Headlines (16 September 2008)

GENERAL

1)NEPAL’S Prime Minister Pushpa Kamal Dahal ‘Prachanda’ on Monday allayed concern over his perceived China tilt, saying his coun- try’s relations with its northern neighbour didn’t compare with the ‘vital’ ties it had with India. Answering a question at a gathering of Indian business people leaders, the visiting Nepalese leader mentioned the “tradition of economic interpendence” and said because of that Nepal’s relations with India were “crucial and vital”.

Indian Express

ECONOMY

2)EXPRESSING optimism that the improved industrial growth in July would continue in the days ahead, Rajya Sabha member and former head of the PM’s economic panel C Rangarajan has said inflation may also come down to 10% by December from over 12% at present.

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CORPORATE / INDUSTRY

3)RELIANCE Infrastructure, an Anil Ambani group company, has entered the engineering, procurement and contract(EPC) business for steel makers. The company last month signed an agreement with the Chinese steel giant China Metallurgical Group(MCC) to execute EPC business of steel projects in India. Confirming the development, a Reliance Infrastructure executive said the move is aimed at encashing opportunities in the EPC business of the Indian steel industry which is expected to see construction of Rs 70,000 crore in a year. If Reliance Infra manages to win a few bids, it will be able to generate business of around Rs 15,000 crore, he said. The total projects under various phases of implementation in West Bengal, Orissa, Jharkhand, Chhatisgarh are likely to generate business volume of over $100 billion in next few years.

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MONEY & BANKING

4)AFTER State Bank of Saurashtra (SBS), it is now the turn of State Bank of Indore and State Bank of Patiala(SBP) to be merged with State Bank of India(SBI). The government would soon initiate the process of merger of these two associate banks of SBI with the parent.

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5)Shamrao Vithal Co-operative Bank, which launched its international banking division in Mumbai on Monday, has said that it plans to acquire a co-operative bank in Andhra Pradesh. The bank plans to have its pan-India presence by 2010.

INSURANCE

6)UNCERTAINTY over the future of AIG in the US continues to cast a shadow over its Indian business. International media have speculated that AIG may go the Lehman way if it is unable to raise $40 billion in a couple of days. Although AIG had announced last week that it was selling assets to raise liquidity, officials in India were quick to point out that India was not part of the sell-off. According to officials, India had the highest potential for life insurance business. However, the picture has changed over the weekend. Although AIG’s commitment to the Indian market continues, there is now a question mark over the parent’s ability to raise capital to stay in business. Customers of AIG’s main businesses in India- Tata AIG Life and Tata AIG General Insurance – are unlikely to be impacted, as the Tatas hold majority stake of 74% in both the companies.

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MARKETS

7)The Sensex plunged to its lowest level in a month, crude oil fell past $95 a barrel, and the rupee pierced 46 against the dollar after Lehman Brothers Holdings Inc filed for bankruptcy and Merrill Lynch was sold out to Bank of America, deepening a global financial crisis. US, European and Southeast Asian stocks tanked as fears about the stability of other US financial institutions spooked investors. The 30-share Sensex reacted sharply in early trades to dip 850 points. The index recouped 380.46 points from the day’s low to end at 13,531.27, that still left a loss of 469.54 points, or 3.4%, its lowest since July 17. Shares recovered some losses after China reduced interest rates, its first in six years, and cut reserve requirement for banks. The S&P CNX Nifty of the National Stock Exchange (NSE) breached the crucial 4,000- level but short-covering pared the loss of 155.55 points, or 3.68%, to end at 4,072.90 points. This is the Nifty’s biggest decline since July 15.

FE

8)IF MONDAY’S fall is compared with similar incidences during the past six months, there are certain interesting points. The fall is not because the market is getting overleveraged or due to short build- ups. This is mainly because of selling in the spot market. Such a selling is generally out of fear/liquidity issues, the effects of which would be difficult to measure. But this would be a temporary effect and the bounceback would be swift, as the market dynamics would come into play.

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COMMODITIES

9)Gold climbed more than 2 per cent after Lehman Brothers filed for bankruptcy protection, spurring buying of gold as a safe haven from risk and knocking the dollar to two-month lows against the yen. How- ever, the precious metal retreated from highs as oil prices slipped and selling of gold held by exchange-traded funds dented investor confidence. Spot gold was at $772.90/774.10 at 1022 GMT, up $9.45 from Friday’s nominal close in New York but off session high of $784.90.

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10)India’s gold prices jumped on Monday in tune with overseas markets making buyers retreat, but major festivals in October could bring them back to the market with strong retail sales expected. “People have already bought a lot of gold,” said Prithviraj Kothari, director of Riddisiddhi Bullions Ltd, a large wholesaler in Mumbai. “They will wait for 11,500 per 10 gms.”

FE

REAL ESTATE

11)LEHMAN Brother’ bankruptcy is likely to cost Indian real estate dear. It may impact the financial major’s existing investments worth $500 million in realty firms, including DLF and Unitech, besides drying up another $500-million worth of potential investment which was expected to flow into Unitech’s Mumbai projects.

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12)Elbit Imaging, an Israeli real estate developer, and its mall development arm Plaza Centers will invest nearly Rs 15,000 crore in a partnership with local developers to build malls, entertainment centres, hotels, houses and other properties in the country in the next five years.

BS

13)Delhi-based developer Omaxe Ltd is on the lookout for business partners in 140 locations across the country to build one million ‘affordable’ homes in eight years. The company intends investing Rs 500 crore in the venture.

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COMMUNICATIONS

14)Complying with telecom regulator TRAI’s guidelines, the country’s largest private telecom operator Bharti Airtel on Monday announced a reduction in processing fee on its all top-ups for mobile subscribers.

Hindu

INFORMATION TECHNOLOGY

15)INDIA’S top-deck IT firms – TCS, Wipro, Infosys and Satyam – are facing the heat of the weekend Wall Street turmoil. The crisis in the US financial sector, the epicentre of India’s outsourcing story, may dry up the deal pipeline further for the IT services players, who are witnessing a slowdown in spends by large corporations. While the immediate impact of the Lehman collapse and Merrill Lynch buy- out by Bank of America(BofA) may be limited to a few vendors, there is no denying a sense of nervousness with the ballooning crisis in the BFSI segment, easily the biggest spender on IT outsourcing.

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16)India’s fifth largest IT firm HCL Technologies, is in early stages of acquiring 3-4 captive carve-outs in the financial services sector. Under the captive carve-outs, as the company terms it, HCL Tech will take over the assets and manage their services. The outsourcing deal is ideally based on revenue share or on milestone basis.

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INTERNATIONAL

17)Lehman Brothers Holdings Inc, the fourth-largest US investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history. The 158-year old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with a US bankruptcy court in Manhattan on Monday. The collapse of Lehman, which listed more than $613 billion in debt, dwarfs WorldCom Inc’s insolvency in 2002 and Drexel Burnham Lambert’s failure in 1990.

FE

18)Bank of America Corp, the biggest US consumer bank, agreed to acquire Merrill Lynch & Co for about $50 billion as the credit crisis claimed another of America’s oldest financial companies. Bank of America will pay $29 a share for New York-based Merrill in stock, 70% more than the September 12 closing price, the company said in a statement on Monday. Merrill, battered by $52.2 billion in losses and write-downs from subprime-mortgage-contaminated securities, has plunged more than 80% from its peak of $97.53 at the start of last year. The takeover ends 94 years of independence for Merrill and gives Charlotte (North Carolina)-based Bank of America a sales force with 16,290 brokers who man- age $1.6 trillion for customers. Merrill, led by CEO John Thain, was in danger of becoming the next subprime casualty after Lehman Brothers Holdings Inc filed for bankruptcy court protection earlier on Monday.

FE

19)TEN of the world’s biggest banks on Sunday committed themselves to establishing a $70-billion borrowing facility to bolster worldwide liquidity and reduce volatility in what they called an “extraordinary market environment”. Each bank has committed to fund $7 billion for the collateralised facility, and any one of the 10 banks would be per- mitted to borrow up to one third of the total facility, the banks said in a joint statement. The financing may grow “as other banks are per- mitted to join”, they said. The 10 banks are Bank of America Corp, Barclays, Citigroup, Credit Suisse Group, Deutsche Bank, Goldman Sachs Group, JP Morgan Chase & Co, Merrill Lynch & Co, Morgan Stanley and UBS AG.

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20)Oil plunged $7 on Monday as investors fled to safer havens, due to turmoil in the US financial system, and on early signs Hurricane Ike had spared key US energy infrastructure. Lehman Brothers’ filing for bankruptcy protection and Bank of America’s agreement to buy Merrill Lynch stirred concerns that mounting global economic problems would slow energy demand further, sending investors out of oil. US crude dropped $6 to $95.18 barrel at 12:35 p.m., the lowest level in seven months.

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