Headlines (15 September 2008)

GENERAL

1)Even as India and China jostle for the same strategic space in the Indian Ocean Region(IOR), driven as they are by the need to secure their energy and other needs, the two navies are taking steps to ensure the “competition” does not transform into “conflict”. Chinese navy chief Admiral Wu Shengli will be visiting India in November-December to discuss ways to bolster confidence-building measures between the two naval forces through regular exercises, port calls and exchanges.

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CORPORATE / INDUSTRY

2)It remains tightly under wraps. But Lakshmi Mittal’s Arcelor Mittal and Tata Steel are about to face intense competition from one of India’s biggest corporate houses in Jharkhand’s multi-billion dollar steel turf. The Reliance Anil Dhirubhai Ambani Group(R-ADAG) has just taken the strategic decision to diversify into steel, and moves are afoot to pump in a staggering Rs 40,000 crore in setting up a mega 12 million tonne (mt) greenfield steel plant in Jharkhand.

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3)DRUG-maker Dr Reddy’s Laboratories is now eyeing brand acquisitions in the US rather than buying firms to strengthen its dermatology business. The move comes close on the heels of the company giving a new identity to its wholly-owned US subsidiary Promius Pharma, previously Reddy Pharmaceutical, in the skin care segment.

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MONEY & BANKING

4)The Reserve Bank of India (RBI) has initiated a review of the benchmarking system for pricing floating rate loans, a move that could impact 70 to 75 per cent of banks’ loan portfolios. Bench- marking in loan pricing refers to selecting a base rate on which other costs are pegged to arrive at the interest rate that banks charge customers who avail of floating rate loans.

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5)Even as currency futures are struggling to gain volumes, there was some improvement in hedging on Friday, with the open interest(OI) crossing the number of traded contracts last Friday. The OI sur- passed traded volumes for the first time last week after the launch of currency futures on the National Stock Exchange(NSE). The OI is more important than the volume for the futures market. The OI is the number of contracts that have not been completed or closed. On Friday, 40,689 contracts were traded, each valuing $1,000, while the open interest was 44,550. This is the highest-ever OI since the launch of currency futures. In the last four trading session, the OI has nearly doubled to 44,550 from 23,402 on September 9.

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MARKETS

6)UNCERTAINTY over the health of global financial giants, especially after the Lehman Brothers fiasco, will be the top of the mind of jittery investors this week. With the speculation emerging about financial troubles in a few other top investment banks, analysts said that investors are choosing to play it safe by either staying away from or cutting exposure to equities. The chief investment officer at a private mutual fund said, “In such situations, these investors would first aim at setting their house in order and, only at a later stage, think about investing in emerging markets.”

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RIGHTS ISSUE

7)THE Securities and Exchange Board of India(Sebi) is all set to take the Application Supported by Blocked Amount(ASBA) concept – where money does not leave the applicant’s account when he applies for shares in public issues – to the next level. After tasting success in the public issue of 20 Microns where nearly 10% of the retail bids came through ASBA, the market regulator wants to extend the facility to other types of issuances, including rights issues. Merchant bankers and registrars, who are handling rights issues, say that Sebi has asked them to incorporate ASBA in the forthcoming issues.

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MUTUAL FUNDS
 
8)Eyeing a huge opportunity in savings surpluses of Indians, 17 companies have applied for a mutual fund licence with the market regulator, including marquee names in financial services such as Axis Bank, Schroder investment Management, Indiabulls, Nikko-Ambit and Shinsei Bank. The asset management industry in India has been attracting a lot of interest globally due to the vast retail population in India and an underpenetrated market. Currently, there are 35 fund houses in the country and the number is expected to go up to 53. With assets under management(AUM) of more than Rs 5 lakh crore, the industry has expanded exponentially in the last few years.

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9)Mutual funds are sitting on a huge cash pile of over Rs 12,000 crore, awaiting right market situation to deploy the funds and in turn protecting investors from any sharp losses due to market down turn. An analysis of the equity and cash allocations of equity diversified funds shows cash piles have increased steadily from 10% in April to over 14% at the end of August.

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COMMODITIES

10)Silver futures on the national bourses dropped on the week ended on Friday following the weakness in the yellow metal. Gold prices also continued its slide in the last week, as stronger dollar has reduced demand for yellow metals as an alternative investment. Base metals, mainly copper futures staged a recovery on the LME, with technical corrective support helping to offset the negative influence of a super-charged dollar and weaker commodities. The copper market received a double-whammy boost on supply vulnerability. Crude oil prices fell in the last week, as a fall in global demand and the rising dollar led to a steep fall in oil prices. Prices managed to close above key psychological support of $100, as traders were still showing concern over Hurricane Ike, which strengthened to category 2 on Thursday. The silver December contracts were down Rs 1,667 or 8.4% to trade at Rs 18,119 per kg over the previous week.

FE

11)Castor seed futures on the NCDEX may trade higher in the short-term (two months) due to shrinking arrivals and low carry-forward stocks. However, prices may decline once the arrivals begin in December. Moreover, the area under castor cultivation has dipped nine per cent to 5.81 lakh hectares tilll August-end against 6.4 lakh hectares in the same period last year, according to Agriculture Department. Normally, it is sown in 7.01 lakh hectares. Sowing was delayed in the early monsoon season due to insufficient rains, especially in Andhra Pradesh and Gujarat.

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REAL ESTATE

12)Speculative buying in the real estate market in leading cities has declined to 5% from 30-40% earlier and genuine end-users account for nearly 80% of total property sale, a report on real estate Ernst & Young and Ficci has said. The report said, “the last three to four quarters have witnessed a significant shift in the buyers’ profile with real estate prices reaching a level where speculators\investors cannot realise significant returns.” Speculators used to account for 30 to 40% of total sales earlier, according to the report released at a real estate summit in Mumbai.

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13)Real estate firm Chintels India plans to invest up to Rs 1,800 crore in the next six years to develop various properties in the northern parts of the country. “Seeing the potential in northern India, we have decided to invest up to Rs 1,800 crore in residential, office, retail and SEZ projects during the next six years,” Chintels India Joint Managing Director Prashant Solomon said.

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COMMUNICATIONS

14)Ending a year-long face-off with the private operators, state-own-ed telecom behemoth Bharat Sanchar Nigam(BSNL) has decided to permit private operators to offer intra-circle roaming on its network. The move will enable private service providers to offer enhanced services to subscribers in areas where they do not have licences to operate. BSNL will levy 52 paise per minute for every outgoing call, according to sources.

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INFORMATION TECHNOLOGY

15)THE National Skills Registry (NSR) the IT-ITeS industry database of employees to counter impersonation and fake CVs, will finally touch the half-a-million registration mark by March 2009. Nasscom is now looking at tie-ups with universities for registration of students about to join the workforce.

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16)FOR ALL the challenges businessmen in India face, for lack of good infrastructure and many bureaucratic hurdles, the country has the advantage of having ‘soft infrastructure’, which is better than China and that is what is driving India’s growth story. Satyam Computer Services founder and chairman B Ramalinga Raju said in Chennai on Saturday, “Our soft infrastructure, in terms of the education system, market mechanism and the influence of bureaucracy in opening up the economy, is far ahead of countries like China.”

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17)TCS, the country’s largest IT services exporter, is keen to tap the potential in the Indian small and medium enterprise (SME) segment. The focus will be on five key verticals within the SME space comprising retail, manufacturing, healthcare, education and professional services.

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18)Bharti Airtel Ltd, the country’s largest private sector telecom operator, is diversifying into information technology business. It plans to offer software applications on a pay-per-use model to small and medium businesses(SMBs) and enterprises.

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INTERNATIONAL

19)Crude oil and gasoline futures fell amid signs that refineries along the Gulf of Mexico coast will soon resume operations after shutting for Hurricane Ike and escaping major damage. Crude oil for October delivery fell $1.58, to $99.60 a barrel at 10:05 am on the New York Mercantile Exchange. Futures touched $99.55, the lowest since March 25.

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20)Barclays Plc, the UK’s third – biggest bank, moved closer to making a bid for Lehman Brothers Holdings Inc as the US government raced to find a solution for the faltering investment bank, two people familiar with the situation said.

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21)Swiss bank UBS will have to write down another $5 billion on its risky investments in the second half of the year, a newspaper reported on Sunday. Without citing its sources, the Sonntags Zeitung newspaper said its research had shown that new writedowns would be necessary due to ongoing turmoil on the credit markets. A UBS spokesman declined to comment.

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