Saturday, November 29, 2008

If paks have mad and crazy people we also have. Mujhe Kashmir Chahiye,

We as a nation have rich heritage, which goes thousand of years back. No other have such long history. from inventing Zero to Nuclear Nation to Chandrayan we have progressed well. We are known for our Intelligence, food, culture, religions, Gods, Education, many countless things.

But somewhere down the line ground realities are far. from 1947 We were attacked many times from China, Pak, many other External and Internal Elements. Our Nation budget goes on increasing to Nations Defense. and our land area goes decreasing. China have their chunk of J&K, which Nehru gave them after loosing war saying this is unproductive land. and again same happened PoK area to Pakistan.

In east, Bangladesh and Ulfa people doing same, many other states have their peace of terrorism. On this Raj Thackrey arrived and made mockery of this Nation. All politician are not less than a mice. all hiding in hole.

We spent morethan 1/4th of our budget on defense than why we are not able to use it. US was also attacked (9/11) but what happened after that we all know-- Afghanistan made in to Ashes. Kuwait (US part II). When US does it, its their self defense and when it happens same with India they suggest us to solve through talks. Are we nutts,

Mine friend rightly said we all Indians are enough, we 1billion power have to just walk over Pak and problem will be solved.

I am Kashmiri (KP), my parents are born and brought up in kashmir, in all my life till now i havent been to kashmir. We are all settled here in Capital. like us many other thousands of kashmiri left J&K for better life of their kids and settled all around India. when we were thrown out no people came to help. we were also Indians then. But were forced to leave land.
This terrorism has made all kashmiris to suffer physically & emotionally.

This Nation is wounded from North to sauth but why we are like this. Why we cannot produce a Leader who have strong Head. We are dented because we forget everything. We desriminate our own fellow Indians thats why our neighbors taking advantage. When Muslims are killed, why we dont think like Indian are killed, when Biharis were beaten why we dont think like indian are Beaten.

This whole lot of politicians who come across as friends when things are running fine and when we need leader for crisis. all Lalus, Shivsenis, youth congress, bajrang dal, rajsena, muslim sena, watever their names are all gone. where are all muslim commitees.
When topic of reservation comes everyone needs pie in it. Politician use it like anything, ask them now.

India is in big growth phase, we will be economic power house, but somewhere down, we are incapable decision making Nation. Why we invite others to scratch us. when this tag of nuclear nation help us. When will 1billion power will be a power, Dr.Kalam vision India 2020 is a still distant Dream.

Why we as Nation act as defensive strategies, why we cant snatch our own land from neighbors. What cordial relationship will do. Lets stop trade with pak, they are in economic crisis, make it bad and worsened. Take steps which dents them.

If paks have mad and crazy people we also have. Mujhe Kashmir Chahiye, If our govt cant do things whats required, than it will be Peoples movement.

Bus ek saal bhool jaaye ki hum Hindu hai ya muslim hai, ek saal bhool jai ki hum North ke hai ya south ke hai, ek saal bhool jai ki kya tera hai kya mera hai

Blast in Delhi, Gujrat, Maharashtra, UP, From Head to Toe of the India we dyeing without doing a thing, atleast die while doing something. Atleast our next generation will live in a sky where their is no smoke.

Hum unko koste hai jinhone azaadi par galat decision liye, kam se kam hamare aane wali peedia to nahi karegi.

We blame our then leaders and people awho took decisions (1947)which today hurting nation, atleast out next genration will not do same.


--- Aditya Kachru

If paks have mad and crazy people we also have. Mujhe Kashmir Chahiye,

We as a nation have rich heritage, which goes thousand of years back. No other have such long history. from inventing Zero to Nuclear Nation to Chandrayan we have progressed well. We are known for our Intelligence, food, culture, religions, Gods, Education, many countless things.

But somewhere down the line ground realities are far. from 1947 We were attacked many times from China, Pak, many other External and Internal Elements. Our Nation budget goes on increasing to Nations Defense. and our land area goes decreasing. China have their chunk of J&K, which Nehru gave them after loosing war saying this is unproductive land. and again same happened PoK area to Pakistan.

In east, Bangladesh and Ulfa people doing same, many other states have their peace of terrorism. On this Raj Thackrey arrived and made mockery of this Nation. All politician are not less than a mice. all hiding in hole.

We spent morethan 1/4th of our budget on defense than why we are not able to use it. US was also attacked (9/11) but what happened after that we all know-- Afghanistan made in to Ashes. Kuwait (US part II). When US does it, its their self defense and when it happens same with India they suggest us to solve through talks. Are we nutts,

Mine friend rightly said we all Indians are enough, we 1billion power have to just walk over Pak and problem will be solved.

I am Kashmiri (KP), my parents are born and brought up in kashmir, in all my life till now i havent been to kashmir. We are all settled here in Capital. like us many other thousands of kashmiri left J&K for better life of their kids and settled all around India. when we were thrown out no people came to help. we were also Indians then. But were forced to leave land.
This terrorism has made all kashmiris to suffer physically & emotionally.

This Nation is wounded from North to sauth but why we are like this. Why we cannot produce a Leader who have strong Head. We are dented because we forget everything. We desriminate our own fellow Indians thats why our neighbors taking advantage. When Muslims are killed, why we dont think like Indian are killed, when Biharis were beaten why we dont think like indian are Beaten.

This whole lot of politicians who come across as friends when things are running fine and when we need leader for crisis. all Lalus, Shivsenis, youth congress, bajrang dal, rajsena, muslim sena, watever their names are all gone. where are all muslim commitees.
When topic of reservation comes everyone needs pie in it. Politician use it like anything, ask them now.

India is in big growth phase, we will be economic power house, but somewhere down, we are incapable decision making Nation. Why we invite others to scratch us. when this tag of nuclear nation help us. When will 1billion power will be a power, Dr.Kalam vision India 2020 is a still distant Dream.

Why we as Nation act as defensive strategies, why we cant snatch our own land from neighbors. What cordial relationship will do. Lets stop trade with pak, they are in economic crisis, make it bad and worsened. Take steps which dents them.

If paks have mad and crazy people we also have. Mujhe Kashmir Chahiye, If our govt cant do things whats required, than it will be Peoples movement.

Bus ek saal bhool jaaye ki hum Hindu hai ya muslim hai, ek saal bhool jai ki hum North ke hai ya south ke hai, ek saal bhool jai ki kya tera hai kya mera hai

Blast in Delhi, Gujrat, Maharashtra, UP, From Head to Toe of the India we dyeing without doing a thing, atleast die while doing something. Atleast our next generation will live in a sky where their is no smoke.

Hum unko koste hai jinhone azaadi par galat decision liye, kam se kam hamare aane wali peedia to nahi karegi.

We blame our then leaders and people awho took decisions (1947)which today hurting nation, atleast out next genration will not do same.


--- Aditya Kachru

Friday, November 28, 2008

TOUGH TIMES AHEAD - An economic slowdown has only just begun

mint COLUMN MARK TO MARKET MANAS CHAKRAVARTY & MOBIS PHILIPOSE

It’s becoming a familiar story: economic or corporate performance may turn out better than expected, but everybody brushes that aside because the reports relate to earlier months and the downward momentum has gathered pace since then.

India’s GDP data for the September quarter, too, has beaten expectations, but the numbers are likely to get worse.

Let’s take the figures one by one. Gross fixed capital formation grew at a year-on-year (yo-y) rate of 13.8%, well above the 8.9% y-o-y growth rate notched up in the June quarter.

But the credit crunch since September has seriously affected the expansion plans of firms.

As Goldman Sachs Group Inc. economist Tushar Poddar had pointed out in a research note: “As the market valuation of capital drops relative to the cost of acquiring new capital, (also known as Tobin’s Q) firms will prefer not to acquire new capital and postpone investment decisions.” In future, the growth rate for capital formation is expected to plunge. At the same time, private consumption growth was at 5%, compared with a growth rate of 7.9% in the June quarter.

An inkling of that trend was seen in the negative growth for car sales while retailers, too, have reported fewer customers.

In future, job losses will also contribute towards keeping private consumption in check.

Construction growth, at 9.7%, also beat expectations since most economists were expecting it to be affected on account of the slowdown in real estate.

All the more reason to be sceptical of this growth rate in future quarters. And since construction has strong linkages with the rest of the economy, a slowdown in this sector will have a wider impact.

The trade, hotels, transport and communication sector held up quite well during the September quarter, growing at an annual rate of 10.8% against 11.2% in Q1. But after the Mumbai attacks, the hotels sector is likely to be hit badly.

Also, as A. Prasanna, economist at ICICI Securities Ltd, says, growth in railway freight showed a decline in October, against the year-ago period.

The financing, insurance, real estate and business services sector grew by 9.2% in the September quarter, almost the same as the 9.3% growth in the previous quarter. With IT services firms reducing their guidance and with cracks in the outlook for real estate, this sector, too, could come under pressure in the next quarter.

And finally manufacturing growth, too, could slow further, because the slowdown in exports has just begun.

The only silver lining could be the outlook for community, social and personal services, where the impact of the Pay Commission could be felt in the next quarter.

In fact, notwithstanding the relatively robust Q2 numbers, Macquarie Securities economist Rajeev Malik has revised his GDP forecast for the full year from 7.2% to 6.8%, which means he’s expecting growth of just 5.8% in the second half. But perhaps we can console ourselves that, as the table shows, we’re not doing badly compared to the rest of the world.
I t’s becoming a familiar sto- ry: economic or corporate performance may turn out bet- ter than expected, but every- body brushes that aside be- cause the reports relate to ear- lier months and the downward momentum has gathered pace since then. India’s GDP data for the Sep- tember quarter, too, has beat- en expectations, but the num- bers are likely to get worse. Let’s take the figures one by one. Gross fixed capital forma- tion grew at a year-on-year (y- o-y) rate of 13.8%, well above the 8.9% y-o-y growth rate notched up in the June quarter. But the credit crunch since September has seriously affect- ed the expansion plans of firms. As Goldman Sachs Group Inc. economist Tushar Poddar had pointed out in a research note: “As the market valuation of capital drops relative to the cost of acquiring new capital, (also known as Tobin’s Q) firms will prefer not to acquire new capital and postpone in- vestment decisions.” In future, the growth rate for capital formation is expected to plunge. At the same time, pri- vate consumption growth was at 5%, compared with a growth rate of 7.9% in the June quarter. An inkling of that trend was seen in the negative growth for car sales while retailers, too, have reported fewer customers. In future, job losses will also contribute towards keeping pri- vate consumption in check. Construction growth, at 9.7%, also beat expectations since most economists were expect- ing it to be affected on account of the slowdown in real estate. All the more reason to be scep- tical of this growth rate in fu- ture quarters. And since con- struction has strong linkages with the rest of the economy, a slowdown in this sector will have a wider impact. The trade, hotels, transport and communication sector held up quite well during the September quarter, growing at an annual rate of 10.8% against 11.2% in Q1. But after the Mumbai attacks, the hotels sector is likely to be hit badly. Also, as A. Prasanna, econo- mist at ICICI Securities Ltd, says, growth in railway freight showed a decline in October, against the year-ago period. The financing, insurance, real estate and business servic- es sector grew by 9.2% in the September quarter, almost the same as the 9.3% growth in the previous quarter. With IT serv- ices firms reducing their guid- ance and with cracks in the outlook for real estate, this sector, too, could come under pressure in the next quarter. And finally manufacturing growth, too, could slow fur- ther, because the slowdown in exports has just begun. The only silver lining could be the outlook for community, social and personal services, where the impact of the Pay Commission could be felt in the next quarter. In fact, notwithstanding the relatively robust Q2 numbers, Macquarie Securities econo- mist Rajeev Malik has revised his GDP forecast for the full year from 7.2% to 6.8%, which means he’s expecting growth of just 5.8% in the second half. But perhaps we can console our- selves that, as the table shows, we’re not doing badly com- pared to the rest of the world.

TOUGH TIMES AHEAD - An economic slowdown has only just begun

mint COLUMN MARK TO MARKET MANAS CHAKRAVARTY & MOBIS PHILIPOSE

It’s becoming a familiar story: economic or corporate performance may turn out better than expected, but everybody brushes that aside because the reports relate to earlier months and the downward momentum has gathered pace since then.

India’s GDP data for the September quarter, too, has beaten expectations, but the numbers are likely to get worse.

Let’s take the figures one by one. Gross fixed capital formation grew at a year-on-year (yo-y) rate of 13.8%, well above the 8.9% y-o-y growth rate notched up in the June quarter.

But the credit crunch since September has seriously affected the expansion plans of firms.

As Goldman Sachs Group Inc. economist Tushar Poddar had pointed out in a research note: “As the market valuation of capital drops relative to the cost of acquiring new capital, (also known as Tobin’s Q) firms will prefer not to acquire new capital and postpone investment decisions.” In future, the growth rate for capital formation is expected to plunge. At the same time, private consumption growth was at 5%, compared with a growth rate of 7.9% in the June quarter.

An inkling of that trend was seen in the negative growth for car sales while retailers, too, have reported fewer customers.

In future, job losses will also contribute towards keeping private consumption in check.

Construction growth, at 9.7%, also beat expectations since most economists were expecting it to be affected on account of the slowdown in real estate.

All the more reason to be sceptical of this growth rate in future quarters. And since construction has strong linkages with the rest of the economy, a slowdown in this sector will have a wider impact.

The trade, hotels, transport and communication sector held up quite well during the September quarter, growing at an annual rate of 10.8% against 11.2% in Q1. But after the Mumbai attacks, the hotels sector is likely to be hit badly.

Also, as A. Prasanna, economist at ICICI Securities Ltd, says, growth in railway freight showed a decline in October, against the year-ago period.

The financing, insurance, real estate and business services sector grew by 9.2% in the September quarter, almost the same as the 9.3% growth in the previous quarter. With IT services firms reducing their guidance and with cracks in the outlook for real estate, this sector, too, could come under pressure in the next quarter.

And finally manufacturing growth, too, could slow further, because the slowdown in exports has just begun.

The only silver lining could be the outlook for community, social and personal services, where the impact of the Pay Commission could be felt in the next quarter.

In fact, notwithstanding the relatively robust Q2 numbers, Macquarie Securities economist Rajeev Malik has revised his GDP forecast for the full year from 7.2% to 6.8%, which means he’s expecting growth of just 5.8% in the second half. But perhaps we can console ourselves that, as the table shows, we’re not doing badly compared to the rest of the world.
I t’s becoming a familiar sto- ry: economic or corporate performance may turn out bet- ter than expected, but every- body brushes that aside be- cause the reports relate to ear- lier months and the downward momentum has gathered pace since then. India’s GDP data for the Sep- tember quarter, too, has beat- en expectations, but the num- bers are likely to get worse. Let’s take the figures one by one. Gross fixed capital forma- tion grew at a year-on-year (y- o-y) rate of 13.8%, well above the 8.9% y-o-y growth rate notched up in the June quarter. But the credit crunch since September has seriously affect- ed the expansion plans of firms. As Goldman Sachs Group Inc. economist Tushar Poddar had pointed out in a research note: “As the market valuation of capital drops relative to the cost of acquiring new capital, (also known as Tobin’s Q) firms will prefer not to acquire new capital and postpone in- vestment decisions.” In future, the growth rate for capital formation is expected to plunge. At the same time, pri- vate consumption growth was at 5%, compared with a growth rate of 7.9% in the June quarter. An inkling of that trend was seen in the negative growth for car sales while retailers, too, have reported fewer customers. In future, job losses will also contribute towards keeping pri- vate consumption in check. Construction growth, at 9.7%, also beat expectations since most economists were expect- ing it to be affected on account of the slowdown in real estate. All the more reason to be scep- tical of this growth rate in fu- ture quarters. And since con- struction has strong linkages with the rest of the economy, a slowdown in this sector will have a wider impact. The trade, hotels, transport and communication sector held up quite well during the September quarter, growing at an annual rate of 10.8% against 11.2% in Q1. But after the Mumbai attacks, the hotels sector is likely to be hit badly. Also, as A. Prasanna, econo- mist at ICICI Securities Ltd, says, growth in railway freight showed a decline in October, against the year-ago period. The financing, insurance, real estate and business servic- es sector grew by 9.2% in the September quarter, almost the same as the 9.3% growth in the previous quarter. With IT serv- ices firms reducing their guid- ance and with cracks in the outlook for real estate, this sector, too, could come under pressure in the next quarter. And finally manufacturing growth, too, could slow fur- ther, because the slowdown in exports has just begun. The only silver lining could be the outlook for community, social and personal services, where the impact of the Pay Commission could be felt in the next quarter. In fact, notwithstanding the relatively robust Q2 numbers, Macquarie Securities econo- mist Rajeev Malik has revised his GDP forecast for the full year from 7.2% to 6.8%, which means he’s expecting growth of just 5.8% in the second half. But perhaps we can console our- selves that, as the table shows, we’re not doing badly com- pared to the rest of the world.

Thursday, November 27, 2008

Quick Take:

      Mphasis October Results:Another stellar operating performance  

      'Best demand' story thesis continues to get vindicated

Mphasis reported results for 7 months ending Oct 31'08 late in the evening today as announced earlier in order to align it's accounting year to HP (HP follows a Nov-Oct financial year). Mphasis reported revenues of Rs 3282 mn,  with operating margins at 26.5%, highest in the company's reporting history for Oct'08 . Net profits for October'08 came in at Rs 754 mn helped by translation gains as well as tax credits (effective tax rate for the month at <1%).If financials were to be quadrupled to make it comparable, revenues are up 17.8% sequentially while operating profits and net profits are up by ~47% and ~60%QoQ respectively. We note that Mphasis has reported earnings of Rs 14.06 for 7 months ended Oct'08 ( as compared to our April'08-March'09 financial year earnings estimates of Rs 21.8). The company had a marginal decline in headcount by ~45  to 28795 during the month V/s Q2FY09 end HC while maintained similar utilization rates to Sept'08 quarter (though note onsite apps utilization up by 200 bps to 87%)  

Decent client addition through EDS, Top client contribution inches by ~200 bps

Mphasis has reported an addition of 7 new clients during Oct'08 month with 6 clients coming in through the EDS channel. We note further that the top client accounted for ~13% of revenues during the month of October'08 V/s ~11% during September'08 quarter. Further we wish to highlight that revenues from BFSI are up by ~21% QoQ while revenues from applications, BPO and ITO increased by ~18%, 10% and 26% sequentially respectively (if they were to be be quadrupled)

In Rs mn

Q3FY09**

Q1FY09

QoQ(%)

Q3FY08

YoY (%)

Net sales

9,847

8,361

17.8%

6,323

55.7%

Total Income

9,847

8,361

 

6,323

 

Operating expenses

7,242

6,592

 

5,218

 

EBITDA

2,606

1,768

47.3%

1,104

135.9%

 Margins (%)

26.5

21.2

 

17.5

 

Depreciation

442

446

 

374

 

EBIT

2,163

1,323

63.6%

730

196.4%

 Margins (%)

22.0

15.8

 

11.5

 

Interest Paid

0

0

 

0

 

Other income

110

164

 

(28)

 

Pre-tax profit

2,273

1,487

 

702

 

Tax provided

11

77

 

40

 

Profit after tax

2,262

1,410

 

663

 

Emkay Net profit

2,262

1,410

60.4%

663

241.3%

EPS, Rs

10.8

6.7

 

3.2

 

Source: Company, Emkay Research

**-October'08 financials have been quadrupled for the sake of comparison

 

We have a BUY rating on the stock with a price target of Rs 240.

 

Tata Steel (Consolidated) 2QFY09 result estimates

Tata Steel will be reporting consolidated 2QFY09 results today. We expect company to report net sales of Rs359.3bn (yoy up 10.8%), EBITDA of Rs41.3bn (yoy down 12.6%) and adjusted PAT of Rs18.4bn (yoy up 26.2%). We expect Tata Steel to report adjusted FDEPS of Rs21.13. Key things to watch out are outlook on volume growth and capex plans.

n        Dealer Comments

The markets opened the session on a marginal positive note with 70 odd point's upward gap on the back of mixed cues from the global markets and further dip in the crude oil price at $51 levels. With just two days to expiry of the November derivatives contract markets were trading in a choppy mood and roll over to next month series was showing weakness. The markets staged a solid pull back rally after China's central bank announced series of steep rate cuts thereby raising hopes that on the domestic front RBI would also go for similar rate cuts which is being anticipated since last couple of weeks. Even statement from the Oil Ministry regarding fuel price revision will be considered in due course keeping in mind dipping crude prices raised the market sentiments further. A good amount of short covering was seen in Nifty futures after these events in last hour of trade. The overall traded volumes were slightly higher compared to earlier day by almost 8% and were at Rs 609 bn. Delivery-based volumes were at 33.1% the total turnover. Among the institutional activities FII's were net buyers to the tune of Rs 0.02 bn while Domestic Funds were net buyers to the tune of Rs 1.18 bn respectively in the cash segment on 25th November 2008. While on 26th November 2008 FII's sold shares worth Rs. 4.17 bn in cash segment (provisional) and in the F&O segment bought Futures and Options worth Rs. 9.45 bn whereas Domestic Funds bought shares worth Rs. 3.62 bn (provisional).

Wednesday, November 26, 2008

Outlook on Gilt Funds

Outlook on Gilt Funds

Outlook on Gilt Funds

November 2008




Over the last couple of months, we have seen a reversal of the tightening interest rate cycle that began in 2004. However, unlike the gradual rise, the decline has been rather steep and quick. The 10-year-benchmark yield has breached 7.2%, down about 2.3% from the high witnessed in July on back of the change in the macro economic environment,fear of recession in major advanced economies, slowdown fears in EME’s including India and sharp fall in commodity prices. Reserve Bank of India has reduced Repo rate by 150 basis points, CRR by 350 and SLR by 100 basis points in a bid to ease the liquidity conditions and credit flow in the domestic market


With the focus of RBI shifting from inflation-containment towards growth, credit flow and liquidity management, we believe that in the medium term there will be bullish bias on interest rates due to the following factors


Inflation: Inflation has come off from its near-13% high in August-08 to single digits as commodity prices have sunk globally. International crude oil prices have declined by 65% from its peak levels and the CRB index stands at 233 almost 50% lower since its peak in the month of March-08. We expect WPI inflation to come down below RBI’s target band of 5%-5.50% before March -2008
Leading indicators pointing towards a slowdown: Index of industrial production for the month of August fell to a low of 1.4% on back of de acceleration in all the sectors. The average IIP growth rate for the period April-October 08 has been at 5.00% as against 9.30% in the similar period last year.
Money supply: Money supply growth, at 19% currently, has also come off from the high of 24% printed in January, closer to RBI’s target rate of 15%. A lower money supply reduces inflationary pressure on the economy.
Supply pressure has eased, additional borrowing to be calibrated with MSS Buyback: Supply pressure has considerably eased as the Government of India has completed its scheduled borrowing for the FY 2008-09. However the Government is likely to exceed the borrowing targets for the FY 208-09 considering the anticipated shortfall in the Budgeted revenue collection. Considering the overall interest rate outlook and RBI’s bias towards soft interest rates, additional borrowing will be easily absorbed by the market. The market will also take comfort from the fact that any additional borrowing will be calibrated by MSS buyback



International Interest Rate Scenario :On the global front Central banks across the world have resorted to accommodative monetary and fiscal policies by reducing policy rates, establishing dedicated credit lines for troubled institutions, announcing the biggest-ever government bailout packages for various sectors of the economy and trying to boost private consumption in various ways including tax breaks. Recessionary and credit squeeze concerns in US, Europe, Japan and rest of the world have led central banks to cut rates in consorted manner. USA which is considered to be the biggest growth engine of the world has reduced the short term rates from a high of 5.25% to 1.00% in last one year. The continued slowdown in the housing sector, employment levels, manufacturing, sales and private consumption numbers clearly point towards a contraction in the economy. The deceleration in US is causing ripple effect in Asian economies which are fast slipping in recessionary zone as their exports contract.


Outlook on gilt funds:


RBI’s focus has shifted towards growth, credit flow and liquidity management in light of the global developments and in a bid to protect the domestic financial markets from the seizure seen in the global credit markets in last few months. The recent statements from the finance ministry and RBI indicate that such expansionary policy would continue to rule the roost until the turmoil in the global market settles down and faith in the robustness of the financial system returns. Given the current economic scenario we believe RBI will continue to adopt an accommodative monetary policy and will ease policy rates significantly to stimulate growth.


Risks to our bullish view on government bonds

Sharp reduction on SLR ratio to infuse liquidity
Higher than expected additional government borrowing


Recommendation:


Considering the present macro economic outlook, risk aversion and RBI’s accommodative monetary policy stance, we recommend investing in gilt funds with a one-year horizon

Outlook on Gilt Funds

Outlook on Gilt Funds

Outlook on Gilt Funds

November 2008




Over the last couple of months, we have seen a reversal of the tightening interest rate cycle that began in 2004. However, unlike the gradual rise, the decline has been rather steep and quick. The 10-year-benchmark yield has breached 7.2%, down about 2.3% from the high witnessed in July on back of the change in the macro economic environment,fear of recession in major advanced economies, slowdown fears in EME’s including India and sharp fall in commodity prices. Reserve Bank of India has reduced Repo rate by 150 basis points, CRR by 350 and SLR by 100 basis points in a bid to ease the liquidity conditions and credit flow in the domestic market


With the focus of RBI shifting from inflation-containment towards growth, credit flow and liquidity management, we believe that in the medium term there will be bullish bias on interest rates due to the following factors


Inflation: Inflation has come off from its near-13% high in August-08 to single digits as commodity prices have sunk globally. International crude oil prices have declined by 65% from its peak levels and the CRB index stands at 233 almost 50% lower since its peak in the month of March-08. We expect WPI inflation to come down below RBI’s target band of 5%-5.50% before March -2008
Leading indicators pointing towards a slowdown: Index of industrial production for the month of August fell to a low of 1.4% on back of de acceleration in all the sectors. The average IIP growth rate for the period April-October 08 has been at 5.00% as against 9.30% in the similar period last year.
Money supply: Money supply growth, at 19% currently, has also come off from the high of 24% printed in January, closer to RBI’s target rate of 15%. A lower money supply reduces inflationary pressure on the economy.
Supply pressure has eased, additional borrowing to be calibrated with MSS Buyback: Supply pressure has considerably eased as the Government of India has completed its scheduled borrowing for the FY 2008-09. However the Government is likely to exceed the borrowing targets for the FY 208-09 considering the anticipated shortfall in the Budgeted revenue collection. Considering the overall interest rate outlook and RBI’s bias towards soft interest rates, additional borrowing will be easily absorbed by the market. The market will also take comfort from the fact that any additional borrowing will be calibrated by MSS buyback



International Interest Rate Scenario :On the global front Central banks across the world have resorted to accommodative monetary and fiscal policies by reducing policy rates, establishing dedicated credit lines for troubled institutions, announcing the biggest-ever government bailout packages for various sectors of the economy and trying to boost private consumption in various ways including tax breaks. Recessionary and credit squeeze concerns in US, Europe, Japan and rest of the world have led central banks to cut rates in consorted manner. USA which is considered to be the biggest growth engine of the world has reduced the short term rates from a high of 5.25% to 1.00% in last one year. The continued slowdown in the housing sector, employment levels, manufacturing, sales and private consumption numbers clearly point towards a contraction in the economy. The deceleration in US is causing ripple effect in Asian economies which are fast slipping in recessionary zone as their exports contract.


Outlook on gilt funds:


RBI’s focus has shifted towards growth, credit flow and liquidity management in light of the global developments and in a bid to protect the domestic financial markets from the seizure seen in the global credit markets in last few months. The recent statements from the finance ministry and RBI indicate that such expansionary policy would continue to rule the roost until the turmoil in the global market settles down and faith in the robustness of the financial system returns. Given the current economic scenario we believe RBI will continue to adopt an accommodative monetary policy and will ease policy rates significantly to stimulate growth.


Risks to our bullish view on government bonds

Sharp reduction on SLR ratio to infuse liquidity
Higher than expected additional government borrowing


Recommendation:


Considering the present macro economic outlook, risk aversion and RBI’s accommodative monetary policy stance, we recommend investing in gilt funds with a one-year horizon

Mumbai rocked by terror attacks, ATS chief, 80 Plus killed

Mumbai: Gunfire rang out as commandos and police laid siege to gunmen holding foreigners hostage in two of India’s plushest hotels in the country’s commercial capital on Thursday, after attacks that killed at least 86 people.
Scores of tourists remained trapped in the Taj Mahal hotel, a 105-year-old city landmark, and the five-star Trident Oberoi in Mumbai’s downtown peninsula, its financial and tourist heart.
Small groups of militants armed with automatic weapons and grenades burst into luxury hotels, a hospital and a railway station late on Wednesday, as well as an iconic cafe popular with foreign tourists, firing indiscriminately and tossing grenades.
They appeared to target British and Americans as they sought hostages before settling in for a prolonged siege.
Police said they had shot dead four gunmen and arrested nine suspects. They said 12 policemen were killed, including Hemant Karkare, the chief of the police anti-terrorist squad in Mumbai.
As dawn broke on the red, white and grey brick facade of the Taj on Mumbai’s waterfront, the hotel was surrounded by armed police, ambulances and fire engines, with intermittent firing heard, and flames and smoke still escaping from the roof.
At least two guests, trapped in their rooms in the Taj, phoned TV stations. One said the firedoors were locked, another said he had seen two dead bodies by the swimming pool.
India has suffered a wave of bomb attacks in recent years. Most have been blamed on Islamist militants, although police have also suspected Hindu extremists of carrying out some bombings.
The latest attacks came amid a slew of state elections, including in Kashmir, and could be an embarrassment for the ruling Congress party ahead of national elections next year, as well as potentially destabilising for the country.
In Mumbai, officials admitted the battle was not yet over.
“The situation is still not under control and we are trying to flush out any more terrorists hiding inside the two hotels,” said Vilasrao Deshmukh, Maharashtra state chief minister.
A Maharashtra state official later told CNN that police had brought the situation under control.
The Mumbai attacks are also bound to spook investors in one of Asia’s largest and fastest-growing economies. Mumbai has seen several major bomb attacks in the past, but never anything so obviously targeted at foreigners.
“I guess they were after foreigners, because they were asking for British or American passports,” said Rakesh Patel, a British witness who lives in Hong Kong and was staying at the Taj Mahal hotel on business. “They had bombs.”
“They came from the restaurant and took us up the stairs,” he told the NDTV channel, smoke stains covering his face. “Young boys, maybe 20 years old, 25 years old. They had two guns.”
Japan’s foreign ministry said at least one Japanese national had been killed and one injured in the attacks, while South Korea said 26 of its nationals had escaped unharmed.
Police said at least 250 people were wounded in the attacks which also targeted the Cafe Leopold, perhaps the most famous restaurant and hang-out for tourists in the city and is featured in the bestselling novel Shantaram.
An organisation calling itself the Deccan Mujahideen said it was behind the attacks, television channels said. The previously little known group sent an email to news organisations claiming responsibility.
Several hundred people had been evacuated from the Taj hotel, one witness said, but many more remained inside, some calling for help from the fifth floor. Firefighters broke windows to reach some trapped guests.

Mumbai rocked by terror attacks, ATS chief, 80 Plus killed

Mumbai: Gunfire rang out as commandos and police laid siege to gunmen holding foreigners hostage in two of India’s plushest hotels in the country’s commercial capital on Thursday, after attacks that killed at least 86 people.
Scores of tourists remained trapped in the Taj Mahal hotel, a 105-year-old city landmark, and the five-star Trident Oberoi in Mumbai’s downtown peninsula, its financial and tourist heart.
Small groups of militants armed with automatic weapons and grenades burst into luxury hotels, a hospital and a railway station late on Wednesday, as well as an iconic cafe popular with foreign tourists, firing indiscriminately and tossing grenades.
They appeared to target British and Americans as they sought hostages before settling in for a prolonged siege.
Police said they had shot dead four gunmen and arrested nine suspects. They said 12 policemen were killed, including Hemant Karkare, the chief of the police anti-terrorist squad in Mumbai.
As dawn broke on the red, white and grey brick facade of the Taj on Mumbai’s waterfront, the hotel was surrounded by armed police, ambulances and fire engines, with intermittent firing heard, and flames and smoke still escaping from the roof.
At least two guests, trapped in their rooms in the Taj, phoned TV stations. One said the firedoors were locked, another said he had seen two dead bodies by the swimming pool.
India has suffered a wave of bomb attacks in recent years. Most have been blamed on Islamist militants, although police have also suspected Hindu extremists of carrying out some bombings.
The latest attacks came amid a slew of state elections, including in Kashmir, and could be an embarrassment for the ruling Congress party ahead of national elections next year, as well as potentially destabilising for the country.
In Mumbai, officials admitted the battle was not yet over.
“The situation is still not under control and we are trying to flush out any more terrorists hiding inside the two hotels,” said Vilasrao Deshmukh, Maharashtra state chief minister.
A Maharashtra state official later told CNN that police had brought the situation under control.
The Mumbai attacks are also bound to spook investors in one of Asia’s largest and fastest-growing economies. Mumbai has seen several major bomb attacks in the past, but never anything so obviously targeted at foreigners.
“I guess they were after foreigners, because they were asking for British or American passports,” said Rakesh Patel, a British witness who lives in Hong Kong and was staying at the Taj Mahal hotel on business. “They had bombs.”
“They came from the restaurant and took us up the stairs,” he told the NDTV channel, smoke stains covering his face. “Young boys, maybe 20 years old, 25 years old. They had two guns.”
Japan’s foreign ministry said at least one Japanese national had been killed and one injured in the attacks, while South Korea said 26 of its nationals had escaped unharmed.
Police said at least 250 people were wounded in the attacks which also targeted the Cafe Leopold, perhaps the most famous restaurant and hang-out for tourists in the city and is featured in the bestselling novel Shantaram.
An organisation calling itself the Deccan Mujahideen said it was behind the attacks, television channels said. The previously little known group sent an email to news organisations claiming responsibility.
Several hundred people had been evacuated from the Taj hotel, one witness said, but many more remained inside, some calling for help from the fifth floor. Firefighters broke windows to reach some trapped guests.

Derivatives Summary


  • Nifty (November) future has turned into a premium of 5.60 points from a discount of 3.75 points and around 34.80 lakh shares were added in open interest.
  • Total open interest in the market was Rs50,879 crore and Rs3,710 crore were added in open interest.
  • Nifty call option shed 1.70 lakh shares in open interest, whereas put option added 23.05 lakh shares in open interest.

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Daring Derivatives


Tuesday, November 25, 2008

Tata Chemicals – Refinancing of US$ 350 mn bridge loan


Tata Chemicals (TCL) has made arrangements to refinance its bridge loan of US$ 350 mn at a very competitive interest rate (however company has not mentioned the effective interest rate). TCL had earlier taken this loan to fund its US$ 1 bn acquisition of General Chemical (GCIP). Funding was arranged through term loan of US$ 450 mn on TCL's balance sheet, US$ 350 mn bridge loan on SPV (non recourse to TCL's balance sheet) and balance through sale of investments. Refinancing will be completed through debt of US$ 300 mn and balance US$ 50 mn through internal accruals. This is a six year door to door facility with interest linked to LIBOR + Margin Grid which is based on Net debt to EBIDTA Ratios. The facility is without recourse to Tata Chemicals Ltd. However the company has not indicated about the effective interest rates or margin grid, we expect effective rate should be in range of 6-6.5% (given 6 months LIBOR at 2.6%).  Our estimated interest expense factors average interest rate of 6% and hence interest expense should broadly be in line with expectations.

TCL's initiative to boost Bio- Fuel's foray

TCL has entered into definitive agreements to invest S$25 million (INR 825 mn) in JOil (Singapore) Pte. Ltd. JOil; a Jatropha Seedling Company based in Singapore, has been set up by the Temasek Life Sciences Laboratory Ltd. (TLL), along with other investors in Singapore. This JV will get TCL exclusive marketing rights for JOIL's Jatropha seedlings in India and East Africa and a preferential price for seedlings it requires for its own cultivation of Jatropha. TCL has plans to enter in bio fuel in India and we believe that this agreement is in line with company's ambitions to boost its bio fuel business and secure future raw materials.

We have HOLD rating on the stock with price target of Rs 194, based on our FY09 estimated book value.

n        Dealer Comments

The markets opened the session on a significant positive note with 260 odd point's upward gap on the back of positive cues from the global markets particularly the strong US markets triggered by US government's rescue pf Citigroup. After a good start markets were showing a good resistance at day's higher levels and post noon trades started giving away the day's initial gain and slipped in the negative zone. The fall was led by concerns after FM hinted about India likely to miss its revenue and fiscal deficit targets in the current financial year and easing of Asian markets led by World Bank announced China's growth could slow to 7% next year. The late fall in the indices was mainly led by heavy selling in oil & gas, capital goods, banking and telecom stocks. The overall traded volumes were slightly lower compared to earlier day by almost 3% and were at Rs 563 bn. Delivery-based volumes were at 34.4% the total turnover. Among the institutional activities FII's were net sellers to the tune of Rs 3.12 bn while Domestic Funds were net buyers to the tune of Rs 1.04 bn respectively in the cash segment on 24th November 2008. While on 25th November 2008 FII's sold shares worth Rs. 1.62 bn in cash segment (provisional) and in the F&O segment bought Futures and Options worth Rs. 6.45 bn whereas Domestic Funds bought shares worth Rs. 1.55 bn (provisional).

         Technical Comments

Nifty opened on a positive note and made a high of 2790, thereafter selling pressure was witnessed on higher levels and by the end of the day Nifty shed all its gains and finally closed at 2654 with a loss of 2.00%. On the sectoral indices front, the BSE Oil & Gas index (-3.86%) followed by BSE Realty index (-2.51%) followed by BSE Cap Good index (-2.56%) was the top-loosers. While the other indices also closed negative. The Advance Decline ratio was almost 2:3.

Yesterday Nifty opened on a positive note and broke Monday's high of 2740, and made new high of 2790, which was very near to our mentioned level of 2832, but thereafter Nifty faced lot of resistance at 2790, which was the upper band of the "Channel" and was trading in the range of 2783 to 2739. During the post lunch trading hour's broad based selling pressure was witnessed and Nifty broke the above mentioned range and there by fell sharply and made a low of 2638. By the end of the trading session Nifty shed all its gains and finally closed below 2700 with a loss of 2.00% at 2654. Now in the coming days Nifty has strong resistance at 2790 levels and if it starts trading above this then we will see further recovery, however downside Nifty is having support at 2612 levels and if it starts trading below this level then it can test its recent bottom of 2502.However on should keep a strict stop-loss of 2501 for all their long-positions.

Real Estate: A Grand Collapse From Spain & Portugal to the Middle East and South China

Real Estate: The Global Bust Becomes Visible
DLF, Unitech, Anantraj and Ganesh Housing could lose half there value even from here, once it becomes apparent to all that the haloed "Land Banks" were nothing more than haloes.
 
Stocks in Dubai, Abu Dhabi and Saudi Arabia that more than doubled the past four years
are unraveling as lower oil and real-estate prices weaken economies in the biggest crude-producing region.

The MSCI GCC Countries Index of 115 gulf companies, already down 57 percent in 2008, may drop 20 percent more in the next six months, said Jeff Chowdhry, who helps oversee
$150 billion at F&C Asset Management. Ten months after the index traded at 20 times
reported earnings, Emaar Properties PJSC, the Middle East's largest developer, trades below 3 times profit; Emirates NBD PJSC, the U.A.E's biggest bank, is valued at 5.

Now some of the world's biggest emerging-market investors say valuations may fall further because prices don't reflect the collapsing property market and 66 percent tumble
in oil since its July 11 record. Templeton Asset Management'Mark Mobius says
stock markets in South Africa and China are more attractive.

If anyone's got any Middle Eastern stocks I would be taking this opportunity to sell, Chowdhry, F&C's head of emerging-market equities, said in an interview from London.
It's a combination of a deteriorating fundamental outlook, bubble valuations which are just starting to unwind in real estate and banks, plus liquidations in funds.
 
The Dubai Financial Market General Index of 29 companies in the emirate surged 493 percent from 2004 to 2007 as residential property prices climbed four-fold in the last
five years and a 195 percent rise in oil boosted government spending. The Abu Dhabi Securities Exchange General Index jumped 159 percent during that period, while Saudi Arabia's Tadawul All Share Index gained 49 percent.

Cheapest Shares

All three indexes tumbled more than 40 percent this year and traded this week at the cheapest levels on record compared with earnings, cash flow and net assets, according to
data compiled by Bloomberg.

Emaar Properties, the second-worst performer this year in the Dubai index, is valued at 2.4 times earnings after falling 83 percent in 2008. Dubai-based Emirates NBD trades
for 5 times profit after a 71 percent retreat. The Dubai index's 69 percent decline in
2008 is the steepest among benchmarks in the world's 50 biggest equity markets.

China's CSI 300 Index lost 66 percent, while India's Sensitive Index dropped 57 percent.      Templeton's Mobius said Nov. 17 that he'saggressively buying in other emerging markets such as China and South Africa and it's too early to go bargain hunting in the Gulf.

We really didn't like the Middle East because it was up too high and there were so many other bargains around, Mobius, who manages about $24 billion of emerging-market
assets as executive chairman at Templeton, said in an interview from Johannesburg.

Forced Selling

While the deteriorating outlook for profits caused the retreat in Gulf stocks at the start of the year, this month's 20 percent decline in the MSCI GCC index is mostly the result of
sellers who dumped shares to repay loans, according to Oliver Bell, the head of emerging-market specialist equities at Pictet Asset Management, which oversees about $91
billion.

Arabtec Holding Co., the construction company building the worldâ's tallest tower in Dubai, has tumbled 42 percent this month and traded for 1.8 times earnings this week, the
cheapest since Bloomberg began tracking the data in 2005.

It's left some companies where the fundamentals really havent changed that much and yet they are trading at ridiculous valuations that give you a once in a lifetime opportunity, aid
Bell, who runs Pictet's Middle East and North Africa equity fund in London. Bell isn't buying yet, because at the end of the day you're catching a falling knife,he said.

Growth Slows

Middle East economic growth will slow to 5.3 percent next year from 6.1 percent in 2008, the International Monetary Fund estimates. The IMF expects China's economy to
grow at an 8.5 percent pace next year and India to expand by 6.3 percent, according to the Washington-based fund's World Economic Outlook.

Property prices in Dubai fell 4 percent in October, and declined 5 percent in Abu Dhabi, signaling a turning point in the markets, London-based HSBC Holdings Plc said
in a Nov. 12 research note.

HSBC and London-based Lloyds TSB Group Plc, two of the largest banks operating in the U.A.E., restricted lending in the region this month. Dubai's two largest mortgage lenders, Amlak Finance PJSC and Tamweel PJSC, will be taken over by a government-owned bank.

Property Bubble

The property bubble has just recently burst and the impact of that on psychology is going to take place here for a few more months,said Cliff Quisenberry, who advises hedge funds at
University Place, Washington-based research and consulting firm Investment Frontiers Research LLC.

Abu Dhabi, which owns nearly 8 percent of the world's proven total oil reserves and runs the largest sovereign wealth fund, may cushion the region's economy from losses at
banks and real-estate developers.. The emirate won't allow Dubai's state-owned
companies default on debt payments, Abu Dhabi Commercial Bank Chief Executive Officer Eirvin Knox said this month in an interview in Abu Dhabi.

F&C's Chowdhry says oil's tumble from a July record $147.27 a barrel to $50.77 yesterday may hamper the ability of governments to rescue developers and construction companies while they shore up financial companies such as Amlak.

Daunting

Middle East oil-producing nations excluding Kuwait may post sizeable fiscal and current account deficits if oil averages $50 a barrel next year, Citigroup Inc. said in a
research note last week. Economic challenges facing the Gulf nations are becoming increasingly daunting, the New York-based bank said.

Lenders in the region are competing for local deposits after overseas investors pulled money, said Fahmi Alghussein, an executive director at New York-based Morgan
Stanley
. That's pushing up interest rates on certificates of deposit and luring
cash from stocks, Alghussein said.

Banks are chasing depositors for funds in the region,said Alghussein, who runs Morgan Stanley's Middle East equity sales and distribution from Dubai. That's pushing money out of
equities and other asset classes. As long as you have that, there's no catalyst to invest in equities.



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India: The Sound Of Crashing Real Estate (Goldman...

Goldman Sachs
India: The Sound Of Crashing Real Estate
India's property market is poised for a deep correction. This will bring on sizeable knock down effects, with India GDP expect to slide down to a growth of 5.8 per cent in FY10.
 
We estimate prices may need to fall by up to 30% from current levels, with significant knock on effects on the economy.
 
In particular, it will slow construction activity, which directly
accounts for 7.3% of GDP, but
has sector linkages which we estimate to be 14% of GDP.
 
After India's last housing bust in 1996, real property prices fell some 40% over three years, negatively affecting consumption and investment demand.
 
Mitigating factors—favorable demographics, low mortgage penetration, ongoing infrastructure demand.
 
India's property market is poised for a deep correction. Property prices
have risen dramatically over the past three years, supply exceeds demand in most geographies, and affordability lags prices. Our India Real Estate Team believes that residential property prices in some geographies may need to fall by up to 30% from current levels for affordability to catch up. As elsewhere globally, we think this will have negative effects on the economy.
 
The imminent slowdown in construction activity can potentially have a big impact on the economy. By using an input-output matrix, we estimate that although the sector directly accounts for 7.3% of GDP, its backward linkages in terms of the sector's usage of iron, steel, cement etc., and forward linkages to other sectors, impacts an estimated 14% of GDP. Therefore, a slowdown in
the construction sector can potentially have large knock-on effects on the economy.
 
From the demand side, a property downturn, we think, will have negative effects on consumption and investment. As housing forms the largest component of household wealth, consumer demand will be impacted. The fall in collateral will also hurt firms' balance sheets, increase their funding costs, hurt confidence, and reduce investment demand. However, the impact on demand will be lower than in developed countries.
 
 
Lessons from previous housing busts suggest that they tend to be prolonged episodes with considerable macro consequences. After India's last housing bust in 1996, real property prices fell some 40% over three years, and did not recover to their previous peaks for a decade.
 
Consumption and investment demand were both negatively affected, and growth slowed from an average of 6.8% in the four years prior to the bust to 5.4% in the four years after it.
 
Typically, housing busts in OECD countries have lasted six years with a 30% decline in prices and substantial negative implications for the economy.
 
Mitigating factors, such as India's favorable demographics, low mortgage penetration, falling interest rates, and ongoing infrastructure demand, in our view, will keep the property downturn from being protracted.
 
However, we believe a sharp slowdown is imminent. We therefore remain negative on the real estate sector, and its supplier industries such as cement, iron, and steel, and reiterate our below consensus estimate of 5.8% GDP growth in FY10.


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