It was a dismal week for the markets and for SmartPortfolios. The benchmark BSE 200 index shed nearly 8 per cent to 1,044, and is now down a whopping 41 per cent since the inception of SmartPortfolios on September 1, 2008. Hence, a sum of Rs 10 lakh invested in the benchmark at the start is now valued at Rs 5.86 lakh.
Similarly, our four fund managers who started with the same (Rs 10 lakh) corpus have seen a drop in their invested capital, albeit far lesser in comparison with the benchmark. Losses of our fund managers, barring those of Amar Ambani’s, vary in the 11 to 16 per cent range. Last week, too, while the benchmark dropped nearly 8 per cent, their portfolios saw a maximum depreciation of close to 4 per cent.
Fund manager were seen buying selectively as trading activity was mainly on the buy side. There were 10 purchase transactions out of a total of 16 trades executed last week. Cumulatively, fund managers bought shares worth Rs 1.75 lakh while they sold stocks worth Rs 1.51 lakh.
WAITING GAME
AMAR AMBANI
Vice President (Research), India Infoline
Amar Ambani preferred to stay on the sidelines last week even as the other fund managers bought stocks in a falling market. Ambani since the start of SmartPortfolios continues to maintain an extremely high ratio (95.4 per cent) of his investments in cash.
At the end of the week, Ambani holds Rs 9.47 lakh in cash, and the two stocks (Sun Pharma & Reliance Communications) in his portfolio are valued at just Rs 0.46 lakh. His net worth now stands at Rs 9.93 lakh, down only 0.7 per cent since the start of SmartPortfolios.
DEPLOYING CASH
SADANAND SHETTY
Vice President, Kotak Securities
Sadanand Shetty executed three trades last week, all on the buy side, wherein he bought shares worth Rs 0.55 lakh. Off the three trades, Maruti was the only addition to his portfolio, while he averaged his holdings in Sun Pharma and Nicholas. Heavyweights Reliance and SBI are the two stocks among his top three picks.
-Shetty's net worth now stands at Rs 8.87 lakh, of which Rs 2.95 lakh is invested in stocks, and the balance Rs 5.92 lakh is cash. Shetty's returns till date is a negative 11.3 per cent.
MIXED ACTION
ANAND AGARWAL
Fund Manager, Reliance Money
Anand Agarwal was the most active fund manager last week with 12 trades out of 16. Of the 12 trades, he had six trades each on the buy and sell sides. However, his total sales exceeded his purchases by Rs 0.31 lakh. Agarwal bought stocks worth Rs 1.19 lakh, and sold equity worth Rs 1.50 lakh.
While he booked gains of 17 per cent and 14 per cent on his investment in HDIL and Reliance Communications, he booked losses of 6 per cent and 3 per cent each on his investments in Jet Airways and Axis Bank. At the end of the week, Agarwal's net worth now stands at Rs 8.43 lakh, with net returns down 15.7 per cent. He holds Rs 6.67 lakh in cash.
CAUTION PREVAILS
KASHYAP PUJARA
Fund Manager, ENAM Direct
Kashyap Pujara, too, remained mostly on the sidelines barring the single trade where he bought 100 shares of Bank of Baroda. Pujara has invested more than 5 per cent of his total invested capital in this stock.
Banking giant SBI has the maximum (8.8 per cent) weightage in his portfolio. Pujara's net worth stands at Rs 8.36 lakh, of which Rs 2.95 lakh is invested in equity and the balance Rs 5.41 lakh is cash.
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Monday, February 23, 2009
HNIs, trusts back to investing in realty
Investors are trickling in, providing temporary relief to the cash-strapped realtors, even as regular sources of financing, including bank funding and private equity investments, continue to shun the real estate sector.
A few of the traditional sources of funding, prior to the 2005 real estate boom, are now returning to invest in commercial projects after about a 30 per cent drop in property prices in the past year, experts say.
High networth individuals, corporates and trusts have invested or are firming up plans to buy stake in projects after almost a three year gap.
Among the high networth individuals, traders, jewellers and tobacco industry related individuals, restaurateurs, have invested in commercial projects that are nearing completion or have already been leased out. The investment known as 'last mile funding' are helping these realtors to finish projects, which were shunned by banks.
"HNIs are also coming back to the real estate projects as they feel that the sector has bottomed out and they will get good returns on the money invested in completing big projects," said Rohtash Goyal, Chairman, Omaxe.
Most of the investments have come in between mid-December to January period, said Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj. A sharp drop in property prices seems to have lured these investors back to the real estate market, who had shunned the sector as prices climbed rapidly.
January was the first month when we saw consummation of four transactions with a cumulative investment of Rs 350 crore, said Puri, declining to give details of the projects and investors.
Surprisingly, a few religious trusts have also evinced interest in investing in the real estate after the correction. A key reason for the interest is the possibility of steady income in the form of lease earnings since these trusts are barred from earning interests.
Adding to the relief of realtors private equity players are also firming up plans.
"Private equity firms are creating 'completion funds', now. Such funds invest only in big projects for which the developers are desperate to get capital and pay high interest," said Goyal of Omaxe.
However, some consultants say that large scale transactions by HNIs and other entities are hard to come by as real estate sector still remains uncertain and investors and buyers expect prices to fall further.
"Investors are evaluating all over again about investing in properties. But I see investments coming in only in the middle or end of the year after the elections, when a trend is expected to emerge. Both buyers and investors are expecting prices to go down further,'' said Ambar Maheshwari, director of DTZ, an international investment advisory.
A few of the traditional sources of funding, prior to the 2005 real estate boom, are now returning to invest in commercial projects after about a 30 per cent drop in property prices in the past year, experts say.
High networth individuals, corporates and trusts have invested or are firming up plans to buy stake in projects after almost a three year gap.
Among the high networth individuals, traders, jewellers and tobacco industry related individuals, restaurateurs, have invested in commercial projects that are nearing completion or have already been leased out. The investment known as 'last mile funding' are helping these realtors to finish projects, which were shunned by banks.
"HNIs are also coming back to the real estate projects as they feel that the sector has bottomed out and they will get good returns on the money invested in completing big projects," said Rohtash Goyal, Chairman, Omaxe.
Most of the investments have come in between mid-December to January period, said Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj. A sharp drop in property prices seems to have lured these investors back to the real estate market, who had shunned the sector as prices climbed rapidly.
January was the first month when we saw consummation of four transactions with a cumulative investment of Rs 350 crore, said Puri, declining to give details of the projects and investors.
Surprisingly, a few religious trusts have also evinced interest in investing in the real estate after the correction. A key reason for the interest is the possibility of steady income in the form of lease earnings since these trusts are barred from earning interests.
Adding to the relief of realtors private equity players are also firming up plans.
"Private equity firms are creating 'completion funds', now. Such funds invest only in big projects for which the developers are desperate to get capital and pay high interest," said Goyal of Omaxe.
However, some consultants say that large scale transactions by HNIs and other entities are hard to come by as real estate sector still remains uncertain and investors and buyers expect prices to fall further.
"Investors are evaluating all over again about investing in properties. But I see investments coming in only in the middle or end of the year after the elections, when a trend is expected to emerge. Both buyers and investors are expecting prices to go down further,'' said Ambar Maheshwari, director of DTZ, an international investment advisory.
Tatas, Birlas to invest in real estate
Two of India’s large business houses, the Birlas and the Tatas, are looking at real estate as a major investment area, albeit in different ways. While the Birlas, through a financial services arm, are offering real estate as an alternative investment option to clients, the Tatas are planning to develop surplus land held by group companies. The Tatas may also invest in the sector part of funds raised through recent public offerings. These moves come at a time when real estate prices are correcting and low demand for projects has prompted large developers to default on financial commitments and project deadlines. Aditya Birla Management director Ajay Srinivasan, who also heads the financial services business, said the conglomerate is merely gearing up for the future. “We are now putting a team in place and want to be ready when the time is right,” he told ET. The financial services arm of the group is setting up a real estate and private equity arm for its wealth management units. To be headed by Sashi Kumar, the real estate business would be managed through Birla Sun Life Asset Management. The Birlas plan to subsequently launch two real estate funds, one offshore and the other local, for the sector. Although funds will be raised overseas as well, the investment destinations will be in India and can include distressed real estate assets. Tata Housing Development, a real estate player, has already said that it plans to leverage its tie-ups with banks by developing properties on surplus land owned by other Tata group companies. Tata Housing is now identifying excess landbanks owned by companies such as TCS, Voltas, Rallis India, Tata Motors, Tata Coffee and Tata Tea. Tata Capital, the financial services arm of the Tatas, is scheduled to close a largely successful non-convertible debenture issue on Tuesday; it has so far raised Rs 2,300 crore against a targeted Rs 1,500 crore. Although Tata Capital has said that it won’t lend to group companies, it has proposed to invest in most asset classes. Anticipating a large value erosion in the realty space, Indian corporates are planning to float new funds to acquire assets in the domestic property market. Real estate funds such as Saffron Advisors have either floated or are in the process of floating funds with corpus ranging between Rs 500 crore and Rs 1,000 crore. “As far as Indian realty is concerned, for the right projects, funds are still available,” said Saffron Advisors MD Ajoy Kapoor. “Conservative European investors, after conducting extensive due diligence and research, are more comfortable with investing in Indian real estate, provided they are able to align with right partners,” he added. A few months ago, Munich-based retail aggregator Deutsche Capital Management underwrote $20 million for Saffron India Real Estate Fund I, an India-focussed real estate fund. DCM is raising a specific fund for investing in Indian real estate through Saffron Advisors. Tough lending norms, unfavourable primary market and global financial worries have affected fund flow into the Indian property market. Real estate deals have fallen and fancy valuations by developers are being corrected to a large extent.
ICICI Bank crashes by 21%; Tata Motors hits year’s low
Fears that the US administration may nationalise troubled banks – Citi and Bank of America – triggered fresh selling in the stock markets. The Dow Jones Industrial Average tumbled 6.17 per cent, its lowest levels since October 2002 while the tech-rich Nasdaq composite fell 6.07 per cent to 1,441.23 and the broad-market Standard & Poor’s 500 tumbled 6.87 per cent to 770.05.
Weak global cues and insipid interim Budget affected the mood at Dalal Street. The BSE Sensex plummeted by 8.22 per cent and the NSE S&P CNX Nifty slumped 7.19 per cent, as foreign institutional investors resumed their selling on Indian bourses.
Amid global ruin, Indian ADRs also buckled. Among the worst affected was ICICI Bank, whose ADR tumbled by 21.1 per cent at $13.78 ($17.46). Weak sentiment towards financial sector across the globe seemed to have affected the sentiment for the counter. The other banking major, HDFC Bank, too fell by 10.3 per cent at $54.27 ($60.5).
Despite State Bank of India announcing flat interest rate of auto buyers, Tata Motors crashed by 14.4 per cent at $3.33 (3.89). It, in fact, registered its year low of $3.25 on Friday.
The other counters that registered their 52-week lows were Rediff.com and MTNL.
While MTNL witnessed a fall of 12.5 per cent at $2.6 ($2.97), Tata Communications slumped 15.5 per cent at $15.34 ($18.15).
Infotech majors also witnessed sharp falls. Wipro declined by 8.9 per cent at $6.17 ($6.77), Infosys Technologies slipped by 8.4 per cent at $24.16 ($26.38).
Scam-hit IT firm Satyam Computer last week got Company Law Board permission to induct one or more strategic investors through a public auction and raise funds by preferential allotment of shares. According to reports, the board of Satyam is likely to announce the details of the process of inviting strategic partners by the end of this week. However, the ADR tumbled by over 10 per cent to end at $1.71 ($1.91).
Weak global cues and insipid interim Budget affected the mood at Dalal Street. The BSE Sensex plummeted by 8.22 per cent and the NSE S&P CNX Nifty slumped 7.19 per cent, as foreign institutional investors resumed their selling on Indian bourses.
Amid global ruin, Indian ADRs also buckled. Among the worst affected was ICICI Bank, whose ADR tumbled by 21.1 per cent at $13.78 ($17.46). Weak sentiment towards financial sector across the globe seemed to have affected the sentiment for the counter. The other banking major, HDFC Bank, too fell by 10.3 per cent at $54.27 ($60.5).
Despite State Bank of India announcing flat interest rate of auto buyers, Tata Motors crashed by 14.4 per cent at $3.33 (3.89). It, in fact, registered its year low of $3.25 on Friday.
The other counters that registered their 52-week lows were Rediff.com and MTNL.
While MTNL witnessed a fall of 12.5 per cent at $2.6 ($2.97), Tata Communications slumped 15.5 per cent at $15.34 ($18.15).
Infotech majors also witnessed sharp falls. Wipro declined by 8.9 per cent at $6.17 ($6.77), Infosys Technologies slipped by 8.4 per cent at $24.16 ($26.38).
Scam-hit IT firm Satyam Computer last week got Company Law Board permission to induct one or more strategic investors through a public auction and raise funds by preferential allotment of shares. According to reports, the board of Satyam is likely to announce the details of the process of inviting strategic partners by the end of this week. However, the ADR tumbled by over 10 per cent to end at $1.71 ($1.91).
Low inflation and low employment
The classic definition of inflation is too much money chasing too few goods. If the inflation rate is falling, by this definition it follows that ‘too little money’ is chasing the goods. Then, a falling inflation rate may not be such good news after all.
Could this be happening in India, where the Wholesale Price Index-based inflation has dropped to its 13-month low? Is loss of income at home supplementing the key global factor — the falling price of crude oil — to push down the inflation rate?
Unemployment factor
In the last few months, as the financial crisis began to bite all manner of industries have been handing out the pink slip to their employees. Even those managing to remain in their job have taken massive salary cuts. Unemployment/wage uncertainty could be one of the factors responsible for the loss of confidence of bankers to lend. Could unemployment have a role in the falling inflation rate especially when it is becoming pervasive, cutting across sectors? The International Labour Organisation has said that by its most optimistic scenario, this year would end with 18 million more unemployed people across the world than at the end of 2007.
With some lag, India is beginning to feel the pressure on the job front. The labour-intensive export sector is the worst hit. Textiles, and gems and jewellery industries, whose main markets are the recession-hit economies of the US and Europe, are among the badly affected. In a written reply to the Lok Sabha, the Corporate Affairs Minister, Mr Prem Chand Gupta, said five lakh jobs were lost in the September-December 2008 quarter. The Commerce Ministry and export organisations put the figure even higher. According to them, since last September, some one million workers have lost jobs. Another half a million are likely to be laid off by March as units across the country cut production. Equally hard hit are the computer services companies that derive 85 per cent of their revenues from exports to America and Britain, and 30-40 per cent from financial-services work. No day passes without some IT company or the other announcing layoffs. The situation could be worse in the unorganised, support services areas, such as shops and restaurants or household-help.
According to Assocham’s annual ‘Employment assessment Report 2009’, the average job creation declined by 38 per cent in the October-December 2008 quarter compared to July-September period. This is in sharp contrast to the sequential growth rate of 124 per cent in July-September and 238 per cent in April-June. As the economic growth decelerates, key employment generating sectors such as IT/BPO, financial services, are witnessing a reduction in job creation. The once booming sectors such aviation, media, hospitality and retail are also badly affected.
Drop in demand
The effect of such job (income) losses and pay-cuts has been on demand for goods and services. According to Assocham’s Eco Pulse study earlier this month, demand growth has been hit across sectors. According to the study that analysed 11 sectors based on the results of 222 companies, the average drop in demand growth in the third quarter of the fiscal across all sectors was 10 per cent; the range was from 18 per cent to 50 per cent. The sectors worst hit were steel, auto, auto components and textiles. People either have no money to buy or those who have are postponing (that is, hoarding money) their buying because of the economic uncertainties ahead.
In fact, the worrying aspect of a recession is the sustained drop in demand leading to deflation that is often caused by a drop in the supply of money or credit. It is also caused by a contraction in spending, by government or people. Deflation tends to raise unemployment, causing a vicious spiral. All this is happening in India. Just to avoid the deflation trap nations are pumping money into their economies disregarding the deficit they are accumulating. This is to stimulate spending and to keep the inflation from falling below a certain level as to become a disincentive to produce.
Could this be happening in India, where the Wholesale Price Index-based inflation has dropped to its 13-month low? Is loss of income at home supplementing the key global factor — the falling price of crude oil — to push down the inflation rate?
Unemployment factor
In the last few months, as the financial crisis began to bite all manner of industries have been handing out the pink slip to their employees. Even those managing to remain in their job have taken massive salary cuts. Unemployment/wage uncertainty could be one of the factors responsible for the loss of confidence of bankers to lend. Could unemployment have a role in the falling inflation rate especially when it is becoming pervasive, cutting across sectors? The International Labour Organisation has said that by its most optimistic scenario, this year would end with 18 million more unemployed people across the world than at the end of 2007.
With some lag, India is beginning to feel the pressure on the job front. The labour-intensive export sector is the worst hit. Textiles, and gems and jewellery industries, whose main markets are the recession-hit economies of the US and Europe, are among the badly affected. In a written reply to the Lok Sabha, the Corporate Affairs Minister, Mr Prem Chand Gupta, said five lakh jobs were lost in the September-December 2008 quarter. The Commerce Ministry and export organisations put the figure even higher. According to them, since last September, some one million workers have lost jobs. Another half a million are likely to be laid off by March as units across the country cut production. Equally hard hit are the computer services companies that derive 85 per cent of their revenues from exports to America and Britain, and 30-40 per cent from financial-services work. No day passes without some IT company or the other announcing layoffs. The situation could be worse in the unorganised, support services areas, such as shops and restaurants or household-help.
According to Assocham’s annual ‘Employment assessment Report 2009’, the average job creation declined by 38 per cent in the October-December 2008 quarter compared to July-September period. This is in sharp contrast to the sequential growth rate of 124 per cent in July-September and 238 per cent in April-June. As the economic growth decelerates, key employment generating sectors such as IT/BPO, financial services, are witnessing a reduction in job creation. The once booming sectors such aviation, media, hospitality and retail are also badly affected.
Drop in demand
The effect of such job (income) losses and pay-cuts has been on demand for goods and services. According to Assocham’s Eco Pulse study earlier this month, demand growth has been hit across sectors. According to the study that analysed 11 sectors based on the results of 222 companies, the average drop in demand growth in the third quarter of the fiscal across all sectors was 10 per cent; the range was from 18 per cent to 50 per cent. The sectors worst hit were steel, auto, auto components and textiles. People either have no money to buy or those who have are postponing (that is, hoarding money) their buying because of the economic uncertainties ahead.
In fact, the worrying aspect of a recession is the sustained drop in demand leading to deflation that is often caused by a drop in the supply of money or credit. It is also caused by a contraction in spending, by government or people. Deflation tends to raise unemployment, causing a vicious spiral. All this is happening in India. Just to avoid the deflation trap nations are pumping money into their economies disregarding the deficit they are accumulating. This is to stimulate spending and to keep the inflation from falling below a certain level as to become a disincentive to produce.
Sugar price rise to hurt cola majors, biscuit cos
The cola majors Pepsi and Coca-Cola India stand to lose Rs 300 crore or more annually from the recent hardening of sugar prices.
The increase of Rs 4.50 to Rs 5 a kg since October could prove a bitter pill for confectionary and biscuit makers such as Britannia, ITC and Nestle as well.
The spokespersons of both the cola companies declined to give details of their sugar consumption needs. Every one-litre bottle of carbonated drink contains around 120 gm of sugar.
According to an ACNielsen report for 2006-07 - the last and probably only authentic survey on sugar usage trends - the carbonated beverages segment consumed 7.89 lakh tonnes (lt) of sugar, with organised players accounting for roughly 90 per cent of this.
Taking a conservative seven lt figure for just the two cola companies, a rise of Rs 4.50-5 a kg would translate into a combined annual outgo of Rs 300-350 crore. This is more than their yearly ad budgets - estimated at Rs 130 crore for Coke and Rs 145 crore for Pepsi.
The cola majors are not the only ones to be affected by costlier sugar. During the year ended March 31, 2008, Britannia Industries consumed 1.15 lt of sugar, with the same amounting to 59,217 tonnes for ITC and 45,057 tonnes for Nestle India. For Britannia, every Re 1 rise in sugar prices entails an extra expenditure of Rs 11.50 crore; a Rs 4.50 a kg increase would set it back by some Rs 50 crore. “If you compare over January last year, sugar prices are higher by almost 45 per cent. This has obviously impacted our input costs negatively”, said Ms Vinita Bali, Managing Director of the Rs 2,600-crore bakery products company. Britannia’s main rival, Parle Products Pvt Ltd, may, however, be somewhat better placed because of a captive 3,500-tcd sugar mill it owns in Uttar Pradesh.
Ex-factory sugar prices are now averaging Rs 20-plus a kg against the Rs 12.50-13 levels at this time last year.
“The steep jump in sugar prices will certainly put pressure on our margins. And the outlook does not look positive even for the months ahead”, noted Mr Sameer Suneja, CEO of Perfetti Van Melle India, which owns the ‘Alpenliebe’, ‘Center Fresh’ and ‘Mentos’ confectionary brands.
The President of the Indian Confectionary Manufacturing Association, Mr B.K. Gurbani, said that it is difficult to pass on higher sugar costs to the consumers because of price point and coinage issues peculiar to the industry. The MRP of a Re 1 toffee cannot be raised to Rs 1.30 or Rs 1.45; doubling it to Rs 2 would put off consumers.
The ACNielsen survey estimated the country’s sugar consumption during 2006-07 at 18.23 million tonnes. The bulk of this was by industrial consumers (5.26 mt) and small businesses such as sweetmeat makers and restaurants (5.51 mt). Households consumed only 7.46 mt or 41 per cent of the total.
The increase of Rs 4.50 to Rs 5 a kg since October could prove a bitter pill for confectionary and biscuit makers such as Britannia, ITC and Nestle as well.
The spokespersons of both the cola companies declined to give details of their sugar consumption needs. Every one-litre bottle of carbonated drink contains around 120 gm of sugar.
According to an ACNielsen report for 2006-07 - the last and probably only authentic survey on sugar usage trends - the carbonated beverages segment consumed 7.89 lakh tonnes (lt) of sugar, with organised players accounting for roughly 90 per cent of this.
Taking a conservative seven lt figure for just the two cola companies, a rise of Rs 4.50-5 a kg would translate into a combined annual outgo of Rs 300-350 crore. This is more than their yearly ad budgets - estimated at Rs 130 crore for Coke and Rs 145 crore for Pepsi.
The cola majors are not the only ones to be affected by costlier sugar. During the year ended March 31, 2008, Britannia Industries consumed 1.15 lt of sugar, with the same amounting to 59,217 tonnes for ITC and 45,057 tonnes for Nestle India. For Britannia, every Re 1 rise in sugar prices entails an extra expenditure of Rs 11.50 crore; a Rs 4.50 a kg increase would set it back by some Rs 50 crore. “If you compare over January last year, sugar prices are higher by almost 45 per cent. This has obviously impacted our input costs negatively”, said Ms Vinita Bali, Managing Director of the Rs 2,600-crore bakery products company. Britannia’s main rival, Parle Products Pvt Ltd, may, however, be somewhat better placed because of a captive 3,500-tcd sugar mill it owns in Uttar Pradesh.
Ex-factory sugar prices are now averaging Rs 20-plus a kg against the Rs 12.50-13 levels at this time last year.
“The steep jump in sugar prices will certainly put pressure on our margins. And the outlook does not look positive even for the months ahead”, noted Mr Sameer Suneja, CEO of Perfetti Van Melle India, which owns the ‘Alpenliebe’, ‘Center Fresh’ and ‘Mentos’ confectionary brands.
The President of the Indian Confectionary Manufacturing Association, Mr B.K. Gurbani, said that it is difficult to pass on higher sugar costs to the consumers because of price point and coinage issues peculiar to the industry. The MRP of a Re 1 toffee cannot be raised to Rs 1.30 or Rs 1.45; doubling it to Rs 2 would put off consumers.
The ACNielsen survey estimated the country’s sugar consumption during 2006-07 at 18.23 million tonnes. The bulk of this was by industrial consumers (5.26 mt) and small businesses such as sweetmeat makers and restaurants (5.51 mt). Households consumed only 7.46 mt or 41 per cent of the total.
EPF interest rate to remain at 8.5%
The Central Board of Trustees (CBT) of the Employees Provident Fund (EPF) has recommended a rate of interest of 8.5 per cent for 2008-09.
The decision was taken at the 186th meeting of the CBT on Sunday, which was the fourth regular meeting of the newly constituted board.
It was convened here under the chairmanship of Mr Oscar Fernandes, Minister of State for Labour and Employment.
“The board considered the statutory item to recommend rate of interest for the year 2008-2009 for crediting to the subscribers account as 8.5 per cent. However, the employees’ representatives were in favour of higher rate of interest and during the deliberations, they recorded their dissent,” an official release issued here after the CBT meeting said.
The board also considered the coverage of contract employees under the EPF Act and better extension of social security cover to existing employees. The matter will be further taken up in a subsequent meeting after obtaining the views of various members, the release added.
During the previous year as well, the subscribers of the EPF had got an interest rate of 8.5 per cent. According to the Labour Ministry, the EPF had a membership of 449.19 lakh as on March 31, 2008, covering 532,702 establishments and with an invested corpus of about Rs 2,00,000 crore.
Till 1975, EPF funds were invested only in Central Government bonds. The Special Deposit Scheme (SDS), managed by scheduled banks, was launched in 1975 to achieve better returns.
Nearly Rs 53,000 crore, or around 44 per cent of the total EPF corpus, was invested in the SDS, according to latest Ministry data. Investments in the SDS, which used to earn an interest rate of 12 per cent earlier, now fetch only 8 per cent.
The decision was taken at the 186th meeting of the CBT on Sunday, which was the fourth regular meeting of the newly constituted board.
It was convened here under the chairmanship of Mr Oscar Fernandes, Minister of State for Labour and Employment.
“The board considered the statutory item to recommend rate of interest for the year 2008-2009 for crediting to the subscribers account as 8.5 per cent. However, the employees’ representatives were in favour of higher rate of interest and during the deliberations, they recorded their dissent,” an official release issued here after the CBT meeting said.
The board also considered the coverage of contract employees under the EPF Act and better extension of social security cover to existing employees. The matter will be further taken up in a subsequent meeting after obtaining the views of various members, the release added.
During the previous year as well, the subscribers of the EPF had got an interest rate of 8.5 per cent. According to the Labour Ministry, the EPF had a membership of 449.19 lakh as on March 31, 2008, covering 532,702 establishments and with an invested corpus of about Rs 2,00,000 crore.
Till 1975, EPF funds were invested only in Central Government bonds. The Special Deposit Scheme (SDS), managed by scheduled banks, was launched in 1975 to achieve better returns.
Nearly Rs 53,000 crore, or around 44 per cent of the total EPF corpus, was invested in the SDS, according to latest Ministry data. Investments in the SDS, which used to earn an interest rate of 12 per cent earlier, now fetch only 8 per cent.
Market to maintain status quo until push from global cues
Some awaiting further dip in indices; short-term bets on select stocks.
After dubbing the vote on account as “disappointing”, the market tumbled last week. The global markets also did not provide any positive signal. This week, the local equity market is unlikely to spring a positive surprise unless the global markets bounce back significantly.
Amid evaporating “feel-good” factor, a pall of gloom envelops the mindset of the investors.
Sensing the chances of testing the bottom in key indices, strategists have suggested general shorting for day traders. Having revised the revenue and earning growth downwards for the current quarter, some of the market players are waiting for a further dip in the indices to chalk out a short- to medium-term strategy.
Exercises are on to identify the likely out-performers during the present quarter. For some, higher dividend yield at lower market prices is an attractive proposition for entries. However, the long-term players are now conspicuous by their absence.
Indications are that the long-term strategies may be unrolled after some time when more confirmation of lowest valuation levels will be available.
Circumspect
In this bear market, fund managers and individual investors have been learning to circumspect about declared numbers, if not downright sceptical. Discounts to growth estimates are being reviewed accordingly. Expansion plans, acquisitions and mergers are hardly generating confidence.
On the contrary, the diminutions of assets acquired in recent past and leveraging on account of capacity expansion are being treated as severely negative.
As valuation on the equity street is largely a function of sentiment, negative excesses are quite in order.
When restatement of accounts (for several years in the past) becomes a reality for once blue-chip or mid-sized companies, investors’ tendency turns not to see them in isolation. Market is currently not in a frame of mind to spare yesterday’s street gods.
Even in this depressing situation, market seems to have arrived at a consensus of sorts on certain stocks on which bets might be placed in the short term. The three public sector oil marketing companies top the list. The current lower global crude oil prices are expected to give them better margins and opportunity for better dividends.
Select telecom, power and power equipment, cement, pharmaceutical and FMCG stocks, which have potential to outperform others relative to the current valuations, are also being looked at with interest but, of course, with varying degrees. But this relative metrics are likely to be used for short-term perspective only. None appear to have the heart for long-term commitment now.
An investment advisory service provider for a large number of foreign investors has identified just 15 stocks that are likely to outperform the BSE 500 Index. The advisory outfit said they are unlikely to revisit the broader index components before June.
After dubbing the vote on account as “disappointing”, the market tumbled last week. The global markets also did not provide any positive signal. This week, the local equity market is unlikely to spring a positive surprise unless the global markets bounce back significantly.
Amid evaporating “feel-good” factor, a pall of gloom envelops the mindset of the investors.
Sensing the chances of testing the bottom in key indices, strategists have suggested general shorting for day traders. Having revised the revenue and earning growth downwards for the current quarter, some of the market players are waiting for a further dip in the indices to chalk out a short- to medium-term strategy.
Exercises are on to identify the likely out-performers during the present quarter. For some, higher dividend yield at lower market prices is an attractive proposition for entries. However, the long-term players are now conspicuous by their absence.
Indications are that the long-term strategies may be unrolled after some time when more confirmation of lowest valuation levels will be available.
Circumspect
In this bear market, fund managers and individual investors have been learning to circumspect about declared numbers, if not downright sceptical. Discounts to growth estimates are being reviewed accordingly. Expansion plans, acquisitions and mergers are hardly generating confidence.
On the contrary, the diminutions of assets acquired in recent past and leveraging on account of capacity expansion are being treated as severely negative.
As valuation on the equity street is largely a function of sentiment, negative excesses are quite in order.
When restatement of accounts (for several years in the past) becomes a reality for once blue-chip or mid-sized companies, investors’ tendency turns not to see them in isolation. Market is currently not in a frame of mind to spare yesterday’s street gods.
Even in this depressing situation, market seems to have arrived at a consensus of sorts on certain stocks on which bets might be placed in the short term. The three public sector oil marketing companies top the list. The current lower global crude oil prices are expected to give them better margins and opportunity for better dividends.
Select telecom, power and power equipment, cement, pharmaceutical and FMCG stocks, which have potential to outperform others relative to the current valuations, are also being looked at with interest but, of course, with varying degrees. But this relative metrics are likely to be used for short-term perspective only. None appear to have the heart for long-term commitment now.
An investment advisory service provider for a large number of foreign investors has identified just 15 stocks that are likely to outperform the BSE 500 Index. The advisory outfit said they are unlikely to revisit the broader index components before June.
Equity funds sitting on Rs 20,000-cr cash chest
Thematic funds lead the pack.
Equity mutual funds are choosing to hold sizeable cash positions in view of current market uncertainties.
Data from Indsec Securities, based on January-end portfolios, show that average cash positions across equity funds were as high as 20 per cent, amounting to over Rs 20,000 crore across fund houses.
Mutual fund managers say that unprecedented volatility has prompted them to wait on the sidelines for buying opportunities. The proportion of cash to total equity assets has gone up from 10.1 to 20.5 per cent between January 2008 and now. Though the actual cash holdings have only increased from Rs 18,000 crore to Rs 20,000 crore, the contraction in equity fund assets (due to NAV declines and some outflows) has resulted in a larger proportion of cash. Cash includes cash and cash equivalents such as money market instruments and short-term debt instruments.
Among the larger asset management companies (AMCs) Reliance Mutual Fund and UTI Mutual Fund hold cash positions amounting to about 30 per cent of the equity assets while those such as SBI and HSBC Mutual hold about 20-22 per cent.
These cash holdings are not evenly spread across schemes.
Thematic funds, which typically focus on one sector (say, infrastructure) or theme (mid/small-cap stocks), account for a big portion of the cash holdings, while diversified equity funds have lower cash on their portfolios.
Reliance Diversified Power, Reliance Natural Resources, UTI Infrastructure and DSP BlackRock TIGER fund are some thematic funds which are high on cash and cash equivalents.
In some cases, cash positions (for funds such as Reliance or Birla Sun Life) are held against their exposure to derivatives in select schemes.
Cautious stance
Are equity fund managers holding high levels of cash anticipating pullouts from the funds? Fund houses deny that that is the case.
Equity funds saw relatively small net outflows (redemptions) of Rs 1,378 crore in the choppy October-December 2008 quarter. In January, there was Rs 338 crore of new outflows.
Fund managers who are high on cash appear to be taking the view that the worst isn’t over yet for the stock markets. Mutual funds have made net sales in stocks amounting to Rs 2,521 crore so far in 2009.
Mr Sanjay Dongre, Senior Equity Fund Manager, UTI Mutual Fund, says that redemption pressures faced by the equity funds were at “negligible” levels, as the investor base was mainly retail.
“We are holding higher cash positions on our funds given the uncertainty prevailing in the marketplace, where the risk appetite of investors is extremely low. Our diversified funds hold a 15-18 per cent allocation to cash and the thematic funds hold larger cash positions.”
Market uncertainties
Asked if the fund house is looking for a specific market level (say, a Sensex of 8,000 or 8,500) to deploy this cash, Mr Dongre replied that it is uncertainty rather than the prevailing market valuation, that is prompting the cautious stance. “If we see risk capital returning to the markets and the uncertainty receding, we will go ahead and deploy that cash, even if market levels are higher than they are currently,” he said.
At the other end of the spectrum, fund houses such as HDFC Mutual Fund and Franklin Templeton Mutual hold only about 7 per cent of their equity fund portfolios in cash.
These AMCs have consistently followed a practice of remaining more or less fully invested, irrespective of market swings.
Equity mutual funds are choosing to hold sizeable cash positions in view of current market uncertainties.
Data from Indsec Securities, based on January-end portfolios, show that average cash positions across equity funds were as high as 20 per cent, amounting to over Rs 20,000 crore across fund houses.
Mutual fund managers say that unprecedented volatility has prompted them to wait on the sidelines for buying opportunities. The proportion of cash to total equity assets has gone up from 10.1 to 20.5 per cent between January 2008 and now. Though the actual cash holdings have only increased from Rs 18,000 crore to Rs 20,000 crore, the contraction in equity fund assets (due to NAV declines and some outflows) has resulted in a larger proportion of cash. Cash includes cash and cash equivalents such as money market instruments and short-term debt instruments.
Among the larger asset management companies (AMCs) Reliance Mutual Fund and UTI Mutual Fund hold cash positions amounting to about 30 per cent of the equity assets while those such as SBI and HSBC Mutual hold about 20-22 per cent.
These cash holdings are not evenly spread across schemes.
Thematic funds, which typically focus on one sector (say, infrastructure) or theme (mid/small-cap stocks), account for a big portion of the cash holdings, while diversified equity funds have lower cash on their portfolios.
Reliance Diversified Power, Reliance Natural Resources, UTI Infrastructure and DSP BlackRock TIGER fund are some thematic funds which are high on cash and cash equivalents.
In some cases, cash positions (for funds such as Reliance or Birla Sun Life) are held against their exposure to derivatives in select schemes.
Cautious stance
Are equity fund managers holding high levels of cash anticipating pullouts from the funds? Fund houses deny that that is the case.
Equity funds saw relatively small net outflows (redemptions) of Rs 1,378 crore in the choppy October-December 2008 quarter. In January, there was Rs 338 crore of new outflows.
Fund managers who are high on cash appear to be taking the view that the worst isn’t over yet for the stock markets. Mutual funds have made net sales in stocks amounting to Rs 2,521 crore so far in 2009.
Mr Sanjay Dongre, Senior Equity Fund Manager, UTI Mutual Fund, says that redemption pressures faced by the equity funds were at “negligible” levels, as the investor base was mainly retail.
“We are holding higher cash positions on our funds given the uncertainty prevailing in the marketplace, where the risk appetite of investors is extremely low. Our diversified funds hold a 15-18 per cent allocation to cash and the thematic funds hold larger cash positions.”
Market uncertainties
Asked if the fund house is looking for a specific market level (say, a Sensex of 8,000 or 8,500) to deploy this cash, Mr Dongre replied that it is uncertainty rather than the prevailing market valuation, that is prompting the cautious stance. “If we see risk capital returning to the markets and the uncertainty receding, we will go ahead and deploy that cash, even if market levels are higher than they are currently,” he said.
At the other end of the spectrum, fund houses such as HDFC Mutual Fund and Franklin Templeton Mutual hold only about 7 per cent of their equity fund portfolios in cash.
These AMCs have consistently followed a practice of remaining more or less fully invested, irrespective of market swings.
Saturday, February 21, 2009
Gold breaches Rs 16,000 level in futures trade
Breaking all previous records, gold prices today surged to a new peak at Rs 16,349 per 10 gram in futures trade, as traders increased their exposure in the precious metal following melting stock and forex markets.
The metal, which had been on a record-setting spree for the last one week, spurted to an all-time high of Rs 16,349, by adding 2.55 per cent on the Multi Commodity Exchange, as funds preferred to park their funds in gold amid deepening global recession.
The August contract for gold climbed 2.55 per cent to touch Rs 16,349 per 10 gram. It clocked two lots.
The bullion market received a major booster from the firming global trend as the gold in the US markets surged to 1,007.20 dollar an ounce last night.
"Funds around the world indulged in picking gold as a safe investment during current financial turmoil," said Galipelli Harish, head of research with Karvy Comtrade.
The firmness was also witnessed in spot market as gold prices climbed much close the market expectations of Rs 6,000 per 10 gram in all domestic bullion markets.
In Delhi, the metal traded at Rs 15,750, in Chennai at Rs 15,775 per 10 gram, respectively.
Buying by jewellers and retail customers almost dried up at existing higher levels, said a Delhi-based jeweller Rakesh Anand.
The metal, which had been on a record-setting spree for the last one week, spurted to an all-time high of Rs 16,349, by adding 2.55 per cent on the Multi Commodity Exchange, as funds preferred to park their funds in gold amid deepening global recession.
The August contract for gold climbed 2.55 per cent to touch Rs 16,349 per 10 gram. It clocked two lots.
The bullion market received a major booster from the firming global trend as the gold in the US markets surged to 1,007.20 dollar an ounce last night.
"Funds around the world indulged in picking gold as a safe investment during current financial turmoil," said Galipelli Harish, head of research with Karvy Comtrade.
The firmness was also witnessed in spot market as gold prices climbed much close the market expectations of Rs 6,000 per 10 gram in all domestic bullion markets.
In Delhi, the metal traded at Rs 15,750, in Chennai at Rs 15,775 per 10 gram, respectively.
Buying by jewellers and retail customers almost dried up at existing higher levels, said a Delhi-based jeweller Rakesh Anand.
Obama's sky-high popularity dips in first month
President Barack Obama's job approval rating dipped in his first month in office amid ongoing economic woes and partisan battles over government spending plans, polls published today showed.
Obama, who entered office on January 20 amid high expectations prompted by his positive election campaign, saw his star dull in a CNN and Opinion Research Corporation survey conducted between February 18-19 that said 67 per cent of Americans approved of his handling of the job.
The approval is down nine points from 76 per cent 11 days earlier.
Almost a third of those polled disapproved of Obama's handling of the job, while 23 per cent said he had fallen short of expectations.
Another poll by Fox News and Opinion Dynamics poll showed that Obama's job approval rating stood at 60 per cent on February 17-18, down from 65 per cent three weeks earlier.
The president's personal favoribility rating also dipped according to the survey, with 68 per cent of Americans holding a favorable opinion of him compared to 76 per cent a month ago.
While Obama's approval ratings do remain relatively high, politicking over the $787 billion stimulus plan passed by Congress on February 13 appears to have eaten into his previously stratospheric popularity.
Obama, who entered office on January 20 amid high expectations prompted by his positive election campaign, saw his star dull in a CNN and Opinion Research Corporation survey conducted between February 18-19 that said 67 per cent of Americans approved of his handling of the job.
The approval is down nine points from 76 per cent 11 days earlier.
Almost a third of those polled disapproved of Obama's handling of the job, while 23 per cent said he had fallen short of expectations.
Another poll by Fox News and Opinion Dynamics poll showed that Obama's job approval rating stood at 60 per cent on February 17-18, down from 65 per cent three weeks earlier.
The president's personal favoribility rating also dipped according to the survey, with 68 per cent of Americans holding a favorable opinion of him compared to 76 per cent a month ago.
While Obama's approval ratings do remain relatively high, politicking over the $787 billion stimulus plan passed by Congress on February 13 appears to have eaten into his previously stratospheric popularity.
Slumdog people's favourite to win the Oscars
"Slumdog Millionaire" has been voted as the number one film people would most like to claim the Best Picture trophy at the 81 Academy awards this Sunday.
The story of a Mumbai slumdweller, who wins against all odds has already won many awards worldwide including seven Baftas and four Golden Globes and is the favourite to claim the top prize at this year's Academy awards.
A poll carried out for HMV's film and music social networking site getcloser.Com, revealed that "Slumdog Millionaire" would win the prize of Best Film and Best Director if the winners were decided by the public.
About 59 per cent of voters named the film as their favourite to win Best Picture, with "The Curious Case of Benjamin Button", which stood at the second place with 22 per cent votes.
In the Best Director category also 59 per cent of the voters named British director Danny Boyle as their favourite to take the trophy.
If "Slumdog Millionaire" wins the Best Picture Oscar, it would be the first British film to do so since "Chariots of Fire" in 1981.
A report in The London News said, "the only shortlist to mirror BAFTA's should see the same outcome - with Slumdog snatching it.
"The Academy likes to reward big name directors after a run of films but with no other film feeling Oscar-worthy this year, Slumdog should win," it said.
As regards to the Best director, it said, "The director of four out of the last five Best Picture winners also bagged the Best Director Oscar and this time it will be Danny Boyle."
In the Best actor and Actress category, the voters picked Mickey Rourke and Kate Winslet for the top Academy honours while Taraji P Henson and the late Heath Ledger emerged as favourite for the Supporting awards.
"This poll suggests that 'Slumdog Millionaire' has a great chance of building on its Bafta success by also prevailing in the key best picture and directing Oscar categories - although it's likely to face a much stronger challenge from 'The Curious Case of Benjamin Button' this time around," said Matt Potter, content manager for getcloser.Com.
"The one thing I feel we can all say with a much greater degree of certainty, however, is that a posthumous Oscar will be awarded to Heath Ledger for his memorably manic portrayal of The Joker in The Dark Knight," Potter added.
The story of a Mumbai slumdweller, who wins against all odds has already won many awards worldwide including seven Baftas and four Golden Globes and is the favourite to claim the top prize at this year's Academy awards.
A poll carried out for HMV's film and music social networking site getcloser.Com, revealed that "Slumdog Millionaire" would win the prize of Best Film and Best Director if the winners were decided by the public.
About 59 per cent of voters named the film as their favourite to win Best Picture, with "The Curious Case of Benjamin Button", which stood at the second place with 22 per cent votes.
In the Best Director category also 59 per cent of the voters named British director Danny Boyle as their favourite to take the trophy.
If "Slumdog Millionaire" wins the Best Picture Oscar, it would be the first British film to do so since "Chariots of Fire" in 1981.
A report in The London News said, "the only shortlist to mirror BAFTA's should see the same outcome - with Slumdog snatching it.
"The Academy likes to reward big name directors after a run of films but with no other film feeling Oscar-worthy this year, Slumdog should win," it said.
As regards to the Best director, it said, "The director of four out of the last five Best Picture winners also bagged the Best Director Oscar and this time it will be Danny Boyle."
In the Best actor and Actress category, the voters picked Mickey Rourke and Kate Winslet for the top Academy honours while Taraji P Henson and the late Heath Ledger emerged as favourite for the Supporting awards.
"This poll suggests that 'Slumdog Millionaire' has a great chance of building on its Bafta success by also prevailing in the key best picture and directing Oscar categories - although it's likely to face a much stronger challenge from 'The Curious Case of Benjamin Button' this time around," said Matt Potter, content manager for getcloser.Com.
"The one thing I feel we can all say with a much greater degree of certainty, however, is that a posthumous Oscar will be awarded to Heath Ledger for his memorably manic portrayal of The Joker in The Dark Knight," Potter added.
No plans to nationalise banks: White House
No plans to nationalise banks: White House
The White House has refuted reports that the US administration was planning to nationalise troubled banks, saying President Barack Obama believes that the country should have a privately-held banking system regulated by the government. "The President believes that a privately held banking system regulated by the government is what this country should have," White House spokesman Robert Gibbs told reporters during his daily press briefing.
White House clarification came as the rumor mill in this regard at the Wall Street resulted in stocks of major US banks pummeled down Friday, specially that of Bank of America and Citigroup.
When asked about the Wall Street rumor in this regard, which resulted in Bank of America and Citigroup stocks coming down, Gibbs said: "Let me reassure as best I can, this administration continues to strongly believe that a privately-held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government."
When insisted by reporters that White House was not ruling out nationalisation, he said: ""No. No, no. Let me be clear. The president believes that a privately held banking system regulated by the government is what this country should have."
The White House has refuted reports that the US administration was planning to nationalise troubled banks, saying President Barack Obama believes that the country should have a privately-held banking system regulated by the government. "The President believes that a privately held banking system regulated by the government is what this country should have," White House spokesman Robert Gibbs told reporters during his daily press briefing.
White House clarification came as the rumor mill in this regard at the Wall Street resulted in stocks of major US banks pummeled down Friday, specially that of Bank of America and Citigroup.
When asked about the Wall Street rumor in this regard, which resulted in Bank of America and Citigroup stocks coming down, Gibbs said: "Let me reassure as best I can, this administration continues to strongly believe that a privately-held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government."
When insisted by reporters that White House was not ruling out nationalisation, he said: ""No. No, no. Let me be clear. The president believes that a privately held banking system regulated by the government is what this country should have."
Consumers on a selling spree as gold prices soar
Bullion prices in India are at record highs nowadays. Importantly, they could be a lot higher but for the large quantities of second hand gold that consumers have been offloading in lieu of cash. Imports too have been nothing to talk about. Here’s what the situation looks like. People have for a while been exhausting gold that has been in their possession. Now, they are also selling their coins and bars. Investment advisors, for their part, have been asking their clients to hold back some of their gold as they expect the prices to rise further. Today, the exorbitant value of gold has reduced imports to a trickle. Gold that is imported costs Rs 300-500 per 10 gm more than second-hand gold. Bhargava Vaidya, a Mumbai-based bullion consultant points out that in the run-up to the record high prices, imported gold was quoting at almost a per cent higher than gold that was recycled. Ashok Jain from Chenaji Narsinghji, a shop selling and buying gold in Mumbai’s Zaveri Bazaar says: “If we were to buy gold from banks it would cost us Rs 16,000 per 10 gm (including tax). The market price for gold is almost Rs 500 lower because of the amount of recycled gold in the market.” The fact that there has been a surge in coin and low value bar sales in the last few weeks is confirmed by those in the trade. Jugraj Kantilal & Co, another shop in Zaveri Bazaar, has witnessed that trend over the last few weeks which is almost equal to the volumes recorded in old jewellery. “Our store has been selling 5-6 kg of gold daily from since January when the price was around Rs 13,000 per 10 gm,” says Jitendra Jain from Jugraj Kantilal & Co. This is evident since customers are at the store early in the morning. “When gold prices began climbing last month, our business picked up dramatically. Those who had earlier purchased coins and bars of 20 gm, 50 gm and 100 gm values are also booking their profits,” he adds. As far as coins go, the bullion merchants deduct between Rs 50 and Rs 100 from the original cost. In the case of ornaments, their value is determined by the purity. The gold that is left over — scrap — is given to refiners to melt who reconvert that into coins and bars.
The phenomenon of a drop in the sale of scrap is not restricted to Mumbai but in cities like Chennai and Ahmedabad as well. Now, along with this they are also beginning to encash their new gold (coins/bars) with prices rising by close to 40% since late last year. Krishna Naithani from India Bullion in Chennai says that most of the scrap had already been sold at a price between Rs 13,500-14,000 per 10 gm. “It is only the investors who are now selling the bullion,” he says and is quick to add that investors should book profits for only 25% of their gold holdings as prices may further rally. According to Mr Naithani, scrap that is normally pledged by the rural folk through the pawn broker route has also dropped. Eventually, this finds its way to larger markets. “This can be gauged as not too many pawn brokers are visiting jewellers in Chennai,” he adds.
The phenomenon of a drop in the sale of scrap is not restricted to Mumbai but in cities like Chennai and Ahmedabad as well. Now, along with this they are also beginning to encash their new gold (coins/bars) with prices rising by close to 40% since late last year. Krishna Naithani from India Bullion in Chennai says that most of the scrap had already been sold at a price between Rs 13,500-14,000 per 10 gm. “It is only the investors who are now selling the bullion,” he says and is quick to add that investors should book profits for only 25% of their gold holdings as prices may further rally. According to Mr Naithani, scrap that is normally pledged by the rural folk through the pawn broker route has also dropped. Eventually, this finds its way to larger markets. “This can be gauged as not too many pawn brokers are visiting jewellers in Chennai,” he adds.
CLSA maintains 'outperformer' on Idea Cellular
CMP: Rs 48.35
Target price: Rs 53
CLSA has maintained its ‘outperformer’ rating on Idea, with price a target of Rs 53, as it feels the company’s stronger balance sheet would support valuations. “Idea’s balance sheet has improved significantly with Telekom Malaysia’s Rs 73 billion cash injection (a 15% preferential placement) and another Rs 21 billion from its stake sale in ABTL (Aditya Birla Telecom), with 3QFY09 net debt/equity of 0.18 times (against 1.8x in 1QFY09),” the investment bank said in a report. “The company’s aggressive expansion strategy and inferior margins for its Spice Communications business have compressed margins, but the big improvement in its balance sheet and strong valuation benchmarks from recent deals for start-ups, will support the stock,” the report added.
Target price: Rs 53
CLSA has maintained its ‘outperformer’ rating on Idea, with price a target of Rs 53, as it feels the company’s stronger balance sheet would support valuations. “Idea’s balance sheet has improved significantly with Telekom Malaysia’s Rs 73 billion cash injection (a 15% preferential placement) and another Rs 21 billion from its stake sale in ABTL (Aditya Birla Telecom), with 3QFY09 net debt/equity of 0.18 times (against 1.8x in 1QFY09),” the investment bank said in a report. “The company’s aggressive expansion strategy and inferior margins for its Spice Communications business have compressed margins, but the big improvement in its balance sheet and strong valuation benchmarks from recent deals for start-ups, will support the stock,” the report added.
Goldman Sachs maintains 'sell' on DLF
CMP: Rs 155.05
Target price: Rs 124 Goldman Sachs has maintained its ‘sell’ rating on DLF while reiterating its cautious outlook on the real estate sector. According to the investment bank, New Delhi-based realty major’s third-quarter results have confirmed a significant slowdown in property sales and construction activity in India. “We push back our medium-term development pipeline projections and lower our property price assumptions,” Goldman Sachs said in a report. The investment bank has lowered its earnings per share (EPS) estimates for FY2009-FY2011 by 29-62% and cut its 12-month target price to Rs 124 from Rs 203.
Target price: Rs 124 Goldman Sachs has maintained its ‘sell’ rating on DLF while reiterating its cautious outlook on the real estate sector. According to the investment bank, New Delhi-based realty major’s third-quarter results have confirmed a significant slowdown in property sales and construction activity in India. “We push back our medium-term development pipeline projections and lower our property price assumptions,” Goldman Sachs said in a report. The investment bank has lowered its earnings per share (EPS) estimates for FY2009-FY2011 by 29-62% and cut its 12-month target price to Rs 124 from Rs 203.
Rupee may fall to 54 per dollar by end-2009
The rupee fell on Friday to end the week down 2 percent against the dollar, its worst performance in nearly two months, as a grim global economic outlook triggered concerns of capital outflows from local shares. The partially convertible rupee ended at 49.72/74 per dollar on Friday, 0.2 percent weaker than Thursday's close of 49.62/63. It was the unit's poorest week since the end of December. "Customer selling around 49.90 per dollar levels capped the dollar/rupee's fall but the medium term outlook for the rupee continues to be bearish and it is only a matter of time before it tests 50.50," said a senior dealer at a private bank. Volumes were lower due to a strike by central bank employees and ahead of a market holiday on Monday, with most traders in state-run banks preferring to stay on the sidelines rather than take aggressive positions. Shares fell 2.2 percent on Friday to their lowest close in a month, joining a global market rout. Foreign funds have sold Indian shares worth a net $1.35 billion this year after withdrawing more than $13 billion in 2008. The outflows have piled pressure on the rupee, which has dropped 2.1 percent this year after falling 19.1 percent in 2008. Some private economists expect the rupee to decline to a lifetime low of 54 by the end of 2009 as foreign direct investment and remittances fall sharply. "While that may be overly pessimistic, the fall in FDI should certainly be spectacular, for global reasons if not the general deterioration in the security/political/corporate governance environment in India," Richard Yetsenga, a forex strategist at HSBC said in a recent note. The dollar and the yen rose on Friday as growing global economic and banking sector woes drove investors into currencies seen as safe havens, while grim euro zone data added to negative sentiment on the euro. One-month offshore non-deliverable forward contracts were quoting at 50.10/17 to a dollar, weaker than the onshore spot rate, indicating a bearish near-term outlook. But traders said the central bank may sell dollars aggressively above 50 per dollar to prevent a sharp slide. Data showed, foreign exchange reserves for the week ended Feb. 13 declined to $249.692 billion from $251.532 billion a week earlier.
Long queues outside jewellery shops, now to sell
GOLD RUSH.
Cashing in on high prices: People lining up at jewellery shops at Zaveri Bazar in Mumbai, to sell old gold ornaments. – Paul Noronha
People have found a golden opportunity in the sharp rise in bullion prices. Even as gold jewellery buyers seem to have almost vanished in thin air, there are long queues outside jewellery shops which buy back old gold ornaments.
Mr Nitendra Jain, Proprietor, Jugraj Kantilal & Co, one of the largest buyers and sellers of gold and silver ornaments in Zaveri Bazar, the hub of gold trade in Mumbai, said, “We have been witnessing huge crowds who have come to sell their gold jewellery for the last ten days and expect it to increase if gold prices continue to rise.”
Without revealing the quantity of gold bought back, Mr Jain said, “We are open from 11.30 a.m. to 6.30 p.m. and buy back whatever people offer to us. Our rates are one per cent lower than the market price for gold.”
Mr J.A. Khan, who was the last in a serpentine queue outside Jugraj Kantilal & Co, said, “Though currently there are no attractive investment options, I decided to sell some of my old family jewellery as I feel the prices have peaked and may take a beating in the short term.”
Mr Khan, who was earlier involved in the jewellery business, said he would invest a portion of the proceeds in mutual funds and fixed deposit schemes.
Gold prices crossed the Rs 15,500-level to an all-time intra-day high of Rs 15,545 for 10 grams, but ended at Rs 15,490 on Wednesday. It gained further on Thursday and closed at Rs 15,660 on Friday.
Mrs Shrikant Shreelekha, homemaker, said, “I was initially reluctant to sell my old jewellery, but then thought it is the right time to do so. I plan to go in for a new design later when prices fall. I had bought these jewels when gold was hovering around the Rs 8,000 to Rs 9,500 level.”
Demand down
Jewellery shops which do not buy old jewels wore a deserted look despite the peak wedding season round the corner. Mr Kiran Dikshit, Manager, Tribhovandas Bhimji Zaveri, said casual buying of gold, particularly for investments and gifting, was just not happening, but compulsory buying, especially for weddings, was taking place.
“In fact, some people have advanced their jewellery purchases, anticipating that prices will go up further,” he added.
Mr Prithviraj Kothari, Chairman, Riddhi Siddhi Bullions, said retail jewellery sales had slowed down and wedding demand was low compared to last year. Mr Harish Galipalli, Head of Research, Karvy Commodities, said gold prices are no longer determined by demand and supply but by investment demand and variations in rupee-dollar value.
Since prices have risen by 20 per cent in the last one month, a sharp fall is expected in the near future before an upward march again.
Cashing in on high prices: People lining up at jewellery shops at Zaveri Bazar in Mumbai, to sell old gold ornaments. – Paul Noronha
People have found a golden opportunity in the sharp rise in bullion prices. Even as gold jewellery buyers seem to have almost vanished in thin air, there are long queues outside jewellery shops which buy back old gold ornaments.
Mr Nitendra Jain, Proprietor, Jugraj Kantilal & Co, one of the largest buyers and sellers of gold and silver ornaments in Zaveri Bazar, the hub of gold trade in Mumbai, said, “We have been witnessing huge crowds who have come to sell their gold jewellery for the last ten days and expect it to increase if gold prices continue to rise.”
Without revealing the quantity of gold bought back, Mr Jain said, “We are open from 11.30 a.m. to 6.30 p.m. and buy back whatever people offer to us. Our rates are one per cent lower than the market price for gold.”
Mr J.A. Khan, who was the last in a serpentine queue outside Jugraj Kantilal & Co, said, “Though currently there are no attractive investment options, I decided to sell some of my old family jewellery as I feel the prices have peaked and may take a beating in the short term.”
Mr Khan, who was earlier involved in the jewellery business, said he would invest a portion of the proceeds in mutual funds and fixed deposit schemes.
Gold prices crossed the Rs 15,500-level to an all-time intra-day high of Rs 15,545 for 10 grams, but ended at Rs 15,490 on Wednesday. It gained further on Thursday and closed at Rs 15,660 on Friday.
Mrs Shrikant Shreelekha, homemaker, said, “I was initially reluctant to sell my old jewellery, but then thought it is the right time to do so. I plan to go in for a new design later when prices fall. I had bought these jewels when gold was hovering around the Rs 8,000 to Rs 9,500 level.”
Demand down
Jewellery shops which do not buy old jewels wore a deserted look despite the peak wedding season round the corner. Mr Kiran Dikshit, Manager, Tribhovandas Bhimji Zaveri, said casual buying of gold, particularly for investments and gifting, was just not happening, but compulsory buying, especially for weddings, was taking place.
“In fact, some people have advanced their jewellery purchases, anticipating that prices will go up further,” he added.
Mr Prithviraj Kothari, Chairman, Riddhi Siddhi Bullions, said retail jewellery sales had slowed down and wedding demand was low compared to last year. Mr Harish Galipalli, Head of Research, Karvy Commodities, said gold prices are no longer determined by demand and supply but by investment demand and variations in rupee-dollar value.
Since prices have risen by 20 per cent in the last one month, a sharp fall is expected in the near future before an upward march again.
L&T touches year low
Bid route for Satyam sale not favourable for L&T: Analysts.
Kolkata, Feb. 20 L&T on Friday hit its year-low at Rs 610 and closed slightly higher at Rs 622.50, yielding a loss of 2.83 per cent against the previous closing on Company Law Board order of bid route for Satyam sale. The Company Law Board order on adopting bidding route for deciding Satyam’s new owner could be detrimental to its prospects, dealers said.
According to analysts, investors appear to be showing their disapproval to the proposed acquisition of Satyam Computer.
According to Mr Arun Kejriwal of KRIS, L&T’s move to buy 12 per cent stake in Satyam cannot be justified by its current fundamentals.
“If it goes ahead and buys the controlling stake, it would be akin to a roll-on in high stake game, where you have not seen your own cards,” he said.
The Government would not bail it out and the terms to acquire the additional stake to control Satyam have not been spelt out.
Mr Sourav Mukherjea, head of equity at Noble, said even if L&T buys additional stake in Satyam for peanuts, the lack of immunity against law suits in the US would be an enormous botheration.
A market strategist observed that a large section of shareholders of L&T have objection to the company’s move to acquire Satyam without taking them into confidence.
L&T does not have a promoter and public institutions such as LIC, UTI or insurance companies holding more than 30 per cent of the company.
The stock has been on a downtrend since its peak at Rs 1,455 in the second week of December 2007. However, the stock managed to find support around Rs 680 in October. After that, the stock has witnessed near-term rallies, but faced resistance at higher levels.
Support level
Recently, the stock broke below its multiple support levels. The recent decline was accompanied by higher than average volumes.
According to Sharekhan: “In the last downturn L&T’s earnings had come under pressure due to slower top line growth, decline in OPM (which could be due to delay in the execution of projects) and higher interest outgo due to rising working capital requirement”.
To meet its guidance of 30 per cent order inflow growth, the company will need to add projects worth Rs 1,53,500 crore in 4QFY09, which now appears difficult, according to analysts.
More worrying factors were PBIT margins in E&E and MIP businesses, which have crashed in Q3FY09. CLSA Asia-Pacific Markets slashed its earnings per share estimate for 2009-10 by 5.1 per cent to Rs 640 on account of lower sales and pressure on margins.
Kolkata, Feb. 20 L&T on Friday hit its year-low at Rs 610 and closed slightly higher at Rs 622.50, yielding a loss of 2.83 per cent against the previous closing on Company Law Board order of bid route for Satyam sale. The Company Law Board order on adopting bidding route for deciding Satyam’s new owner could be detrimental to its prospects, dealers said.
According to analysts, investors appear to be showing their disapproval to the proposed acquisition of Satyam Computer.
According to Mr Arun Kejriwal of KRIS, L&T’s move to buy 12 per cent stake in Satyam cannot be justified by its current fundamentals.
“If it goes ahead and buys the controlling stake, it would be akin to a roll-on in high stake game, where you have not seen your own cards,” he said.
The Government would not bail it out and the terms to acquire the additional stake to control Satyam have not been spelt out.
Mr Sourav Mukherjea, head of equity at Noble, said even if L&T buys additional stake in Satyam for peanuts, the lack of immunity against law suits in the US would be an enormous botheration.
A market strategist observed that a large section of shareholders of L&T have objection to the company’s move to acquire Satyam without taking them into confidence.
L&T does not have a promoter and public institutions such as LIC, UTI or insurance companies holding more than 30 per cent of the company.
The stock has been on a downtrend since its peak at Rs 1,455 in the second week of December 2007. However, the stock managed to find support around Rs 680 in October. After that, the stock has witnessed near-term rallies, but faced resistance at higher levels.
Support level
Recently, the stock broke below its multiple support levels. The recent decline was accompanied by higher than average volumes.
According to Sharekhan: “In the last downturn L&T’s earnings had come under pressure due to slower top line growth, decline in OPM (which could be due to delay in the execution of projects) and higher interest outgo due to rising working capital requirement”.
To meet its guidance of 30 per cent order inflow growth, the company will need to add projects worth Rs 1,53,500 crore in 4QFY09, which now appears difficult, according to analysts.
More worrying factors were PBIT margins in E&E and MIP businesses, which have crashed in Q3FY09. CLSA Asia-Pacific Markets slashed its earnings per share estimate for 2009-10 by 5.1 per cent to Rs 640 on account of lower sales and pressure on margins.
Thursday, February 19, 2009
Canada’s Tar-Sands Oil Can Be ‘Clean,’ Obama Says (Update1)
Feb. 18 (Bloomberg) -- Oil extracted from tar sands in Canada can be made a clean energy source, and the U.S. will work with its northern neighbor to develop the technology, President Barack Obama said.
A joint effort by the U.S. and Canada, its biggest trading partner, on ways to capture and store carbon dioxide underground would “be good for everybody,” Obama said yesterday in an interview with the Canadian Broadcasting Corp. Obama will make his first journey as president outside the U.S. tomorrow to meet with Canadian Prime Minister Stephen Harper.
Conservationists on both sides of the border have called on Obama to reject any bid to exempt tar-sands oil from proposed climate-protection rules. Government officials in Canada say restrictions on exports would increase U.S. dependence on oil from unfriendly countries. The oil is separated from sand and clay with intense heat in a process that releases more greenhouse gases than pumping conventional crude.
“The United States is the Saudi Arabia of coal, but we have our own homegrown problems in terms of dealing with a cheap energy source that creates a big carbon footprint,” said Obama, who has backed “clean-coal” technology in the U.S. over skepticism about its prospects from environmentalists such as former Vice President Al Gore.
Reducing greenhouse-gas emissions from energy sources such as coal and oil sands will promote economic growth in both countries, Obama said.
‘Ceiling’ on Growth
“If we don’t, then we’re going to have a ceiling at some point in terms of our ability to expand our economies and maintain the standard of living that’s so important, particularly when you’ve got countries like China and India that are obviously interested in catching up,” the president said.
Two oil-sands producers, Chevron Corp. and Canadian Natural Resources Ltd., were among nine companies singled out today by Ceres, an alliance of investor and environmental groups, that said the producers aren’t accounting for changes brought on by global warming or emerging climate-change regulations. The group includes the Sierra Club and the United Nations Foundation and says it represents investors with $1.9 trillion in assets.
“Investors have a message for President Obama on the eve of his visit to Canada: please do not forsake long-term prosperity and long-term shareholder value for short-term energy independence,” Ceres president Mindy Lubber said in a statement.
Kurt Glaubitz, a spokesman for San Ramon, California-based Chevron and Corey Bieber, a spokesman for Calgary-based Canadian Natural, weren’t immediately available for comment.
780,000 Barrels
The U.S. imported about 780,000 barrels a day of tar-sands oil in 2008, 60 percent of total production, according to the Canadian Association of Petroleum Producers. Petro-Canada, the country’s third-largest oil company, and other producers expect to more than double industry output to 3.3 million barrels a day by 2020.
Alberta’s oil sands may hold the equivalent of 173 billion barrels, enough to supply the U.S. for 24 years, according to some government estimates. Only Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, has more reserves.
“Canada’s energy industry is willing to invest money, technology, know-how and time in this effort, but we really can’t do it alone,” Petro-Canada Chief Executive Officer Ronald Brenneman told reporters last week in New York. “It will take the combined efforts of the industry, government, regulators and consumers.”
Environment Minister
Canadian Environment Minister Jim Prentice has said Canada and the U.S. should work together to develop systems to capture and sequester underground carbon-dioxide emissions. The total “life- cycle” of emissions released, all the way to filling a car’s tank with gasoline, are 20 percent more than conventional oil, the Rand Corp. research organization of Santa Monica, California, said in a 2008 report.
Carbon capture would help “transition from a high-carbon present to a low-carbon future while avoiding a disruptive and dislocative period,” Prentice said on Jan. 20.
Obama backs slashing emissions of heat-trapping gases to 1990 levels. The new president will have to square his environmental agenda with his call to trim dependence on oil supplies from the Mideast and with the U.S.’s longstanding policy to treat Canada as a commercial and strategic ally.
“Would I rather rely on Canada for my energy security or would I rather rely on Hugo Chavez?” Gordon Giffin, U.S. ambassador to Canada during President Bill Clinton’s second term, said in an interview, referring to Venezuela’s president. “What Canada is saying to the United States is we now believe that we ought to be developing a North American approach to energy and to the environment. Our energy issues are not identically connected, but they’re logically connected.”
A joint effort by the U.S. and Canada, its biggest trading partner, on ways to capture and store carbon dioxide underground would “be good for everybody,” Obama said yesterday in an interview with the Canadian Broadcasting Corp. Obama will make his first journey as president outside the U.S. tomorrow to meet with Canadian Prime Minister Stephen Harper.
Conservationists on both sides of the border have called on Obama to reject any bid to exempt tar-sands oil from proposed climate-protection rules. Government officials in Canada say restrictions on exports would increase U.S. dependence on oil from unfriendly countries. The oil is separated from sand and clay with intense heat in a process that releases more greenhouse gases than pumping conventional crude.
“The United States is the Saudi Arabia of coal, but we have our own homegrown problems in terms of dealing with a cheap energy source that creates a big carbon footprint,” said Obama, who has backed “clean-coal” technology in the U.S. over skepticism about its prospects from environmentalists such as former Vice President Al Gore.
Reducing greenhouse-gas emissions from energy sources such as coal and oil sands will promote economic growth in both countries, Obama said.
‘Ceiling’ on Growth
“If we don’t, then we’re going to have a ceiling at some point in terms of our ability to expand our economies and maintain the standard of living that’s so important, particularly when you’ve got countries like China and India that are obviously interested in catching up,” the president said.
Two oil-sands producers, Chevron Corp. and Canadian Natural Resources Ltd., were among nine companies singled out today by Ceres, an alliance of investor and environmental groups, that said the producers aren’t accounting for changes brought on by global warming or emerging climate-change regulations. The group includes the Sierra Club and the United Nations Foundation and says it represents investors with $1.9 trillion in assets.
“Investors have a message for President Obama on the eve of his visit to Canada: please do not forsake long-term prosperity and long-term shareholder value for short-term energy independence,” Ceres president Mindy Lubber said in a statement.
Kurt Glaubitz, a spokesman for San Ramon, California-based Chevron and Corey Bieber, a spokesman for Calgary-based Canadian Natural, weren’t immediately available for comment.
780,000 Barrels
The U.S. imported about 780,000 barrels a day of tar-sands oil in 2008, 60 percent of total production, according to the Canadian Association of Petroleum Producers. Petro-Canada, the country’s third-largest oil company, and other producers expect to more than double industry output to 3.3 million barrels a day by 2020.
Alberta’s oil sands may hold the equivalent of 173 billion barrels, enough to supply the U.S. for 24 years, according to some government estimates. Only Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, has more reserves.
“Canada’s energy industry is willing to invest money, technology, know-how and time in this effort, but we really can’t do it alone,” Petro-Canada Chief Executive Officer Ronald Brenneman told reporters last week in New York. “It will take the combined efforts of the industry, government, regulators and consumers.”
Environment Minister
Canadian Environment Minister Jim Prentice has said Canada and the U.S. should work together to develop systems to capture and sequester underground carbon-dioxide emissions. The total “life- cycle” of emissions released, all the way to filling a car’s tank with gasoline, are 20 percent more than conventional oil, the Rand Corp. research organization of Santa Monica, California, said in a 2008 report.
Carbon capture would help “transition from a high-carbon present to a low-carbon future while avoiding a disruptive and dislocative period,” Prentice said on Jan. 20.
Obama backs slashing emissions of heat-trapping gases to 1990 levels. The new president will have to square his environmental agenda with his call to trim dependence on oil supplies from the Mideast and with the U.S.’s longstanding policy to treat Canada as a commercial and strategic ally.
“Would I rather rely on Canada for my energy security or would I rather rely on Hugo Chavez?” Gordon Giffin, U.S. ambassador to Canada during President Bill Clinton’s second term, said in an interview, referring to Venezuela’s president. “What Canada is saying to the United States is we now believe that we ought to be developing a North American approach to energy and to the environment. Our energy issues are not identically connected, but they’re logically connected.”
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