly, will you?

KKP

ps: Excerpts taken from SeekingAlpha as well as Yahoo to write the above article

Talk of India, China dominates Wharton summit

2007-05-03T10:10:00.000-05:00

India and China were the main topics of interest at The Wharton Economic Summit held last month by the University of Pennsylvania's The Wharton School in Philadelphia.

Several panelists across all sessions highlighted the underlying importance of the two Asian nations and the value they hold for companies to do business. Senior economists and top-level managers stressed the need for companies to look at China and India and their booming potential.

Their message was succinct — multinationals cannot encompass the concept of globalization without having set foot either in India or China.

In a lunch session, Wharton professor of finance Jeremy Siegel took this a step further in discussing some of his findings from closely monitoring China and India. According to his research, China and India will jump to the first and third positions, respectively, in terms of consumption of goods by 2050. The United States will be sandwiched between the two and he pointed out that companies should not view this Asian explosion as a threat, but should consider it an opportunity to target a population of almost 2 billion and the vast potential it holds.

Following Siegel's thoughts, panel sessions focusing on outsourcing and emerging markets drew some of the largest crowds of the summit.

In the session on emerging markets, Manuel Montero, the chief executive officer of SAFTPAY, a non-credit card company that offers a payment system allowing bank customers worldwide to make e-commerce transactions, said that 86 percent of the world population is part of emerging markets.

"Even though 86 percent of the world population comes from these emerging markets, they constitute only 23 percent of the world economies," Montero said. "So, it's very difficult to find the perfect partner country. You have to select the country and have to understand the culture and how the country functions. You have to make sure that you have a commitment and also a strong, close and continuous management."

Montero focused predominantly on the Latin American markets while Rohit Aggerwal, co-founder and managing director of RAS Capital Management, focused on India.

He laid out several favorable facts that would entice potential entrepreneurs to do business in India. A 13-year veteran of handling foreign investments in India, he said that the greatest asset of India was its human capital.

"The greatest asset that has India going is its population," Aggerwal said. "Fifty percent of the population is under 25 and that represents a large, potential workforce entering employment."
He attributed India's sudden spurt of growth to a favorable economic climate in the last 10 years.

"Between 1998 and 2007, cable subscribers have gone from 25 million to 85 million," Aggerwal said. "Cell phone users have gone from a million to 120 million. There has been a huge explosion in consumer service.

"The interest rate has come down from 40 percent to 10 percent," he said. "Inflation has fairly come under control. There is a strong flow of foreign investment and that has resulted in an increase in mergers and acquisitions."

Finally, Shiv Khemka, vice chairman of the Sun Group, summed it up when talking about choosing the perfect partner to do business with in emerging markets.

"You have to choose the right partner," Khemka, who spoke about the benefits of Russia, said. "Get the best human capital and have a long-term view in these emerging markets. These are the keys to succeed in these regions."

Rajat Gupta, senior partner at McKinsey & Co., was the keynote speaker of The Wharton Economic Summit. Panels throughout the two-day summit, held on April 12 and April 13 at the Pennsylvania Convention Center, covered a number of business topics, including the future of technology, "Wall Street meets Hollywood," sports business, real estate and security.

The summit also featured a focus on ethical issues confounding business organizations and on equity markets.

Cognizant's Growth Is Slowing Slightly More Than Expected

2007-05-02T18:56:00.000-05:00

When we previewed earnings for Cognizant Techonolgy Solutions (CTSH) we said “one of these days the growth will hit a wall, but probably not this day.” Today the company reported earnings:

Revenue for the first quarter increased to $460.3 million, up 8% from $424.4 million in the fourth quarter of 2006, and up 61% from $285.5 million in the first quarter of 2006. GAAP net income was $75.4 million, or $0.50 per diluted share, compared to $47.2 million, or $0.32 per diluted share, in the first quarter of 2006. GAAP operating margin for the quarter was 18.2%. Excluding stock based compensation expense of $7.4 million, non-GAAP operating margin was 19.8%, in-line with the Company’s targeted 19 to 20% range.

So far, so good as the consensus was expecting $0.48 on $451 million in sales. Likewise, next quarter’s consensus target of $0.51 on $496 million in sales appears to be in the bag. However, Cognizant’s full-year “at leasts” don’t quite make the cut of current estimates.

2007 Outlook - Second Quarter & Full Year Based on current visibility, the Company is now providing the following guidance: — Second quarter 2007 revenue anticipated to be at least $500 million.

– Second quarter 2007 diluted EPS expected to be $0.51 on a GAAP basis, and $0.56 on a non-GAAP basis, which excludes the impact of stock- based compensation expense of $0.05.

– Fiscal 2007 revenue now anticipated to be at least $2.07 billion.

– Fiscal 2007 diluted EPS expected to be at least $2.13 on a GAAP basis, and at least $2.34 on a non-GAAP basis, which excludes the impact of stock-based compensation expense of $0.21.

– Total headcount by end of 2007 expected to be approximately 55,000, reflecting the Company’s plan to increase utilization throughout the remainder of the year.

Let us first say that it is time for Cognizant to toss aside the “non-GAAP” adjustment for options. It sure looks like the estimates are GAAP-based, so why bother?

The company did not disclose net employee additions in the body of the press release, but the company description at the bottom says “Cognizant has more than 43,000 employees.” This compares to “over 40,000” at year-end. While we remain impressed that a company can add even 3,000 employees in three months, the pace is below the 4,500 added in Q4 and below the run rate to match last year’s 14,500 additions. Further, since the company is now larger the 3,000 additions represent a sequential growth rate of 7.5%, or approximately 33% annualized. This is not only below the current growth rate of 61% but also below the consensus 2008 revenue growth rate of 36.3%.

This is important because Cognizant is a consulting firm, and increasing headcount is the primary way such firms can increase future revenues. While 33% annual growth is indeed good, a trailing P/E multiple of 55x probably requires a bit more. With the growth slowing just a bit faster than expected, however, we still don’t believe that “this day” is “the day.”

Mumbai Investor Meet - Nishit Vadhavkar

2007-04-30T23:22:00.000-05:00

We had an interesting discussion on stock ideas this Sunday.

The consensus amongst the members was that stock picking has indeed become difficult in current times. The market has now become very stock specific which underscores the need for more interactions amongst members.

Vipul our analyst with Edelwiss met the management of Crisil and was convinced of its long term potential. He also is strongly bullish on Pantaloon Retail.

Sunder Rajan sir was bullish on two off beat scrips Tripex and Sukhjit Starch.

I made a presentation on GE Offshore reccomended by Vijay Sir. We tried to understand the working of the company and the high entry barriers made it a compelling buy at lower levels.

Siddarth continues to remain very bullish on KLG Systel having closely studied the company.

FMPs were considered to be an attractive option offering in excess of 10 pc returns for a short period.

Vipul also provided a list of conference calls numbers where individuals could pose questions to managements.

Private Lables would dominate 50 % of Indian Retail

2007-04-30T17:18:00.000-05:00

Organised retail is on the threshold of a boom in India. But as companies line up to grab a bigger and bigger slice of the retail pie, another battle is likely to change the face of the industry — the one between the manufacturer brands and the retail chains’ private label brands, which are far from being just cheap generics. Worldwide experience shows that as retailers become more powerful, they have increasingly focused on their own brands at the expense of manufacturer brands.

Nirmalya Kumar, Professor of Marketing and Director of the Aditya Birla India Centre, London Business School, and co-author of Private Label Strategy, speaks to Govindkrishna Seshan on the new strategies for private labels that retailers are using and the challenges brand manufacturers face to develop an effective response. Kumar says private label brands, which occupy less than 5 per cent of the market in India now, are likely to corner 50 per cent of the market as the retail space opens up and matures.

He also says the following -

"Retailing in India is still very primitive. At the moment, private labels almost do not exist in the country. They are less than 5 per cent of the retail business and still have a long way to go. But Indian retail is extremely hot and it offers a proposition that can’t be seen anywhere else in the world. Only in China and India can retail chains have as many stores as they have in the US. In no other country can one imagine companies having 5,000-6,000 stores of their own.

Here’s a little calculation: in a few years, most retail chains will have close to 5,000 stores in India. A profit of, say, Rs 5 lakh a store a month would mean a profit of Rs 250 crore. Ten such companies would mean profits of Rs 2,500 crore with their combined turnover being more than Rs 25,000 crore.

In the next 20 years, the richest Indian or one of the top three richest people in India will surely be a retailer. Private labels will have a huge role to play in this. As much as 50 per cent of Indian retail will be occupied by private labels. The question is not whether this will happen, but when? If the government opens up retail, we would see it happen within the next 10 or 15 years.

ICICI banks on $320 bn Government infrastructural investment - Live Mint

2007-04-30T10:59:00.000-05:00

ICICI Bank Ltd.’s plan for the biggest share sale by an Indian company may prompt investors to sell its stock on concern it could dilute earnings of the nation’s largest lender by market value.

The bank plans to raise Rs200 billion ($4.9 billion) by selling stock in India and American Depositary Shares in June, Chief Executive K.V. Kamath said on 28 April. Its equity will increase 20%. Mumbai-based ICICI raised Rs80 billion in 2005 to meet demand for loans from companies and consumers in the world’s fastest-growing major economy after China.

`It may dilute the earnings per share in the short run and one could see some short-term negative performance on the stock from the weight of the fresh issuance,’’ said Rajiv Anand, who manages $3 billion at Standard Chartered Mutual Fund in Mumbai and owns shares in ICICI Bank. Still, `it’s a clear indication of the growth that ICICI can see for India.’

Prime Minister Manmohan Singh in October doubled his budgeted spending on roads, airports and ports to $320 billion by 2012 to support growth in an economy that expanded an estimated 9.2 % in the year ended 31 March. The benchmark Sensitive Index gained 65 % in the past two years amid record profits at companies such as Reliance Industries Ltd., India’s biggest.

`Over the next three years, we will likely see a doubling of infrastructure and manufacturing capacity in the country,’’ Kamath said in an interview in Mumbai. `There is an investment pipeline that runs into half a trillion dollars’’ in infrastructure and manufacturing.

Rivals Tata Steel

ICICI Bank’s proposal rivals that of Tata Steel Ltd., the world’s sixth-largest maker of the metal, which said on 18 April that it will sell $2.4 billion of shares in India and overseas to fund its purchase of Corus Group Plc.

Companies in India borrowed about 28 % more in the year ended 31 March. ICICI Bank’s loans increased 34 % that year, after surging 60 % the previous year. Bank lending in India grew more than an average 35 % in the year ended March 2006, and a year earlier, according to central bank data.

The Reserve Bank of India (RBI) last week told banks to maintain loan growth of about 25 % in the year to 31March.

`Assuming a systemic growth of 25 %, this capital should be good for the next three years,’’ Kamath said. `We have to prepare ourselves for market opportunities and given the economic environment in the country and prospects for the country, we thought it appropriate to raise capital and shore ourselves up for the opportunities going ahead.’

Funding Needs

Indian banks will need atleast Rs500 billion this year to bolster capital as lending expands, India’s banking secretary Vinod Rai said on 19 April in New Delhi. State Bank of India (SBI), the country’s largest lender, which needs Rs100 billion of capital this year, has not made any decision to sell shares.

The 50-year old Mumbai-based ICICI Bank received bids for seven times the stock offered at its 2005 share sale to local and international investors, including 40 overseas funds. Merrill Lynch & Co., Morgan Stanley and Nomura International (Hong Kong) Ltd. arranged the previous sale.

The bank sold shares at 525 rupees apiece in December 2005. The stock, which has risen 4.9 % this year against the benchmark’s 0.9 % increase, dropped 30.4 rupees, or 3.2 %, to 933.65 on the Bombay Stock Exchange on April 27.

China, India

`We believe in India’s growth,’’ Kamath said. `If you look at China in context, the size of their banks and the size they have grown over the last few years, we need to take this kind of a step change to meet the opportunity.’

Industrial & Commercial Bank of China Ltd. boosted the size of the world’s biggest initial public offering to $22 billion after increasing its Shanghai share sale 15 % last year.

`If one looks at it from the perspective of the Chinese banks, and on a global perspective, a $5 billion sale is not very big,’’ said Anand of Standard Chartered Mutual Fund. `It should get taken quite comfortably.’

Anand said he will consider investing in the new ICICI Bank shares depending on their price.

The bank said that the money will also be used to conform to Reserve Bank of India (RBI) regulations that stipulate increased capitalization levels for consumer and other loans.

Nishit Vadhavkar's Analysis on GE Offshore

2007-04-30T10:55:00.000-05:00

A new posting is available under Nishit Vadhavkar's Stock Analysis on GE Offshore.

This company belongs to the erstwhile GE Shipping Group handling Offshore business for Shipping Industry. It got listed separately last year and has been underperforming for sometime now.

Charter Rates having been on an uptrend, it also provides an impetus to the charter rate for the offshore rigs and vessels.

Do visit the presentation for more information.

Tata Tea Growing Up AGAIN.....KKP Investor

2007-04-25T22:07:00.000-05:00

Tata Tea has a similar profile to Tata Steel that we talked about last week. How, you say? Well, the Tata's have figured out that grabbing market share throughout the globe is what is going to have a huge impact on each of it's kingdoms over the long term. If you are also a visionary thinker as the Tatas have been, then you will also agree that buying Eight O'Clock coffee, Tetley, JEMCO and Good Earth will be impactful to the top and bottom line of TataTea. Then you get to Glaceau where Tata's have been doing tremendous marketing, but in the end, it is going to help net margins. Now Coca Cola and Tata Tea are working together to decide what to do with the partial ownership that Tat has of the vitaminized water bottler, Glaceau.

Once upon a time, we used to be water drinkers with each of our meals - no exceptions. The Western world used to drink Coke or Pepsi and that was the 'in' thing to do. Today, on a global level it has become a real fad (fashion) to be walking around with bottled water instead of Bull or Coke or 7-Up or Mountain Dew or even Coffee for that matter, or for that matter to order bottled water at a restaurant, or be served only bottled water at your 'working-lunch-session' (you can tell I'm in constantly in sales meetings!). Chai is another big hit for non-Asian folks. Asians do not go for it at Starbucks since it costs $3.98 per medium cup of Tea (and Coffee is $2!). It is this fad that is Tata Tea does not want to give up with Glaceau, or for that matter by staying 'national only', and it is very likely that we will get some new developments from the Coca Cola <> Tata Tea discusions that are currently on-going.

Let's look at the chart of Tata Tea (not attached here).....It was riding high at around Rs 1000 before the big acquisition. It took a hit all the way down from Rs 1000 to Rs 550 (in the Feb/Mar low). All due to the weight of all the debt and dilution of acquisitions. The chart is forming a great pattern seen typically in a stock that is about to bottom, and start moving up (higher high and higher lows). Volume during updays has not been in a 'blow out' category, but it not 'in the groove' as yet. Early buyers should consider buying this fundamentally solid company with 1/3rd position at this time and additional positions later. Tata Tea seems to have a 'zinger' (catalyst) in place now. Basically, folks, Dalal Street memory is starting to fade about why it was a bad idea to hold Tata Tea (in last 3-6 months), we are getting renewed buying that will start breaking resistance levels (1st one already broken). All this time the Promoter, FI and MF holdings have been pretty well intact, but now this Global Brand is about to start showing it colors.

The stock currently trades at 9.9x FY08E earnings estimates. Its strong operating performance partly offset interest concerns in the upcoming nine months. It should continue to exhibit strong revenue growth over the next two years. Also, it will utilize the proceeds from the recent issue of shares to repay debt and, thereby, reduce the decretive impact of interest on earnings. The stock is well on it's way to a price target of Rs1000.

Good luck ya'al......

KKP_Investor

ps: I am a long long term holder of Tata Tea

Is Tata Steel following performance of Mittal Steel (KKP Investor)

2007-04-21T00:54:00.000-05:00

Steel companies have been on an acquisition binge around the world. There are companies in North America, Europe and Asia that are buying to get bigger to demand a larger percent of the global demand. Global demand for steel? Imagine that for a moment. Steel is a highly dense material that takes a lot to produce, and then your globalize it, it does not take an simple email package to email that material out. In the mid-80's steel city was Pittsburgh, the primary provider of steel to make the GM, Ford and Chrysler cars, who had a combined 50%+ market share of the world. Now it has gone global. It takes a lot of logistics, ships and loading zone to take it from A to B. But, yet, we are today in the mania of Buy-Outs and M&A's. Tata's decision to buy-out Corus seemed awefully ambitious, esp. in light of the fact that they kept bumping up their prices to gain % of votes to have the merger approved. Well, now there are doubts of funding this huge deal....But wait, we have an answer for that too - Let's get those funds from the market.

The Tata's who were clearly incapable of funding this deal alone, have decided to fund this mega-deal through a combination of domestic rights, preference shares and overseas equity. They are going for an almost 50% equity dilution, which should raise over Rs 15,000 crore. Starting with a 1:5 rights issue at a price of Rs 300 a share, it would finance the Corus acquisition to the extent of almost Rs 3700 crore.

There is a lot of bearishness surrounding this dilution that is about to happen. That is rightfully so. Even after announcing this dilution, the press releases from the company is eluding to the factor that EPS will not be affected due to these additional shares today, or when the preferential shares are converted over to common stocks.

Only time will tell how this is going to work out, but, if we take the example of Mittal Steel and what has happened to it, we should be totally inclined to pick up any and all shares during the current sell-off or if you own the shares now, then get the most number of rights issues that you can. Of course, you got to have staying power during the sell-off, or to buy the rights issues, and then wait for a year or so when the short term memory of Dalal Street will once again kick in and it will start to look forward to the market share that it has gained, the additional margin points that it has gained with the Corus absorption, and finally, the bullishness back into the Indian and Chinese markets. Check out http://finance.yahoo.com/q/bc?s=MT&t=5y&l=on&z=m&q=l&c= on yahoo to see how Mittal has performed.

You are now getting my general direction of this article-----> Bullishness on Tata Steel basing the pattern on a similar large purchase, dilution, and market share gain by our own Senior Mittal and his son. As of this writing, Tata Steel opened at Rs 464 and closed at Rs 544.

www.relianceretail.com to go live...

2007-04-19T22:33:00.000-05:00

Reliance Retail is readying itself to take the online route as it unfurls major plans for its e-commerce business. According to sources, the Mukesh Ambani-owned retail venture, has already set up a separate team to kick-start an online retail channel to go alongside its physical stores. There are plans to set up depots at various locations which will serve as a delivery point once the orders are placed through the internet.

Industry observers say that increasingly, retail bigwigs will strengthen their online presence as they witness real estate pressures and growth in broadband penetration in the country. When contacted, an RIL spokesperson declined to comment. Sources confirming the plan, however, told ET, “In the next 2-3 years, a significant 5-6% of Reliance Retail’s overall revenues will be generated through the e-commerce network.” The company will gradually use the e-commerce platform to link its front-end retail with the back end logistics.

“The e-commerce business will thrive on a two-pronged strategy, B2B as well as B2C. It will also help the company strengthen its logistics network,” a source said. Industry experts say that with the organised retail pie getting bigger, e-commerce will become an important part of business strategies. “e-commerce will become a significant part of the overall format mix for retailers.

For Reliance Retail it makes a lot of sense to introduce an e-commerce arm as they have the advantage of physical stores already being present. Having physical delivery stores always add to the convenience and success of the online business model for retailers,” says Arvind Singhal, chairman of Technopak Advisors.

Reliance Retail is also looking at having co-branded credit cards and consumer financing schemes, which will enable the company to further strengthen its e-commerce venture. For the same, it has roped in the head of credit card at American Express. Internationally, all the retail giants including Tesco, Wal-Mart and Best Buy have a huge online presence.

Monsoon to be below normal this year says IMD

2007-04-19T22:23:00.000-05:00

The country’s monsoon may be weaker than normal this year, according to India's Meteorological Department.The rain is expected to be 95% of the long-term average, said P.S. Goel, Secretary at the Ministry of Earth Sciences in New Delhi today.

Earlier, a report quoting B.N. Goswami, director of Indian Institute of Tropical Meteorology, said the rains would be more than normal.

Property prices in Hyderabad set to fall...

2007-04-19T22:21:00.000-05:00

Hyderabad may now be the country's second largest city. But the city's big growth could actually mean property prices falling, reports CNBC-TV18.

The Municipal Corporation of Hyderabad is now 450 sq km larger, second only to the National Capital Region (NCR). The additional areas will have all infrastructure and basic amenities that the center of the city enjoys. The project will require a total investment of Rs 28,000 crore from the government. Officials said the new supply would cause prices of residential property in the city to fall

Jayesh Canjan, Vice-Chairman of Huda said, “Property developers will be able to open up many more areas for residential purposes and the availability of housing in terms of supply will go up and because of that the prices will come down."

Hyderabad has seen an increase of % over the last two years because of the large gap between demand and supply of residential property. Real estate consultants expect the fresh land supply coupled with rising interest rates to lead to a 15% correction in property prices

Besides this, the Hyderabad urban development jurisdiction has been increased from 2,000 to 6,000 sq km and the authority is doubling its expenditure to Rs 2,000 crore a year to develop the area.

“We will announce a number of projects like new townships, as well as specialised area developments like medical tourism areas, eco tourism, health city, pharma city and so on," Canjan said.

Over the last year, the local Government has been accused of driving up real estate prices in the city unnaturally through highly priced land auctions with a huge amount of land set to hit the market all that could change, leaving consumers happy.

Mcnally Bharat Engineering

2007-04-19T22:12:00.000-05:00

Mehraboon Irani of Darashaw & Company is of the view that Mcnally Bharat Engineering is a very safe bet at present level.

Irani told CNBC-TV18, "McNally Bharat is a company, which is an expert in a way in providing turnkey solutions and has provided over 250 plants on a turnkey basis. It had a very good growth of 41% in the last three years but what we are confident of McNally Bharat doing is we are seeing it achieve exponential growth over the next 4-5 years, a big beneficiary of infrastructure growth."

He further added, "As far as the earnings go we are looking at the company showing an EPS of around 7.2 in the current year 2006-07 and results should be coming sometime in the next week but what is interesting is the orders in hand which is of Rs 1300 crore which should get executed over the next 12-18 months. 2007-08 we are looking at a topline of Rs 775 crore and a bottomline of Rs 49 crore."

"Assuming that there is going to be no further dilution of equity we are looking at an EPS of around Rs 19. Rs 19 even if we consider conservative multiple of just 15 this should be quoting at over and around Rs 325-330. For the present level that provides a great opportunity in the market in which we are seeing a lot of volatility off late, so big beneficiary of what is going to happen to this company in terms of the order execution over the next 12-18 months. McNally Bharat is a very safe bet at the present level with atleast 100% appreciation possible over the next 12-18 months."

Wal-Mart selling a feel-good image

2007-04-19T21:28:00.000-05:00

The Beast of Bentonville has finally broken its silence. CEO designate for India Raj Jain on Thursday attempted to set the record straight on a host of controversies surrounding the Wal-Mart-Bharti alliance announced late last year.

In an e-mail to ET, Mr Jain asserted that his company aims at establishing a relationship with the Indian small business community by partnering them and helping them lower costs and increase profits.

He also traced Wal-Mart’s “strong history’’ with India, stating that the company sources goods worth over $600 million directly from suppliers in India. In a bid to appease critics, he also held out the carrot of increasing direct sourcing from the region.

After months of silence, his e-mail comes at a time when the Bharti-Wal-Mart joint venture is expected to be announced finally. But more importantly, it comes on the eve of anti-Wal-Mart activist Wade Rathke’s India visit, which ET reported on April 14. Mr Rathke, chief organiser of the Association of Community Organisations for Reform Now, is famous in the US for spoiling Wal-Mart’s party. He is known to have mobilised public opinion against the retail behemoth in South Korea and Germany, the two markets from where Wal-Mart subsequently withdrew, said a source.

Mr Jain said there have been a number of media reports about Wal-Mart that do not reflect the facts, and “for this very reason I thought I should proactively send you certain information about Wal-Mart”. First on Mr Jain’s list is clearing the anti-mom-and-pop-store image the retail giant has acquired, especially in view of the protests in India following the announcement of the Bharti-Wal-Mart JV.

He has clarified that the JV for wholesale cash-and-carry business will sell quality goods to retailers, including small store owners. Not only that, the venture’s wholesale supply chain would link farmers and small manufacturers, thus minimising wastage of fresh foods and vegetables and helping control inflation, Mr Jain says in his e-mail. He also clarified that the front-end retail venture would be a separate wholly-owned and managed Bharti venture.

Infamous for its labour policies? No way. The missive would have everyone know that Wal-Mart is the largest employer in the US and its jobs are “sought-after because of the investment we make in our associates and opportunities we provide them”. In fact, Wal-Mart’s average hourly wages in the US are more than double the federal minimum wage.

China's Q1 GDP: Too hot for comfort

2007-04-19T21:23:00.000-05:00

Is there such a thing as too much of a good thing, well if the reaction to China's latest GDP figures is anything to go by, it surely is. But there are major fears of the dragon over heating.The bustle on China's streets reflects the boom in its economy with its people spending more, but it might be growing too fast and that's the fear of the government.

China's GDP in the first quarter of this year grew faster than expected at 11.1 per cent supported by consumption growth at 3.3 per cent against its Central Bank's target of 3 per cent.The county's trade surplus doubled to $46 billion taking the foreign currency reserves to all time highs.

Meanwhile inflation also touched is at two-year highs.

Worried central bank

While the Dragon is racing too fast beating all the expectations for its own good Central Bank is worried. And when China comes out of a binge the entire world gets a hangover.

With fears of overheating engulfing China's markets that government might clamp down by raising the interest rates China's market indices tanked nearly 5 per cent creating global fears.

Hong Kong's Hang Seng and Singapore's Strait Times lost 2.3, 3.2 per cent while Jakarta closed down by 2.1 per cent.

Markets are afraid that raising interest rates could threaten China's weak banking system or by letting the Yuan appreciate would hurt export growth.But everyone around the world is hoping that the dragon's landing is a soft one and not a thud that shakes all other markets.

Govt says BHEL can’t deliver, to invite global tenders for project

2007-04-19T21:16:00.000-05:00

Stating that Bharat Heavy Electricals Limited would not be able to deliver in time, the West Bengal government has decided to invite global tenders for a project to enhance power output by 2012.

Power minister Mrinal Banerjee said the commissioning of the Santaldih Thermal Power Project, slated for March 2007, is already behind schedule because of delay in manufacture of the main plant package by BHEL. He said the government would not like to have a similar experience again.

Banerjee was talking to Newsline during a conference organised by the Indian Electrical and Electronic Equipment Manufacturers’ Association here.

However, BHEL Director (Power) K Ravi Kumar said although the company has an order book bulging with projects, it is still capable of executing projects in time. “The country has adopted an aggressive time frame for capacity addition but there are infrastructure lacunae to match such schedules,” he said.

“At most, delays caused by BHEL extend to three to four months. But lack of proper ports, roads and other infrastructure must also be taken into account for such delays,” he said.
Kumar said BHEL would apply for the project if global tenders are floated.

In 2006-07, BHEL had orders worth Rs 50,000 crore, of which Rs 28,000 crore was the power sector’s share. Out of this, West Bengal government’s orders alone are worth Rs 5,300 crore.

As part of the 10th Five Year Plan, West Bengal was supposed to add 2,670 MW to its output of power from thermal plants. Though the plan ended this March, the state is to start enhancing power generation from around July.

While BHEL has been responsible for supplying the 250 MW main plant package for the Santaldih project, Itochu of Japan has done it for the Bakreswar plant and a Chinese firm for the Sagardihi project.

Although BHEL’s orders for 2006-07 were worth Rs 50,000 crore, orders worth Rs 55,000 crore were still lying pending at the end of the year.

SEBI fiat: Fixed maturity plans, liquid, floating funds may have to act fast

2007-04-17T20:10:00.000-05:00

The recent SEBI circular on exposure to short term bank deposits by mutual funds will require the asset management industry to rationalise its investments in such deposits, a measure that not all concerned can take immediately.

While there are no definite indications as to how much is exactly at stake, it is believed that liquid funds, floating rate funds and fixed maturity plans will be immediately impacted by the move initiated by the regulator.

At the heart of the matter is SEBI's definition of `short term' for parking of funds, `short term' will relate to a period not more than 91 days. Such a period, notes Mr A.P. Kurian, Chairman of Association of Mutual Funds in India, may be a bit short for a section of the industry, especially players, which are into longer term deposits.

Reliance open offer for TV Today

2007-04-17T19:45:00.000-05:00

Reliance Capital is making an open offer for 20 per cent equity in TV Today, the company that runs a clutch of TV channels including Aaj Tak, Headlines Today and Tez.

The Reliance Anil Dhirubhai Ambani group (R-ADAG) company has offered to buy the shares at Rs 130.50 (approximately Rs 150 crore in all), a 7 per cent discount on today's market price of Rs 140.20

Reliance Capital has already increased it stake in the TV company from 12 to 15 per cent through secondary market operations. Under Securities and Exchange Board of India guidelines, any party that buys more than 15 per cent in a company has to make an open offer.

Confirming the development, an R-ADAG spokesperson said, "We see this as an investment and it would not affect the management or control of the company."

However, Anil Mehra, director, TV Today, said, "We have not heard that Reliance Capital has increased its stake from about 12 per cent to 15 per cent, so we cannot comment. They should make their intent clear. If it's only an investment, we have no problems." Living Media, which also owns the India Today group of publications, controls 55.69 per cent of the TV company.

TV Today has a market capitalisation of only Rs 812.87 crore, against Rs 3,729.94 crore for TV18 (which runs CNBC) and Rs 2,037 crore for NDTV. Reliance Capital has equity in a clutch of media and entertainment entities which include TV18, NDTV, GBN, Zee Telefilms and even the Deccan Chronicle.

It made its big entry in the entertainment sector by acquiring a majority stake in Adlabs, which makes films, and has a bevy of multiplexes across the country.

It also recently picked up a majority equity stake in Synergy Communications, a TV production house which makes the popular game show Kaun Banega Crorepati 3.

Telecom user base swells to 189.92 mn in Q3

2007-04-17T18:56:00.000-05:00

Boom time for the communications continued non-stop with India adding 20.08 million wireless subscribers in the quarter ended December 2006, taking the gross telecom subscriber base to 189.92 million.

Ironically the growth has also brought in less average revenues for the operators with tariffs touching low levels.

The all India blended ARPU (Average Revenue Per User) per month for GSM services has declined by 6.2 per cent from Rs 337 in the previous quarter to Rs 316 in the December quarter.

The wireless market grew at 15.5 per cent in the quarter ending December 2006 by adding 20.08 million subscribers.

The gross subscriber base of the wire-line and wireless services together reached 189.92 million in the quarter ending December, 2006 from 170.02 million as on September 2006, showing an increase of 11.70 per cent, said the TRAI's quarterly performance indicator.

Internet subscribers base reached 85.47 lakhs in the quarter by registering a growth of 5.9 per cent and broadband subscriber base reached 20.19 lakhs in the quarter by registering a growth of 11.12 per cent.

Calper wants and gets more from India

2007-04-17T18:25:00.000-05:00

The government may still have reservations over allowing pension funds in stock markets, but retirement savings worth a billion dollars of more than one million Americans have already been invested in Indian equities and this is likely to rise further this year.

California Public Employees’ Retirement System (Calpers), the largest pension fund in the US, has recognised India as one of the best performers among all the emerging markets in its investment policy report for 2007, approved by its board on Monday. Currently, Calpers has investments of about $1 billion in over 55 Indian stocks, which represents a whopping over 260% return since the purchase of these stocks.

Market experts feel Calpers would be looking to expand its exposure to Indian stock market, as it has given impressive returns ever since the world’s second-largest pension fund with assets worth around $240 billion began investing here in 2004. India has remained on Calpers’ permissible list of emerging markets for investments since its entry in 2004.

For 2007, Calpers board has decided it might invest in 20 emerging markets including Argentina, Brazil, India, Israel, Malaysia, South Korea, Taiwan, Thailand and Turkey. The decision was based on a report from its consultant Wilshire Associates, which reviewed country and financial market factors such as political stability, transparency and labour practices of 27 emerging markets, Calpers said in a statement.

According to the report, India and the Philippines made the biggest improvement in 2006, while a total of 10 markets improved their scores, two (Hungary and Poland) moved down the ranks and 15 kept their scores unchanged during the year.

Calpers, however, would not be permitted public equity investments in China, Colombia, Egypt, Pakistan, Russia, Venezuela, and Sri Lanka.

The pension fund, which provides retirement and health benefits to about 1.5 million state and local public employees and their families, had about $5.2 billion invested in emerging markets as of December 31, 2006.

While announcing its annual report last year, it had disclosed investments in 55 Indian companies at a book value of about $277 million, whose market value stood at over $353 million on June 30, 2006 itself.

It had recorded a total return of about 12% on its investments during the one-year period ended June 30, while marking the third straight year of double-digit returns.

The cumulative current market value of these investments today stand close to $860 million, while the fund has further expanded its investment portfolio since the end of its last accounting year, which ends in June. Indian companies in Calpers’ portfolio include blue-chips like Reliance Industries, Tata Steel, TCS, Tata Motors, SBI, Satyam, Reliance Energy, Reliance Communications, Maruti, Ranbaxy, M&M, Infosys, L&T, IPCL, ICICI Bank, HLL, HDFC Bank, Bharti Airtel, Bajaj Auto, Cipla and Dr Reddy’s Labs.

Other Indian companies where it has invested are ABB, Allahabad Bank, Arvind Mills, Asian Paints, Aventis Pharma, Bajaj Hindusthan, Bharat Forge, Biocon, Cadila, Gail, Gujarat Ambuja, HCL Tech, PNB and Sun Pharma.

Infosys a Safe bet for next 1 year - Nishit Vadhavkar

2007-04-16T21:12:00.000-05:00

The Infosys results have been declared and the annual ritual of the next year guidance also has been given.

The guidance for the next year has been pegged at rs 82-83.

Infosys always beats its own guidance by a long margin. Taking a minimum 1 year view of the stock, at this time next year, a price target of Rs 3000 looks very realistic. That is assuming Infosys gives Fy09 guidance at 20 pc.

20 pc guidance for next year should not be too difficult for a company like Infosys which has moved into Consulting, its china operations have broken even.

Infosys may not be hot stock it once was, but as long as it continues delivering steady numbers, it should occupy a a sizeable chunk of one's portfolio.

I flex yesterday touched Rs 2360, a far cry from the open ofer price of Rs 2100. As I mentioned earlier, I flex is like opening a fixed deposit, there is virtually no down side.

In last week of December when recommended to to convert major part of portfolio into I-Flex it was trading at Rs 1880. A gain of 25 pc risk free.

The easy days of the bull market are over now. It is a stock pickers market. Over the next 1 year, its time to be very cautious.

I am still bearish on the markets and would wait at sidelines with i flex and cash and wait for the UP election results to come through. 1 more CRR hike seems to be on the anvil.

RBI would be happy with Rupee Appreciation

2007-04-16T19:54:00.000-05:00

Leaving the rupee appreciate makes me feel that RBI would be happy to leave it appreciate. This is mainly because of the fact that imports would be cheaper and India imports more than it exports. There are other goods like Gold and Crude Oil which would be cheaper and impact inflation to reduce it.

At the same time, exports would be impacted and the biggest losers would be IT Sector. IT majors like TCS have been bracing for a weakening dollar. TCS on Monday announced that it has obtained a $1-billion hedge at a price range of 43.5-44.00. However, small exporters who do not have opportunity to hedge will be worst hit.

On Monday, Rupee touched a near ten year high of 41.75 against US Dollar.

Sundeep Bhandari, regional head-global markets, South Asia, Standard Chartered Bank said: “The absence of sustained intervention from the Reserve Bank of India in the past few weeks has provided the market with the much-needed direction. The dollar will remain weaker in the near-term, while the UK pound and the euro are expected to start weakening against the greenback only in the medium term.”

Report says that within Asia, the rupee and the Chinese yuan are expected to outperform, while others such as the Singapore dollar, the Taiwan dollar and the Korean won may not be doing so as they are not dealing with large forex inflows.

Rupee below 42 mark vs Dollar

2007-04-16T19:40:00.000-05:00

The rupee crossed the 42 mark against the dollar on Monday on the back of strong capital inflows even as Finance Minister P. Chidambaram said that the Indian currency was competitive despite the sharp appreciation this year.

The rupee rose by 1.4% to 41.9050 against the dollar as of the 5 p.m. close in Mumbai. The Indian currency rose as high as 41.85 today, the strongest since June 1998. On Friday, the rupee closed at 42.51/52 per dollar -- its strongest since April 6, 1999.

The partially-convertible currency is one of the top 10 gainers among the world's most-actively traded currencies this year, rising 5.4%, spurred partly by strong capital inflows and partly due to liquidity crunch.

Exporters continued to sell dollars, while importers stayed on the sidelines hoping for cheaper dollar/rupee rates. Meanwhile, the central bank was virtually absent in the foreign exchange market today.

Although importers may enter at the current levels a few of them will prefer to await for better rates. The Reserve Bank of India (RBI) may also intervene and absorb dollars, to curb the rapid rise in the rupee.

"The rupee appreciation is because of the large inflow of capital," Chidambaram said. "The rupee is still very competitive relative to other currencies."

5 Trillion Equity Market Is in India's Reach: Andy Mukherjee

2007-04-16T18:54:00.000-05:00

The next few months will set the tone for the growth of Indian financial markets in years to come.

If India can make a successful beginning with the proposed modernization of its pension industry, the market value of domestic stocks may well exceed $5 trillion in 2020, higher than that of Japan's equities today.

That prediction is based on back-of-the-envelope calculations, taking into account the impact that old-age savings appear to have had on stock markets elsewhere in the world.

According to Helene Poirson, an economist at the International Monetary Fund, equity markets in the Group of Seven industrialized nations grew the equivalent of 40 percentage points of gross domestic product from 1980 to 1998, led by an increase in pension assets.

Chile, too, witnessed a similar strong correlation between retirement savings and market value.

There's no reason the script should play out any differently in India. The size of the retirement market as a ratio of GDP is only a 10th as big as in Singapore, Japan and Malaysia, and a quarter as large as in Hong Kong, according to HSBC Holdings Plc.

Assuming that India's $822 billion economy grows 8 percent a year with 5 percent inflation, a $5 trillion stock-market should be within India's reach in slightly more than a decade; as much as a fifth of it may be associated with larger flows of retirement funds into equities.

In July, India will take a small yet significant step in this direction.

Political Impasse

The task of ensuring old-age security for all federal government employees who joined after January 2004 will be handed over to three asset-management companies.

The managers will be able to invest 5 percent of the money in equities and 10 percent in equity-linked mutual funds, D. Swarup, chairman of India's Pension Fund Regulatory and Development Authority, said in New Delhi last week.

The political consensus for a fuller liberalization of the pension industry still eludes.

The legislation that will see all workers building nest eggs through 401(k)-type personal, portable accounts has been stuck in parliament for more than two years because of staunch opposition from trade unions and the government's Marxist backers. No one expects the impasse to end soon.

That's because the left-wing parties and unions want every civil servant to continue to receive a guaranteed pension equal to half of their last-drawn pay. Never mind that these ``defined- benefit'' plans have been shown to be veritable time bombs for fiscal sustainability.

By 2010, the annual budgetary outlay on government pensions in India will amount to 1.8 percent of GDP, or double what the government spends on health care.

Baby Step

So why should investors care about 500,000 ``new'' public servants migrating to an actively managed ``defined- contribution'' retirement plan from July?

That isn't exactly critical mass in a country where the government alone has 17 million employees and the workforce is 400-million strong.

Besides, to begin with, pension-fund managers will be selected from within the state-run financial industry. Limited competition raises the specter of high fund-management fees and diminished returns for retirees.

Yet, for all its timidity, it's a step in the right direction. Ajay Shah, a former consultant to the Indian Finance Ministry, says India should move to a partially deregulated pension management industry within the ambit of the existing regulatory framework, rather than wait for the passage of a compromised pension-fund bill.

Surging Demand

Surveys have pointed to strong demand in India for long-term retirement products.

Public servants who joined before 1984 have their guaranteed pensions. The hundreds of millions of workers toiling in the informal or unorganized economy have nothing at all.

Stuck in between are the 40 million employees working in the non-state formal economy whose mandatory savings go to the state- run Employment Provident Fund, a defined-contribution plan that shuns equity and invests most of its money in sedate ``special'' government securities. It's simply not a vehicle for providing meaningful, old-age security to anyone.

As income levels in India rise, people will increasingly look for investment options that marry present-day tax savings with serious long-term wealth creation. The urban affluent should be the logical target in expanding the scope of the new pension plan, which aims to offer -- to those who have the appetite for risk -- a maximum of 50 percent exposure to stocks.

Financial Markets

What will all this mean for Indian equities?

By the late 1990s, much of the regulatory work in improving the efficiency and integrity of the stock market in India was complete. Yet, ``it is only since 2003, when the GDP started growing at its current pace, that the large global investors became interested and poured money into it,'' says a new report by Standard & Poor's.

Growing overseas interest is only part of the equation. What's still missing from the Indian equity market, as UTI Mutual Fund's chief investment officer, A.K. Sridhar, told me late last year, is long-term domestic money. That's where retirement funds will play a big role.

The quest for old-age security has the power to deepen Indian equity markets. How the government goes about opening the industry in the next few months and years will be crucial.

Market Buzz from a newsletter

2007-04-15T22:19:00.000-05:00

As the mid caps are in demand informed sources are picking up low priced scrips like:

Shyam Star Gem (BSE: 526365) Rs.36.80 and International Diamond Services (BSE: 530193. Rs.5.94)

Solix Technology (BSE: 501421) Rs.3.88, The volumes are very low but can improve with time.

Marksans Pharma (NSE/BSE: 524404 Rs.66.65) It has fallen from a high of Rs.302 to 100 when it reported 50% less profit for Dec 06.In the recent market fall the shares fell very badly to Rs.58 and now the recovery has begun.

Noble Explochem (BSE: 506991. Rs.13.30). It has closed down its explosive division. It has huge surrounding land which was earlier needed as a protective device as the co was in explosives. Land in Nagpur is very lucrative.

Some thing to think over: Newly listed ICRA clocked a massive 3.07 crore shares together on BSE and NSE, That is almost 11.8 times the total shares offered through the public offer. Global rating agency, Moody’s, is the single-largest shareholder in ICRA. For April-December (9-month) 2007, ICRA reported a net profit of Rs 13.59 crore on revenue of Rs 49.54 crore. The equity capital of the company is Rs 10 crore and the face value per share is Rs 10. Currently the share looks fully valued .IFCI who has a huge stake in ICRA is a better choice’

Multiplex Stocks in News

2007-04-15T22:17:00.000-05:00

PYRAMID SAI MIRA THEATERS: (NSE/BSE: 532791 Rs.331.65. Recent high Rs.487):

Target Rs.400. What is the latest Buzz in this counter that is moving it up?

PSTL’s strategy is to distribute digital films simultaneously in a large number of cinema halls. This will bring in maximum revenues for the company. Pyramid Saimira Theatre (PSTL) surged 10% to Rs 331.65, after the company announced RM 10 million investments plans to digitalize about 50 theatre screens in Malaysia. The company also announced that it would be producing its first Tamil film in Malaysia, which will be released internationally

SHREE ASHTAVINAYAKA CINE

(BSE: 532793 Rs.173.85.) As the chart indicates It has come down sharply from Rs. 383 that is the top it reached in Feb 07 to Rs.140 in March 07.The IPO was issued at Rs.160.):

Short term target Rs.250. The company is engaged in production of full-length films and has subsequently entered film distribution, its stronghold being the Mumbai territory, which also includes Gujarat, Western Maharashtra and Northern Karnataka. Territory. It has produced films like Golmal, Bhagam Bhag, Jaane Man, Phir Hera Pheri Etc. The co is about to announce its plans for a new film. Hence accumulation is going on.

Cinemax (NSE/BSE: 532807)
If the craze to chase the multiplexes continues the next best bet will be Cinemax. When the shares got listed it opened around a high of Rs.204. This share was running along with all the new listing which were enjoying huge following. Then came the inquiry into whether there is any rigging. Then came the fall that bought down Cinemax to a low of Rs.104 in March 07

After a long break a bull grip is now building up in Cinemax (NSE/BSE: 532807) It has started recovering from its low of its low of Rs.104 and has been on the move and touched Rs.133.55 on Friday. Current confidence for the operators to have come from the news below:

ICICI Prudential Life Insurance Company has mopped up additional shares of multiplex operator Cinemax India. It acquired 1.94 lakh shares of Cinemax through open market purchases on 28 March 2007. It now holds 14.31 lakh shares in Cinemax which is a 5.11% stake

Review on IFCI

2007-04-15T22:14:00.000-05:00

SEVEN TO EIGHT FOREIGN INVESTORS INTERSTED IN TAKING 51% STAKE IN IFCI :( (NSE/BSE: 500106 .Rs.38)

Overseas funds and institutions, as well as domestic entities, are showing heightened buying interest in IFCI so as to come on board as a "strategic investor" in the term-lending institution.

The prospect of acquiring up to 51 per cent stake along with management rights in the company might be an important factor for the surge in interest, said sources privy to the mandate given by IFCI to the Advisor, Ernst & Young.

Last month, IFCI had appointed Ernst &Young to advise it on the induction of a strategic investor in the company. Although the expressions of interest (EoIs) are yet to be invited, six domestic and 7-8 foreign institutions and funds have already sounded out Ernst & Young that they are keen to participate in the EoI and information memorandum process.

To augment its resources, IFCI has, during calendar 2007, sold seven per cent stake in the NSE and eight per cent stake in ICRA in the recent public issue and holding the rest of the shares. With ICRA doing so well in the market IFCI which is one of the major share holders of ICRA will get a big boost to its value What is more exciting is on Friday there were strong rumours that IFCI plans to sell off its TCS holding as well. Consider IFCI a dark horse priced very low.

Commentary from a Newsletter

2007-04-15T22:13:00.000-05:00

GLOBAL MARKETS ARE ON NEW HIGH OUR MARKETS AT THREE MONTHS LOW:

The Friday’s rise of 270 points after the earlier 300 points rise comes with the Infosys results and guidance. The curtain raiser for the Q4 results to follow seems exciting. When every one was crying wolf and unable to see any reason for the market to rise and predicting that the markets can only fall are now wondering what to say.

It was Albert Einstein who said that reality is the greatest illusion in this world. This is applicable to our market as well. This made him take interest in the Indian concept of Maya. When the RBI increased the rate of interest every analysts said that sectors like banking, auto and home loans, construction and real estate will get affected badly. Yes it was the truth at that time. All the shares belonging to these sectors declined very sharply. Then what happened? Many found these shares unusually low priced and attractive. Then buying bought up the whole lot of shares to back to their earlier levels. The moral is not to sell in panic on hearing bad news. RBI has hiked the interest only twice whereas in the USA the interest rates have been hiked over 14 times. That does not mean every thing is over in the USA.

WHAT ARE THE CURRENT BULLISH SIGNALS?

As mentioned earlier, the Indian markets have under performed the world markets. Most of the international markets hit their all time high in the last three months. BSE Sensex is at the bottom of three months low. When the markets have already gone down there are better chances for our markets recovering.

Also look at the factors responsible for bringing the markets down. Hike in the interest rates, some negative provisions in the budget, fear of market friendly Congress loosing the UP poll and run away inflation are some reasons that have kept the markets lower in India. This Friday for the first time the date on inflation announced show that the rate of inflation has come down for the first time below 6% to 5.74. RBI wants the inflation to stay around 5%. If this can be achieved further rise in interest may not happen.

For the last three to four sessions the FII have turned buyers. Their buying is at an average of Rs. 250 to 400 Cr against their normal placement of Rs.1000 Cr. a day. Any time expect the further allocation to follow and that can change the scenario. Whatever it is our markets still have strength and refuses to go below certain levels.

As the market has recovered some of its post budget loses there is a likelihood of another fall for some reason. Gather some strength to buy when the next fall comes. This is becoming the in thing in the market today.

Media industry turns hot job market

2007-04-15T18:43:00.000-05:00

Media and entertainment industry is likely to offer maximum employment opportunities by 2013, says an official report.

According to a statistical report presented by the department of labour, media industry would experience an annual growth of 18 per cent and employment growth of 27 per cent followed by automobile 15.6 per cent and 20.8 per cent respectively.

Indian media, which grew at 20 percent in 2006, is held in high esteem in the world for its content and analytical ability. However, in order to sustain the credibility the industry has to shift its focus from quintessential reporting to something new so as to take a lead in the developing markets, say experts.

The study predicts about 760 million youth are likely to enter the job market by 2020. Other sectors like manufacturing and capital-intensive firms would have to contribute enormously to occupy the new entrants.

The IT-ITES would have a 22 per cent annual industry growth with employment growth of 19 per cent. The retail services which provided maximum employment of 25.8 per cent during 1999-2000 would fall drastically to a mere eight per cent during 2006-2013.

Large Deal Pros and Cons in Indian IT Services Context

2007-04-15T18:38:00.000-05:00

As the President of commercial and healthcare businesses at Satyam Computer Services, Ram Mynampati provides business leadership in market segments such as BFSI (banking, financial services and insurance) and healthcare. In addition, he provides executive leadership to Satyam's relationship with GE, Satyam's largest client. Mynampati is also responsible for the retail, transportation and US Government vertical business units. He also spearheads Satyam's emerging business in Canada. In a chat with eWorld, he talks about Satyam's core business:

What constitutes a large deal for Satyam Computer Services and what is it that you look for in a large deal? Are large deals likely to be margin-accretive?

The minimum size associated with a large deal is $50 million (Rs 225 crore). The size and period varies but what categorises it as a large deal is the guaranteed and sustained revenues associated with it. I don't think large deals can always be margin-accretive to start with.

They might be margin-neutral at times, but not be margin-dilutive. This implies that for a fixed period we are guaranteed a certain flow of revenue, which further means that the cost associated with having to sell is not there. Second, large deals provide us with the freedom to mix and match competencies, resources and locations to meet client expectations.

As long as we see the predictability of revenues and opportunity to manage margins selectively, large deals will be a good fit.

In today's scenario, deal sizes are really getting out of hand. When do you know that you are not being opportunistic or tactical in choosing deals?

We are only six months old when it comes to large deals and only 5 per cent of our revenues come from them. First of all, we need to master the art of delivery of a large deal. I can grow large deals by 50 per cent, as these are only one-time fixes. If I get a large five-year deal, that client is not going to give a second five-year deal immediately. It's a one-time effort. As long as volumes are there and we are able to manage at least a margin neutral scenario, percentages wouldn't worry us much.

What are the other levers that will work well for you in the coming quarters? Apart from cost optimisation, what are the other levers that can enhance your margins?

I believe that from a margin perspective, the total cost of delivery can be managed much more efficiently than we presently do. Our first endeavour is to bring down the total cost of delivery of projects. Optimising the resources deployed in a project is a very important lever as it brings down the total cost of delivery. We have to try cutting costs and that can mean moving to tier two cities or relocating from the US to India.

What proportion of your revenues will come from new service offerings, apart from enterprise solutions, in which you have been a traditional leader?

Engineering services outsourcing (ESO) and infrastructure management services (IMS) contribute about 15 per cent to our revenues. We are looking at scaling that up substantially in the next 2-3 quarters (by 2007-end). ESO, in particular, looks very potent, as we have already invested in some interesting competencies.

Which verticals do you think will drive the next wave of growth for Satyam?

While verticals such as banking, financial services and insurance and manufacturing will continue to do well, the pharmaceutical sector is surely something to watch out for. In addition, retail and consumer durables have a lot of scope. Moreover, you can expect above average kind of growth from energy and utilities.

What strategy do you follow when it comes to acquiring companies in overseas markets?

For Satyam, acquisitions need to be strategic and complementary, otherwise they don't mean much. Acquisitions should help us to bring multiple competencies to the existing domains. We would never acquire companies to create a new market. All our previous acquisitions and the ones that we will be making in future are going to extend our value chain and not create new service offerings. We will not acquire product companies or companies that operate in distant markets such as Chile or Brazil just to anchor into these markets.

Downgrades continue for Indian Market

2007-04-15T14:07:00.000-05:00

The Indian stock market, which was not so long ago celebrated by investors as the best thing to have happened to the securities world, seems to have all of a sudden become anything but desirable. Contrary to the prevailing perception that economy remains fundamentally strong here and financial markets are more mature than those of other emerging nations, global financial giant Citigroup has ranked India as the second least attractive among all Asia-Pacific stock markets.

Joining the ranks with Citigroup, another leading global brokerage house Bear Stearns as well as a leading overseas fund house, Aberdeen Investment Trust, have labelled Indian stocks as "expensive." "After February's sharp fall (a 1,329-point plunge including three one-day falls of 300-500 points), market conditions in March remained choppy," Citigroup said in its latest Asia-Pacific radar screen report, which tracks market attractiveness across the region. While, Hong Kong, Singapore and Australia took the top three spots on the Asia-Pacific list, followed by Malaysia at the fourth position (down from second position), Citigroup said that India was among the bottom half of the ladder along with New Zealand, and Taiwan.

Even Thailand moved sharply up the ladder and secured a safe position ahead of India on the back of improved momentum and continuing low valuations. India was ranked ahead of New Zealand alone in the list. Investor interest helps drive the stock price and valuation higher, it continued to edge closer to unattractive quadrant, where investors start recognising that valuations are stretched and begin selling. Echoing the fears that foreign investors may not find Indian stocks a hot proposition any longer, a number of investment banking and brokerage firms like Bear Stearns have already begun cutting their outlook on India, due to "expensive" valuations as compared to the earnings prospects.

Analysts at Bear Stearns, which has just downgraded its rating on Indian market from "market weight" to "underweight", said in a research note, "diminished investor appetite and poor relative performance presumably reflects Indian stocks' over-owned status and high valuations." India's benchmark index, Sensex has fallen 3.2 per cent since the beginning of this fiscal, while Malaysia's Kuala Lumpur composite index has surged over 15 per cent and there has been over 5 per cent gain in the Morgan Stanley capital international Asia Pacific index, Bear Stearns' Michael Kurtz and Joey Lam Lam said.

Fidelity brings International investment expertise to India

2007-04-13T23:28:00.000-05:00

Fidelity Fund Management is bringing its world renowned expertise in international investment to the Indian market. Investors will now have the opportunity to add an element of geographical diversification to their portfolios with a fund house that has a strong track record in investing globally.

The Fidelity International Opportunities Fund is Fidelity’s first international offering in India and other global products will be introduced once guidelines are issued under the recently announced $50,000 remittance scheme. This new fund is an open ended equity growth scheme that seeks to invest 65% in Indian equities and around 35% in international equities, with a focus on Asia, to generate long term capital appreciation.

GSM user base crosses six million mark for March 2007

2007-04-13T23:17:00.000-05:00

The country's GSM-based mobile telephone operators added a record 6.1mn new subscribers in March, taking their total user base to 121.4mn, data released by the Cellular Operators' Association of India (COAI) shows.

At the end of February, total GSM customers stood at 115.3mn.

The March increase was the highest-ever monthly rise and was higher than the 4.9mn new user additions in February, the body representing the GSM service providers said in a statement released late on Wednesday.

Bharti Airtel added 1.7mn customers in March, taking its total to 37.14mn. BSNL added 1.98mn new users, taking its user base to 27.43mn. Hutchison Essar added 1.1mn new customers, taking its total to 26.44mn.

Idea Cellular added only 370,551 subscribers in March as against 568,051 mobile phone users added in February, boosting its user base to 14.01mn. MTNL added 167,992 mobile phone users to take its subscriber base at the end of March to 2.75mn.

Inflation falls below 6 %

2007-04-13T23:05:00.000-05:00

Finally, there is some good news on inflation which should cheer up the Government and the Reserve Bank of India (RBI) ahead of the annual monetary and credit policy announcement on April 24.

India's inflation, based on the Wholesale Price Index (WPI), tumbled to 5.74% in the week ended March 31 as against 6.39% in the previous week, the Commerce & Industry Ministry said on Friday.

The final headline inflation reading for FY07, which is subject to a revision, is slightly above the RBI's annual target range of 5-5.5%. What's also heartening is that inflation was much below the average expectations of around 5.8%.

The annual inflation rate was 3.98% during the corresponding week of the previous year.

In the past few months, the Government has unleashed a slew of monetary tightening steps and slashed import duties on a number of essential products to reign in spiraling prices. The latest data should take some pressure of the policy makers though there are doubts whether the inflation will remain under 6% for long.

Jet-Sahara Deal a Lose-Lose Deal by Nishit Vadhavkar

2007-04-13T21:59:00.000-05:00

We have heard of a win-win deal but this should surely go down in Indian Aviation history as a lose-lose deal.

Lets look at it from Sahara point of view. Last yr they were pocketing around 2300 crores and were gonna live happily ever after. Now they get around 1400 crores, lot of heart ache, and had to run an airline which made losses for a year.

Jet claims 40 pc discount to the price offered last year. But they will have to bear some of Sahara's losses, interest lost on 1500 cr in escrow account, lawyers fees so actually they have to shelve out Rs 1950 crores.

For 1950 cr what are they getting?

Rights to fly to international routes which they already. 24 aircrafts which are on lease anyway and aircraft type is different from jet, one is boeing other is airbus. they get pilots who can easily fly away to their competitors as they did last year.

They do they get important parking slots in delhi and mumbai but thats not worth the price paid. From naresh goyal point of view, if the arbitration panel had voted against him, he would have to shelve out around 1000 crores and got nothing. by paying double at least he is getting something.

The people to gain are Kingfisher and Air Deccan, for them one rival less in the skies. Air Sahara was undercutting everyone in the business. Jet is unlikely to do the same. The gleeful reactions say it all.

Gopinath of Air Deccan says Jet buying Sahara is like marrying a girl because you have lived with her for a while. Vijay Mallya wishes all the best to jet with a loud guffaw. Air Deccan remains my top stock to buy and the current merger is just one bonus for it.

Wait for Deccan to come to rs 75 and pick up huge quantities. 3 years from now i expect it to quote at rs 500 nothing less.

What to expect from IT Service Leader - Infosys

2007-04-12T18:51:00.000-05:00

The first off the pack was iGate which said that their operating profit increased four fold due to better operating margins management and because they could achieve a rate above their goal of 15 %.

iGATE reported a net profit of Rs 22.6 crore on revenue of Rs 210.1 crore for quarter-ended March 2007 compared with a net of Rs 4.7 crore on revenue of Rs 210.8 crore in the preceding December quarter.

As far as company specific outlook is concerned, Phaneesh Murthy said "We are concerned about the mortgage meltdown as our revenues from loan fulfilment process have been adversely impacted. We expect the sluggishness to continue in the first quarter". But at the same time he agreed that CIO's world over are increasingly looking at offshore considering the fact that it saves money for the CEO's. So, the demand is going to be robust but specific instances like Mortgage meltdown would impact profitability to some extent.

Now, going to Mastek, it was an erractic performance as usual for the company. Mastek could increase the component of US Billing this quarter and Mastek could increase the revenue due to new customer billing in UK and Asia.

Total income for the quarter rose to Rs 214.79 crore from Rs 179.47 crore for the quarter ended March 31, 2006, the company said in a communiqué to the BSE. The company, on a stand-alone basis, has posted a net profit of Rs 57.33 crore for the third quarter as against Rs 12.29 crore for the previous corresponding quarter. Total income increased to Rs 134.73 crore from Rs 102.26 crore.

There was a one time profit on sale of a JV with Deloitte Consulting. But otherwise, the result was nothing to boost about.

Now, what to expect from Infosys -

Two factors which weight heavily on the guidance to be given by Infosys are Rupee Appreciation and Taxation.

Other important factor which has been clarified by many top rung IT Service providers and also from Cognizant's guidance for Calendar Year 2007 (Congnizant reports from Jan to Dec every year), there is a feeling that Infosys would be able to increase the volume and compromise a bit on margin front.

This means that the revenue guidance would be robust but the profit guidance would be affected by the above factors and the demand supply glut of the IT Employees in India which would necessitate Infosys to provide a better hike this year.

Overall, I feel the guidance should look better than what everone is expecting. Infosys giving a revenue growth guidance of more than 35 % and profit growth of more than 30 % would be viewed as a good sign for the overall IT Sector.

Reliance Retail off vertical limits

2007-04-12T18:48:00.000-05:00

Call it the Wal-Mart effect. In the first gear shift since its launch last year, Reliance Retail is overhauling its management structure and changing operational heads.

From an industry vertical structure, the company has decided to move towards a store format-based structure with effect from May 1 to expedite the rollout of its ambitious retail venture and make it more accountable with separate profit and loss accounts.

Senior operational and functional chiefs such as Raghu Pillai (head of store operations), Gunender Kapur (head of Reliance Fresh), Sanjeev Asthana (head of agri) and Bijay Sahoo (head of HR) are likely to be moved up to the newly-created central leadership team, which will supervise the retail activities of Reliance Retail.

A new set of operation heads will manage the various retail formats. Bhavdeep Singh will take over as head of Reliance Fresh from Mr Kapur while S Radhakrishna will head hypermarkets, likely to be named Reliance Hyper Marts. Ajay Baijal will head Reliance Digital, the consumer electronics and IT store. The heads of other speciality chains will be decided at the time of their launch.

Another critical function of the retail industry—human resources—is also changing hands with Uday Bhende taking over as head from Mr Sahoo.

All format heads will report directly to Reliance Industries chairman and managing director Mukesh Ambani, said a source.

Mr Singh has been hired recently from the US, where he was working in a retail chain while Mr Bhende has been roped in from Siemens. Mr Radhakrishna joined Reliance Retail from retail chain Spencer’s last year and Mr Baijal was poached from Reliance Communications as a replacement for Rajeev Karwal.

Reliance’s new structure is a clear departure from its earlier one, which was managed as verticals, each under a CEO, with the front-end divorced from the back-end. “The structure was centralised and the merchandise and sourcing teams were independent from the actual retail business. That may end now,’’ said a source.

Veteran Reliance watchers compare this considerable change in the management structure to a similar exercise undertaken by the then Mukesh Ambani-controlled Reliance Infocomm, after the failure of the Dhirubhai Ambani Pioneer scheme.

Despite repeated attempts, the Reliance Retail spokesperson could not be contacted. While some professionals in Reliance Retail’s central leadership team are likely to play an active role, there will be some who will get sidelined in the process. While it’s not clear as to what prompted the development, analysts say growing urgency to usher in effective supply-chain co-ordination could have triggered the move.

“With each vertical working across more than one format, the company may have foreseen the problems it would lead to as the retail venture rolls out nationally,” said a source close to Reliance Retail.

Some call it a “hit-and-trial” approach to arrive at the right combination so as to gear up for the mega competition when the likes of Wal-Mart and Tesco enter the market.

Reliance Fresh just opened its 111th outlet, and the first Reliance hypermarket is likely to be set up in Ahmedabad next month while the first digital store is likely to open in Delhi on April 19.

'It is easy to achieve success; it is difficult to maintain it'

2007-04-12T18:44:00.000-05:00

Future Group CEO Kishore Biyani had a two-hour breakfast meeting with ET earlier this week, in which he shared the logic behind the retail group’s new makeover. Excerpts from the interview:

You seem to have segregated mature and new businesses. Why?

We are immunising mature businesses from the risks we face in new businesses. So we can form a clear P&L account of every retail brand. Today, our formats have become so big, we are competing with ourselves. Earlier, products and operations worked together. I was accountable for everything. But today, growth is so much that somebody else has to concentrate on that growth. Earlier, we were hungry for topline. Now, we are hungry for bottomline growth.

Accountability for the profitability of the lines of businesses lies with one individual now. And profitability of a category lies with the individual handling the product in that category. We have to look at the costs of doing a business. The fact that we have been able to cut costs in the last few months has improved margins. We are getting result oriented.

For somebody who did not think much of processes, isn’t a lot of attention suddenly seems to be going into that area?

Every retail data (even Harvard studies show that) has only 70% accuracy. Therefore, a whole lot of decisions have to be based on gut feeling. Processes do not make a retail business. Human emotions make retail. For instance, if there is some bad news in the morning, or on a gloomy day, sales are at rock-bottom. Processes can’t capture all these things. As a group we believe that demand creates supply, supply does not create demand.

You have to do retail to do processes. I think processes do not allow you to react to a consumer. Processes work when you think everything is constant. But nothing is constant. Consumers are not constant. At 30 years of age a consumer behaves differently from what he will do at 34, assuming he is married or has a kid. Processes are a way to deliver consistently to the consumer.

How do you decide which businesses will be relevant in the long run?

You need businesses outside retail to support the retail business. The margins aren’t enough to support growth. So, for instance, in our real estate business, we get 20% margins, but we have partnered somebody who knows how to run it.

If there is no potential for a business to cross Rs 100 crore in the second year of operations, we are not interested. We developed pharmacy and beauty parlours, but we may not run it ourselves. As a group, fashion will be nearly 40-50% of our businesses and through that we will be able to raise margins by 5-8%.

Looking back, do you think there’s something you would ideally never have taken up, something that didn’t succeed?

I always believe that unless you do it yourself, you will never learn. There are no shortcuts. My biggest mistake was that I made cinemas. Cinema teaches you that although you think you know everything, you really know nothing. Today, all that humility and acceptance come out of doing cinema as a business. It taught me to be dispassionate about what you create. Without the cinema experience, we would never have learnt anything. It is easy to achieve success. It is difficult to maintain it.

Rakesh Biyani has taken over as the retail CEO. Did the group consider getting anybody from outside?

There was an option to bring in an outsider. But even within our organisation, people will move up some day. Bringing in an outsider sometimes does not make sense. We did not want to lose the comfort factor with our senior people. Rakesh has come in through consensus. We are open about everything. The vote went in his favour. Acceptance is important. Continuity is important

Output mismatch may upset govt’s sugarcart

2007-04-12T18:36:00.000-05:00

Believe it or not! The agriculture ministry’s first sugar output estimates in September and the latest figures have a mismatch of 40mt. The just-announced estimates see production in 2006-07 at 322.94mt against September estimates of 283.4mt.

Such gross discrepancies in estimates, experts feel, not only holds potential for deflating the sugar economy, but also threatens to impact the overall economy. Curiously enough, the substantial jump in estimates comes despite a persistent refrain by those in the industry and trade that the government’s first estimate(283.40 mt) was much lower than their own.

Little wonder, then, that agriculture minister Sharad Pawar found it necessary to comment on how sugarcane farming was dominating a good chunk of the arable land in the country and eating into land that could cultivate oilseeds and pulses, both of which are imported annually at a high price.

One reason why farmers chose to plant cane in such an overwhelming manner last season could be the gross returns per hectare for sugarcane, which is the highest among all key crops, at Rs 50,000 per ha this season. There’s a strong reason why sugarcane should worry Mr Pawar.

During 2006, according to an ICRA study, the progress of sugar cane acreage indicates a 3.9% (year-on-year) increase to 4.45 mha up to July 2006, with increase in acreage reported from all key states. To boot, it is an all-year crop, allowing little possibility of an inter-crop or rabi and kharif interchangeability.

In a recent write-up, Rajya Sabha MP and Shetkari Sangathana leader Sharad Joshi said, “The statistical averaging method used by the CACP results in some hilarious but very wrong computations. The costs attributed to labour, pesticides, manure, power and irrigation have been often quite bizarre. Recently, the minister of state for agriculture in Maharashtra admitted that the actual cost of production of sugarcane in the State was about Rs 300 a tonne higher than the SMP.”

Since the sugar industry, the second largest agro processing industry in the country, contributes an estimated Rs 17 billion annually to the national exchequer and treasuries of various states by way of excise duty and purchase tax on sugar cane, clearly, big mis-steps on estimates could also prove expensive for the government both politically and economically.

With the government now forking out funds for both maintenance of a two million tonne buffer and extending export subsidies after having imposed the prolonged export ban against the best advise of the industry, it is sharply evident just how much a skewed sugar economy without a rational and comprehensive policy can significantly impact the overall economy. Crucially, 2006 was the year when the sugar industry faced a historic period when its produce commanded a markedly higher price internationally than in the domestic market, thanks to a strong bullish sentiment globally.

The WTO award preventing dumping by the EU of subsidised sugar of five million tonnes in the world market annually, as also the decline in production in major producer countries such as Thailand and Australia due to bad weather helped the bullish sentiment. Add to that lower exports from top producer Brazil, thanks to higher ethanol doping domestically, and lower production by Pakistan, things could not have been better for sugar exporters here.

Asian Stocks Rise for a Third Day

2007-04-10T23:18:00.000-05:00

Asian stocks rose for a third day, with indexes in South Korea, China and Indonesia set for records.
Samsung Electronics Co. advanced after LG.Philips LCD Co. reported a loss that was smaller than some analyst estimates and as Banc of America Securities LLC said Intel Corp.'s profit will match its forecast. Rio Tinto Group led mining companies higher after copper prices advanced to a seven-month high and U.S.- based Alcoa Inc. posted its most profitable quarter ever.

The Morgan Stanley Capital International Asia-Pacific Index added 0.1 percent to 147.80 as of 12:36 p.m. in Tokyo, set for its highest since Feb. 27. A three-day gain will be the measure's longest rally since a similar period ended March 26.

``The LCD industry has entered a recovery phase and profitability is likely to continue to improve,'' said Kevin Yang, chief investment officer at Paradigm Asset Management Co., which oversees $360 million in assets. ``The worst is over.''

Japan's Nikkei 225 Stock Average dropped 0.2 percent to 17,634.15, while the broader Topix index declined 0.1 percent. Kubota Corp., the country's largest maker of farm equipment, fell on a report that showed Japanese machinery orders slipped more than expected in February.

Benchmarks advanced in Taiwan and Thailand, while indexes in Singapore and Malaysia touched record highs.

U.S. shares rose yesterday, boosted by improved profit outlooks for Intel Corp. and Exxon Mobil Corp. The Dow Jones Industrial Average gained for an eighth day, the longest winning streak since March 2003.

India's Industrial Production Probably Accelerated in February - Bloomberg

2007-04-10T23:14:00.000-05:00

India's industrial production growth probably accelerated in February, vindicating the central bank's unexpected interest rate increase a fortnight ago to damp consumer demand and curb inflation.

Production at factories, utilities and mines rose 11.2 percent from a year earlier, following January's 10.9 percent gain, according to the median forecast of 12 economists in a Bloomberg survey. The data is due tomorrow at noon in New Delhi.

Unprecedented demand for manufactured goods has kept inflation above the central bank's target for 16 straight weeks, prompting the Reserve Bank of India on March 30 to raise its key overnight lending rate and banks' reserve requirement. The central bank, which has increased its lending rate to a five- year high, may now refrain from raising borrowing costs in its scheduled April 24 monetary policy announcement, economists said.

``The Reserve Bank may prefer to wait and see the impact of recent monetary policy actions on consumer demand and inflation,'' said D. H. Pai Panandiker, president of the RPG Foundation, an economic policy group based in New Delhi. ``Interest rate increases in the past four months have been quite aggressive.''

Reserve Bank Governor Yaga Venugopal Reddy on March 30 raised the cash reserve ratio, or the amount of cash lenders must set aside against deposits, for the third time since December and increased the benchmark overnight lending rate for the sixth time in 15 months.

``The outlook for the medium term is a bit clouded given recent tightening measures,'' Citigroup Global Markets Inc. economists Rohini Malkani and Anushka Shah said in a report on April 4. ``However, given the continuation of key growth drivers, such as an investment cycle upturn and urban consumption, we expect economic growth to sustain around 9 percent in the current fiscal.'' India IIP Forecasts
-------------------------------------
IIP Firm YoY
-------------------------------------
Median 11.2%
Average 11.3%
High 13.9%
Low 9.0%
Number of Estimates 12
-------------------------------------
Anand Rathi Securities 13.5%
Citigroup 11.3%
DBS Group 12.1%
HSBC 11.0%
ICICI Securities 9.1%
ICRA Limited 10.7%
IDBI Capital 12.6%
ING Vysya Bank 13.9%
Institute of Economic Growth 9.0%
JPMorgan Chase 10.6%
Lehman Brothers 10.7%
Thomson IFR 11.3%
-------------------------------------

Most Americans Fear Recession in the Next 12 Months, Poll Finds

2007-04-10T23:11:00.000-05:00

Most Americans expect a recession within a year and disapprove of President George W. Bush's handling of the economy even though the unemployment rate is at a five-year low, a new Bloomberg/Los Angeles Times poll found.

Six in 10 who were surveyed predicted a recession, similar to the 64 percent who anticipated the economy would contract in a December 2000 poll by the Los Angeles Times three months before the last decline. In the current survey, 71 percent of those earning less than $40,000 said they expect a recession compared with about half for those making more than $100,000.

``We're living on borrowed time,'' said Andrew Herring, 43, a chemical engineering professor at the Colorado School of Mines in Golden, Colorado, who took part in the survey. ``We spend ridiculous amounts of money on the war and now we have issues with the subprime housing market,'' said Herring, a Democrat.

Fifty-seven percent of those surveyed disapproved of Bush's handling of the economy and 38 percent approved, his worst showing in eight months. Nonetheless, 57 percent said the economy is doing well. That was down 11 points from January.

The Department of Labor reported on April 6 that the economy added 180,000 new jobs in March and the unemployment rate fell to 4.4 percent, matching October's five-year low. On the minus side, gasoline prices have risen 29 percent since January and the housing market has cooled.

Sixty-four percent of those polled said their own finances are very or fairly secure compared with 35 percent who described them as shaky.

Interest rate hike means twin benefits for NRIs

2007-04-10T23:01:00.000-05:00

The hike in interest rates in India gives NRIs an opportunity to reap twin benefits. The Reserve Bank of India (RBI) jacked up interest rates March 30 to control inflation since this is the number one priority of the government. The unexpected increase in interest rates sent a tsunami to the Indian stock market when it opened April 2 as it plummeted by over 600 points in a single day. The market recovered quickly but the yo-yo effect has scared the investors.

For the long-term investor, this is the time to buy. And NRIs have amply demonstrated this response when they pumped nearly Rs1bn in just two months of February and March. In January they were sellers. Compared to Rs.80 million they invested in the same period last year, the trend now shows that NRIs are bullish. Earlier, NRIs were not investing due to high rupee-dollar rate and valuation concerns. When the Indian market corrected, they returned. This was not the case when the rupee appreciated and the market was at a new high. Now shrewd NRI investors are on the lookout for entering the bearish market. The mutual funds have also eased off and become attractive for the investor.

From April 2006 to January 2007, portfolio investment by corporate bodies, foreign institutional investors (FIIs) and NRIs was $6.8bn. Will the FIIs and NRIs pull out in the bear run? Or invest for the long term? Mass exodus from the market remains a far-fetched possibility due to solid basic economic fundamentals and economy is still expected to grow around 7-8 per cent. This interest rate hike will cool the overheated Indian economy.

The market is expected to stay bearish because the cost of borrowing money has gone up for the quoted companies. Thus the prices of their goods are likely to go up. This means lower consumer demand. In due course, all this means lower company dividends and so lower returns on the equity investment. In the current uncertain scenario, it makes sense for the conservative NRIs to wait a little because the market can go down further. Since no one can time the market, the best approach is to gradually enter the equity market and mutual funds over the next few months.

The second benefit for NRIs lies in buying property. Many NRIs dream of buying a home in India for various reasons but astronomical prices ensured that these dreams remained just dreams. Now NRIs can make them a reality by monitoring the easing of prices. High interest rates mean high mortgage payments; thus the property prices should decline as the buyers find it difficult to pay the high monthly instalments. But not in the short-term as most projects started over a year ago have been sold out. Other housing units in recently launched projects with high prices have also been mostly sold out. Builders will be wary of launching new projects with higher costs unless they have substantial local or foreign funds.

The first effects of this trend could be felt after three to six months as most property developers have the capacity to hold on to their new housing for the short term. Another factor is the two to three months taken for approval of home loans. The ones in the process may most likely continue after increasing the repayment period but new buyers will be careful before taking on higher mortgage payments every month. Thus the demand for housing should slacken and NRIs can move in.

If an NRI wants to buy a house in the metros, the prices are not going to ease off just yet. Property developers in the metros — Delhi, Mumbai, Chennai, Kolkata and Bangalore — have deep pockets and can maintain their high prices for over six months or longer. And they have overseas funds to develop new projects. But the developers in Tier Two cities and towns will have to ease off earlier and lower their prices if they have to survive. Prices are expected to decline in the second half of this year in these cities and towns. The price decline in these Tier Two cities could be steeper than the metros. Gulf NRIs stand to benefit the most. Most NRIs from the Gulf region usually want to buy a home for themselves and invest in real estate. Since their target towns fall in Tier Two or even smaller townships and villages, they stand to benefit the most from lower housing prices. Since metros have new companies opening offices and requiring housing for their executives, their prices will hold on for a while. Now is the time for NRIs to wait and watch and reap the twin benefits of interest rate hike.

Nasdaq seeks lenient norms to lure desi cos - ET

2007-04-10T22:58:00.000-05:00

The year 2007 could see a fierce battle between two leading stock exchanges in the world — Nasdaq and London Stock Exchange (LSE) — to bring Indian firms in its fold.

Nasdaq has sought approval from Securities Exchange Commission (SEC) for a new trading platform with less-stringent guidelines. The move is intended to listing more companies on the exchange which could give run for its money to Alternative Investment Market (AIM) of LSE, the preferred destination of midcap Indian companies for last two years.

Sources close to the development informed that Nasdaq has launched a new portal in December 2006 which could be evolved as a trading platform with less-stringent norms. Interestingly, 14 Indian companies have so far registered to the portal.

Some of these are Bajaj Hindusthan, Cipla, Central Bank, Gail India, Kotak Mahindra Bank, Reliance Petro, Suzlon Energy, TCS and Tech Mahindra. It may be noted that Nasdaq is operating a portal from 1990. This facility provides regulatory review to ensure eligibility for the clearance and of securities through the DTC (depository trust company).

“Now Nasdaq has sought SEC approval for the portal market system for secondary trading in 144A securities among QIB’s , qualified brokers and dealers,” sources added. The section 144A of SEC allows private placement without SEC registration and US Gaap compliance.

LSE launched AIM around two years back for companies which cannot comply with the stringent guidelines of the main market. In last two years (2005 and 2006) 13 Indian companies got listed on AIM. On the contrary, the number of Indian companies listed on Nasdaq remains the same because of the stringent guidelines.

The Indian companies listed on Nasdaq are Infosys, Rediff and Sify. Besides, there are five companies listed on Nasdaq which has its main business interest in India like Cognizant. Sources pointed out that Nasdaq has over 2,600 QIB’s so the alternative market in the exchange will have an adequate depth.

Nishit Vadhavkar's View on Healthcare Sector

2007-04-10T20:37:00.000-05:00

One of the niche and overlooked sectors is that of Healthcare. India is now going through a consumption and IT driven boom.India has become the back office of the world. Thousands of Indian are leading an affluent lifestyle which only a few years ago, they could only dream of.

Life styles have become more sedentary and stress levels ahve increased dramatcially. The stress levels have are directly proportional to the salray increases.People now have the money to spend but along with that also the lifestyle diseases to boot. Diabetes and heart attacks are now hitting peole in their 30s a phenomenon which was unheard of until even a few years back.

The demographics suggest that the Indian population which has a large work force in the 25-35 years age group will peak around 2015 and then become greying.As has happened in the 1960s in the USA, the baby boomer generation has the money in hand and are willing to pay the premium for better healthcare services.I strongly feel healthcare is the sector to watch in the future.

There are very few listed companies in this space.1 of them is Apollo Hospitals. Now Apollo has a chain of hospitals in major cities and they have started Apollo pharmacies. Better supply chain efficiencies and bargaining power can make them a force to reckon with. They have also started the Apollo clinics where diagnostics services are provided. I have not studied this stock in detail but with a 10 year holding horizon a good stock to buy and forget.

Fortis healthcare has filed the red herring draft prospectus with SEBI. At the right price this could be a good buy, given that the promoters are the Ranbaxy group.

NDTV to take on STAR TV in entertainment industry

2007-04-09T22:19:00.000-05:00

Eyeing to dislodge Star from the top slot in the Hindi entertainment segment, Prannoy Roy-promoted media giant NDTV on Monday said it was in talks with major producers, including Ekta Kapoor, for serials on its to-be-launched channels.

The group would launch three channels under its new entertainment venture - NDTV Imagine, which will be headed by Star's ex-CEO Sameer Nair, credited with turning Star networks' fortunes with programmes like Kaun Banega Crorepati and plethora of hugely popular 'Saas-Bahu' serials.

"We will launch the first general entertainment channel in Hindi by the end of this year or early next year. We are in conversation with all major producers including Ekta Kapoor for producing serials on our channel," NDTV Imagine CEO Sameer Nair said. The second channel would be a movie channel, which would be launched around March, 2008. Nair, however, did not disclose the details of the planned third channel.

NDTV had recently got approval from FIPB for foreign investment to the tune of Rs 585 crore (Rs 5.85 billion) for its foray into entertainment and lifestyle space. "Most of this investment (from Rs 585 crore) will be into NDTV Imagine," he said without divulging the exact figures.

Earlier this year, NDTV had announced a tie-up with Karan Johar's Dharma Productions for the venture. Karan Johar will be the creative consultant and the ambassador of the NDTV brand. The company is also in discussions with leading production houses such as Hats Off and Synergy to come with new and different shows on its channel, which will target audience in the age group of 6-60 with a variety of programmes.

Hedge funds will have to cool their heels - DNA

2007-04-09T22:15:00.000-05:00

The government has shelved the idea of allowing hedge funds to participate directly in the Indian market despite market regulator Sebi’s keenness to let at least the established hedge funds in.

The finance ministry, officials in the know said, is wary of opening up the market to hedge funds for two reason: maintaining financial stability and avoiding political criticism. The ministry does not want to take any chances - at this point of time - with highly volatile hedge funds, especially since the Reserve Bank of India (RBI) has advocated a closer watch on short-term capital inflows. The RBI has even sought a review of existing regulations on short-term portfolio flows to avoid assets price bubbles and financial instability.

The ministry does not view foreign portfolio investments as “hot money” and is unlikely to resort to measures that would discourage foreign institutional investors (FIIs) from investing here. However, it has much less confidence in hedge funds, on which international regulation is either weak or non-existent.

The RBI is concerned over large capital inflows which are fuelling domestic inflation. As the country’s foreign exchange reserves have swelled to just under $200 billion, the RBI’s task of managing liquidity in the monetary system is becoming tougher. The RBI wants a relook at the Foreign Exchange Management Act (FEMA) to get a tighter grip over short-term capital flows.

The finance ministry shares the central bank’s view that in case there is an economic downturn, there is considerable risk of foreign funds quickly withdrawing from India and putting financial stability in jeopardy. The government would thus like to avoid a crisis like the east Asian currency crisis of 1997-98.

Earlier, the government had been toying with the idea of letting hedge funds in with a view to further augmenting liquidity and deepening the market. But it had not come out with a comprehensive policy as a detailed examination of the emerging global regulatory framework governing these funds was underway.

Officials said hedge funds worldwide are largely unregulated and lack transparency. A policy that allows hedge funds into stock markets would face political resistance from the government’s Left allies, which have been critical of what they see as inflows of speculative foreign capital into the Indian capital market.

At the behest of Prime Minister Manmohan Singh, an expert group headed by the chief economic advisor in the finance ministry, Ashok Lahiri, had examined the issue of whether the existing regulatory framework adequately covers the aspect of reducing the vulnerability of capital markets to the flow of speculative capital.

The group, comprising representatives from the RBI, Sebi and the department of economic affairs, had recommended that the policy on hedge funds should be put on the hold till regulatory developments in the US and elsewhere are available. The National Common Minimum Programme of the UPA government states that FIIs will continue to be encouraged while the vulnerability of the financial system to the flow of speculative capital will be reduced.

At present, while international hedge funds are not allowed to directly invest in Indian stock markets, they continue to put in money through participatory notes (PNs) issued by registered FIIs. The Lahiri committee had recommended that the current dispensation for PNs should continue though Sebi should have full powers to obtain information regarding the final beneficiary, or any holder, in the case of any investigation or surveillance action. FIIs should be obliged to provide full information to Sebi.

Sebi, according to officials, already had the necessary powers to ask FIIs to give details of PN holders. It, however, needs to be verified if any change in Sebi regulations relating to FIIs, issued in 1995, is required. The data on PNs do not show any substantial increase in their value as a proportion of total FII investment. The government has, therefore, taken the view that there is no concern over their disproportionate influence on market behaviour.

The RBI-appointed Tarapore committee, which recently came up with a roadmap for capital account convertibility of the rupee has, however, recommended the discontinuance of PNs.

Reliance plans 180 outlets in Gujarat

2007-04-09T22:14:00.000-05:00

Reliance Retail is all set to capture the food retail market in Gujarat by setting up over 180 Reliance Fresh stores in 16 cities and towns in the state over the next six months.

Reliance Retail, a wholly owned subsidiary of Mukesh Ambani-led Reliance Industries, will kick its operations in western India by launching nine Reliance Fresh stores in Ahmedabad on Tuesday. "Within a month, the company will open over 45 stores in Vadodara, Surat, Jamnagar, Bhavnagar and Rajkot", RIL president (corporate affairs) Parimal Nathwani said. "The number of stores is expected to cross 180 mark within the next six to seven months after cities like Mehsana, Palanpur, Anand, Nadidad and others are covered", he added.

The first Reliance Fresh store was launched in Banjara Hills in Hyderabad in November last year and till date, the company has started 100 such stores across the country. The stores that will be launched tomorrow will be the first in the entire Western Region and will provide fresh fruits and vegetables, grocery, dairy products and staples, said Gunender Kapur, president and CEO (foods business) Reliance Retail.

Pyramid Saimira (from a newletter)

2007-04-08T23:39:00.001-05:00

The reason triggered by fears of SEBI looking into the sudden rise in new listings. Finally SEBI could only target Atlanta that fell from Rs.1250 to 268 and once again there are upper circuits for Atlanta.

A new entrant on the bourses, Pyramid Saimira Theatre (PSTL)'s scrip had tumbled in February 2007, after a solid surge in the stock post listing in January 2007. From Rs 355.45 on 22 February 2007, PSTL's stock had tumbled to Rs 219.85, by 8 March 2007. The setback in the stock was on general market concerns of Securities & Exchange Board of India (Sebi) action on more stocks after the market regulator clamped down on alleged price manipulation in newly-listed firm construction firm Atlanta on 22 February 2007. PSTL too had witnessed a solid surge post listing. The stock had debuted at Rs 158.20 on BSE on 5 January 2007 (closing price on BSE on that day) compared to the IPO price of Rs 100. A solid surge in the stock was witnessed shortly after, when it advanced to Rs 464.50, by 7 February 2007, from Rs 190.15 on 19 January 2007. PSTL had later cooled off from that peak to Rs 355.45, by 22 February 2007.

PSTL said on Thursday (29 March 2007) it had joined hands with Baderwals Infraprojects, to build 200 malls in four years. Pyramid Saimira would hold 49% in ther joint venture, Baderwals Pyramid Development, and will invest about Rs 250 crore in the next two years on the project, estimated to cost Rs 12000 crore.

The joint venture will include 100 larger format malls covering 3,00,000 sq ft each and budget hotels. By 2010, Pyramid Saimira hopes to have malls in 300 locations across India through such partnerships.

PSTL is the largest theatre chain in India, with over 1.75 lakh seats in Tamil Nadu, Andhra Pradesh and Karnataka.. PSTL's objective is to have a presence in all categories of theaters. That includes malls, multiplexes, Cineplex’s and standalones across the country in Tier I, II and III locations.

PSTL’s strategy is to distribute digital films simultaneously in a large number of cinema halls. This will bring in maximum revenues for the company.

PTSL reported a net profit of Rs 5.15 crore in the December 2006 quarter on total income of Rs 46.05 crore. For April-December 2006, the company reported a net profit of Rs 10.04 crore on revenues of Rs 98.58 crore.
Source: BSE - Pyramid Saimira Theatre Ltd has informed BSE that an Extra Ordinary General Meeting (EGM) of the members of the Company will be held on April 19, 2007, inter alia, to transact the following:

1. The Company has signed major expansion deals for development of international theatre chains, malls, multiplexes in India, promotion of content funds and also to fund organic and in-organic expansion in the film exhibition and distribution business. To fund the above, the Company is proposing the issuance of foreign currency convertible bonds. The Extra-Ordinary General Meeting is to seek the approval of the members of the Company under Section 81 (1) A of the Companies Act to place the said FCCB for an aggregate subscription amount not exceeding US $ 150,000,000 (150 Million US $ ).

2. The Company has become an equity shareholder in M/s. Pyramid Saimira — Theatre Chain Malaysia, Sdn. Bhd., M/s. Mallplex Pvt Ltd., Baderwals Pyramid Development Pvt Ltd. Further the Company is promoting Pyramid Saimira Productions Ltd., Pyramid Saimira Content Fund Management Co. Pvt Ltd. The shareholders permission under Section 372 (A) is being sought for investment / managing loans / providing guarantee to the aforesaid Companies. 3. To seek the members permission, to enhance borrowing limit of the Board from Rs 500 crores to Rs 1500 crores. Date: 2007-03-29

Source: BSE - Pyramid Saimira Theatre Ltd has informed BSE that the Company and Baderwals Infraprojects Pvt Ltd to form a SPV for construction of 200 Malls-cum-Multiplexes in 4 years time with an approximate Project Cost of Rs 12000 Crores. Baderwals to operate 51% in the SPV Baderwals Pyramid Development Pvt Ltd and the Company to hold 49%. The project is to develop 200 State of art integrated Leisure and Shopping destination, primarily across Northern part of India. The Project will consist of 1. Multiplexes. 2. Budget Hotels (Estimated demand - supply gap of 50000 rooms exists in India). 3. Mall. 4. Hyper Market. Baderwals is one of the major Land Bank and integrated Real Estate Group in India. Date: 2007-03-30

Few more stocks from a Newsletter...

2007-04-08T23:37:00.000-05:00

Bayer CropScience Ltd: Current rate: 223. It has declined from a high of Rs. 338

Industry: Pesticides / Agrochemicals - Multinational BSE Code: 506285

Net Profit of Bayer CropScience rose 161.85% to Rs 19.77 crore in the quarter ended December 2006 as against Rs 7.55 crore during the previous quarter ended December 2005. Net sales rose 12.14% to Rs 240.53 crore in the quarter ended December 2006 as against Rs 214.50 crore during the quarter ended December 2005.

For the full year, net profit rose 53.03% to Rs 56.85 crore for the year ended December 2006 as against Rs 37.15 in the year ended December 2005.Net Sales rose 14.22% to Rs 775.74 crore for the year ended December 2006 as against Rs 679.18 crore in the year ended December 2005.

Shares are cum dividend of Rs.2.70

Taneja Aerospace: (BSE: 522222 Rs.174.70): On 7 February 2007, Taneja Aerospace & Aviation planned to form a joint venture with Sabena Technics, Belgium for maintenance, repair and overhaul services. On the expectation of this news the shares flew sky high to Rs.294 and in the current market turmoil came down to as low as Rs.160 and now again trying to regain the lost level. Another reason why the share flew high was in December 2006, the company issued 2350,000 equity shares to Merrill Lynch Capital Markets S.A, on a preferential basis @ Rs.155 per share. After the allotment, the share of Merrill Lynch has moved up to 9.43% in the company. The company had also resolved to raise $20 million at an EGM held in November 2006.

What is latest: Taneja Aerospace & Aviation has signed a memorandum of understanding (MOU) with Bharat Earth Movers (BEML) at Aero India 2007.

The pact was signed, with a motive of exploring the aeronautical opportunities in the defence and civilian sectors and the domestic market.

Taneja Aerospace and Aviation (TAAL): it was incorporated in Jul.'88 and received the licence to manufacture gliders in 1990. It is India's only manufacturer of six- to eleven-seater civilian aircraft, in the private sector.

The company has technical collaborations with Partenavia Construzioni Aeronautiche, Italy, to manufacture the P68 Observer, and with National Aerospace Laboratory to manufacture light twin-seater trainer aircraft.

The company reported a rise of 27.9% in net profit at Rs 2.75 crore in the December 2006 quarter. Net sales in the same quarter declined 3.5% to Rs 6.83 crore over the year ago period.

Few Stock Reviews from a Newsletter....

2007-04-08T23:35:00.000-05:00

IFCI (NSE/BSE: 500106 Rs.35.10) A Dark Horse about to unlock the hidden values

After many years of being in the red, term lending institution IFCI is on the verge of announcing a major turnaround with a profit of around Rs 1,000 crore for financial year 2006-07. At the current price of rs.35 it has immense potentiality for higher than any imaginable appreciation.

The management has already been roped the Consultant firm Ernst & Young to find a strategic partner for the company, a process that would take at least two months time, official sources said. Several global financial majors like Citigroup and Barclays have expressed interest. The stake is likely to go to a company which can help IFCI to scale greater heights.

Till December 2006, IFCI had a net profit of Rs 229 crore. In the January-March quarter of 2007, the company raked in Rs 800 crore from a seven per cent stake sale in the National Stock Exchange and about Rs 30 crore by divesting its entire stake in ICRA. About Rs 200 crore of non performing assets are also understood to have been recovered in the last quarter of 2006-07. The market expectation is the profit will be more than Rs 1,000 crore in 2006-07.

IFCI had made a loss of Rs 74 crore in 2005-06 and Rs 324 crore in 2004-05. According to the data available on the Bombay Stock Exchange, IFCI has been losing money since 2000-01. The company's accumulated losses stood at Rs 4,600 crore till March 31, 2006. Out of that the company has made recoveries of Rs 1,000 crore in 2006-07. The company has made loan and other recoveries of about 1100 crore in 2006-07. The aggregate recovery of Rs 2,100 crore is higher than the target of Rs 2,000 crore set for 2006-07.

The accumulated losses will be wiped out very soon as the company has hidden unlocked values in its investments, which can generate Rs 6,000 crore cash anytime. The company has immediate realizable investment of Rs 2,000 crore

The sudden realization that IFCI is turning black has led to a 135 per cent increase in the share price - to Rs 33 as on March 30 from Rs 14 as on January 8, 2007.

IFCI is in the process of selling Malavika Steel Plant, estimated to fetch close to Rs 600 crore. The 750 acres of land of the Malavika Steel at Sultanpur (UP) can fetch it around Rs 800 crore at the lower end and Rs 2000 crore at the higher end.

Similarly, the company is in the process of selling the land, building, plant and machinery of Hitech Electro Thermics & Hydro Power Ltd. All these will materialize in the early part of 2007-08. IFCI is also understood to have very attractive real estates, which is worth Rs 1,000 crore.

ATLANTA: (BSE; 532759 Rs.268) Due to SEBI inquiry into some malpractices the shares of this co has fallen from a high of Rs.1450 to the current levels. With FII buying the shares it hit the 5% upper circuit today after remaining in the lower circuit for more than two weeks. The worst seems to be over and price is attractive.

Neo Sack Ltd (BSE: 523820. Rs.15.09) has informed BSE that a meeting of the Board of Directors of the Company will be held on April 09, 2007 to consider the following: 1. Forfeiture of shares 2. Future expansion plans. When the markets closed on Thursday there were orders to buy 3.80 lakh shares but there were no sellers .Share may move up in the coming days.

Speculative counters become hot again: WI Ship yard (BSE: 531217 Rs.6.69) If you buy around current levels exit around Rs, 9.50.

Current Market View from a Newsletter

2007-04-08T23:34:00.000-05:00

The RBI has increased the interest rates twice this year in a surprising manner both on Fridays after the closure of the market. In both occasions the market reacted in the same way by coming down crashing. This time the fall was still higher as the Sensex lost 646 points. After the hike every expert analyses the situation and predicts a big fall. Even SMS are sent by many warning a disaster to strike the market on Monday.

MARKETS BOUNCED BACK: Investors should take a lesson from the behaviour of the market in the last two falls. In both the occasions the market has recovered and the recovery has come within 24 hours. Never that the market continued falling in the same fashion even for two or more days. This is a clear indication that there are buyers at lower levels. No one has the courage to go short when the fall is severe. This time banks autos and cement shares had a very sharp fall just to recover in 24 hours. It is better to remain with cash expecting such falls in the future as well.

WHY THE CENTRAL BANKS HIKE THE INTEREST? It is not only in India but all over the world the banking rates have gone up recently. Chinese central bank said it would raise the amount that lenders must hold in reserve for the sixth time in 10 months time since last June, in an aim to further control liquidity and curb lending. The 0.5% point increase in the reserve requirement ratio would take effect 16 April, the People's Bank of China added. The main reason for hiking the interest rate is the spiraling of prices or inflation. In India the rate of inflation was around 3% last year and it has gone up by over 100% to 6.39 % in the current year as on this week.

INDIAN ECONOMY IS TOO HOT TO HANDLE: Every analyst was delighted with the GDP growing at an amazing speed 8 t0 10%. In other words there is so much of economic growth all around and lots of money is being spent on consumption like buying cars, two wheelers, white goods and other fast moving consumer goods. Money came in the form of loans to buy land, housing and other luxuries as well. These are the signs of prosperity but growth also comes with a price and that is inflation. The demand for goods is so much and they are made affordable to you by the bank loans. Banks were cash rich and even tele marketed by calling on mobiles and offering personal loans.

Since demand exceeded supply mainly in agriculture the cost of food sky rocketed. Pulses like toor dhall and udad became unaffordable to the masses. What was worse is no where in the world these pulses area available to even import .Only in the Asian countries people consume dhal. Then politics took over economy as seen in the latest budget proposals where the Govt wants manufacturers to reduce prices of Cement and steel. With elections in UP and the general elections too around the corner the Govt is forced to settle for lower growth rather than higher inflation.

WILL THE HIGH INTERST HARM INDUSTIRES? It is said that because the rate of interest has gone up in the recent months from 8% to 12% demand for various loans like auto and home will fall. Economic actions are never that straight forward. When the demand for loans come down the prices of homes too may fall in the beginning say by 10 to 20% this will attract people to rush for loans even at higher rates. Once again the home prices will rise. This goes with other products as well. In other words RBI measures can harm the industry only for a while and the growth story continues to remain in tact in long run.

Most of the big industries do not borrow from the local banks at all they are global borrowers and get interest at nominal rates. The Bank of Japan still gives loan at 0.5%. It is the small to medium industries that will get affected by such interest rate hikes. Just seven years back the bank rate for home loan was at 18.% and the banks just started giving loans for buying automobiles at 18% then the Indian GDP jumped to 5% and at that time too it was considered that the growth was too high and the economy was getting over heated. Now at 10% GDP the economy is red hot?

RBI is forced to hike the interest rates to curtail money supply and reduce the rate of inflation. Already the inflation is showing signs of coming down once it falls from current levels to 5% one can expect RBI to reduce the rate of interest once again.

THE NEXT TRIGGER TO MOVE THE MARKET: The result season is about to begin. The Q4 results are expected to be the best in the recent years. With many of the cos having paid more than 50% higher advanced tax it is expected to be a great performance. All eyes are on Infosys whose results are on the 13th of this month.

Asian Market rises..

2007-04-08T23:12:00.000-05:00

Asian stocks advanced for the first time in three days, led by Toyota Motor Corp., after the U.S. unemployment rate unexpectedly dropped, easing concern demand will slow in the world's biggest economy.

``The employment data was good news for exporters because it provided evidence that the fundamentals of the U.S. economy are stable,'' said Hideyuki Ookoshi, who oversees $365 million at Chiba-Gin Asset Management Co. in Tokyo.

Doosan Heavy Industries & Construction Co. gained after the value of South Korean developers' overseas contracts jumped 43 percent in the first quarter. Taiwan's Bank of Overseas Chinese climbed after Citigroup Inc. agreed to buy the lender.

The Morgan Stanley Capital International Asia-Pacific Index added 0.3 percent to 146.73 at 10.46 p.m. in Tokyo. Japan's Nikkei 225 Stock Average advanced 1.3 percent. All markets open for trading gained. Hong Kong, Australia, New Zealand and the Philippines are closed for holidays.

Toyota, the world's largest automaker by value, rose 1.4 percent to 7,500 yen. Sony Corp., the maker of the PlayStation 3 game console, jumped 2.3 percent to 6,340 yen. Toyota generated more than a third of its fiscal 2006 revenue in North America while Sony made 70 percent of its sales overseas last year.

U.S. unemployment fell to 4.4 percent last month, the Labor Department said on April 6, matching a five-year low in October. The median estimate of 73 economists surveyed by Bloomberg News was for a 4.6 percent climb, from 4.5 percent. Some 180,000 new jobs were created in March, more than the forecast 130,000 rise.

Taiwan Semiconductor Manufacturing Co., the world's biggest supplier of made-to-order chips, gained 0.3 percent to NT$69.50. Chartered Semiconductor Manufacturing Ltd., the third-largest custom chip maker, climbed 1.4 percent to S$1.46 in Singapore.

Yen Weakens

Japanese stocks also gained after the yen weakened against the dollar and the euro, increasing the value of overseas sales when converted back into yen. Komatsu Ltd., the world's second-largest maker of construction machinery, climbed 2.2 percent to 2,520 yen.

The yen weakened to 119.26 against the dollar in New York on April 6, the lowest since Feb. 26. Japan's currency fell to a record intra-day low of 159.69 versus the euro. The yen recently changed hands at 119.37 per dollar and 159.61 to the euro.

``If the yen continues to trade around its current level that will be positive for companies here,'' said Chiba-Gin Asset Management's Ookoshi.

Google April Fool Map - You will like it....

2007-04-08T12:27:00.000-05:00

Google Maps: Wishing you a happy April Fools!

Create a new trick by customizing the map:
2) Pick the trick type & drag it around to place it:

3) Permalink to this Map!

Off Topic but relevant for regular Air Traveller Readers

2007-04-08T12:24:00.000-05:00

The days when airplanes offer a hiatus from being connected to the office are numbered.

After years of discussion and delay, U.S. airlines will start offering in-flight Internet connections, instant messaging and wireless email within 12 months, turning the cabin into a WiFi "hotspot." Carriers are expected to start making announcements around the end of the summer, with service beginning early next year.

Like it or not, airborne cellphone chatter still has a flying chance in U.S. airplane cabins, as well, despite a recent indication that the Federal Communications Commission will keep a ban in place.

The FCC has already auctioned off radio spectrum for cellphone use on airplanes, and telecommunications companies partnering with airlines have successfully tested several systems. But no company made a firm proposal. Facing high costs and opposition from fliers, U.S. airline customers weren't interested. Yet with airlines in Europe and the Middle East to begin offering cellphone service aboard airplanes later this year, that could change.

If the technology proves safe, popular and profitable, U.S. airlines and telecommunications companies may be more interested, under pressure to keep up competitively. In-flight phone calls may not be as popular as lie-flat beds in business class, an innovation that started in Europe and spread, but air travel is a copycat business. Success in Europe could prompt action in the U.S., and bring the FCC back to possibly dropping its ban.

"The likelihood of cellphone service on airplanes coming into play is still very high," said Jack Blumenstein, chief executive of AirCell Inc., a major player in airplane cabin communications.

That may not be what road warriors want to hear as they dread listening to a blathering seatmate.

Still, with current technology, capacity would be limited, so the entire cabin wouldn't be able to chat at the same time. Indeed, only about 14 calls or fewer would be able to take place simultaneously.

For now, the preferred cabin technology in the U.S. is Internet service, which will launch early next year. If broadband connections at 35,000 feet are as popular as they have been at hotels, airports, homes, schools and coffee shops, airplanes will likely be fitted with the relatively inexpensive technology rapidly.

AirCell paid $31.3 million at an FCC auction last year to take over radio frequency once used for expensive air-phone service and reallocate it to Internet and cellphone service. The Internet service already has the approval of both the FCC and the Federal Aviation Administration. Mr. Blumenstein says AirCell, a closely held Colorado company that provides communications for private jets, is building out its network of 80 to 100 ground towers and talking to multiple airlines. No customers have been named yet.

"It can't happen soon enough," said Henry Harteveldt, a travel technology analyst at Forrester Research Inc.

AirCell will install equipment on airliners that will act as a WiFi hotspot in the cabin and connect to laptop computers and devices like BlackBerrys that have WiFi chips. In all, it will cost about $100,000 to outfit a plane with less than 100 pounds of equipment, and the work can be done overnight by airline maintenance workers, AirCell says.

What makes the service particularly attractive to airlines is that they will share revenue with AirCell. The service will cost about the same as existing WiFi offerings. Mr. Blumenstein says it will charge no more than $10 a day to passengers. It will also offer discounted options for customers and tie into existing service programs like T-Mobile, iPass and Boingo. Speeds will be equivalent to WiFi service on the ground.

AirCell will block voice calls over the Internet with services like Skype -- except for pilots, flight attendants and air marshals, who will be allowed to talk to people on the ground for scheduling, safety and security issues.

While WiFi is preferred in the U.S., cellular service is the top priority in Europe, the Middle East and Asia, where social objections to cellphones on airplanes appear to be more muted.

Ryanair Holdings PLC signed a deal to equip all of its 200 planes with a system from OnAir, a joint venture of airplane maker Airbus and SITA, an aviation technology provider. Installation is likely to take place in the third quarter of this year, an OnAir spokesman says. Dubai-based Emirates hopes to begin offering service from AeroMobile Ltd., a joint venture of technology firms Arinc Inc. and Telenor ASA, on flights to Asia starting in late summer. Qantas Airways will start a trial of the AeroMobile system in Australia before June.

Some 30 countries have approved the service from a telecommunications perspective, convinced cellphones on planes with the equipment installed won't tie up large chunks of capacity at towers on the ground. But both companies still need approval from air-safety regulators who have been studying whether cellphones might interfere with aircraft navigation equipment. So far, regulatory approval has been slower than they expected.

OnAir and AeroMobile both install "pico cell" receivers on planes that connect to cellular phones, allowing them to operate at low power to minimize technical problems. The pico cell then routes calls to cellular networks through a satellite link.

Only about 14 calls or fewer can be successfully made at a time per flight, and airline crews can turn the system off during takeoff and landing. If you make the 15th call, you'll get some kind of indication of "no service."

Pico-cell technology has been successfully tested in the U.S., but deployment would be complicated and costly. While Europe has migrated heavily to GSM phone technology, the U.S. still has lots of older phones around more likely to cause ground problems. With the public lining up firmly against cellphones, airlines have been reluctant to sign on and telecom companies were reluctant to invest millions in a potentially unpopular product.

On March 22, FCC Chairman Kevin J. Martin said he would recommend ending consideration of lifting the ban on cellphone use aboard planes because a two-year investigation into possible interference with ground towers had proven inconclusive. It also drew more than 8,000 consumer complaints.

But if systems prove they work in other parts of the world, airborne cellphone service likely will migrate to the U.S. -- perhaps within just a couple of years. AirCell says it can expand its service to include cellular voice calls a year or two after its data launch, if U.S. airlines ever have the stomach for it. Already, LiveTV, the satellite television arm of JetBlue Airways Corp., paid $7 million at an FCC auction for a more-limited frequency that could be used for cellular phones. JetBlue hasn't said what its plans for the frequency will be.

Someday, many more travelers may be donning noise-canceling headphones.

Nishit Vadhavkar's Stock Analysis

2007-04-07T13:59:00.000-05:00

I have been associated with Nishit for long time now. It atleast feels like that since we regularly discuss about stock picks and investment environment in India as well as US.

Nishit has been contributing to this blog for few weeks now and has been providing his independent views on the market situation in India. He is a young guy with lots of knowledge and insights in the market.

Nishit has also been conducting investor's meet in Mumbai for a long time now where they discuss specific stocks and the fundamentals behind the same which makes it cheaper in terms of value with enough margin of safety, a classic Warren Buffet principle.

He has agreed to share few of the stock analysis he had completed during last few weeks for the benefits of the readers of this blog. I am sure it would be very useful, especially readers investing in the Indian Stock Market. Not to discourage US Investors who can decide on investing in the most exciting emerging market in the world alongwith China.

Would also like to invite comments from readers marked to me or Nishit (@ nishv77@gmail.com) for any questions they might have on the fundamentals of the stock picks.

I would like to offer readers investment portfolio suggestions if they send me specific query to my personal email id - gurudatta22@gmail.com

New Poll Added

2007-04-07T10:57:00.000-05:00

My apologize for not updating my Poll for a long time now. No excuses but was little lazy.

I have added a new poll and would ensure that I keep the poll current so that people get a sense of what others think.

New Poll which I added relates to the finalization of the SEZ Amendments. There has been hue and cry about the Real Estate Stocks being affected by the derailment of SEZ Policies. I am sure there are other factors like Interest Rate Hike and the Real Estate Bull Market is defying the logic of gravitational force. But SEZ Policy is an important factor many companies like DLF, Mahindra Gesco and to some extent Ashiana Housing too because of the fact that the increase in real estate prices in Nimrana and few of its other projects are linked to the RIL Haryana SEZ. So, friends, please do go ahead and vote for the poll.

I would also like to invite comments from friends and well wishers as to how better I can serve them in terms of Polling.

The Result for the last poll is as follows :

How much is cash/FD in your portfolio
0 to 10 % 34% (14 votes)
10 to 20 % 24% (10 votes)
20 to 50 % 24% (10 votes)
50 to 75 % 2% (1 votes)
> 75 % 15% (6 votes)
Total voters for this poll: 41

Reliance Comm adds 1.2 mn subscribes in Mar`07

2007-04-07T10:21:00.000-05:00

Reliance Communications added over 1.2 million wireless subscribers in the month of March 2007. The company also maintained its position as India`s second largest wireless operator with a re-verified wireless subscriber base of over 28 million as on Mar. 31 2007.

As on Mar. 31, 2007, Reliance Communications completed re-verification of 85% of its entire wireless subscriber base, in accordance with the industry-wide requirement from the Department of Telecommunications (DoT).

Reliance Communications` ARPU (average revenue per user) is expected to increase 12% as a result of the re-verification exercise, making it one of the top 3 players in India in terms of ARPU, said the company.

Reliance Communications is an integrated telecommunications service provider. It has an aggregate of over 30 million customers across its wireless, wireline, broadband, and national and international long distance businesses.

The shares of the company closed at Rs 397.45, down Rs 0.35, or 0.09%. The total volume of shares traded at the BSE was 1,545,469. (Thursday)

FINALLY, SEBI ON SCAMSTER ALERT

2007-04-07T07:44:00.000-05:00

Clones of Harshad Mehta and Ketan Parekh continue to manipulate the bourses at the cost of the gullible investor.

The Indian stock markets are on a reality check. Market regulator Securities and Exchange Board of India (SEBI) is concerned at what it calls the rise of unregistered portfolio managers pushing stocks that do not even merit a second look and which eventually collapse. This, in turn, is causing tensions among gullible investors — and at times, even foreign institutional investors — who are routinely losing money at the bourses.

SEBI chairman M. Damodaran calls it a credibility issue for the market regulator. Every day, he and his team are issuing suspension notices to brokers to check what could be another multiple-application scandal with initial public offers (ipo) ramping on the listing day. Consider the case of Ahluwalia Contractors, which issued its shares at Rs 54 and soared to Rs 611 on the day of listing. And theirs is not an isolated case. Al Champdany, Nissan Copper, Shree Ashtavinayak Cine Vision, MindTree Consulting, Pyramid Saimira — the list of companies is endless.

SEBI says it is happening because little-known trading firms are emerging as big punters. Investigations by SEBI — which has been suspending brokers by the dozen almost every day — showed small punters accounting for nearly 40 percent of the total volume in most ipos this year. “They target one particular stock in a day and push it up to attract gullible investors.

We have started tracking this abnormal volatility with all seriousness,” says Damodaran, adding, “We are looking into all instances of 50-60 percent price rise to check whether they are manipulations or speculations.”

Brokers and their manipulative tactics are one crisis. The other is unknown investment advisors. Currently, SEBI does not register and regulate investment advisors as a separate class of intermediaries. As a result, many — without any formal contract with SEBI — continue to render investment advice to specific clients.

Suspending brokerage firms is relatively easy but Damodaran realises that the regulation of all non-registered entities rendering investment will require enormous resources. India has over 22 lakh small advisors and distributors and it is not feasible for SEBI to regulate such a large number.

How does the nexus operate? Shree Ashtavinayak Cine Vision, a company with an ipo grading of 2/5, was listed on the bse and its turnover topped Rs 360 crore against mid-cap market capitalisation of Rs 227 crore. On February 5 this year, the stock witnessed intra-day volatility of Rs 64. Of the total quantity traded, about 41 lakh shares were traded by a number of firms that day. But late last month, when there was no bulk deal, the stock clocked a turnover of a mere Rs 50 lakh with a volume of 37,000 shares.

Similar is the case of Ashok Soota-promoted MindTree Consulting whose price rise was so sharp that the stock — listed at Rs 599 against an issue price of Rs 425 — touched a high of Rs 1,005 in five simple trading sessions. Why? It was traded in bulk by a number of brokers.

Not just SEBI, even the finance ministry is alarmed at the developments plaguing the Indian bourses. In fact, top officials — encouraged by Finance Minister P. Chidambaram and Damodaran — want a private sector self-financing regulatory organisation (RO) to check investment advisors.

“Typically, investment advisors deal not only in securities, but also other products such as insurance, commodities and pension products. Hence, the ro should regulate investment advice relating to all the products,” SEBI admits in a consultative paper circulated among its top brass.

Interestingly, a section of the Indian media is also a part of the SEBI worry list. “There have been concerns in India regarding misuse of investment advice, particularly in publicly accessible media... SEBI has had to take regulatory action against some investment advisors found to be misusing the media,” says the paper.

The Indian markets’ reality check now appears to be taking some shape. “But it will take some time because there is no definitive system in place, neither with SEBI nor with the finance ministry,” opines stockbroker Hemen Kapadia.

Many cite the example of Manish Marwah, till very recently associated with the soaring prices of several shares. Both SEBI and the finance ministry tracked him for more than a year but took no action. Only recently, the SEBI order on Atlanta Limited — which has changed its name and profile several times and had a rise from its offer price of Rs 150 to Rs 1,446 this January — confirmed Marwah’s hand in the stock’s meteoric rise and the nexus its promoters had with market operators.

Was Marwah fronting a banned big-time trader? No one has the answer.

“It is this nexus that SEBI wants to break since someone is unfairly maximising wealth at the cost of the lay investor,” Damodaran told Tehelka.

“The surveillance system of SEBI should have worked better. Why didn’t SEBI pick up Marwah earlier? Now that Damodaran is trying to clean the markets, the SEBI check system — hopefully — will function better than before,” quips stockbroker and analyst Alok Kejriwal.

Will it, will it not? No one in the market is sure . For the time being, the SEBI crackdown has surely put the rampant price manipulation mechanism on the backseat, at least for some time.

Inflation grows @ 6.39 % vs. 6.46 %

2007-04-06T21:01:00.000-05:00

After stubbornly remaining static for three consecutive weeks, India's inflation, based on the Wholesale Price Index (WPI), declined marginally in the week ended March 24. The point-to-point inflation was 6.39% compared with 6.46% in the preceding week.

The latest inflation reading is above the average estimate of around 6.25% by economists. The annual inflation rate was 4.06% during the corresponding week of the previous year. The slight dip in inflation may not bring much relief to the Government and the Reserve Bank of India (RBI) till it falls below 6%. Finance Minister P. Chidambaram wants inflation at 4%. The RBI has set a target of 5-5.5% for the year 2006-07.

It may be recalled that on March 30, the RBI announced a 25 basis point hike in the repo rate, a key short-term lending rate, besides raising the Cash Reserve Ratio (CRR) by 50 basis points to 6.5% in two stages. The surprising monetary tightening measures by the RBI took most economists by surprise as they had expected the central bank to wait at least till the annual policy meeting, scheduled for April 24, before taking any further steps.

Tight money to slow down growth, says CII

2007-04-06T20:58:00.000-05:00

The Confederation of Indian Industry (CII) on Friday warned that any further tightening of money supply by the Reserve Bank of India would trigger a slowdowm of the economy.

"There are already emerging signals in the form of slowdown in the automotive sector and retail banking,'' CII President R. Seshasayee said in a statement here. Mr. Seshasayee said that while inflation control was legitimately at the top of the national agenda, "it is important that growth is not traded off in the bargain.''

The RBI recently announced another increase of 25 basis points in the repo rate (the rate at which RBI lends short-term money to banks) to 7.75 per cent and increased the cash reserve ratio to 6.5 per cent from 6 per cent. The central bank's move would suck up Rs. 15,000 crore liquidity from the system. The CII President said a large number of projects were in the pipeline and any more intervention by the RBI could "force companies to rethink their investment.''

He said that if at all the central bank had to intervene it should be on a selective basis and restricted to the segments where overheating was felt. He also wanted that the RBI should not surprise industry by sudden jerks. The CII chief said industry had to live with appreciation of the rupee even if it hurt exports. "While the supply side measures take effect, industry might have to accept in the short term, appreciation of the rupee even if it means that exports are hurt a bit.''

He hoped that the industry would improve productivity and competitiveness in the face of the adverse exchange rate. For improving supply side constraints, post grain harvest measures like cold chain infrastructure should be built in and over the medium term, agricultural productivity must match the ever-increasing demand, he said.

NTPC: Targetting 22,000 MW in 11th Plan

2007-04-06T20:46:00.000-05:00

NTPC is enthusiastic about its growth plans, having added 1,915 MW In FY07, and expecting to add another 3,160 MW In FY08. The power company has already commissioned 5,000 MW for the 10th Plan, and envisages 22,000 MW in the 11th Plan, since it sees a 4000 MW shortfall in the same.

It hopes to boost margins by improving operating efficiencies. It also intends to bid for upcoming Ultra Mega Power Projects (UMPPs) in April and June, and is relooking its costing and financing strategies for the same. It is open to alliances with other companies for such bids.

NTPC hopes to foray into capital goods with its 12th plan.

SEZs back on track, cut to size

2007-04-05T14:33:00.000-05:00

Bowing to political pressure, the Centre on Thursday decided that no SEZ would be allowed beyond 5,000 hectares of land and states will not acquire land for industry. In the middle of a raging debate on SEZ policy, especially in the wake of the Nandigram violence, the empowered Group of Ministers took these decisions.

At the same time, the eGOM, headed by Foreign Minister Pranab Mukherjee, gave a clear signal that new SEZ norms would not compromise the industrialisation process and lifted the freeze, clearing 83 new projects.

"No state can compulsorily acquire land from farmers through Land Acquisition Act," Commerce Minister Kamal Nath said, adding that promoters would have to themselves go to farmers and acquire land at commercial rates. Further, the states would be empowered to reduce the size of SEZs below the 5,000 hectare limit set by the Centre.

Nath said under the new Relief and Rehabilitation Policy, which would be finalised soon, at least one member of the displaced family would have to be employed in the project. This would be in addition to the compensation paid to farmers.

With the freeze lifted, the government would approve all pending applications where there is no land dispute. Of the 234 SEZs with formal approvals, 63 have already been notified, while 83 more were today cleared for notification. The Board of Approvals will now take up 162 SEZs with in-principle approval and 140 pending applications.

The decision on limiting the size would hurt plans of companies such as Reliance Industries, besides real estate players DLF and Omaxe, which plan to set up mega SEZs.

Asian Market Falls

2007-04-04T23:53:00.001-05:00

Asian stocks dropped for the first time in three days, led by BHP Billiton Ltd. as oil prices extended declines after Iran said it will release 15 British sailors and marines.

``The tension between Iran and the U.K. drove crude prices higher and people are speculating further gains in oil will be difficult after this geopolitical risk was removed,'' said Yoshinori Nagano, who helps oversee about $70 billion at Daiwa Asset Management Co. in Tokyo.

Australia's Westfield Group and Foster's Group Ltd. fell after the country's currency climbed to a decade-high against the dollar, reducing the value of U.S. sales. Rinker Group Ltd. rose after a hostile takeover bid from Cemex SA won U.S. regulatory approval.

The Morgan Stanley Capital International Asia-Pacific Index declined 0.4 percent to 146.30 at 12:24 p.m. in Tokyo. Japan's Nikkei 225 Stock Average lost 0.4 percent, as did Australia's S&P/ASX 200 Index, which fell from an all-time high.

All markets open for trading fell, except in China and Singapore, which both climbed to records. Hong Kong, the Philippines and Taiwan are shut for holidays, while Australia closes at 1 p.m. Tokyo time.

Toshiba Corp. and Samsung Electronics Co. paced gains among Asian computer-related shares after a report from Citigroup Investment Research said Microsoft Corp.'s earnings increased last quarter. The report helped U.S. technology stocks pace an advance in the broader market.

Ending Tension

Crude oil in New York yesterday settled 0.4 percent lower at $64.38 a barrel, after sliding as much as 1.7 percent. It recently traded at $64.39, a 5.4 percent decline from $68.09 it reached on March 27, the highest since Sept. 6.

Monsoon to be good this time..

2007-04-04T23:37:00.000-05:00

After several years, the top four international weather models have come out with near-identical forecasts with respect to an evolving southwest monsoon in India.

The UK Met Office and the Japanese Meteorological Agency have now joined their US and European counterparts in projecting favourable oceanic conditions to "altogether rule out a monsoon deficit scenario."

The International Research Institute (IRI) for Climate and Society at the University of Columbia and the European Centre for Medium-Range Weather Forecasts (ECMWF) had made known their forecasts supporting an above normal monsoon this year.

MAY CONDITIONS

But atmospheric conditions in May are crucial to the proper evolving of the monsoon, according to Dr K.J. Ramesh of the Department of Science and Technology.

The pressure gradient and wind speeds, among others, would have to jell to establish ideal monsoon onset conditions around June 1.

This is something that bears close watching, he said.

Anomalous weather developing in May have upset the monsoon applecart on a few occasions in the past.

THUNDERSTORMS BREWING

Meanwhile, an increase in thundershower activity has been forecast for the southern peninsula over the next few days from relentless surface heating and resultant convection.
Prevailing easterly winds blowing inland will carry enough moisture to aid convection, Dr Ramesh said.

Seven-day forecasts put out by the ECMWF have indicated the possibility of some activity in the southwest Bay of Bengal by April 15.

This is part of the Inter Tropical Convergence Zone (ITCZ), the global band of `low,' which is moving north of the Equator to be around nearer home to aid monsoon development.

The dying El Nino and the nascent La Nina event have prompted leading US forecasters to predict a "busy" 2007 North Atlantic hurricane season.

Dr William Gray and Dr Philip Klotzbach of the Colorado State University have upgraded their seasonal forecasts by slotting the evolving 2007 season in the "very active category."

New storms

The forecaster duo predicted 17 named storms, of which nine would become hurricanes making landfalls on the US and Caribbean coasts.

In contrast, the hyper active 2005 season had seen a record-breaking 28 storms form, 15 of which went on to become hurricanes.

Govt revise Wheat Production Number - Good for reducing the inflation

2007-04-04T23:16:00.000-05:00

The Government on Wednesday revised its forecast for wheat production this year citing improved cultivation by farmers.

Wheat output may reach 73.7mn tons in the year ending June, exceeding 72.5mn tons forecast in February, Agriculture Secretary P.K. Mishra said in New Delhi.

India, world's second-biggest wheat producer, produced 69.35mn tons of the grain last year.

Wheat was planted in 28.45mn hectares (70.30mn acres), up 7% from a year ago, according to the Agriculture Ministry.

Global wheat prices are up 24% in the last 12 months. Wheat for delivery in May rose 1.5% to US$4.2575 per bushel in the after hours electronic trading on the Chicago Board of Trade today, ending three days of losses.

Global wheat prices surged to a 10-year high in October 2006, partly because India resumed imports in February 2006 after six years to meet a shortfall in domestic production.

India's foodgrain production may rise to 211.78mn tons from 208.6mn tons a year earlier, while output of oilseeds may fall to 23.26mn tons from 27.98mn tons,Mishra said.

Bharti Retail to adopt a different model compared to Walmart's

2007-04-04T20:27:00.000-05:00

In a model that will fundamentally differ from its partner Wal-Mart's, Bharti Retail has finalised a three-tier retail format that will provide customers access to a store 1.5 to 7 km from their homes.

Bharti Retail, a subsidiary of the Delhi-based Mittal group, has tied up with Wal-Mart for back-end and logistics support. Foreign direct investment in retail is currently prohibited in all but single-brand retail stores. Based on customer research, Bharti Retail is planning a small-format convenience store within 1.5 km of the customer home, a mid-level store 2-3 km distant and a hypermarket within a 5-7 km drive.

This is in sharp contrast with the Wal-Mart retail model in the US which is dominated by large-format stores on city outskirts. The world's largest retailer has a few small convenience stores in countries like Mexico to cater to neighbourhood demand. Bharti's model, on the other hand, will have more convenience stores and fewer hypermarkets.

"In India, our studies have shown we require a multi-format store structure, and for large store formats we have to consider the challenges posed by our poor infrastructure. The distance has to be convenient for customers to go to the store," explains Bharti Retail President and Chief Operating Officer Vinod Sawhney. The small stores will range from 2,000 sq ft to 5,000 sq ft in size and will mainly stock food, grocery and household items that have a high purchase frequency of seven to eight a month.

The company plans to build a majority of the stores within this format under a model that will franchise existing mom-and-pop stores. The hypermarkets will range from 75,000 sq ft to 1.5 lakh sq ft in size and a mid-level store will be 25,000-50,000 sq ft in size.

The new retail entrant, which hopes to have over 10 million square feet of retail space by 2015, is also considering shop-in-shop formats (under which it would rent space to a jewellery or pharmacy chain), and a private label for food, grocery and even consumer electronics.

It is also studying the possibility of introducing free home delivery services and an online format, should customer demand exists.

Samir Arora says expect 15 - 20 % return from Indian Investment

2007-04-04T20:24:00.000-05:00

Fund Manager of Helios Capital, Samir Arora believes that earnings slowdown related prices is already reflected in the prices. Arora expects a 15-20% return from the Indian market and is currently bullish on India.

According to him, auto stock prices factor in the rate hike impact, however, he mentions that they don't own any of them. He favours private banks compared to PSU banks.

Arora expects one more rate hike from RBI. He continues to remain bullish on Infosys and the technology sector.

Excerpts of CNBC-TV18's exclusive interview with Samir Arora:

Q: How are you feeling after this correction?

A: The correction has been there and expected in some sense. But as I had earlier said, we are bullish now - of course, we have to define what is bullishness. In the past years, bullishness meant 30-40% returns now bullishness may mean 15-20% return. So that is still possible and achievable in India.

Q: How will the next 3-6 months pan out in India, with concerns about interest rates, earnings slowdown? Will we get back to new highs anytime in the next 3-6 months?

A: New highs is a difficult thing because we do not relate so much to the Index. But if you look at the fact that earning slowdown is related with interest rates, I think some of that is already reflected in the prices. If you look at Indian market performance relative to China; the Chinese market is up 24% this year and I think the Shenzhen is up 50% odd and Brazil is up 9-10%, India is down 4-5% in dollar terms. So it is not that the market has stood still while the interest rate went up or inflation fears went up. Also, earnings expectations for this year from the most bullish estimates are not more than 15-16% EPS growth for '08 or '07. So the point to note here is the markets do not stand still while the rest of the economy changes.

The market predicts that the anomaly is not going to react to things which happen concurrently. This means if something happens today, the stock market, in theory, other than once in a while should have taken that into account 4-5 months and it appears that it has done that in India because the Indian market is down, while two of our other three BRIC peers are up a lot

Q: Because of those earnings concerns though, do you think the markets need to tamper a whole lot more? Do you think a lot more adjustments are required?

A: If adjustment is required, it is required in a few sectors. Even there, we are not sure that it is required but one needs to look at what happened to the market on Monday. From Friday night to Monday, the only negative that happened was that the RBI in a sense affected an increase in interest rates. So why did Reliance have to fall 5% on that day and why did Infosys, HLL, ITC and ONGC have to fall that day?

So the point is that the market overreacts at overall levels. It is possible that certain sectors need a correction. But the point is that it doesn’t mean that the overall market has suddenly become negative because we have a higher interest rate. Everyone has been saying that the direction or the extent was not a surprise. It's just that they expected that this will happen on April 24 and it is sad that it happened on March 31.

Q: Even so, it impacts several key sectors like autos, banks, real estate. In fact in autos, EPS estimates are being downgraded to low single digits from what was double digits, is there problem in those sectors?

A: That’s what I am saying - it is possible in those sectors and it may take some 3-4 months to figure out whether the customers overly care about interest rate in the case of auto. In case of property, if you look at it in a macro sense, there is no beneficiary of higher property prices except 5-6 companies, all of whom are not even in the Index and all of which are up 30, 40, 50 times except if they did an IPO recently. Even then, they are up from what they thought their own company was worth a year ago. So property prices may correct and may adjust but we should not care about them and actually hope and pray that they fall off lot more.

But in auto, we don’t know the exact response of the customers to this new higher interest rate and you are most welcome or anybody is most welcome to wait two, three, four, even six months, if they desire. But normally, if you look at something happening currently and then you react to it, you will lose money most probably. On Monday morning, if you had come in because the market opened gap down and you had shorted the Index, as of right now, you are losing on that trade. You are only gaining if you did the trade on Friday evening. If you did on Monday morning, you are losing already.

So the point is that auto will correct. Their earnings expectation maybe lower but so have the stock prices. Maybe it doesn’t correct as much, and even if it does, you are most welcome. We don’t own any auto, not for this reason, but generally, we have not owned on a simple theory that what doesn’t make money in the rest of the world normally doesn’t make money in India and we never owned it. But the point is that somebody can wait for that but it doesn’t change the overall opportunities in our market.

Q: What about banks - how have you been positioned on the Indian banking sector, public or private?

A: We have always favoured private because of our logic that we compete with the government in particular sectors in terms of our stocks, and again, those stocks have corrected a little bit and maybe they will correct a little bit more. But in general, my belief is that inflation may have peaked or near peaked and interest rates may have peaked or near peaked.

So you may have one more to drive home the point that the government or the Reserve Bank is particularly looking at it. But as of now, the EBITDA evidence is that it might cool off in one or two months. So you cannot overly time that. But in an opportunity sense, we know the market cap of Indian companies, banks vis-à-vis other banks in the region.

Q: What’s your call on cement after all that you have heard from the government over the last two-three months?

A: We have never as in ever owned a cement stock in our new fund since 2005, so we never participated in the bull run and we didn’t participate in the bear run. But in general, the point is that the market, and particularly foreign investors, who have a three week memory have found it very disappointing that the Indian government intervened in one sector and this is going back to the control era and the control raj. I think what they forget is that less than about three-four months ago, there was a coup in Thailand; since then foreign investors have put more money into Thailand and the market is up 12%.

In Hong Kong, there was a company called Pacific Century CyberWorks where the government refused to allow a takeover by private equity funds, and one day later everybody moved on. So let’s not overdo this, the government in these countries, our country, every country, after all we are an emerging markets, so let’s allow one-two of these things and not make it as if the government is now going after every fellow who is ever made money in India. It's not like that, it's part of the game of being in an emerging market.

Cement Manufacturers coming back at Govt.

2007-04-04T20:16:00.000-05:00

The cement price tussle between the government and manufacturers continues. Last evening the government cut the countervailing and additional customs duties.

Today, perhaps in response to the announcement, it is being heard from sources that Cement Manufacturers Association may consider cancelling the cement price freeze pact with the government. However, CNBC-TV18 has not yet received any final confirmation from the government and CMA.

After coaxing the cement industry to freeze prices, the Finance Ministry has removed 16% countervailing duty and 4% Special Additional Customs duty on imported cement. This has been done in order to make imported cement more viable than domestic cement.

However, JK Cement states that the industry has not yet submitted any proposal for a re-look at prices. Newspaper reports suggest that the government may think of banning cement exports next.

CLSA has downgraded ACC and Gujarat Ambuja from underperform to sell, India Cement from outperform to underperform. It also feels that the cement price cut seems unlikely to stay as the industry may not want cement imports to get established.

Meanwhile, the Pakistani PM Pervez Musharraf has expressed an interest in supplying cement to India.

However, Sanjay Ladiwala of Cement Stockists and Dealers Association mentions that he has not heard of any move from CMA as of now. He adds that logistical hurdles would restrict imports.

He says, "Imports are not going to be surging in as its envisaged or people thing it could be mainly because of logistical obstacles in most of the port areas I don’t think we are going to see such a fantastic flow of imports that is going to breach the gap between demand and supply. Firstly with that provision in mind, it’s after all the customer who is going to really go in for imports. Now the customer has to be motivated sufficiently to go ahead and take on the hassle of importing cement, albeit it maybe a few rupees cheaper, yes would land at about Rs 20-25 cheaper."

According to him, cement prices may stay subdued in areas near ports. He says that clients may not want the hassles of imports. Furthermore, Ladiwala says that monetary incentive is not enough motivation for imports.

According to Ladiwala, "Unless he has got adequate motivation the customer is not going to import and that would also be an obstacle in the surge of imports coming into the country. Once they do the prices would stay subdued in these port areas which according to my estimates would be either 3-4 ports in India itself and not more than that."

Also, earlier prediction of excess supply in 2010 may not happen, he adds.

Indian Inflation not high enough says World Bank

2007-04-03T13:05:00.000-05:00

India's annual inflation of 6.5 per cent is not that high when considering the nation's strong economic growth, a senior World Bank official said on Tuesday.

The Indian economy is forecast to grow 9 per cent this year, the same pace of growth estimated for 2006, making it one of the fastest-growing economies in the world, said Isabel Guerrero, the World Bank's Country Director for India.

The Reserve Bank of India (RBI) has been raising interest rates on concern that the economy might be overheating, but it is also 'playing by ear' how its policy action could affect future economic growth, she said. "That shows they are concerned about inflation but not as much because inflation is still quite low," Guerrero said in an interview. She was in Tokyo with other World Bank South Asia country directors to meet Japanese officials.

The RBI raised its repo rate by 25 basis points to 7.75 per cent in March, its highest in nearly 4-½ years, saying it was critical to take 'demonstrable and determined action' to fight inflation. Annual inflation, as measured by wholesale prices, is running at nearly 6.5 per cent, which is well above the RBI's comfort zone of 5.0-5.5 per cent. But Guerrero, who oversaw Latin American countries at the World Bank before assuming her current post in March, said annual inflation of 6.5 per cent is 'not really high' and inflation staying below 10 per cent is in fact 'very good'. For a country achieving growth as high as India's, it is hard to tell whether inflation is caused by economic overheating or by high capacity needs, Guerrero said.

"It could be consumption overheating, but it could very much be high economic growth, and high growth always puts a strain on the productive capacity of an economy," she said. Guerrero also said that by maintaining certain financial market controls, such as limiting the presence of foreign banks operating in the nation, India remains less vulnerable to financial market shocks such as the one that hit much of Asia in the late 1990s.

"The risks of destabilising inflows and outflows is less in India than in other countries, and I think the government has done the right thing by being careful about opening up its financial markets," she said. India's economy, Asia's fourth largest, is estimated to have grown 9.2 per cent in the financial year that ended March 31, growth that has attracted foreign fund inflows and prompted the RBI to hike rates in March.

The projected growth would be the fastest pace in 18 years and higher than the 6.5-8 per cent rate which economists say is the country's more natural speed while it works on improving its transport network and other infrastructure.

Indian Market Update 4/3/2007

2007-04-03T09:50:00.000-05:00

Sensex and Nifty advanced higher after yesterday's carnage, making modest recovery. Today's start was a little tentative but picked up later. However midcap and smallcaps underperformed the broader markets and the overall volumes were low. The Asian markets ended positive. Technology is leading the uptrend followed by power, capital goods and FMCG. BHEL came out with results which were inline with expectations on the bottomlie and topline numbers were above expectations.

Sensex closed up 169.21 points or 1.36% at 12624.58, and the Nifty up 57.05 points or 1.57% at 3690.65.

About 1356 shares have advanced, 1028 shares declined, and 88 shares are unchanged.

BHEL, NTPC and Hero Honda were the top gainers on the Sensex

The BSE Midcap Index ended at 5,236.36 up 27 points or 0.52%.

The BSE Smallcap Index ended at 6,313.64 up 20 points or 0.3%.

The BSE Bankex was up 0.5% at 6,182.44. Bank of India, Oriental Bank, IOB, Federal Bank, Bank of Baroda
moved upwards.

The BSE Capital Goods Index was up 1.1% at 8,718.07. Aban Offshore, BHEL, Bharat Elec, Praj Industries, Alstom Projects closed higher.

The BSE Health Care Index was up 0.6% at 3,574.65. Sterling Bio, Glenmark, FDC, Pfizer closed higher.

The BSE Auto Index closed at 4,612.32 up 0.9%. Exide Industrie, Hero Honda, Sundaram-Clayto, Sundram, Tata Motors surged.

The BSE Metal Index closed at 8,219.63 up 1%. SAIL, Guj NRE Coke, Sesa Goa, Sterlite Ind, Tata Steel advanced higher.

The BSE FMCG Index gained 1.3% at 1,713.62. Nestle, HLL, ITC, Shaw Wallace closed higher.

BSE Oil and Gas Index closed higher at 6,287.21 up 1.9%. GAIL, Reliance, ONGC, Chennai Petro ended in green.

The BSE IT Index gained 2% at 4,766.97. Wipro, Satyam, HCL Tech, Infosys, TCS closed higher.

The NSE cash turnover was at Rs 6729.28 crore and the NSE F&O turnover was at Rs 23350.93 crore. The BSE cash turnover was Rs 2881 crore.

Total market wide turnover was at Rs 32961.21 crore.

Indian Government becoming adamant on reducing the Cement Price

2007-04-03T09:12:00.000-05:00

In yet another twist to the ongoing spat between the Government and the cement manufacturers, the Centre on Tuesday announced that it was doing away with 16% Countervailing Duty (CVD) and 4% Special Additional Duty (SAD) on Portland Cement. "The Government expects that the cement manufacturers, in the larger interests of consumers and for checking inflation, will take appropriate measures for moderating cement prices,'' the Finance Ministry said in a statement.

The move is likely to make imported cement cheaper than domestic cement. At present, imported cement is slightly expensive than local cement. Average cement prices increased to Rs220 per 50-kg bag in March from Rs165 in January and Rs209 in February, the Government said.

The Government, with a view to keep prices of cement in check, had fully exempted basic customs duty on portland cement in January. The cement industry was requested to moderate prices in the interest of the consumer. However, the industry is of the view that prevailing high prices are a consequence of a demand-supply mismatch. "It is expected that the present move will improve supply situation in the country," the Finance Ministry said.

The Government has already invited cement manufacturers to come forward with proposals to moderate the price of cement. "The Centre expects that cement manufacturers, in the larger interests of consumers and for checking inflation, will take appropriate measures for moderating cement prices," the Finance Ministry said.

It may be recalled that the Government has been seeking a reduction in cement prices for quite some time now, but cement makers have refused to toe the Centre's line, offering to freeze prices at the current level for a year. The standoff between the Government and cement manufacturers started when Finance Minister P. Chidambaram announced a dual excise duty structure on cement in the Budget for the year 2007-08.

Chidambaram proposed an excise tax of Rs600 per metric ton on cement sold at more than Rs190 a 50-kg bag. For cement priced below Rs190 a bag, the tax was cut to Rs350 a ton from Rs400 starting April 1. In response to the Finance Minister's move, the cement companies raised the prices and have repeatedly turned down the Government's call for a cut in cement prices, leading to a deadlock over the issue.

Asian Stocks Advance, Led by Canon, Mitsubishi

2007-04-02T22:26:00.000-05:00

Asian stocks gained, led by Canon Inc. and Mitsubishi UFJ Financial Group Inc., as investors bought shares that fell yesterday on concern a U.S. manufacturing report would drive down equities.

``U.S. markets turned out more stable than people feared yesterday and that prompted buying back of large-cap stocks, although it may only last a couple of days,'' said Yoshihisa Okamoto, who helps oversee $1.9 billion in assets at Fuji Investment Management Co. in Tokyo.

U.S. stocks rose even after the Institute for Supply Management said manufacturing growth in the world's largest economy slowed more than forecast in March.

The Morgan Stanley Capital International Asia-Pacific Index climbed 0.8 percent to 144.47 as of 11:04 a.m. in Tokyo. BHP Billiton Ltd. led resources stocks higher after copper climbed to a four-month high and nickel gained.

The Nikkei 225 Stock Average rose 0.8 percent to 17,162.62. Markets elsewhere in the region gained, except for in South Korea which was little changed.

Canon, the world's biggest digital-camera maker, rose 1.1 percent to 6,300 yen, after falling 1.6 percent yesterday. Mitsubishi UFJ, Japan's biggest lender by assets, climbed 1.5 percent to 1.34 million yen. The stock declined 0.8 percent yesterday. Matsushita Electric Industrial Co., the world's biggest consumer electronics maker, advanced 2.8 percent to 2,420 yen, rebounding from a 0.8 percent loss yesterday.

Maruti, Tata Motors report surge in March sales - BL

2007-04-02T19:48:00.000-05:00

Maruti Udyog Ltd (MUL) on Monday reported 14 per cent jump in March sales to 71,772 vehicles, up from 63,196 units a year ago, mainly from increPublishased demand for the Zen Estilo and diesel-powered Swift hatchbacks.

MUL said that it sold 64,556 units in the domestic market, up six per cent from 61,141 units a year earlier.

Exports more than tripled to 7,216 units (2,055 units).

For the fiscal ended March 31, the company sold 6,74,924 units, up 20 per cent from 5,61,822 units sold in the previous year.

Maruti is 54.2 per cent owned by Suzuki Motor Corp, Japan's largest maker of minicars.

"Sales showed robust growth throughout the fiscal, but more significantly in the second half," MUL said in the statement.

Hyundai Motor

Meanwhile, Hyundai Motor India Ltd (HMIL) reported 22.8 per cent jump in domestic vehicle sales in 2006-07 to 1,95,261 units, even as domestic sales in March this year dipped 14.31 per cent to 19,300 units.

The company had reported domestic sales of 22,524 units during March 2006.

Total sales (including exports) in March 2007 declined 5.9 per cent to 28,239 units (30,038 units), the company said in a statement.

"The 2006-07 results are encouraging and we have maintained our growth rate in the market here," said HMIL Managing Director Mr H.S. Lheem.

"Our exports are growing rapidly and once we overcome our production constraints with additional capacity, we will grow even faster."

Tata Motors

Tata Motors reported 11 per cent jump in vehicle sales (including exports) during March to 62,779 units (56,406 units).

The company said that it recorded the highest passenger vehicle sales in a month during March at 25,760 units, up 14 per cent over the same month last year.

Exports in the month, however, declined 33 per cent to 6,299 units (6,508 units).

For the fiscal ended March 31, the company reported cumulative sales of 5,79,378 units (4,54,345 units), up 28 per cent.

Fixed Maturity Plan from MFs

2007-04-02T19:37:00.000-05:00

The soaring inflation rate and plunging stock market has made retail investors reluctant to invest in equities and in bonds. To solve investors’ dilemma Fund houses are always in queue with crafted products that would enable investors to earn higher returns in turbulent market and also one that would help their assets to grow.

Fund houses are back in trends of launching Fixed Maturity Plans and the rates offered by them this time is between 10-13%.

FMP are more flexible and less risky products. FMP offers 10-13% rate of interest on minimum 90-365 days which is lowest time horizon than investor earn 10-12% returns on three years fixed deposits in banks.

Recently Reliance Mutual Fund offered 11.20% rate of return on investment for 92 days whereas Sundaram BNP Paribas Mutual Funds offered 11.30% yield on investment for 90 days.

Fixed Maturity Plans are flexible debt series products structured with fixed tenure.

All FMP launched comes with different maturities and therefore invest in selected debt securities. For instance, The FMP with one year maturity will invest its funds in debt securities of one year tenure. As such portfolios are not traded; fluctuation in market value does not affect Investors investment.

High yields on short term investments, investors are parking their funds in these smart funds and also fund houses are swiping cash under management.

Money supply, credit growth remain elevated

2007-04-02T19:32:00.000-05:00

Money supply expanded at the fastest pace in eight and a half years during the fortnight ended March 16, the Reserve Bank of India (RBI) said on Friday.

The M3 measure of money supply grew by 22% in the two weeks to March 16 from a year earlier, compared with 22.1% in the previous two weeks, the central bank said in a statement.

M3, which mainly comprises currency in public circulation, bank deposits and money invested in other saving plans, stood at Rs32.06 trillion on March 16.

Money supply has expanded at an average rate of 19.3% since April 1, 2006. This is more than the 15% growth targeted by the RBI for the fiscal year 2006-07.

During the fortnight ended March 16, the annual growth in non-food credit of scheduled commercial banks (SCBs) was 29.5% as against 32.7% a year ago.

Banks' total loans increased by Rs205.5bn in the period under review, taking outstanding advances to Rs18.7 trillion, the RBI said.

While non-food credit to industry and consumers was up by an additional Rs197.05bn, food credit rose by Rs8.5bn, the RBI said.

Meanwhile, total deposits rose by 24.8%, or Rs5 trillion, in the same period to Rs25.04 trillion.

BoP turns into surplus; current a/c gap shrinks

2007-04-02T19:28:00.000-05:00

Strong Foreign Direct Investment (FDI) during the October-December quarter lifted the overall Balance of Payments (BoP) into a surplus of US$7.5bn as against a BoP deficit of US$4.67bn in the year-ago period.

The net capital inflows in Q3 FY07 stood at US $ 10.7bn versus US $ 0.4bn in the corresponding period of last year. It may be mentioned that in Q3 FY06, net capital flows were affected by outflows due to repayments of IMDs (US $ 5.5bn).

While FDI in to India surged in the third quarter to US $ 8.7bn (US$2bn), outward direct investments from India at US $ 6.4bn (US$784mn) also showed strong growth due to some large overseas acquisitions. The major contributors to net capital inflows were External Commercial Borrowings (ECBs), NRI deposits and other capital.

The current account deficit, a key barometer of a country's trade, declined to US$3.04bn in the quarter ended December 31, 2006 from US$4.78bn a year earlier, the Reserve Bank of India (RBI) said on Friday.

The fall in the current account deficit was largely due to higher income from software, business and financial services rendered abroad, coupled with remittances from Non-resident Indians and income from tourism.

External debt up at US$142.7bn

2007-04-02T19:27:00.000-05:00

India's external debt increased to US$142.7bn as of December 31, 2006 as companies stepped up their overseas borrowings amid rising local interest rates. India had an external debt of US$136.5bn by the end of September, data released on Friday by the Finance Ministry showed.

Total external debt as at December 2006 was up 12.8% over the period ended March 2006 when it stood at US$126.41bn.

The rise in external debt at the end of December 2006 was due to an increase in multilateral debt, External Commercial Borrowings (ECBs) and NRI deposits, offset by a marginal decline in short-term debt, the Finance Ministry said.

February exports up 8% yoy

2007-04-02T19:12:00.000-05:00

India's merchandise exports grew by 7.87% in February to US$9.7bn from US$8.99bn in the same month last year, the Government said on Monday. Imports rose 25.11% to US$14.36bn from US$11.48bn in the year-ago period.

As a result, the trade deficit in February was US$4.66bn as against US$2.49bn in the corresponding month a year earlier. The trade deficit stood at US$5.78bn in January, US$5.68bn in December 2006 and US$6.2bn in November 2006.

During April-February 2006-07 (first 11 months of the fiscal year 2006-07), exports were up 19.26% at US$109.13bn while imports climbed by 27.78% to US$164.98bn. Year-to-date trade gap is up at US$55.86bn from US$37.62bn in the year-ago period.

2007-04-02T16:28:00.000-05:00

The expert committee on making Mumbai an international financial centre, chaired by former World Bank economist Percy S Mistry, has offered a package of radical recommendations ranging from full rupee float by 2008 to the abolition of the securities transaction tax and doing away with restrictions on foreign investment in sovereign bonds.

The 15-member committee, which was set up following a Budget announcement by Finance Minister P Chidambaram, has also recommended the imposition of a goods and service tax on financial services, and creation of a currency spot market and rupee-settled exchange traded currency derivatives market. The call for full convertibility by next year takes forward the second committee report by former Reserve Bank deputy governor S S Tarapore, which recommends a five-year timeframe.

“Having considered the recommendations of the Tarapore-2 Committee report carefully, the expert committee nevertheless recommends that full capital convertibility should be achieved within a time-bound period of the next 18-24 months and by no later than the end of calendar 2008,” the report said. The committee’s report was preceded by some controversy after Mistry resigned on February 7 following differences with the committee over describing government-owned banks as “zombie banks,” a term used for banks that are dependent on government hand-outs. Other members included ICICI Bank Chief Executive KV Kamath and UTI Bank Chairman PJ Nayak.

The report has said that moving towards export of financial services from India is synonymous with developing Mumbai as a financial hub, making it vital to remove domestic entry barriers, trade barriers and barriers to FDI. The report envisions a first phase, from 2007-2012, when Mumbai will connect India’s financial system to the world’s financial markets.

In the second phase, from 2012-2020, the megapolis would develop the capacity to join London, New York and Singapore as one of the top global financial hubs. Seeking radical improvement in infrastructure, the report has said that Mumbai needs to become a first-world city that can attract the world’s brightest minds by being an “attractive place to live, work and play”.

WHAT PANEL WANTS

Abolition of securities transaction tax, stamp duties

Pruning of public debt

No restriction on foreign investment in sovereign bonds

Imposition of Goods and Service Tax on financial services

Creation of a currency spot market and rupee-settled exchange traded currency derivatives market.

A new unified financial services modernisation Act

Removing domestic entry barriers, trade barriers and barriers to FDI

2007-04-02T10:58:00.000-05:00

I have been asked a few times now about India investment options in the US, and rather than answering each one individually, I decided to make it a blog post. For those who want to take advantage of the booming Indian markets without having to do the initial research, read on. I would still encourage each of you to thoroughly investigate any particular investment option that interests you. I will present this article in parts, and this is the first part.

Background:

India is, and has been, an attractive investment option for foreign money for some time now. The average GDP growth in India has been 8% for the last 3 years, and the average salary increase abt 30%. This has brought about a tremendous increase in people's disposable income, and hence the purchasing power. No wonder, all kinds of international companies are clamoring to have an Indian presence. Some of these companies include well known names like Walmart (WMT) and Starbucks (SBUX).

Funds:

This is probably the easiest way to invest in India and to take advantage of the booming Indian markets. But you still have to have some appetite for volatility - Indian markets are quite volatile and it wouldnt surprise me if these funds took a hit of more than 5% within a span of few days.

The two popular closed end funds include Blackstone group's India Fund (IFN) and Morgan Stanley's India Investment Fund (IIF), both established in 1993. For those new to closed end funds, a closed end fund is practically similar to a mutual fund, except that it trades on the stock market. A closed end fund may trade at a discount or premium to its Net Asset Value [NAV], whereas you always end up buying or selling a mutual fund at its NAV. For a more detailed discussion on closed end funds, click here.

The graphs of both these funds have pretty much mimicked each other since inception. India Fund's annualized returns for the last 3 and 5 years have been 33.20% and 36.66% respectively according to Blackstone Group's website. India Investment Fund's annualized returns have been 34% and 35.99% over the same time. As I write this, both these funds are trading at a slight discount to their NAV, which makes them worth a look.

Another fund that deserves a mention here is the Matthews' India Fund [MINDX]. This is a regular mutual fund, which benchmarks the BSE 100 index. This fund has been around since 10/31/05 and boasts of a 1-year average annualized returns of 36.48%. Matthews Asian Funds have boasted of a strong performance in various Asian countries and Matthews in general holds a good reputation. Matthews India Fund has also outperformed its counterparts IIF and IFN over the past 6 months.

Then there's also the EATON Vance Greater India Fund [ETGIX] established in 1994. This fund invests in India as well as other countries in the Indian sub-continent, like Pakistan and Sri-Lanka. This fund has returned 29.92 and 33.43% annualized returns over the past 3 and 5 years respectively.

Since we are talking about funds here, one more investment vehicle that deserves mention here is the Barclay's iPath India MSCI Exchange Traded Note (INP). For those unfamiliar with ETNs, here's a quick refresher. In simple terms, an exchange traded note is like a hybrid between bonds and ETFs. This exchange traded was recently started by Barclays in December 2006.

Another thing to keep in mind while investing in any of these funds is the expense ratio and other fees associated with it.

Heres a quick summary of the funds and ETN I mentioned above:

India Fund from Blackstone group (IFN): Expense ratio of 1.41% Annual Report

India Investment Fund from Morgan Stanley (IIF): Expense ratio of 1.35% Prospectus

Matthews India Fund [MINDX]: Annual operating fee of 1.34% Prospectus

EATON Vance Greater India Fund [ETGIX]: Expense ratio of 2.14% Prospectus

Barclay's iPath India MSCI Exchange Traded Note (INP): Yearly fee of 0.89% Prospectus

Shares to watch from a Newsletter

2007-04-01T23:29:00.000-05:00

If there is any declines in the market watch out for Tele Data Informatics.(BSE: 532358) This is holding on to its Rs.57 range very strongly. Even when the markets fell it did not give up its gain. Market whispers indicate very strong performance for the quarter ended in March 07. Any fall in the price should be used as an opportunity to buy this scrip.

The whole of last week Garnet Construction (BSE: 526727) has almost added Rs.12 to its quotation from its last week rate of Rs.55 without a break. If there is a set back consider adding this to your portfolio as on the return of good times the share can cross Rs100 once again.

Cinema chain operator Pyramid Saimira (BSE: 532791 )jumped 5% to Rs 269.10, after the company on Thursday joined hands with Baderwals Infraprojects, to build 200 malls in four years. Pyramid Saimira will hold 49% in this joint venture, Baderwals Pyramid Development, and will invest about Rs 250 crore in the next two years on the project estimated to cost Rs 12000 crore. The joint venture will include 100 larger format malls covering 300,000 sq ft each and budget hotels. By 2010, Pyramid Saimira hopes to have malls in 300 locations across India through such partnerships. If there is a decline one can accumulate. This share has fallen from a high of Rs.488

Lawreshwar Polymer: (BSE: 532829):. It is the manufacturers of Lehar footwear; The Rs.16 paid IPO is available around Rs.11.40. Lehar footwear, which is mainly sold in northern region, would use the funds to open five showrooms in different parts of the country and to build a new corporate office in Jaipur. On a sale of Rs.25 Cr the net will be around Rs.1.75 Cr and the EPS will be around Rs.3.50 in the first year. Normally speculation starts in such IPOs which are available below the issue price. Watch this on Monday.

IFCI: (NSE/BSE: 500106 .Rs.33.50): This share has moved up from a recent low of rs.27 to 34. Any set back on Monday may be considered to buy this scrip. As per reports the co is reported to have a paid an advance tax of Rs.71 Cr. for the current year compared to Rs25 lakh paid in the same period last year.

There are strong whispers that a strategic foreing investor will be roped in and most probably Barclays Bank and that can change the fortune of this co.

Commentary from a Newsletter

2007-04-01T23:27:00.000-05:00

MARKETS TO TURN CHOPPY WITH RBI HIKE: Jesus Christ was crucified on a Friday which will be a holiday for the market. It appears that the bulls will be crucified as early as on Monday itself. Finally the RBI has decided to curtail inflation rather than batting with growth.

RBI after the closing of the market on Friday announced that it was raising repo rate by 25 basis points and would hike the Cash Reserve Ratio (CRR) by 50 basis points in two stages. The central bank has increased the repo rate, a key short-term lending rate, from 7.5% to 7.75% with immediate effect. Every one is expecting a fall of at least 175 to 250 points as it has happened earlier in two occasions when the RBI did the same. This time there will be less panic as every one knows that the markets recover after the initial shocks. Perhaps Bank stocks may take more time to recover.

After all, the measures taken by the RBI is to check inflation which can eat away all the growth a county can have. Other thing is the rate hikes are not permanent features and they can come down once the inflation comes down by say one percent to the permissible level of 5%.It is worth while picking shares at such falls as the recovery too comes up very quickly. Many are still fresh with memories of May 06 when the markets crashed by over 2000 points in just two to three sessions. Some even fear that such a thing may happen again.

Those who take a bearish view of the market place their arguments in the following lines:
Tech stocks in the Sensex: Earnings can get affected on the back of stronger rupee and the MAT Tax imposed in the budget. Infosys guidance during MQ results around 12th April may be not aggressive and this goes for other tech stocks also Infosys is already trading weak. Hence stocks like Infosys, Wipro, Sat yam and TCS will under perform the Sensex.

Cement stocks: Govt is hell-bent on keeping the cement price down. Cement cos will come out with excellent results but investors will avoid these scrips due to Govt. interference. Hence ACC, Ambuja and Grasim will not be contribute to the Sensex

With sales already plunging the auto sectors represented by Maruti and Tata Motors will remain sluggish. Same is the case for Bajaj Auto as well as Hero Honda. Hike in the interest rates are keeping the buyers away. In a bull market it is the auto shares which run up first to indicate the start of a bul market.

The huge amount of money gone into over seas acquisition will keep investors away from Tata Steel as well as HINDALCO.

States are imposing VAT on cigarette and this will affect its margins of ITC further. Already the share is not in the buying list of many.

With Vodafone entry into India changes several equations. At this point of time Reliance Telecom and Bharti Look over priced with lesser chances for further appreciation.

Sensex shares like Dr. Reddy, Ranbaxy, NTPC, ONGC, Hind lever, HDFC, Reliance Energy, and Tata Power are avoided by every one as they have stopped performing for the last one year. 8. These leaves, BHEL, Cipla, HDFC Bank, SBI, Reliance, ICICI Bank, L&T, Bajaj Auto and Hero Honda:

Although these stocks together have a weight age of 32% on the Sensex, bank stocks with the new RBI measures are not likely to rally and support the Sensex. In other words if the Sensex has to climb up it has to be supported by Reliance ONGC and other oil marketing cos. Thus it looks the rally of the Sensex remains curtailed for the time being.

The 2008 budget would be the last one before the next General election and there cannot be any hope of big-ticket announcement till the next elections. GDP growth would also be lower by one percentage point and inflation is still not under check. The crude price has moved up to $ 62.

HOW CORRECT IS THE ABOVE ASSUMPTION? : What is stated above is a logical conclusion arrived by stating what appear to be the facts at that time? When you use logic in the market it does not always work. It can go against your conclusions for the simple reason that the markets are never logical. When we come to certain conclusions as above we take it for granted that the prevailing situation is permanent. In fact the situations are so dynamic they can change any moment

ONE TRIGGER THAT CAN CHANGE THE SCENARIO: What ever may be said finally what changes the market is the liquidity. Current market is cheerless. Even though the FII buy Rs. 50 to 100 Cr on some days they have lost their huge money bags. Last year they used to put in Rs.1000 Cr a day to keep the bears away. This factor is totally missing.
INTEREST RATE CUT IN AMERICA WILL SIGNAL THE NEXT BULL RUN:
Since June 2004, In the USA the Fed has increased the rate of interest 17 times. (RBI has done it here only three times.) In the USA when borrowing rates are high, housing demand falls. And that translates into lower housing prices. Worst is that the borrowers are faced with rising interest rates and falling property prices. For the first time in the USA after 1983 the prices of houses have started falling. Naturally, defaults on such loans have gone up in recent times.
The American Central Bank is now aware of this serious crisis and already hinted that it may consider a rate cut when it meets after a couple of months . If the rate of interest is reduced in America it will ring the alarm bells for many more nations to cut the rate as the interest rates have already gone higher to alarming proportions.
When the rate of interest gets reduced in America the flood gate will be opened for the money from America to enter merging markets like India.

Asian Stocks Advance, Led by Honda and Sony on Tankan Survey - Bloomberg

2007-04-01T23:21:00.000-05:00

Asian stocks climbed, led by Honda Motor Co. and Sony Corp., after a survey showing Japan's largest companies may increase capital spending this year stoked optimism about corporate profits.

The Bank of Japan's quarterly Tankan survey of business confidence showed large manufacturers in Asia's biggest economy plan to raise spending on factories and equipment by a bigger- than-forecast 2.9 percent this fiscal year.

``Planned capital spending that exceeded forecasts and business sentiment which was roughly in line with the market consensus eased investors' concern they need to change their strategy,'' said Koji Uchida, who helps manage $61 billion at Mitsubishi UFJ Asset Management Co. in Tokyo.

The Morgan Stanley Capital International Asia-Pacific Index climbed 0.5 percent to 145.36 as of 12:15 p.m. in Tokyo. Japan's Nikkei 225 Stock Average advanced 0.5 percent to 17,377.17, while the broader Topix index added 0.2 percent.

Benchmarks elsewhere in the region rose, except in Australia. Woolworths Ltd. and Westpac Banking Corp. fell as a surge in retail sales and home-building approvals fueled expectations the central bank may raise interest rates this week.

China's CSI 300 Index gained, set for a record close. Steelmakers rose after Baoshan Iron & Steel Co. reported a 77 percent increase in fourth-quarter profit. Automakers such as Hyundai Motor Co. led South Korea's Kospi index higher on speculation a free-trade accord with the U.S., which may be reached today, will boost car exports.

Good one from Outlook India...

2007-04-01T22:36:00.000-05:00

Nothing Works

By 2020, India may face the problem of high growth, higher unemployment

Manufacturing has lost over 3% jobs in the past decade; the overall decline is 0.6%

Formal employment in services comprises less than 0.5% of total labour force

Unviable remuneration and inconsistent growth has pushed people from farming

NREGA is riddled with bureaucratic problems and lack of resources

NREGA can only be a short-term solution to a long-term issue, experts feel

Read on at http://www.outlookindia.com/full.asp?fodname=20070409&fname=KJobless&sid=1

Morgan Stanley view on Market - ET

2007-04-01T22:20:00.000-05:00

rokerage house JM Morgan Stanley Securities has estimated the fair value for the 30-share BSE Sensex around 11,500, but has warned that the index was likely to quote below this level as the fundamental picture appeared to be less rosy than before.

Morgan Stanley is advocating a portfolio that is biased in favour of defensive stocks, while it is advocating lower exposure to consumer cyclicals and stocks that are sensitive to interest rate changes. Late Friday, the Reserve Bank of India announced a two-phased hike in cash reserve ratio by 50 basis points to 6.5% and a hike in repo rate by 25 basis points to 7.75%. “As the market tries to forge ahead, we think it is more likely to encounter snakes that gulp it down to lower levels than arrows or ladders that propel it to higher levels.

In a tactical move, we are increasing the cash balance in our model portfolio, while trimming our position in the software services sector,” the Morgan Stanley note to clients said. Since touching fresh peaks in the second week of February, equities have been steadily losing ground despite the occasional pullbacks.

“ Anecdotally, investors seem complacent about the recent fall, having been burnt by their experience last year when they were caught being too bearish post the May 2006 fall,” the Morgan Stanley note said. “Second, the market faces several headwinds in the form of a weaker domestic demand outlook (heralded by higher interest rates), a relatively less docile political environment at home and uncertain prospects for global risk appetite. Last, neither fundamentals nor market technicals suggest that we are done with the correction,” the note added.

The brokerage opines that the key differentiating factor from the May 2006 crash is the combination of slowing domestic growth and a less favourable political environment (in view of the numerous elections ahead) this time around. “The market is trading at valuations that do not suggest positive returns, while fundamentals are looking less robust than before. India’s high and rising beta indicates heavy dependence on global factors for its immediate performance and global factors appear less predictable than before,” the note said, adding that such a situation was hard for a fixed bag of technical indicators to neutralise.

The brokerage has cited rising inflation as one of the main worries for the market. “In our view, the inflation problem is one of excess demand over supply and, with supply unlikely to be created quickly, demand needs to slow. The rise in rates over recent months should produce a lagged effect on India’s leveraged consumption-driven growth cycle,” the note said.

Morgan Stanley feels that in all probability, the forthcoming earnings season “will be good”. At the same time, the brokerage has cautioned that expectations continued to run high, “It is noteworthy that, for the first time in several months, the sell side consensus has been lowering estimates. We think earnings will turn distinctly weaker in the latter part of 2007 if the economy slows down as we are forecasting,” the note said.

Morgan Stanley also expects the return on equity of corporates to come under pressure. “The fact is that corporate India has upped the ante on adding assets to its balance sheet. This will have negative implications for asset turnover, especially if revenue growth slows,” the note said. “The other issue for investors to deal with is the slippage that we are witnessing in earnings quality. Thus the share of operating cash flow in net profit is at an eight-year low, suggesting that book entries may be shoring up reported earnings,” the note added.

‘Not having a good pension fund reform can be dangerous for the long run’ - FE

2007-04-01T22:11:00.000-05:00

Naval Bir Kumar, the managing director of Standard Chartered Asset Management Company, is a busy man as UBS Securities is acquiring his fund house and he is caught up in the process involved. In an exclusive interview to Avishek Maitra and Sai Prasan of The Financial Express, Kumar spoke on the impact of the persistent higher inflation numbers, hardening interest rates leading to the market volatility, the growing mutual fund industry and the future plans of the fund house. Excerpts:

The market has been quite volatile in the last one month. What is your take on it?

The Indian market right now is mostly driven by global factors rather than domestic instabilities. The markets will get its spine only in April, when the last quarter results start appearing. The market will get some guidance and direction then. On the global level, we believe that at some point of time high interest rates will start impacting asset markets. And, we are nearing the point. Higher interest rates have already impacted real estate and equity prices.

Having said that, we still do not believe that the Indian equity market will behave like a glass ball. The biggest fear, which the Indian investors live with, is that the market will one day collapse and die like they have done many times in the past.

This is the first time when we have had such a long bull-run in the market. We clearly believe that the market have in-built strengths.

Do you think that there is a demand-supply mismatch in the economy that is creating a nuisance?
Our belief of a healthy economy and a leading market is derived from a virtuous cycle. Basically, if there is very high consumption and investments in an economy, then it leads to high demand in the economy which feeds growth either in the manufacturing side or the service sector side. This in turn feeds employment and the employment feeds back consumption. Previously, the economy was in the demand creation side and we witnessed only investment demand. A lot of that demand came from the government sector and not just the private sector, but we had no consumption demand. So as soon as the investments demand impetus was withdrawn from the market the entire virtuous cycle was disrupted and there would be a complete collapse. However, in today’s scenario, we believe that investment demand will always be off and on.

But how much of this demand is coming out of the unlocking of the real estate wealth and sustainable wealth?
Our belief is that there is a fair amount of unlocking of real estate wealth, like selling of ancestral land or property that has occurred. This has boosted spending activity in the current boom. We also believe, on the other hand, that there has been a fair degree of sustainable consumption that has been built up. Another interesting aspect that is being witnessed is the change of demographics. The present generation has now started to earn and spend and is having a very different attitude to money.

Should we look at pension reforms more seriously?
In the absence of any social security arrangement this is the best time to save as they get the benefit of compounding. So, ideally pension fund reforms should have occurred many years ago. If pension fund reforms had occurred decades ago then the balance between saving and spending could have been perfect. Not having a good pension fund reform could be very dangerous in the longer run as the Indian society has moved into a nuclear family mode.

How can the government’s initiative to curb inflation affect the MF industry?
This entire episode has made debt investing look interesting again. Rising interest rates have put a pause in the growth of equity indices globally. Fixed maturity plans (FMPs) are slowly becoming retail products from being purely institutional products. Banks offering more than 10% fixed deposits (FDs) will disappear in some time as we are witnessing more and more retail participation in FMPs than in the past.

How do you think the rising interest rates have affected the credit off-take of the industry?
The corporate sector has many sources for borrowing. The banking sector is one among them. Today, most of the borrowing is from the external commercial borrowing (ECB) route because there is a clear arbitrage between domestic rates and the offshore rates. So, overall I don’t think that the corporate sector is suffering due to rising interest rates.

Sebi has tightened the norms of real estate IPOs. Is it the right time to launch real estate mutual funds (REMFs)?
As a fund industry we need to give our investors a diversity of assets. At an individual level if one has his retirement money or saving money, the best way to grow the savings is through diversification. It is not possible to predict as to which asset class will perform better and for how long. The real estate market is highly complex and hugely overstretched. The basic valuation in this environment is a concern for us as fund mangers.

When will the process of UBS securities taking over Standard Chartered AMC be complete?
We are still in the process of getting all the regulatory approvals. The fruits of the UBS acquisition will happen after the legal ownership changes.

And till we receive the Sebi approval the new sponsor will not play any role in the company. The process will take about six months. UBS has bought over the entire AMC since they want to establish themselves in India.