Current Economic Statistics and Review For the
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Theme
of the week:
Private Corporate Sector: Performance During the First Half of 2007-08 The
present note attempts to review the RBI’s study “Performance of Private
Corporate Business Sector during the first half of 2007-08”, which
analyses the performance of 2082 non-government financial and non-financial
public limited companies during the period, i.e., April to September 2007.
The
private corporate business sector in This
is getting reflected in the economy’s overall performance. According to
the Central Statistical Organisation (CSO), GDP at 1999-2000 prices
increased by 9.1 per cent, in the first half of the 2007-08, a shade lower
than the growth of 9.9 per cent registered in the corresponding period of
2006-07. More significantly, the growth in the Index of Industrial
Production (IIP) has slowed down from 10.1 per cent during April-October
2006 to 9.7 per cent during the comparable period of 2007-08. The
manufacturing sector, which carries a weight of 79.4 per cent in the IIP,
has recorded a growth of 10.4 per cent during April-October 2007, compared
with 11.1 per cent growth registered during April-October 2006. The
RBI study reveals that during the first half of 2007-08, the private
corporate sector’s aggregate sales and net profits growth rates at 17.4
per cent and 31.1 per cent are substantially lower by 10 and 10.5 percentage
points when compared to 27.4 per cent and 41.6 per cent, respectively, over
the corresponding period in 2006-07. Over
the quarters, the sales growth and profits after tax at 16 per cent and 22.7
per cent, observed in the second quarter, was lower than the respective
growth rate at 19.2 per cent and 33.9 per cent in the first quarter of
2007-08. As
indicated in Table 1, the aggregate sales of 2,082 companies have increased
by 17.4 per cent to Rs 5,36,358 crore during the first half of 2007-08
considerably lower by 10 per cent as compared with 27.4 per cent in H1:
2006-07.
Consequently,
the growth in net profits have declined by 10.5 percentage points to 31.1
per cent (Rs 62,846 crore) from that of 41.6 per cent in the corresponding
period of 2006-07. More
importantly, interest outgo in the review period increased by 10.1 per cent
vis-à-vis 20.8 per cent increase in H1: 2006-07. On
account of considerable rise in expenditure, power and fuel in the case of
manufacturing companies and increased spending on salaries of the employees
by IT and services sector companies, the total expenditure of the selected
companies has increased to Rs 4,45,086 crore (16.9 per cent) during H1:
2007-08, substantially lower by 8.7 percentage points when compared to 25.6
per cent rise in the corresponding period of 2006-07 due to decelerated
growth in production and some success of companies in controlling cost. The
aggregate depreciation of the 2,082 companies stood at Rs 19,347 crore in
H1:2007-08 as against Rs 16,805 crore in H1:2006-07, registering a rise of
15.1 per cent. The aggregate tax provisioning rose by 30.9 per cent to Rs
16,866 crore as against Rs 12,885 crore in H1:2006-07. The other income has
sharply improved by 63.6 per cent to Rs 18,547 crore from Rs 11,335 crore in
H1:2006-07 conceivably attributable to higher returns on investments in the
stock market.
Sector-wise
Performance
The key indicators of performance across different major sectors have exhibited considerable variations in their growth during H1:2007-08. Performance of companies in the services sector has been better than that of the manufacturing sector. The services sector posted 26.4 per cent rise in sales vis-à-vis 15.1 per cent rise posted by manufacturing sector. The companies in the services sector have witnessed a steep rise of 25.1 per cent in staff cost owing to wage costs and enlarged business activity. Interestingly,
performance of services sector companies (excluding those engaged in
computer and related activities) has been impressive in terms of growth in
revenue as well as profits at 27.7 per cent and 70.7 per cent respectively.
Also, their performance has been significant in terms of growth in sales and
net profits at 26.4 per cent and 48.4 per cent respectively, during
H1:2007-08. In
contrast, manufacturing companies reported lower growth in sales (15.1 per
cent) as well as profit after tax (25.1 per cent). For this sector, cost of
raw materials, accounting for about 66 per cent of the total expenses, were
up by 12.9 per cent, little lower than 14.8 per cent increase observed for
total expenditure. However, the aggregate staff cost has shot up by 16.6 per
cent in relation to the increase in total expenditure at 14.8 per cent,
reflecting an increase in salaries and perquisites.
Industry-wise
Performance
During
H1:2007-08, the key performance indicators across the industries showed
considerable variations in their growth rates and ratios. The overall
industry-wise performance reveals that sectors like mining and quarrying,
basic industrial chemicals, pharmaceuticals & medicines, rubber &
plastic products, iron & steel, construction, and transport, storage
& communication have continued sustained growth whereas sugar, textiles,
chemicals, fertilizers & pesticides, machinery & machine tools
have reported subdued performance. Of
the 30 industries analysed, fifteen industries have recorded very high sales
growth of more than 20 per cent while 8 industries recorded an impressive
growth of more than 50 per cent in net profits and 16 industries recorded
more than 20 per cent growth in their interest payments while depreciation
provision increased by more than 20 per cent for the eleven industries. Construction
industry has reported an impressive sales growth of 36.9 per cent during
H1:2007-08, consequently real-estate companies have posted spectacular
growth of 80 per cent in net profits. Owing to rising demand from the
construction and infrastructure companies the cement industry has also
registered significant sales growth of 24.3 per cent due to higher output.
Net profit margin for the cement industry has improved to 35.2 per cent in
H1:2007-08, because of higher prices observed during the year. Iron
and steel companies have posted 54 per cent growth in post tax profits in
H1:2007-08 mainly on account of steep jump in other income (183.7 per cent)
and 6.4 per cent fall in interest payments. Sugar industry continued to
incur losses mainly owing to lower sales realisations, as sales were down by
16.7 per cent and interest payments rose by 31.5 per cent. The edible oil
industry witnessed a remarkable performance in terms of turnover as well as
net profits. The turnover growth of 34 per cent helped these companies to
register 78.3 per cent increase in profit after tax in H1:2007-08. Expenditure
of the textile industry rose at a higher rate of 15.7 per cent than sales
growth of 12.9 per cent, and as a result, net profits of these companies
were lower by 20.2 per cent. Removal of quota constraint from January 2005
has opened up substantial export opportunities for the domestic textile
companies. After the dismantling of the quota regime, the Indian textile
industry has seen a remarkable rise in its export performance. However, at
present the textile sector is struggling to maintain the export growth
because of increasing raw material costs coupled with a steep rise in
interest rate and the sharp appreciation of the Indian rupee. The hardening
of the rupee is hitting exporters, with Companies
in pharmaceuticals and medicine industry have recorded higher growth in
expenditure relative to sales and yet registered 25.2 per cent cent rise in
net profits mainly on account of 80 per cent jump in other income.
Performance
of motor vehicles and other transport equipments industry was subdued in the
first half of 2007-08 on account of slower consumer demand. The lower
turnover growth of 8.1 per cent, plus relatively higher increase in
expenditure by 9 per cent accompanied by as much as 51.2 per cent rise in
interest payments affected the performance of these companies adversely. Net
profit has been stagnant at the previous periods level. The
sales of machinery and machine tools industry surged by around 25 per cent,
while expenditure went up by 24.3 per cent and their net profits have
increased by 21.6 per cent reflecting increased investment demand from
almost all the sectors. The
computer and related activities industry continued to perform well with 23.9
per cent increase in revenue resulting in 28.7 per cent rise in net profits.
The
transport, storage and communication industry has registered revenue growth
of 28.4 per cent, and consequently, the net profits increased by 90.9 per
cent. This rise could be attributed primarily to the robust performance of
the telecom companies. Currently, Fertilizer
companies posted moderate growth in sales and expenditure at 6.1 per cent
and 5.2 per cent, respectively. The lower turnover growth coupled with a
fall of 27.7 per cent in other income acted adversely on the net profit
which declined by 7.2 per cent in H1:2007-08.
Hotels
and restaurant industry posted 24.6 per cent increase in net profits with a
turnover growth of 22.8 per cent.
Table
4 indicates that during H1:2007-08, the profits after tax (PAT) to sales
ratio has increased to 11.7 per cent (10.5 per cent in H1:2006-07). At the
same time, the interest to sales ratio at 2 per cent has remained nearly the
same as that (2.1 per cent) in H1:2006-07 despite the interest payments have
increased by 10.1 per cent.
Profits
after Tax (PAT) to sales ratio of the cement and computer and related
activities has witnessed a marginal rise to 19.9 per cent and 22 per cent,
during H1:2007-08 as against 18.3 per cent and 21.2 per cent, respectively,
in H1:2006-07, whereas in the case of sugar industry, this ratio has
declined to 6.6 per cent from 11.7 per cent. A
Few Other Aspects
According
to the Reserve Bank's latest Industrial Outlook Survey, the business
expectations indices based on assessment for October-December 2007 and on
expectations for January-March 2008 declined by 2.5 per cent and 4.7 per
cent, respectively, over the previous quarters. According
to Centre for Monitoring Indian Economy (CMIE), the private corporate sector
in The
slowdown in aggregate sales will be largely on account of a significant
slowdown in sales expansion in sectors like chemicals, information
technology, food products, commercial vehicles, auto ancillaries,
two-and-three-wheelers, aluminium and aluminium products. The automobile
companies will maintain their growth momentum on the basis of strong growth
in domestic and export sales volumes. However, profit margins may remain
subdued due to higher input costs mainly aluminium, steel, rubber and
plastic and there by raise total cost of production. During 2006-07, the
domestic pharmaceutical industry has shown a strong growth. However, in
order to sustain growth, it is imperative for pharma companies to be
internationally competitive. The fast moving consumer goods companies are
expected to distend their growth rally. Despite
a rise in cement prices, demand for cement is expected to be unaltered, due
to increased infrastructure activities, mega investments in retail and real
estate sector. The invigorating activity in the infrastructure and
construction sectors is projected to provide the demand backed revenue
growth impetus to the cement sector. Banking,
construction, telecommunication, general purpose machinery, prime movers,
material handling equipment, air transport and non-banking financial
companies are expected to witness a healthy growth during the third quarter.
Highlights of Current Economic Scene AGRICULTURE
As
per the second advanced estimates released by ministry of agriculture,
overall foodgrain output during 2007-08 would marginally rise by 0.9 per
cent as compared to the output of last year, driven by expected record
production of rice, maize, soyabean and cotton. Production of foodgrains
as well as that of non-food crops is estimated to decline during the rabi
season for the crop year 2007-08 as compared to that of kharif season.
Rice output is projected to rise by 0.8 percent as compared a year ago.
Wheat production is expected to touch 74.81 million tonnes, lower than
last year’s production of 75.8 million tonnes. Coarse cereals production
is likely to grow by 6.4 to 36 million tonnes and that of pulses by 0.9
per cent to 14.3 million tonnes as compared to that of 2006-07. Total
Output of all the oilseeds is estimated to soar by 11.8 per cent to 27.2
million tonnes higher from last year, though rabi production of all the
major oilseeds is expected to fall. Among commercial crops, cotton is
expected to augment by 3.3 per cent to 23.24 lakh bales, due to the
reported increase in coverage under Bt cotton. On the contrary, output of
sugarcane would fall down by 4.3 per cent to 340.3 million tonnes (Table),
due to fall in sugar realisations.
According
to Director General Of Foreign Trade, the central government has allowed
exports of 22,100 tonnes of wheat flour to According
to Spice Board,
According to data compiled by the Soybean Processors Association of
India (SOPA), exports of soymeal in India has recorded a growth of 13.89
per cent in the period between October-January 2007-08, on account of
growing demand from overseas countries. Total exports have jumped to
19,77,628 tonnes during the same period as compared with 17,36,407 tonnes
in the corresponding period of the last year. The shipments to
According
to International Coffee Organisation (ICO), global coffee production in
the crop year 2006-07
has increased by 14 per cent to 125 million bags as compared
with 110 million bags in the previous year. The worldwide exports for the
year has gone up by 9.6 per cent to 96.7 million bags against 88.2 million
bags in 2005-06.The increase in export was significant in the case of
Robusta, that is, 14.3 per cent and for Arabica, it has been 7.3 per cent.
The total value of exports in 2006-07 is estimated to be at US $ 12.3
billion against US $ 10.1 billion in 2005-06.
Production in
According
to International Cotton Advisory Committee (ICAC), the world cotton
acreage is projected to be around 33.9 million hectares in 2008-09,
similar to that in 2007-08. Acreages under cotton are projected to decline
in US by 11 per cent and are likely to show slight improvement in
Persistent
cold weather conditions prevailing in According
to officials of Bihar's Director of Animal Husbandry department, villages
falling within 5 km. of The
poultry industry has requested the central government for two-year
moratorium on repayment of outstanding loans and 7 per cent interest
subvention for conversion operations of outstanding working capital loans
into long-term loans and sanction of fresh working capital for farmers to
restart operations. Further, they have asked to allocate 5 lakh tonnes of
maize at a subsidised price, due to outbreak of bird flu in According
to Marine Products Export Development Authority (MPEDA) seafood exports
have fallen As
per the draft prepared by petroleum ministry under natural gas utilisation
policy, fertiliser plants would get first right over the domestic natural
gas followed by petrochemical and power units. On approval of this draft,
natural gas produced from field like eastern offshore KG D6 field of
reliance industries or Panna /Mukta and Tapti field of Mumbai would first
be given to the fertiliser sector as existing gas based fertiliser units
are running at less than designed capacity because of shortage of gas.
A
pick up in the production of all the major group during December pushed up
the index of industrial production from 5.1 per cent in November to 7.6
per cent in December 2007. As a result during the fiscal so far registered
an increase of 9.0 per cent as against 11.2 per cent last year. Mining
sector and electricity sector grew by 3.0 per cent and 3.8 per cent during
the month. The growth of manufacturing sector is at 8.4 per cent during
December is much below to that of 14.5 per cent recorded last December.
Out of the 17 industries, four industries declined and five industries
registered double digit growth.. As per use-based classification, the
sectoral growth rates in December 2007 over December 2006 are 3.1 per cent
in basic goods industries, 16.6 per cent in capital goods and 7.2 per cent
in intermediate goods. Consumer goods recorded an increase of 8.7 per
cent. Infrastructure The
index of six core infrastructure industries having a combined weight of
26.7 per cent in the index of industrial production registered a slower
growth of 4.0 per cent as compared to 9.0 per cent in December 2007. The
dismal performance of crude petroleum which registered a negative growth
of 1.5 per cent against a
growth of 6.0 per cent last year, and comparatively lower growth
performance of refinery products, electricity, cement, steel all
contributed for the lower rate of growth. However, coal production for the
fourth month in succession registered a faster growth with its production
rate registering a growth of 8.4 per cent in December 2007 as against a
low growth of 2.9 per cent in November 2006 Inflation The
annual rate of inflation calculated on a point to point basis, rose by
4.11 per cent for the week ended January 26,2008 as compared 6.69 per cent
as on January 27.2007. Marginal
rise 0.4 per cent in has been witnessed in Index of Primary Articles group
from 223.6 from 222.8 for the previous week. Food articles group rose by
0.2 per cent. Index of non-food articles rose by 0.5 per cent mainly due
to higher prices raw cotton, cstor seed and groundnut. The
index for the major group Fuel, Power, Light and Lubricants remained
stationary. The
index of manufactured products rose by 0.3 per cent due to higher prices
of many edible oils.. The
final WPI for all commodities had been revised upward from 216.3 to 216.0
for the week ended December 01,2007. As a result the rate of inflation
calculated on a point to point basis stood at 3.89 per cent as compared to
3.75 per cent provisional. Banking Public
sector banks Canara Bank, Corporation Bank and Allahabad Bank have decided
to lower interest rates on housing loans, preferring to keep their prime
lending rates unchanged. Canara Bank, which had reduced interest rates by
50 basis points on fresh home loans in October 2007, will cut floating
interest rates by 25 basis points for new as well as existing borrowers
from February 7, 2008. Allahabad Bank has also cut interest rates only for
new borrowers by 50-100 basis points on home loans, loans for consumer
durables, car loans and education loans from February 10, 2008. Financial
Market Capital
Markets Primary
Market
The initial public offering (IPO) of Wockhardt Hospitals withdrew
on February 07, 2008, after the company decided to pullout the issue,
which has been, subscribed only 20 per cent on its last day. Wockhardt
Hospitals became the first IPO casualty since July 2006, to be unable to
gather sufficient investor interest. This can be explained partly by an
offer price that was perceived to be stiff in the current primary market
conditions and partly by the unexciting performance of the listed
companies in this space. The offer was unable to garner subscriptions
despite a downward revision in price band and an extension in the period
of offer.
Following the withdrawal of Wockhardt Hospitals issue, Emaar MGF
Land also withdrew its IPO on February 08, 2008 due to lack of adequate
response from investors citing adverse market conditions. NSE data showed
that Emaar MGF IPO was subscribed 0.39 times. According to Mr Shravan
Gupta, Executive Vice-Chairman and Managing Director,
As per Thomson Financial, the global initial public offer (IPO)
activity dipped to a three-year low in January 2008, with just 45 offers
making their debut with volumes totaling $6.32 billion. The year-on-year
IPO volumes in 2008 declined by 15.4 per cent from $7.46 billion mobilised
in January 2007 from 65 issues. The data compiled by Thomson Financial
show that if not for
Risk aversion by investors towards the equity Markets, owing to the
recent meltdown, along with high volatility has battered the recent IPO
launches of Companies. For instance, the IPO of Tulsi Extrusion Ltd and
IRB Infrastructures Developers Ltd, which closed on
February 05,2008, was fully subscribed but failed to elicit
favourable response from retail investors. Similarly, the IPO of IRB
Infrastructure Developers Ltd witnessed poor response from the retail
category even when the issue managed to get subscribed by 4.30 times. The
retail portion remained undersubscribed at 0.05 times with the issue
receiving bids for 8.71 lakh shares against the reserved size of 1.52
crore shares.
The city-based Microsec Financial Services Ltd, a diversified
financial services company engaged in investment banking, retail brokerage
(equity and commodities), wealth management, insurance broking, IPO and
mutual funds distribution, proposes to enter the capital market with a
public issue of Rs 160 crore. The company has filed the Draft Red Herring
Prospectus (DRHP) with SEBI for the purpose.
Bangalore-based Archidply Industries plans to raise about Rs 55
crore in the capital market through an IPO sometime in April. According to
Mr Shyam Daga, Joint Managing Director, Archidply, the proceeds of the
issue will be utilised to set up a Rs 43-crore manufacturing unit for
plain particle, pre-laminated and decorative boards at Chintamani, near
Reliance Infratel, the tower subsidiary of Reliance Communications,
has proposed to raise Rs 6,000 crore through an Initial Public Offering
(IPO) and has filed the DRHP with the Securities and Exchange Board of
India (SEBI). According to the DRHP, Reliance Infratel has proposed to
offload 8,91,64,100 equity shares of Rs 5 each at a price that will be
decided through the book building process.
State-owned Rural Electrification Corporation proposes to raise up
to Rs 1,640 crore through an IPO of 15.61 crore equity shares. The IPO
opens on February 19 and closes on February 22. The price band has been
set at Rs 90-105. At the lower end of the band, the company will raise Rs
1,400 crore and at the cap Rs 1,640 crore.
Reliance Power is set to make its debut in the stock markets on
February 11. The equity shares of the company will be listed on both the
BSE and the NSE. The IPO was the largest to hit the Indian markets, where
the issue was subscribed by about 70 times. Analysts and investors are
wondering whether Reliance Power will list below the issue price in the
current bear market, or above the issue price despite the bear market. The
issue price was Rs 450 a share; retail investors received allotment at Rs
430 a share. The concern extends to whether the Reliance Power price will
sustain, even if the company lists at a premium to the issue price. Secondary
Market
There was immense volatility in the markets during the week despite
a positive start the markets extended their losses for the fourth straight
week as the major indices succumbed to unabated selling pressure in the
latter half of the trading week as investors opted to book profits rather
than making fresh commitments on slew of negative factors. According to
market participants, fall in GDP growth, rise in inflation, sluggish
global markets, a feeble response to the IPOs and fears of recession in
the
BSE has decided to change the eligibility criteria for inclusion of
scrip in A group effective from March 03, 2008.
The revised list would be announced on February 18. A total of 200
companies would find place in 'A' group. The BSE has also discontinued the
division of group B into group B1 and B2. All companies not included
in-group A, S or Z, will constitute group B.
Mirae Asset Mutual Fund, an arm of South Korean asset manager Mirae
Investments, is launching a diversified equity fund to mark its foray into
the Indian market on February 11, 2008. Subscriptions to the Mirae Asset
India Opportunities Fund’s new fund offer will close on March 10.
The open-ended diversified equity scheme will invest at least 65
per cent of its corpus in Indian shares and the rest in fixed income
securities. According to
Arindam Ghosh Chief Executive Officer the fund house is bullish on the
prospects of banking and financial services companies and also finds
investments in power, capital goods and infrastructure sectors exciting.
The Group on Review of Issue Process (Grip), the SEBI-appointed
committee, on reforming the IPO process has suggested a vast number of
measures to minimise the cost and time involved in the IPO process. These
include using an ‘indicative price’ for the stock price discovery
instead of the price band, mandating qualified institutional buyers (QIBs)
to deposit 100 percent of the bid amount, in contrast to 10 per cent at
present, and minimising the period between close of the issue and its
listing to 7 days from 21 days. The committee has further suggested that
Companies should be permitted to file draft offer with the SEBI even if
they are yet to receive authority for issue of capital and the High Court
approvals for mergers or de-mergers. The report suggests doubling the
amount for retail investors to Rs 2 lakh of the application value. It has
also recommended that allotment of shares to investors should be made on
‘proportionate basis’ using a software formula, rather than on
discretionary basis and the issuer, or Companies going for IPO, should
mention the ‘indicative price’ in the red herring prospectus instead
of the price band. Retail investors can be given the option participating
at a maximum of 1.2 times the indicative price. Retail investors can be
given the option of participating at a maximum of 1.2 times the indicative
price QIBs should submit 100 per cent of their bid amount, at par with
retail investors. The report has also recommended reserving a separate
quota for private insurers.
On January 30, 2008 SEBI given approval for the proposal, which
states that henceforth, all mutual funds schemes shall meet the sales,
marketing and other such expenses connected with sales and distribution of
schemes from the entry load. The move by the market regulator SEBI for
removal of charging and amortisation of initial issue expense in
closed-ended mutual fund (MF) schemes has prompted fund houses to rush
with their new fund offers (NFOs) under closed-ended category before the
proposal comes in to force. Out of the 11 equity-linked NFOs, floated by
major fund houses that are currently opened for subscription, 9 NFOs, are
closed-ended funds.
After missing the February 1 deadline, institutional investors may
have to wait longer before they can sell short. Putting the onus back on
market regulator SEBI for the delay in introducing short-selling by these
investors, the Central Board of Direct Taxes (CBDT) has said it will make
a move only after the scheme is launched.
Despite the market mayhem, assets managed by MFs have dipped by a
marginal Rs
2,200 crore, or 0.4 per cent. As on January 31, they had assets worth Rs
5,52,000 crore under management from Rs 5,54,000 crore, including fund of
funds, from a month ago, says a report of rating agency Crisil. NSE Nifty
lost more than 16 per cent in January 2008 over the previous month. Of the
32 fund houses, 14 posted an increase in AUMs in January. Even though the
market fall in January, mutual funds bought Rs 7,700 crore more equities.
They bought shares worth Rs 3,000 crore in December 2007
After 13 years, Morgan Stanley Investment Managers on February
7,2008 launched its second fund, Morgan Stanley ACE (Across
Capitalisations Equity) Fund, which will invest in a portfolio of equity
and equity-related securities, including equity derivatives.
The fund will be benchmarked against the BSE-200 and will be
managed by Jayesh Gandhi, formerly with Birla Sun life Asset Management
Company.
On February 07, 2008 the stock market regulator of France, Autorite
des Marches Financiers (AMF) and SEBI announced terms of cooperation and
collaboration in order to promote efficient and transparent capital
markets in
SEBI started to reviewing share margin requirement system which has
been receiving feedback on it. According to market players stiff margin
norms accentuated the recent sharp correction on bourses. Market
intermediaries are keen on SEBI introducing longer tenure of stock lending
and borrowing contracts and inclusion of more stocks for short selling. Derivatives
The derivatives market continued to exhibit a dangerous combination
of low volumes and high volatility leading to a rise in the implied
volatility of option premiums. The Nifty continues to swing by over 3 per
cent per session, which means that day traders must reckon with 150-200
point moves. Volumes have started to concentrate in the index derivatives
with the smaller F&O stocks all losing liquidity. In this situation,
where even overnight positions may be dangerous, very few traders are
prepared to even investigate the possibilities of the far-term and
mid-term futures. All the
other indices had negligible liquidity in the mid or far term futures.
Most were trading at discounts to the spot rates, which does suggest the
short-term sentiment remains bearish.
The spot Nifty closed at 5,120 while the Feb Nifty futures was
settled at 5,090 and the March and April series at 5,086 and 5,082
respectively. Open interest expanded across all three series but April
open interest was not much in absolute terms. The differential between the
spot and near-term was exceedingly high. But there are no calendar trades
available with the current differentials between the futures' series. The
Mini Nifty was settled at 5,091 (Feb), 5,087(Mar) and 5,100 (April) with
very little open interest except in the near month.
The Junior closed at 9,740 in spot and it was settled at 9,706 in
the near-term futures. A few contracts were cashed out leading to a small
reduction in near-term open interest. The Bank Nifty closed at 8,817 in
spot and it was settled at 8,814.6 near-term with a few contracts in the
March futures at 8,952.4. The CNXIT closed at 3,961 and it was settled at
3,926. The Midcaps closed at 2,796.8 with the Feb contract settled at
2,809.
In the Nifty options market, premiums are unsurprisingly high,
given the extreme volatility. The put-call ratio is at 0.95, which is
quite bearish. Both put and call open interest has been expanding. But
there is lots of liquidity above and below the money.
A bull spread with long 5,200c (208.5) versus short 5,300c (166)
costs 43 and pays a maximum of 57. A bear spread with long 5,000p (226.7)
and short 4,900p (181) costs 45 and pays a maximum of 55. Government
Securities Market Primary
Market
Under Market Stabilisation Scheme (MSS), RBI auctioned 12.25 per
cent 2010, for the notified amounts of Rs.4,000 crore at the cut-off
yields of 7.52 per cent on February 07, 2008.
On February 06, 2008, RBI auctioned 91-day and 182-day T-bills for
the notified amounts of Rs.2,000 crore (out of which Rs.1,500 crore under
MSS) and Rs.1,500 crore (out of which Rs.1,000 crore under MSS),
respectively. The cut-off yields for 91-day and 182-day T-bills were 7.27
per cent each respectively.
RBI re-issued 8.20 per cent 2022 and 8.33 per cent 2036 for Rs.
5,000 crore and Rs. 4,000 crore on February 08, 2008, at the cut-off
yields of 7.62 per cent and 7.77 per cent, respectively. Secondary
Market
The call money rates ruled during the week at a lower range of
5.9-6.37 per cent , up from the previous week’s range of 6.86-7.35 per
cent. Even on the second reporting Friday of the month, the call rate
ruled at 6.02 per cent as banks had already covered their positions.
Trading in
Despite MSS absorptions, the reverse repo bids tendered and
accepted ranged between Rs 6,690 crore and Rs 43,150 crore implying
improved liquidity situation. Even
dated securities were auctioned during the week for an aggregate amount of
Rs 13,000 crore: 8.20 per cent 2022, 8.33 per cent 2036 and 12.25 per cent
2010 at cut-off yields of 7.62 per cent, 7.77 per cent and 7.52 per cent
respectively. Bond
Market
During the week under review, two development finance institutions
and two non-banking financial companies
have tapped the market by issuance of bonds.
Housing Development Finance Corp Ltd tapped the market by issuing
bonds to mobilise Rs 700 crore by offering 9.20 per cent for 18 months.
The bond has been rated AAA by Crisil and Icra.
Infrastructure Development Finance Co Ltd tapped the market by
issuing bonds to mobilise Rs 150crore by offering 9.05 per cent and 9.10
per cent for 5and 10 years respectively. The bond has been rated AAA by
Crisil, Icra, and Fitch.
National Capital Region Planning Board tapped the market by the
issuance of bonds by offering 8.98 per cent for call at the end of 10
years for an amount of Rs 200 crore. The
bond has been rated AAA, AAA (so) by Crisil and Fitch.
Power Finance Corporation tapped the market by the issuance of
bonds by offering 8.96 per cent and 8.98 per cent for 3 years and 5 years
respectively, with a step-up of 50 bps through book building for an amount
of Rs 300 crore. The issue has been rated AAA by Crisil and Icra.
According to research report of City of Foreign Exchange Market
Despite the large flows, the rupee-dollar exchange rate
depreciated. The reason stemmed from bunched payment dues of public sector
oil companies. In addition, there were also large debt service outflows on
corporate external commercial borrowings. The dollar, as a result, firmed
to Rs 39.55 towards the week-end. Forward premia, despite this trend, went
into a premium up to three months. The premium implied that forward
dollars were cheaper than spot. Traditionally, forward rupee has remained
at a discount or more expensive than spot against the dollar. The switch
to a premium was largely on account of forward cover by exporters. As a
result, forward premia for one month and three months were at a premium of
2.43 per cent (1.52 per cent discount) and 1.01 per cent (2.34 per cent)
respectively. The discounts for six months and 12 months crashed to 0.66
per cent (2.08 per cent) and 1.01 per cent (1.78 per cent). The RBI’s
interventions in the foreign exchange markets were restrained in view of
large purchases by oil companies. The
Reserve Bank of India (RBI) has stopped banks from selling exotic foreign
exchange derivatives amid a flood of complaints by companies hurt by large
losses. The central bank has told banks that they should sell only vanilla
rupee-dollar derivative products from now on and that too only for hedging
corporate foreign currency exposures, not for trading. The regulator's
Foreign Exchange Department recently pulled up representatives of banks
against whom the RBI had received complaints for selling their clients
exotic products when they were supposed to offer plain vanilla products.
Estimated losses suffered by companies that had opted for complex
derivative products exceed Rs 1,000 crore. Commodities
Futures derivatives
The Foward Markets Commission (FMC) has become an independent
regulator after President Pratibha Patil signed the ordinance amending the
Forward Contracts (Regulation) Act (FCRA), 1952, on January 31. According
to FMC Chairman B C Khatua, there were no changes in the bill, and the
ordinance would be tabled as a bill in Parliament in the forthcoming
budget session. The ordinance will pave the way for introducing options
trading in commodities and index-based futures and options. FMC and FCRA
were conceptualised in the fifties.
Financial Technologies is in talks with the
Chana spot and futures prices on the national bourses may rule firm
due to continued buying by millers and stockists amid concerns of a likely
lower acreage in current Rabi season. MCX February and April 2008 contract
traded around Rs 2,280 a quintal and Rs 2,430 a quintal, respectively,
mainly on expectation that this season's output may fall between 2 lakh
tonne and 2.5 lakh tonne. Chana acreage for Rabi crop is slightly lower at
79.31 lakh hectares against last year's area of 83.08 lakh hectares as on
January 28, 2008. Insurance Societe
Generale has entered into a joint venture with IndiaBulls Financial
Services for a life insurance joint venture in Corporate
Sector As
part of its expansion plans, IT services company, KPIT Cummins is planning
to set up a new development facility at Pune at an investment of close to
Rs 80 crore, is expected to be operational by September 2008. Volkswagen
plans to launch the mid-sized sedan and Jetta by mid-2008 and an
India-specific small car by 2009. Swiss
cement maker Holcim is investing about Rs 10,000 crore in the next five
years to set up plants and raise capacity by 25 million tonnes in the
country. The company is in Japanese
firm Suzuki plans to roll out a 125cc scooter by September, a 150cc
motorcycle and its flagship pro bike Hayabusa by March 2008. Mahindra
and Mahindra (M&M) will launch a premium SUV, a multi-utility vehicle-Ingenio,
LCV's and heavy duty trucks and trailers in collaboration with
International Truck and Engine Corporation (ITEC), and passenger cars in a
JV with Renault. Telecom Reliance
Infratel, the tower subsidiary of Reliance Communication (RCom), will
build 56,596 telecom towers by financial year 2010, increasing the total
number of towers of 1 lakh. The
Department of Telecom (DoT) has offered letters of intent (LoIs) for
unified access service licences (UASL) to 9 companies among 45 applicants.
Around eight of these companies paid the required licence fees and bank
guarantees. However, DoT has not yet allocated spectrum to the new
players. As a result, the new aspirants are unable to launch mobile
services as a specified band of spectrum, i.e. radio frequencies, are
required to enable wireless communications. Telecom analysts estimate that
the government has received around Rs 6,500 crore from non-refundable
licence fees from these nine companies. At
the end of December 2007 the total broadband connections in the country
have
reached 3.13 million as against 2.05 million in December 2006
(Table 5.3). The additions during the first nine months of the current
financial year was 0.79 million as compared to 0.70 million during the
corresponding period in the previous financial year. The total increase in
broadband subscribers from January to December 2007 has been 1.08 million
as compared to addition of 1.20 million during 2006.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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