Can New Delhi's economic diplomacy change India's business profile in Africa?

If Africa is a beautiful woman being courted by the rest of the world, India is a childhood sweetheart who is a good-natured, hesitant suitor. Touchingly solicitous, yet frustratingly distant, India is a bundle of contradictions.

In the past few weeks, in the lead-up to the India-Africa Forum summit in Addis Ababa from May 20 to May 26, India's reticence has receded into the background. Instead, what we have is a serenading of Africa by the world's largest democracy.

An example of the fervour that has gripped the government now is the amount of attention and money it is spending sending teams of journalists from India on trips to Africa. Three groups have been to different parts of the continent for about two weeks each and the foreign ministry is looking for suggestions to deepen media interaction between India and Africa. For now, there is an impression of deep involvement in the relationship.

This correspondent, who was in Senegal, Ghana and Nigeria as part of a government-sponsored team, found that goodwill for India is unquestionable. There is a feeling that India and Africa are kindred souls. "India makes us feel at ease; it respects us and supports us," says Maitre Madicke Niang, the foreign minister of Senegal, a west African nation with a population of about 12 million.

It is in Senegal that India has scored one of its biggest successes as it competes with other developed and emerging economies for Africa's market and mineral and oil resources. An Indian-led consortium is turning around Industries Chimiques du Senegal (ICS), a former state-owned company that owns one of the world's biggest phosphate mines and a plant making phosphoric acid for use in fertilisers.

Nominally, Iffco is described as the driving force behind the consortium but the public sector cooperative is actually the main consumer of the phosphoric acid and only a minor shareholder in ICS, which contributes about 2% to the Francophone nation's GDP of nearly $13 billion (Rs 58,000 crore). The major owner is the low-profile Archean Group, a Chennai-based company that also has interests in Indonesia, China and Dubai.

It is nimble-footed companies like Archean, not resource-hungry state-run enterprises, that are transforming business relationships in Africa. The government, for all its good intentions, is a step behind even as it facilitates Indian business and helps Africa.

One such sincere and ambitious initiative is the Pan African e-Network Project to use Indian expertise in telecommunications to bring top-class education and health care to the rural parts of Africa. Conceived by the former president APJ Abdul Kalam, the network links many of India's best universities and hospitals to Africa, allowing the continent access to expertise it would not have otherwise had.

While India's intentions have been noble, the benefits of the pan-African network are not being utilised fully: only 311 telemedicine consultations took place until March. JL Kachroo, the project's director in Senegal, says this is because many doctors in African nations think it is a slight to be advised by their Indian peers. In Nigeria, too, the network is underutilised, prompting high commissioner Mahesh Sachdev to urge Nigeria's foreign minister Odien Ajumogobia to make better use of the infrastructure.

Index Outlook: Market in a state of flux

It was a dull and lacklustre week on the stock market with the Sensex ending almost flat after treading water for most part. The meltdown in commodity prices and the pending decision on fuel price hike influenced movement in the early part of the week. The results of the Assembly elections buoyed the sentiments on Friday as the trading fraternity decided that it has positive implications for the ruling UPA.

Volumes were very low in the early part of the week though it picked up towards the weekend. Surprisingly, FIIs were buying selectively in the early part of the week but they turned net sellers on Friday, the day the Sensex bounced 200 points. Open interest is edging higher towards Rs 1, 40,000 crore. The index put call ratio below 1 suggests that the mood is veering towards the positive with most bears closing their shorts at these levels.

Commodity prices and economic data will be closely tracked next week too to give some direction to stock prices. Some relief can be expected with the onset of monsoon towards the end of May. Corporate results trickling in will also make up an interesting side-show.

Oscillators in the daily chart are moving sideways but in the negative zone. The 10-week rate of change oscillator is critically positioned on the zero line, on the verge of declining in to the bearish region. Weekly relative strength index is also moving deeper in to bearish zone. Interestingly, oscillators in the monthly chart are also pointing lower while perched in the neutral zone.

This implies that if the index moves any lower from current levels, the long-term picture could also get impacted negatively. The sideways move recorded last week has not altered the short and medium-term trend in the index. Both the short as well as the medium-term trends in the index are currently down

As we have been explaining over the past few weeks, the medium-term trend in the index appears weak since it is possible that the third leg of the down-move from November 2010 peak is currently unfolding. This wave has the targets of 17,761 and then 16,493. A strong move above 19,800 is needed to make the medium-term view positive and pave the way for rally to the previous lifetime high.

The sideways move being witnessed since May 5 appears to be a pause in the short-term trend that commenced at the April peak of 19,811. Immediate resistances for the index are at 18,747, 19,005 and 19,109. The Sensex is yet to move beyond even the first resistance. If it struggles to do so next week as well, there is the possibility of a sharp decline to 17,792 or 17,774. If this zone is crossed, the next target zone for the index is between 17,300 and 17,450.

In other words, the odds are currently piled in favour of the bears and it appears a little too soon to presume that a bottom is in place. Investors can start buying only on an emphatic close above 19,100.

Nifty (5,544.7)

Nifty too whipsawed in a narrow band last week before ending the week seven points lower. The medium-term view on the index remains unaltered. It is highly likely that the third leg down from the peak of 6,338 is in progress. This wave can take the index down to 5,332 or 4,954. This view will be negated only on a firm close above 5,950.

Short-term resistances are at 5,638, 5,690 and 5,743. If the index continues to struggle to move above the first resistance, it would be a cue for initiating fresh short positions. It is, however, possible that the index remains in this sideways range for few more sessions before making the next move. Therefore, it would also be more prudent to wait for a move below 5,440 before initiating fresh short positions.

Short-term downward target is 5,348. Since the target coincides with the March 21 trough, traders should watch out with short positions around this level.

Global Cues

Global benchmarks continued to be volatile led by another bout of selling in commodity prices. Most indices extended the losses recorded in the previous week. CBOE volatility index did not move past the resistance at 19 but it did not decline sharply either, implying that traders were not too worried about a meltdown just yet.

European stocks were weak due to the ongoing troubles in Greece. DJ Euro STOXX 50 ended 58 points lower implying that the medium-term correction that began in February continues to be in force.

Most Asian indices however recovered from lower levels to close slightly in the green.

The Dow was also choppy, moving in a range between 12,540 and 12,800. The short-term correction that began on May 2 continues to be in force and can drag the index lower to the zone between 12,350 and 12,400. The short-term trend will turn negative only if the index closes below this zone. The medium-term uptrend will be under threat on close below 11,640.

The dollar index traded continued to make headway. It faces key hurdle at 76.3 that is just ahead. Close above this level will imply that a sustainable medium-term bottom has been formed at 72.86 and that is not good news for commodity prices or for the emerging market equities.

Investments in gold, silver a safe bet in the long-term: Analysts

Precious metals have gained popularity as investment options over the last few years, as they have yielded attractive returns. Global commodities in general are going through profit booking since the last few weeks. The prices of gold and silver have also come down from their peaks. Silver has been through a deeper correction as it had gone up quite sharply.

Analysts believe prices in the commodity markets had gone into the over-brought zone and a correction was long due. The prices had gone way above their justified fundamentals. The short-term outlook for precious metals is uncertain, but analysts believe the long-term outlook is bullish due to several factors that influence the prices of precious metals in the international markets.

Safe haven

Investments in precious metals are believed to be a safe haven with respect to the global uncertainties. Although the world economy has come out of the slowdown, there are many uncertain and grey areas still.

The governments of developed countries have mounted huge debts due to large stimulus packages they promoted during the economic slowdown. The demand for precious metals is expected to remain intact in the short to medium terms. This will keep the investment outlook bullish for these instruments.

Increase in demand

The demand for precious metals has increased significantly over the last few years. The new avenues of demand are coming from small investors, hedge funds as well as central governments of various countries. This demand is in addition to the existing demand from the industrial sector and jewellery segment.

On the other hand, the supply of precious metals has not caught up in line with the increase in demand. The higher demand for precious metals is expected to keep the outlook bullish in the medium to long terms.

Trading activity

Speculation and trading is a prime factor driving the volatile price movements in precious metals. Many investors are trading in precious metals in the physical as well as derivative markets .

The increased activity in the markets has resulted in some artificial demand. This has skewed the demand-supply equation and is behind the volatile price movements in precious metals.

Outlook

The outlook for precious metals is good from a longterm perspective, given the several uncertainties in the world markets, high government debt and demand-supply mismatch at the global level. However, it is very difficult to predict the shortterm direction. In the short term, prices are expected to remain highly volatile due to the speculation activity of large investors and fund houses.

For those invested

The recent crash in global commodities has raised some questions and concerns. Investors are worried about the sustainability of the commodities' bull run over the long run and the possibility of a bubble formation in the prices of gold and silver.

Investors should not take any action in a hurry. The long-term investment outlook for precious metals is still good due to various domestic and global factors. Those with a long-term investment horizon should not panic due to the shortterm volatile movements in precious metal prices, and look for opportunities to accumulate positions further at lower price levels during correction phases.

For those planning to invest

Those looking at making fresh investments in precious metals should use the ongoing correction phase to invest.

However, since the market is quite volatile, investors are advised to accumulate positions in small quantities.
Small investors should invest with a medium to long-term horizon and avoid trading positions in precious metals as the commodity market is quite volatile.

Economists surprised as black gold gets pricier

MUMBAI: Stock and equity market players and economists were surprised by the decision of government-run oil marketing companies (OMCs) to raise price of petrol by Rs 5 per litre, since they expected the prices of diesel, cooking gas and kerosene to go up as well.

Dealers and analysts agree that hike in the prices of petro products was on the cards, but none expected this to come only for petrol. Now they feel since technically only petrol prices have been 'de-controlled', meaning OMCs can hike its price without consulting the government, and not of diesel, LPG and kerosene, the ministry will raise prices of the other products once global crude prices stabilize.

"Of late, global crude prices have turned volatile. Probably this has put the government on a wait-and-watch mode and defer a decision on the hike in prices of other products," said Siddhartha Sanyal, Chief India Economist, Barclays Capital.

Economists feel since a hike in petrol prices will have a minimal impact on the rate of inflation, this has been hiked. "The direct impact of the hike could be 10-15 basis points (100 basis points = 1%) for a Rs 5 rise, while the indirect impact is much less," Sanyal added.

On the other hand, any hike in the price of diesel has substantially higher indirect impact, including on the prices of food items. "With the food price inflation showing some signs of moderating, probably the government does not want to disturb it," said a bond market dealer. Although brokers and dealers expect the stocks of OMCs to gain when markets open on Monday, but hiking the price of only one product is seen as 'lopsided'.

US attorney who rattled Wall Street

Every few days during the trial of Galleon co-founder Raj Rajaratnam, Preet Bharara, the US attorney for the Southern District of New York, would quietly enter the courtroom and take a seat in the last row.
From that unassuming vantage point, Bharara watched his colleagues try to persuade a jury to convict the former hedge fund titan of securities fraud and conspiracy.

The presence of Bharara at the largest insider trading case in a generation—and the office's resounding victory on Wednesday—signaled that the chief federal prosecutor in Manhattan was back as the sheriff of Wall Street.

Over the last decade, the New York attorney general, federal prosecutors in Brooklyn , the Manhattan district attorney and even the Justice Department in Washington angled for their share of financial fraud cases, an area traditionally dominated by the Southern District.

But Bharara has not-soquietly reaffirmed his office's leading role in pursuing corporate crime with this landmark insider trading case, which relied on aggressive prosecutorial methods and unprecedented tactics. For the first time, federal authorities used wiretaps to listen in on stock traders swapping illegal tips.
"What this case has done," said Neil Barofsky, a former Southern District prosecutor who recently served as the special inspector general for the government's Troubled Asset Relief Program, "goes well beyond simply putting a billionaire hedge fund manager behind bars."

"The case will impact an entire industry," Barofsky said. He said that Bharara "did more than just oversee and support the prosecutionhe made sure that the target audience, traders on Wall Street, fully understood the extraordinary lengths that his office will go to discover these crimes, and that justice will be served."
Bharara was an infant in 1970 when he came to the US from India with his parents. He grew up in Eatontown, NJ, and earned degrees from Harvard and Columbia Law School. After several years in private practice, including a stint at Gibson Dunn & Crutcher in New York, Bharara became a federal prosecutor in Manhattan, handling organized crime, narcotics and securities fraud cases. In 2005, he became chief counsel to Senator Charles Schumer of New York, leading a Congressional inquiry into the firings of US attorneys.

Some lawyers have wondered aloud whether Bharara may have political aspirations like his predecessors, including former New York Mayor Rudolph Giuliani, who filled the post in the 1980s. As with Giuliani, Bharara is a charismatic figure who is comfortable in front of cameras , can talk tough and has a knack for the witty sound bite. At a news conference announcing Rajaratnam's arrest , Bharara riffed off a famous line from the movie "Wall Street."

"Greed, sometimes, is not good," he said.

Unlike Giuliani, whose political ambitions seemed barely hidden while he led the prosecutor's office, Bharara has told friends he has no interest in elected office. "Everything about Preet's record suggests that he's a federal prosecutor for all the right reasons ," said Randy Mastro, a lawyer at Gibson Dunn and a former top deputy under Mayor Giuliani. "The best prosecutors are often those who don't have political ambitions." Mastro, who overlapped for a time with Bharara at Gibson Dunn, added, "But that doesn't mean he shouldn't be drafted into running."

Ellen Davis, Bharara's spokeswoman , said in a statement on Thursday: "Preet loves his job and has no desire to run for public office now or ever."

Bharara has not commented publicly on the Rajaratnam verdict, other than a short statement in a news release . But in a series of speeches, he has explained his aggressive approach to corporate crime.

"When sophisticated business people begin to adopt the methods of common criminals , we have no choice but to treat them as such," Bharara said weeks after revealing the use of wiretaps in building a case against Rajaratnam. "To use tough tactics in these circumstances is not being heavy-handed ; it is being even-handed ."
He has taken that approach in other areas of financial crime.

Cartelization: Airlines seek more time from CCI

CHENNAI: Cargo traffic at major ports rose 7% to 49.8 million tonnes (mt) in April , the highest since February 2010. The cargo volumes were healthy despite a 26% (year-on-year ) drop in iron ore cargo volumes.

The traffic was driven by strong growth in petroleum , oil and lubes (POL) cargo, which was up 15% yoy, and container volumes which were up 5%. Solid cargo reported a 2.5% yearover-year growth.

POL, witnessed a 15% rise in volumes in April, rising to 15.5 mt. Container volumes grew by around 5% to 9.9 mt, coal volumes by 47% to 7.6 mt, and fertilizer volumes grew by 39% year-over-year to 1.3 mt.

Container cargo volumes at JNPT, the biggest port in the country, grew by 1% year-over-year to 4.96 mt in April and all-India container traffic was up around 7%year-over-year at 9.9 mt. Container cargo in India was boosted Vishakhapatnam port, which saw a 51% year-over-year cargo volume growth at 0.7 mt, and Chennai port, which saw container volumes rise 22% to 0.7 mt.

In April, 11 ports posted positive traffic growth, of which Tuticorin and Haldia were up 29% and 21% respectively, data from Indian Ports Association said.

TCS rejigs top management of UK unit

MUMBAI: India's largest software exporter, Tata Consultancy Services (TCS), has rejiged the top management deck of its UK arm Diligenta, as it seeks to grow the BPO business. It has named Phiroz Vandrevala, executive director of TCS, as the managing director and vice chairman of Diligenta. Vandrevala, 53, was the chairman of the six-year-old unit that started operations by acquiring the life and pension businesses of the Pearl Group.

According to the Tata Group policy, a person cannot hold the chairman and managing director's post and so TCS's MD N Chandrasekaran will now don the chairman's role at Diligenta. The changes are with immediate effect, said a company statement. Following the changes, Vandrevala, who has been with TCS for several years, would cease to be its executive director.

He will, however, continue to be on the board of the $8-billion company but in a non-executive capacity. He joined the TCS board in 2005. The Pearl deal worth 486 million pounds, at one shot, made TCS the second largest firm in the UK to service the life and pension sector. In 2010, Diligenta acquired Unisys Insurance Services that brought business worth pounds 250 million. Diligenta employs over 1,500 people and counts Old Mutual, Sun Life Insurance among others as its clients. In 2009-10, Diligenta reported a net loss of Rs 56 crore on a turnover of Rs 456 crore.

Big-ticket mergers will need competition panel's nod from June 1

India has joined the club of countries that control corporate mergers and acquisitions (M&As). The Competition Commission of India (CCI) has notified the long-awaited regulations on big-ticket M&As.

The new norms, drafted with the objective of curbing anti-competitive practices, will come into effect from June 1.

However, M&As that commenced before June 1 with definitive action have been kept outside the competition watchdog's purview.

It is not clear if big-ticket deals such as the proposed Cairn-Vedanta one will now fall under the purview of the CCI. Though the companies have got the approval from their boards and the process of acquisition is well underway, the deal is yet to be sealed.

The notified Sections 5 and 6 of the Competition Act will enable the CCI probe any combination that is likely to have an appreciable adverse effect on competition in the relevant market, said Mr Dhanendra Kumar, Chairman, CCI. But CCI will have to take decisions within 180 calendar days of the proposal.

A combination taking place outside India with insignificant local nexus and effect on markets in India will not come under the purview of CCI. For instance, if Coca-Cola acquires a bottling plant in Bolivia, then it need not notify the CCI. But in the case of two competitive Intellectual Property Rights (IPRs) holders merging abroad, the CCI may come into the picture.

“In the pharmaceutical industry, for example, the aspirin IPR is held by two. If they merge abroad, it would have an impact on the Indian market and that would amount to a local nexus,” said a CCI official.

Transactions such as acquisition of shares up to 15 per cent solely as investment, voting rights or stock splits, bonus issues, stock-in- trade, raw material, stores and spares, have been exempted from the ambit of these sections.

In interconnected transactions, a single notice covering all the small transactions may be filed by the parties.

Fee, a source of revenue

The fee for filing notification, a source of revenue for the CCI, has been drastically reduced from the proposed Rs 40 lakh to Rs 50,000 for Form 1 (simple) and Rs 10 lakh for Form 2 (detailed).

Further, CCI officials would be available to the industry for informal discussions and guidance.

Industry bodies such as FICCI and CII have welcomed this move. Ms Pallavi S. Shroff, Senior Partner and Head of the Competition/Antitrust Practice at Amarchand Mangaldas, said, “The regulations are a step in the right direction. Industry may still have some concerns over the powers of the Commission to review acquisitions where control is not being acquired and the notifying party or transaction is subject to a possible 210-day review.”

“The regulations have clarified that pipeline mergers need not be notified (to CCI). This is a welcome step,” says Mr Samir Gandhi, partner at Economic Laws Practice.

Though the sections exempt some combinations that happen outside India, Mr Gandhi feels that the “CCI has not defined what it means by the term ‘insignificant local nexus', so we need clarity on, or a definition to, that.”

Sensex hovers near 18500; metals, IT, FMCG down

MUMBAI: Indian markets were witnessing a subdued session as weak cues from global peers dampened sentiments. According to analysts, the market is likely to take cues from IIP data to be released later in the day. Gains in auto, capital goods and pharmaceuticals were offset by losses in metals and technology space.

"After a big scare last week, the Indian market has lacked action and excitement this week, with the key indices getting stuck in a "no-man's-land". But, all that could potentially change in the next few sessions, as market participants react to the latest IIP numbers today and the results of the assembly polls on Friday.

We expect a weak opening, thanks largely to a global sell-off led by the US market. But, there may be a turnaround if the IIP data turns out to be better than expected. The drop in crude might also aid the sentiment. Also watch out for the weekly inflation numbers. Overall, we see the sideways consolidation continuing with dull volumes," said IIFL report

At 9:35 am; Bombay Stock Exchange's Sensex was at 18514.53, down 70.43 points or 0.38 per cent. The 30-share index hit a high of 18547.72 and low of 18458.98 in early trade.

National Stock Exchange's Nifty was at 5544.30, down 20.75 points or 0.37 per cent. The broader index touched a high of 5552.85 and low of 5527.30 in trade so far.

BSE Midcap Index was up 0.05 per cent and BSE Smallcap Index moved 0.10 per cent higher.

Amongst the sectoral indices, BSE Metal Index declined 0.92 per cent, BSE IT Index slipped 0.31 per cent and BSE FMCG Index moved 0.25 per cent lower. BSE Auto Index was up 0.10 per cent, BSE Capital Goods Index moved 0.01 per cent higher.

Hindalco (-1.78%), Sterlite Industries (-1.55%), HDFC (-1.38%), Sesa Goa (-1.15%) and TCS (-1.09%) were the major Nifty losers.

Grasim (2.11%), Siemens (1.43%), Bajaj Auto (1.03%), Maruti (0.90%) and Ranbaxy Laboratories (0.65%) were the top gainers.

Market breadth was positive on the NSE with 734 gainers against 635 losers.

Asian markets were witnessing a profit booking session. Nikkei 225 was down 0.65 per cent, Hang Seng declined 0.83 per cent and Seoul Composite slipped 1.38 per cent.

Renault to up parts sourcing from India

CHENNAI: French carmaker Renault will source 80 million worth components this year from India to feed its overseas plants. The firm sourced 35 million worth parts last year.

Renault is gearing up for its re-entry after severing ties with Mahindra & Mahindra. The first car will be its sedan Fluence which will be assembled at the companys plant in Oragadam,Chennai. The plant was set up in alliance with Nissan with a capacity to produce 4 lakh cars a year.

Increased sourcing of parts for our global operations demonstrates our determination to make India the hub for our activities in this region, Sudhir Rao, deputy managing director, Renault India,said. The company had announced plans to launch five cars over the next 18 months. We will now launch five new models in the Indian market over the next 15 months instead of 18 months, Rao said. The company, he said, will have cars in every segment in 15 months.

Terming the Indian market as a challenge, Rao said Renaults success in India was crucial. India entry is a litmus test for success. Only if we succeed here, some other markets will open up for Renault. It is a huge challenge, Rao said.
The company hopes to have 14 dealer outlets across 12 cities by June 2011 which will increase to 40 outlets by December. In the third phase the dealer footprint will increase to 100 outlets.

Component sourcing by Renaults alliance partner Nissan from India for its worldwide operations is also gaining momentum. The company had envisaged $10 million worth components to be sourced from Indian vendors for its plants Thailand, China, Japan and the UK. For the last year we sourced components worth $40 million. For the current fiscal (ending March 2012),we will source $100 million worth parts, Kiminobu Tokuyama,MD of Nissan India,said.

Indian villagers fear arrival of nuclear ‘monster’

In the once-tranquil fishing village of Tulsanda on India’s western coast, Sushima Surve, a 50-year-old shopkeeper and mother of two, is in a state of anxiety.

The source of her unease is the government’s plan to build a nuclear power station – with up to six reactors generating 9,900 megawatts (MW) – next door to the community.

The Jaitapur power plant, to be built by French energy group Areva, is due to start with two third-generation European reactors. At a price of $9.3bn, they will provide 3,300MW of much-needed power to the state of Maharashtra, whose state capital is Mumbai, India’s financial hub.

But up and down a coastal region famed for its luscious Alphonso mangos and bountiful seas, residents such as Ms Surve fear the reactors will devastate their livelihoods. Their protest marches, candlelight vigils and hunger strikes have gained new fervour since the crisis at Japan’s stricken Fukushima Daiichi plant.

“When I saw pictures of people evacuating the Fukushima zone I thought, ‘That might happen to us one day if we don’t stop the government,” says Ms Surve. “We will live in the shadow of a monster.”

The intense protests at Jaitapur highlight the struggle India faces in realising the vast expansion of its nuclear energy capacity that has been a driving ambition ever since a groundbreaking 2008 deal with the US ended its nuclear pariah status.

In the port of Sakhri Nate, 3km from the proposed site, coffee shops and street vendors’ stalls are plastered with posters of the Fukushima plant, alongside pictures of nuclear mushroom clouds.

Last month, a 30-year-old fisherman was shot and killed and several others were injured in the port, when police opened fire on anti-nuclear protesters mobbing the police station.

“We have to do everything possible to make sure his death isn’t in vain,” says fisherman Amjad Borkar. “This struggle is about self-determination, democracy, public safety and the future of our community.”

Grassroots resistance to the nuclear plant at Jaitapur extends well beyond those losing their land, to those living in a wide area around the 936 hectare project site.

Farmers worry that the reactor’s proximity will affect mango prices, while fishermen fear discharges from the reactors could devastate fish stocks, and that coastal access will be restricted in antiterrorist security measures.
Ratnagari, the chosen site for India’s new 9,900 MW nuclear plant

“Once the plant is built, they will not allow boats to get close to it, and that’s exactly where many of us fish,” says Mr Borkar, who exports prawns and mackerel. “The bottom line is we will be stranded.”

Areva, which is still negotiating commercial terms with India’s state-owned Nuclear Power Corp and is yet to start work at the site, insists the reactors are safe, and will have "no impact" on the environment.

“It is absolutely normal for local people and other stakeholders to raise questions,” the company said in an e-mail response to questions. “Through open and transparent information about the project, it is quite possible to alleviate people’s legitimate concerns for their safety and environment.”

The anxiety over India’s nuclear plans is not confined to the grassroots.

Prime Minister Manmohan Singh’s government has signed preliminary deals with Areva, Russia’s Rosatom, and US-based General Electric to buy reactors in an apparent gesture of thanks to friendly governments for helping end India’s nuclear outcast status.

Yet A. Gopalakrishnan, former chairman of India’s Atomic Energy Regulatory Board, says those decisions have come too early. The decisions over what reactors to buy, he says, should have been made only after Indian nuclear experts studied their technical parameters, and ranked them.

Both India, and Areva, may find the resistance more than they bargained for. Mango farmer Praveen Gawankar, who lost one of his five acres of land to the project, says he is willing to die to stop the nuclear plant.

“I will tie myself to the ground,” he says. “They will have to bulldoze me away, they will have to hit me, they will have to kill me, but I can guarantee you there is no way I’m going down easily.”

SBI raises base rate, bplr by 75 basis pts

State bank of India (SBI), India’s largest lender, has increased its base rate and its benchmark prime lending rate (BPLR) by 75 basis points (bps) each, following the recent policy rate increases by the Reserve Bank of India (RBI).

The bank’s base rate, or the minimum lending rate, will be 9.25 per cent, while the BPLR will be 14 per cent from May 12. This is the steepest rate rise by a commercial bank since the last policy announcement. This is also the second rate increase by the state-run lender in a month. On April 25, the bank had raised its lending rates by 25 bps. According to RBI guidelines, banks can revise their base rates at least once every quarter.
“The increase in lending rates is in line with the policy rate rise by RBI earlier this month, which was aimed at curbing inflation,” said Managing Director and Chief Financial Officer Diwakar Gupta. He also said the bank did not expect a further increase in deposit rates after the latest rise.
Currently, the bank offers home loans at 100 bps above the base rate and car loans at 225 bps above the base rate. With this rate rise, the bank would now charge interest on home loans at 10.25 per cent and car loans at 11.50 per cent.

RBI had raised policy rates by 50 basis points in its annual monetary and credit policy announcement on May 3. The mid-quarter review is slated for June 16. After the rate increases by RBI, most banks had raised their lending rates. The base rates of a few banks have even touched double digits.

SBI Chairman Pratip Chaudhuri had earlier said SBI may revise both lending rates and deposit rates to aid the transmission of policy actions.

Nifty lackluster; tech, realty, metals gain

MUMBAI: Indian markets were witnessing a sluggish session due to lack of cues to give direction to market. Technology, realty and metals led the gainers pack while oil&gas, FMCG and banks were the major underperformers.

"The start today will be quiet again but the undertone is not as bad as it was last week. FII selling seems to have abated a bit.

Robust Chinese trade data boosted the sentiment across the globe on Tuesday. The latest data shows inflation staying elevated in China last month even as industrial output slowed.

Back home, the latest IIP report will be out on Thursday. It will be a light day in terms of corporate results. ABB India, Apollo Tyres and Grasim Industries are the notable ones to watch out for.

Meanwhile, SBI has hiked BPLR and the base rate by 75 bps. It has also increased rates on shorter tenor deposits. Oil PSUs will remain in focus as the EGoM on fuel prices has been deferred till next week," said IIFL report.

At 9:45 am; National Stock Exchange's Nifty was at 5539, down 2.25 points or 0.04 per cent. The broader index touched a high of 5556.85 and low of 5537.55 in trade so far.

Bombay Stock Exchange's Sensex was at 18514.74, up 1.97 points or 0.01 per cent. The 30-share index hit a high of 18575 and low of 18504.72 in early trade.

BSE Midcap Index was up 0.32 per cent and BSE Smallcap Index moved 0.45 per cent higher.

Amongst the sectoral indices, BSE Oil&gas was down 0.49 per cent, BSE FMCG Index slipped 0.19 per cent and BSE Bankex declined 0.08 per cent. BSE IT Index was up 0.79 per cent, BSE Realty Index moved 0.79 per cent higher and BSE Metal Index advanced 0.53 per cent.

Hero Honda (1.81%), Reliance Communications (1.55%), DLF (1.47%), TCS (0.73%) and Tata Motors (0.58%) were the major Nifty gainers.

NTPC (-1.11%), ONGC (-0.77%), Bajaj Auto (-0.47%), ITC (-0.40%) and Maruti (-0.34%) were the top Nifty losers.

Market breadth was positive on the NSE with 1065 gainers against 648 losers.

Google rolls out new music service

NEW DELHI: Google on Tuesday announced a cloud based music service that will let users store their songs on its servers and stream them on any computer or smartphones using an internet connection anywhere, anytime. This comes a day after it announced availability of movie renting service at YouTube.

The company also said users will be able to rent movies from Android Market and watch them on computing device, including smartphones.

The service - Music Beta - was announced at a Google event in San Francisco . Initially , the service will be an invitation-only , similar to the way Gmail was in the early days and will be available only in the US . Users will be able to upload up to 20,000 songs on a cloud based hard disk . Cloud is a term for web-based computing where data is stored on servers connected to internet.

In March , Amazon launched a similar service like Google called Cloud Player . Vishal Tripathi , an analyst with Gartner Research said that with Music Beta , Google is aiming squarely at Apple's iTunes .

"Seemingly both products are different. On iTunes you can buy songs but can't store them in a cloud. But I believe the differences are just because Google and record labels failed to reach a deal in time ," said Tripathi . "Once the deals are done , Googlewilloffer users an option to buy songs as well store them on the cloud," he added . Apple is slated to launch music streaming service , rumoured to be called iCloud, soon .

In India, Google has already partnered several movie studios to offer full Hindi films on YouTube.

Recently, Shemaroo Entertainment announced that Dil To Bachha Hai Ji and Aakrosh were made available on YouTube on the day their of DVD release .

Rupee gains 7 paise against US dollar in early trade

MUMBAI: The Indian Rupee appreciated by 7 paise to Rs 44.67 per dollar at the Interbank Foreign Exchange today, supported by a higher opening in the stock market and dollar weakness against the euro and other Asian currencies.

The rupee had depreciated by 2 paise to close at Rs 44.74/75 against the US currency in yesterday's trade due to dollar demand from banks and importers in view of a firm trend overseas.

Forex dealers said dollar weakness against the euro and other Asian currencies overseas and a higher opening in the stock market helped the rupee gain some ground against the American dollar.

Meanwhile, the Bombay Stock Exchange Sensex was up by 62.23 points, or 0.33%, at 18,575.00 in opening trade today.

Optimizing web business

Paras Chopra and Sparsh Gupta of fer a great lesson on how the internet can provide opportunities to build a profitable global business in next to no time. Chopra is just 23, Gupta is 25, and within two years of starting work on a project they call a 'website optimizer', they have several thousand customers, including Microsoft, Groupon, Rackspace, MakeMyTrip, FourSquare, and WWF.

And while Chopra and Gupta said the company was profitable, one person, who knows them well, described the company as "insanely profitable" .

They call their company Wingify. "Just thought it was a cool name and the URL was available," says Chopra. And their product, Visual Website Optimizer (VWO), helps marketers create different versions of their website in real time to figure out which one works best.

If your website has a coloured button that users need to click to download a product , you can check in real time which colour works best to persuade users to click on it. The technology randomly shows, say, green and red buttons, and then generates the data to tell you which one drew more clicks. It can test similarly for different layouts of a web page and tell you which one made viewers stay longer on it or pushed people to take some actions on the website like downloading objects. It can generate 'heat maps' of your web page that tell you how many people clicked on which parts of your page. That could help you determine where you should place your most important messages or links. Chopra thought of the idea to create an easy-to-use website optimizer when he found that a free version offered by Google was hard to use even for technical folks. "Google has not updated the product for the last five years. We found that people needed it, and saw an opportunity," he says. Chopra, who grew up in Delhi, developed a serious interest in programming and web applications when he was still studying . He joined a biotech course in Delhi College of Engineering (DCE) because he had some interest in computational biology (used in modeling gene networks), but web application was his real interest.

In 2007, when he was in his penultimate year at DCE, he developed an application that allowed multiple live web pages to be presented as a slide show. In his final year at college, he developed a music portal for independent rock bands. "It failed because nobody pays to listen to music," says Chopra, wryly.

Once out of college, he was keen to work on a project that would combine data mining , marketing and technology. The result was a testing and analytics product. "But I built in too many features and people did not know what to do with it," says Chopra. Which is when he felt that he might be better off focusing on just the testing part of the analytics product and improve on the Google offering.

By December 2009, he had a beta version of the product ready, which he distributed among bloggers. With feedback pouring in over the next six months, he improved on the product, and finally launched it commercially in May 2010.

Chopra meanwhile also got in touch with Gupta, who was senior to him in DCE and who had gone on to do a masters in science from Oxford University where his major was artificial intelligence. He initially worked part time for Wingify. But now, he works full-time . "I focus on the technology, and Paras focuses more on the business," Gupta says.

They have spent almost nothing on marketing . Chopra uses blogs and writes guest posts on popular websites about testing and website optimization to attract attention to their product. "The idea is also to build our image as thought leaders in the space," he says.

Globally, there are other such testing products, such as Optimizely and Adobe's Omniture. But Chopra and Gupta say those are priced substantially higher than their product. "That's one reason why our revenues are growing by 10-15 % per month," says Chopra.

Now they are looking at adding more features that big enterprises value, such as enabling real-time targeting of website visitors with promotions, based on their activities on the websites.
"But our USP will always be ease of use. With our product, companies would not have to involve their IT departments to test their websites," says Chopra.

Jaguar Land Rover plans £1bn bond sale

Jaguar Land Rover, the British luxury carmaker, plans to raise about £1bn in its first bond sale since it was acquired by India’s Tata Motors in 2008, the company told the Financial Times.

The move comes as JLR plans to invest £5bn over the next five years to develop new higher-quality vehicles that can rival BMW, Mercedes-Benz and Audi – the three German groups that dominate the luxury end of the business globally.


However, bankers in Mumbai said that the bond sale was also linked to Tata Motors’ intention to dilute the £2.3bn debt it took out to acquire the luxury marques from Ford Motor, the US auto giant.

The Indian group plans to shift part of its debt burden on to JLR’s balance sheet, which has been posting strong revenues in the past five quarters, people close to Tata said.

“The company does not want to comment on the bond sale but we can confirm that we plan to raise £1bn via a bond sale,” Tata Motors told the Financial Times.

Citigroup, Credit Suisse, JPMorgan and Standard Chartered have been hired by JLR to conduct the bond sale, people familiar with the issue said.

The bond sale will be partly in sterling- £500m - and partly in dollars - $400m (£244m) due in 2018, and another $400m due in 2021.

JLR, which returned to profit last year after a deep sales slump during the financial crisis that stretched its owner’s finances, is now in better position to make long-term investments.

S&P assigned a B plus to JLR’s corporate credit rating, as it assess group’s financial risk profile as “aggressive” and its business risk profile as “weak”.

The carmaker plans to spend £5bn on product development and new equipment at JLR’s three UK plants, which together employ just over 17,000 people, with some of it likely to cover new investments at a planned factory in China.

As part of this effort to improve the vehicles’ overall quality, the group also said that it plans hire 1,000 engineers over the next two years, a move that would increase the total number of highly skilled employees to 4,000 people. During the downturn the company shed about 2,500 jobs.

JLR is now the only volume manufacturer of premium vehicles in the UK and the largest investor in automotive research and development and engineering. It spends about 50 per cent of its materials budget with UK suppliers, and earlier this year announced more than £2bn of supply contracts in the UK, specifically for the new Range Rover Evoque model.

Profit after tax for Jaguar Land Rover was £275m for the third quarter of the current financial year, the fifth consecutive quarter of profit, driven by higher sales volumes, improvements in margins and efficiency measures, including strong sales in the UK for both Jaguar and Land Rover models.

Nifty rangebound; Ranbaxy, Ambuja Cement, ICICI up

MUMBAI: Indian markets were witnessing a choppy session due to lack of cues from global peers. Gains in FMCG, oil&gas and metals stocks were offset by losses in banks, IT and realty space.

"We are in for a sedate opening and another day of rangebound consolidation, as investors remain wary after last week's drubbing. The undertone continues to be cautious amid macroeconomic headwinds like high inflation and rising borrowing costs. Crude oil has recovered after last week's crash and is back above US$100 per barrel.

Corporate earnings have been mixed at best. FII flows have not been supportive of late. Policy-making at the Centre has been in a limbo for a while now and may not pick up pace anytime soon.

In a nutshell, the market will largely remain stable without any clear bias. Investors ought to focus on stock centric action, as the main indices are not going anywhere in a hurry. The near term outlook is uncertain with a rangebound trade likely between 5450 and 5630. The 100-DMA is at 5680 and 200-DMA is placed around 5750.

Oil & Gas PSUs will be in focus amid reports that the EGoM will on Wednesday consider fuel price hike and possible steps to reform pricing of petroleum products," said IIFL report.

At 9:40 am; National Stock Exchange's Nifty was at 5540.90, down 10.20 points or 0.18 per cent. The broader index touched a high of 5558.80 and low of 5537.50 in trade so far.

Bombay Stock Exchange's Sensex was at 18530.22, up 1.26 points or 0.01 per cent. The 30-share index hit a high of 18568.25 and low of 18485.42 in early trade.

BSE Midcap Index was up 0.06 per cent and BSE Smallcap Index moved 0.19 per cent higher.

Amongst the sectoral indices, BSE Bankex was down 0.85 per cent, BSE IT slipped 0.50 per cent and BSE Realty Index declined 0.16 per cent. BSE FMCG Index was up 1.69 per cent, BSE Oil&gas Index moved 0.57 per cent higher and BSE Metal Index advanced 0.31 per cent.

Ranbaxy Laboratories (-1.69%), Ambuja Cement (-1.54%), Hero Honda (-1.47%), HDFC Bank (-1.38%) and ICICI Bank (-1.26%) were the top Nifty losers.

Hindustan Unilever (4.04%), Hindalco (1.73%), ONGC (1.53%), ITC (1.38%) and Sterlite Industries (1.24%) were the major gainers.

Market breadth was positive on the NSE with 719 gainers against 649 losers.

HSBC bank under US IRS scanner

The US Internal Revenue Service (IRS) has asked HSBC Bank to provide information on incomes of US residents who may be using accounts in India to evade income taxes.

The move has raised several questions. First, why did US authorities single out HSBC? Second, would US IRS also approach banks like State Bank of India and Citibank for information?

Responding to questions by Business Standard on what steps the US IRS was likely to take in its investigation, a spokesperson for the US Embassy press office in India said, “ As a rule, the IRS doesn’t comment on ongoing investigations”.

On April 7, US authorities sought an order from a federal court in San Francisco, authorising the US IRS to request for information from HSBC Bank, USA, on US residents who may be using accounts at HSBC India to evade federal income taxes. The US government had filed a petition with the court to allow the IRS to serve what is called a ‘John Doe’ summons on the bank and had, subsequently, secured the approval. The summons seek to obtain information to help US authorities determine if additional actions are needed.

The IRS uses John Doe summons to obtain information about possible tax frauds by people whose identities are unknown. It has directed HSBC USA to produce records identifying US taxpayers with accounts at HSBC India. The US government believes many of these account holders have kept their accounts hidden from the IRS. When contacted, an HSBC spokesperson said, “HSBC does not condone tax evasion and fully supports US efforts to promote appropriate payment of taxes by US taxpayers.”

US laws require taxpayers to pay federal income taxes on all income earned worldwide and report foreign financial accounts if their total value exceeds $10,000 at any time. A failure to report a foreign account may result in a penalty of up to 50 per cent of the amount in the account at the time of the violation.

The issue assumes significance, since the US IRS 2011 Voluntary Disclosure Program expires on August 31. A failure to disclose incomes by HSBC account holders before that date would result in severe action, apart from the penalty, if information by HSBC proves such people guilty.

On the possibility of support from the Indian government with regard to Indian banks, a finance ministry official said the US may seek such information from India under the Double Taxation Avoidance Agreement. Banks which have a branch, a subsidiary or a representative office in the US, may come under pressure. Information on accounts of US citizens of Indian origin may be directly sought from these banks, the way information was sought from Swiss bank UBS.

For information from Indian banks which are not present in the US, the US would have to approach the foreign taxation division in the Central Board of Direct Taxes under the finance ministry.

Income tax department officials say banks have to deduct TDS (tax deduction at source) on bank accounts of US citizens in India. These account holders can then seek credit (exemption) for that in the US.

Undoubtedly, the whole issue has brought out in the open the fact that banks helping their customers in evading tax in any jurisdiction is not a profitable business any more.

What led IRS to HSBC

The US IRS decided to approach HSBC after securing actionable intelligence and information on the matter. A US Justice Department press release issued on April 7, which sought permission to approach HSBC, said according to documents filed with the government’s petition on January 26, a jury in Newark, New Jersey, indicted Vaibhav Dahake of Somerset. He was charged with conspiracy to defraud the United States by using undeclared accounts in the British Virgin Islands and HSBC India to evade his income taxes.

“According to those documents, employees of HSBC Holdings and its affiliates operating in the United States assured Dahake that accounts maintained in India would not be reported to the IRS,” said the US Justice Department. “The government alleges that, according to HSBC’s website, in 2002, HSBC India opened a ‘representative office’ at an HSBC USA office in New York City to enable non-resident Indians (NRIs) living in the United States to open accounts in India,” it said.

The US Justice Department said in 2007, HSBC India allegedly opened a second representative office at an HSBC USA office in Fremont, California, purportedly “to make banking transactions more convenient for the NRI community based in California.” “Although HSBC India closed those offices in June 2010, the government alleges NRI clients may still access their accounts at HSBC India from the United States,” it said.

According to the petition documents, NRI clients told IRS investigators bank representatives in the United States told them they could open accounts at HSBC India. This would help them avoid paying income tax in the US on interest earned on these accounts and that HSBC would not report the income earned on HSBC India accounts to the IRS.

Markets open flat, Hindalco surges 2%

Markets opened flat tracking lacklustre cues in the global markets as commodity prices firmed up renewing concerns of inflation and further rate hike. The Nifty was up 2 points, at 5,553 and the Sensex gained 23 points, at 18,555,

Brent Crude rebounded to $114/bbl and silver also climbed 5% leading the recovery in the precious metals as Dollar Index fell to 74.6 from 74.7 after breaking out above the 75 level.

US Markets bounced back as energy and natural resource companies surged led by rebound in commodities. The Dow Jones Industrial Average gained 0.4%, the Standard & Poor’s 500 Index added 0.5% and the Nasdaq Composite rose 0.6%.

Asian markets were trading flat in the morning session. Japan's Nikkei Stock Average was down 0.2% driven by potential power shortages. Hang Seng surged 0.8% as crude firmed up boosting energy shares. Shanghai Composite was also up 0.3%. South Korea's Kospi Composite fell 0.4%, Taiwan's weighted index was up 0.1% and Singapore's Strait Times gained 0.3%.

Back in India investors continue to wait on the sidelines and are watching the movement in commodity prices very closely. If commodities continue to remain at elevated level it will put pressure on operating margins of the companies wleading to earnings downgrades going forward.

On the technical charts, Nifty continued to form higher tops and bottom indicating that the markets are in a bear trend. Edelweiss in the morning note said "we continue to maintain an upward bias in the absolute near-term and look for a test of 5630-5650 resistance clusters. On the downside the index is pivoted at 5500 on a daily closing basis."

According to the data available from Bombay Stock Exchange, FIIs were net buyers of Rs 196 crore after being net sellers for past 10 sessions. While DIIs were net sellers of Rs 126 crore on Monday.

Among the new listing, Future Ventures (Private Equity firm) a subsidiary of the Future Group led by Kishore Biyani dipped 10% to Rs 9 on listing.


From the individual stocks, Hindalco Industries surged 1.9% after fourth quarter earnings beat expectations; net profit rose 6.7% to Rs 709 crore. Power Finance Corporation follow-on-public offer (FPO) opened today and the stock was down 1.6% at Rs 209.4. The price band of the FPO is set between Rs 193-203 per share and government plans to raise around Rs 4,700 crore.

BSE Bankex was the top sectoral loser, down 0.2%. HDFC Bank fell 0.5%, ICICI Bank lost 0.4% and Bank of India declined 0.7%. While, the BSE FMCG index was the top gainer, up 1%. Hindustan Unilever was up 3.4%, Dabur India gained 0.9% and Nestle was up 0.9%.

Top gainers on the Sensex were Hindustan Unilever, up 3.4%, Hindalco, up 1.9% and Sterlite gained 1.4%. Top losers were JP Associates and Tata Power, down 0.5% each, and Hero Honda declined 0.4%.

Braoder markets were trading flat. Market breadth was marginally positive, 517 stocks advanced for 498 declining stocks.

Panel moots higher tax on diesel cars

NEW DELHI: Diesel cars and SUV owners should pay higher tax when purchasing these vehicles, the government-appointed committee recommended on Monday.

While diesel is cheaper in Indian market, diesel cars will cost more as committee suggest an up-front tax on vehicles to compensate for differential fuel pricing. The panel headed by Kirit Parikh on low carbon strategies for inclusive growth, which submitted its interim report, also recommended mandatory vehicle rating system and minimum efficiency standards for all vehicles.

The committee says the measures will help 10% reduction in fuel consumption along with improvement in air quality, road safety, better mobility and energy security..

The Parikh committee report came out with suggestions to adopt low carbon strategies for power, transport , industry, buildings and forestry sectors. It projects a range for green house gas emissions intensity reduction in 2020 for both eight and nine per cent real GDP growth.

For transport sector, it has recommended to increase in railways' share, which is more energy efficient, in freight transports by speeding up construction of dedicated freight corridors , better operational efficiency and reducing burden of cross-subsidy vis-à-vis passenger traffic.

Worried with declining share of public and non-motorized transports , the committee has asked to frame housing and habitat policies to encourage neighbourhood shops by promoting mixed land-use cities, city planning to encourage public transport and mass transport corridors for medium cities.

RIL eyes bigger play in fin space

MUMBAI: Reliance Industries, India's largest private sector company, is looking beyond the DE Shaw Group for its participation in the country's rapidly growing financial services space. It plans to join hands with leading global companies to offer a host of financial products, the company disclosed in its annual report.

"The financial services sector is poised for rapid and significant growth," Mukesh Ambani, CMD, Reliance, wrote in his letter to shareholders. "Several international companies have approached Reliance to be their partner of choice in establishing niche businesses in India. We will participate in this sector through partnerships with leading global companies," Ambani added. The statement comes at a time when there are reports about Reliance buying a substantial stake in IL&FS, one of the leading players in financing of infrastructure projects, and also about its foray into the life insurance space.

Ambani is now busy chalking out major plans in the financial services sector after he forged a deal with his younger brother, Anil, in May last year that allowed both to enter each others' business. At one point, Reliance had plans for a consumer finance joint venture with Citi but things didn't materialize as it competed with Anil's Reliance Consumer Finance. However, things started taking shape in March this year when the $58-billion company announced a joint venture with New York based DE Shaw Group to build a financial services business in India. While both the parties said that the venture will incorporate DE Shaw's investment and technology expertise with Reliance's operational knowledge and extensive presence across India, they haven't revealed the segments they would operate in. Reports suggest that the venture initially plans to float a $800-million infrastructure fund, and then get into carbon trading.

Analysts pointed out that DE Shaw is known mainly as a hedge fund giant. However, Reliance wants to play across the financial services spectrum, including MFs and insurance.


Meanwhile, Reliance's employee strength in 2010-11 fiscal stood at 22,661, down by 704 employees compared to the staff strength last fiscal. This number, however, excludes its subsidiaries such as Reliance Retail.

The Indian major is looking beyond DE Shaw. At one point, Reliance Retail, a unit of the energy-to-education company, was looking to launch co-branded credit cards targeting its loyalty programme (Reliance One) customers.

Although Reliance has its origin in textiles and grew into petrochem, oil explorations and retail, its chief was recently inducted on the global board of Bank of America Corporation, one of the largest banks in the US. Other than this high-profile association of its chairman with a global financial powerhouse, Reliance also nurtures a desire to get into banking, as and when the sector regulator RBI gives the green signal to corporate houses to set up banks. Reliance over the last five years has entered into over 50 partnerships, more noticeable in the retail and shale gas sectors.

Meanwhile, Reliance's staff strength in 2010-11 stood at 22,661, down by 704 employees compared to the staff strength last fiscal. This number, however, excludes its subsidiaries such as Reliance Retail.

Seeking Business, States Loosen Insurance Rules

Companies looking to do business in secret once had to travel to places like the Cayman Islands or Bermuda.

Vermont, and a handful of other states including Utah, South Carolina, Delaware and Hawaii, are aggressively remaking themselves as destinations of choice for the kind of complex private insurance transactions once done almost exclusively offshore. Roughly 30 states have passed some type of law to allow companies to set up special insurance subsidiaries called captives, which can conduct Bermuda-style financial wizardry right in a policyholder’s own backyard.

Captives provide insurance to their parent companies, and the term originally referred to subsidiaries set up by any large company to insure the company’s own risks. Oil companies, for example, used them for years to gird for environmental claims related to infrequent but potentially high-cost events. They did so in overseas locations that offered light regulation amid little concern since the parent company was the only one at risk.

Now some states make it just as easy. And they have broadened the definition of captives so that even insurance companies can create them. This has given rise to concern that a shadow insurance industry is emerging, with less regulation and more potential debt than policyholders know, raising the possibility that some companies will find themselves without enough money to pay future claims. Critics say this is much like the shadow banking system that contributed to the financial crisis.

Aetna recently used a subsidiary in Vermont to refinance a block of health insurance policies, reaping $150 million in savings, according to its chief financial officer, Joseph M. Zubretsky. The main reason is that the insurer did not need to maintain conventional reserves at the same level as would have been required by insurance regulators in Aetna’s home state of Connecticut.

In other big transactions, companies including MetLife, the Hartford Financial Services Group, Swiss Reinsurance, Genworth Financial and the American International Group, among others, have refinanced life, disability and long-term-care insurance policies, as well as annuities.

For the states, attracting these insurance deals promotes business travel and creates jobs for lawyers, actuaries and other white-collar workers, who pay taxes. States have also found that they can impose modest taxes on the premiums collected by captives.

For insurers, these subsidiaries offer ways to unlock some of the money tied up in reserves, making millions available for dividends, acquisitions, bonuses and other projects. Three weeks after Aetna’s deal closed, the company announced it was increasing its dividend fifteenfold.

And as changes to the nation’s health systems are phased in, such innovations might even help hold down the cost of insurance for consumers, much as selling pooled mortgages to investors has made buying a home less expensive.

The downside, though, is that the states are offering a refuge from other states’ insurance rules, especially the all-important ones requiring companies to have sufficient reserves. California, for one, has already chosen not to try to lure such businesses. “We are concerned about systems that usher in less robust financial security and oversight,” said Dave Jones, the California insurance commissioner.

While saying that he wanted to remain open to innovation, Mr. Jones added, “We need to ensure that innovative transactions are not a strategy to drain value away from policyholders only to provide short-term enrichment to shareholders and investment bankers.”

The cost of some of the deals has been considerable. In 2008, MetLife used a subsidiary in Vermont to handle a crucial $3.5 billion letter of credit, with help from Deutsche Bank, because the subsidiary was not subject to the same collateral requirements as in New York. The trade immediately bolstered MetLife’s balance sheet, helping the company to endure that year’s market turmoil without government assistance. But MetLife agreed to pay Deutsche Bank $3.5 million a year for 15 years, according to internal documents obtained by The New York Times — locking itself into high costs for years.

MetLife said its transaction was in keeping with industry rules and norms, and Deutsche Bank declined to comment.

Another issue is public oversight. State regulators normally require insurance companies to make available reams of detailed information. A policyholder can find every asset in an insurer’s investment portfolio, for instance, or the company the carrier turns to for reinsurance. But not if the insurer relies on a captive. The new state laws make the audited financial statements of the captives confidential.

Oil Gains in New York as U.S. Economic Data Signals Slump Was Exaggerated

Oil rose in New York, rebounding from the biggest weekly decline since 2008 as signs of an improving economy in the U.S., the world’s largest crude consumer, stoked speculation last week’s slump was exaggerated.

Futures climbed as much as 1.9 percent today, snapping a five-day losing streak, after Labor Department data on May 6 showed payrolls expanded more than forecast. The global economy isn’t weak enough to justify a freefall in prices, Qatar Oil Minister Mohammed bin Saleh al-Sada said yesterday. Oil’s 14-day relative strength index, a measure of how rapidly prices are rising or falling, dropped to 29.2 on May 6. A reading below 30 typically indicates prices may rebound.

“You’d expect some sort of reaction after the reasonable employment data,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, who predicted oil will average $100 a barrel this year. “I’d expect a nervous recovery after the move from $113 down to $97. We may see some strength the next couple of days.”

Crude for June delivery increased as much as $1.81 to $98.99 a barrel in electronic trading on the New York Mercantile Exchange. It was at $98.75 at 12:22 p.m. Singapore time. On May 6, the contract fell $2.62, or 2.6 percent, to $97.18, the lowest settlement since March 15.

Oil slumped 15 percent last week, the biggest drop since December 2008. Prices are up 29 in the past year.

Brent crude for June settlement on the London-based ICE Futures Europe exchange rose as much as $1.57, or 1.4 percent, to $110.70 a barrel.
Bullish Bets

Hedge funds were caught with bullish bets near record highs last week as oil in New York plunged.

Large speculators reduced net-long positions by 2.4 percent to 293,823 futures and options in the seven days to May 3, according to the U.S. Commodity Futures Trading Commission’s weekly Commitments of Traders report. That’s still within 5.7 percent of an all-time high in March.

U.S. retail sales climbed in April, bolstering evidence employment gains are allowing Americans to weather higher fuel costs, according to economists surveyed by Bloomberg News before a Commerce Department report on May 12. Purchases probably gained 0.6 percent, based on the median forecast.

A stable oil price is a goal of the Organization of Petroleum Exporting Countries, Qatar’s al-Sada said yesterday. Markets are well supplied and it’s too early to say whether OPEC will decide to pump more crude at its next meeting on June 8, he said. The 12-member group is responsible for 40 percent of the world’s oil supply.
Brent Crude

Brent, the benchmark for Europe and Africa, has rallied 17 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and disrupted exports from Libya, an OPEC member.

Security forces yesterday beat back protests and fired on demonstrators in Syria and Yemen as Egypt’s justice minister vowed to restore order with an “iron fist,” after sectarian clashes in Cairo left 12 people dead.

“Some of the tightness that was expected around the supply side seems to have abated,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said in an interview with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.”

The regional conflict “seems to be relatively well contained,” said Westmore, who predicted oil will average $113 a barrel in the third quarter.

Asia Stocks Advance as U.S. Jobs Report Beats Estimate

Energy producers led Asian stocks higher, with the regional benchmark index climbing for the first time in five days, after stronger-than-forecast U.S. jobs growth bolstered confidence in the world’s largest economy and halted a rout of commodity prices. Japan’s power companies fell.

Cnooc Ltd., China’s largest offshore oil producer, climbed 1.8 percent in Hong Kong as oil rebounded from the biggest weekly decline since 2008. BHP Billiton Ltd., Australia’s biggest oil producer, gained 0.8 percent in Sydney. HSBC Holdings Plc (5), Europe’s biggest bank by market value, added 1.5 percent in Hong Kong after Greece denied it was considering leaving the euro. Chubu Electric Power Co. slumped 11 percent in Tokyo after Japan’s Prime Minister Naoto Kan asked the utility to shut its Hamaoka nuclear plant.

The MSCI Asia Pacific Index climbed 0.4 percent to 138.06 as of 1:41 p.m. in Tokyo, with about five stocks rising for every four that fell.

“The U.S. nonfarm payroll data released on Friday was encouraging to see, although the tenor of recent economic releases out of the U.S. has been very mixed,” said Tim Schroeders, Melbourne-based manager at Pengana Capital Ltd., which oversees about A$1 billion. “It is highly unrealistic that Greece will leave the European Union.”
Regional Indexes

The Asia-Pacific gauge sank 1.4 percent last week after central banks from India to the Philippines raised interest rates and U.S. reports ahead of Friday’s employment data suggested the country’s economic recovery was slowing.

Japan’s Nikkei 225 (NKY) Stock Average slipped 0.6 percent, dropping for a second straight day on speculation the government’s request to shut the nuclear reactor located close to an earthquake fault-line may hurt the economy. Australia’s S&P/ASX 200 Index rose 0.4 percent, while Hong Kong’s Hang Seng Index gained 0.9 percent.

Futures on the Standard & Poor’s 500 Index added 0.5 percent today. In New York, the index advanced 0.4 percent on May 6 as a government report showed the U.S. economy added more jobs than forecast in April, easing concern that higher fuel prices are slowing a recovery.

Payrolls increased by 244,000 workers last month, the biggest gain since May 2010, after a revised 221,000 increase the prior month, the U.S. Labor Department said. Economists projected an April increase of 185,000, according to the median estimate in a Bloomberg News survey. Employment excluding government jobs jumped the most in five years, while the jobless rate rose to 9 percent, the first increase since November.
Economic Recovery

“The stronger-than-expected payroll report tells us that the U.S. economic recovery is becoming more sustainable,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which manages $98 billion in Sydney. “More jobs means more spending, means more profits, means more jobs, and so on.”

In Hong Kong today, Cnooc gained 1.8 percent to HK$18.30, while PetroChina Co., the nation’s largest oil company, advanced 2.3 percent to HK$10.72. BHP Billiton, the world’s No. 1 mining company, rose 0.8 percent to A$44.92 in Sydney, while Woodside Petroleum Ltd. (WPL), Australia’s second-biggest oil and gas producer, gained 1.1 percent to A$45.81.

A measure of energy stocks on the Asia-Pacific gauge advanced the most among 10 industry groups as oil futures climbed for the first day in six. Crude for June delivery rose as much as 1.9 percent in electronic trading on the New York Mercantile Exchange after slumping 14.7 percent last week, the biggest decrease since December 2008.
Payroll Data

HSBC climbed 1.5 percent to HK$83.95 in Hong Kong, and Billabong International Ltd. (BBG), a surf-wear maker that gets more than a fifth of its sales in Europe, climbed 1.2 percent to A$6.71 in Sydney.

European Union leaders showed their resolve in keeping the euro region together, agreeing in an unannounced meeting last week to ease the terms of the 110 billion-euro ($158 billion) lifeline that Greece received last year.

The euro tumbled 3.45 percent in the final two days last week, the biggest back-to-back loss since 2008, as Der Spiegel magazine said Greece may withdraw from the currency bloc. EU officials denied the report and said Greece will need more aid.

In Sydney, Spotless Group Ltd. (SPT), a corporate-services provider that grew from one Melbourne dry-cleaning store in 1946, soared 15 percent to A$2.24 after receiving a A$657 million ($707 million) takeover bid from a private-equity firm. Spotless, which didn’t name the suitor, said the A$2.50-a-share cash offer was too low. Spotless provides facilities management, food and cleaning services in more than 30 countries.
Power Companies

Chubu Electric plunged 11 percent to 1,569 yen in Tokyo today, leading power and gas companies to the steepest decline among 33 industry groups in Japan’s broader Topix index.

Prime Minister Kan on May 6 asked the nation’s third- biggest utility to shut its Hamaoka power plant, citing a government study that showed an 87 percent likelihood of a magnitude-8 quake striking the area within 30 years. It is the first government request to close reactors since a temblor and tsunami hit northeastern Japan on March 11 and caused the world’s worst nuclear accident in 25 years.

Tohoku Electric Power Co., a utility based in Miyagi prefecture, northern Japan, sank 2 percent to 1,206 yen after Asahi newspaper reported it may post a full-year loss after power plants were damaged in the earthquake.
Government Measures

Toyota Motor Corp., the world’s largest carmaker, retreated 0.8 percent to 3,185 yen.

“A lot of industrial-use products such as cars and electronics parts are produced in the Chubu district,” said Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets Co. in Tokyo. “The uncertainty about the government measures toward nuclear power is a negative factor for stock prices.”

The Topix has declined about 8 percent through May 6 since March 10, the day before a magnitude-9 earthquake and tsunami devastated Japan’s northeast coast, disabled a nuclear power plant and disrupted supply chains at companies from Toyota to Canon Inc.

Tata Motors pins hopes on twin-track approach

Tata Motors has set its sights on being an “unconventional global player” in the automotive industry, drawing out important benefits from its twin bases in India and Britain, according to Carl-Peter Forster, the chief executive and a German car industry veteran.

Mr Forster concedes that the combination of operations at Tata Motors – part of India’s Tata industrial group, and the country’s largest automotive supplier – is unusual by the standards of the global vehicle industry.

Tata has a large commercial vehicles business in India and a solid position in cheap and small cars built around its Nano vehicle, the brainchild of Ratan Tata, the Tata Group’s chairman.

Tacked on to this is UK-based Jaguar Land Rover, which specialises in relatively sophisticated cars at the expensive end of the market. Tata bought JLR from Ford Motor three years ago for $2.3bn as part of a plan by Mr Tata to make his group more global.

“We have a combination of a low cost base and a rapidly growing market in India, and a strong technological position in Britain,” says Mr Forster. “That gives us a lot of advantages which we can build on.”

An aeronautical engineer who previously ran General Motors’ operations in Europe and who also worked at BMW, Mr Forster was recruited to Tata Motors last year by Mr Tata as part of an effort to inject international management and engineering expertise at the top of the Mumbai-based company.

Mr Forster bases much of his hope for future growth on connections between the company’s 7,500-strong engineering team. Of these people, 4,000 work in the UK for JLR, with the rest mainly in India.

The company plans to add another 1,000 to the UK engineering group, part of a £5bn ($8.2bn) effort in the next five years to bring new vehicle models to JLR’s product range, while also increasing “at a rapid rate” its cadre of India-based engineers, Mr Forster said.

One idea for mixing the efforts of the Indian and UK groups involves expertise in fields such as novel transmissions or turbocharger-based fuel compression. Both of these are being developed by JLR to try to make versions of cars that emit less carbon dioxide.

The skills in these fields could be linked to fresh concepts for lightweight materials – which also have a role in low-emission vehicles – that have been developed in India as part of Tata’s project to build the Nano.

Ian Fletcher, an automotive analyst at IHS Global Insight, a consultancy, said Mr Forster’s strategy had “some credibility” as a result of the potential that existed for collaboration between the Indian and UK parts of the business.

“For instance, it is fairly easy to visualise the company in the next few years introducing a new series of models that could fill the gap between its small cars made in India and the vehicles at the luxury end of the market that JLR is making.”

In the year to March, Tata Motors produced 1.1m vehicles – a small figure by the standards of the world’s biggest automotive businesses such as Toyota and Ford.

Of the total, slightly less than half were medium and heavy trucks, of which the company is the world’s fourth-biggest producer. The company’s car output during the year of 512,000 vehicles was split about equally between operations in India and Britain.

As part of Mr Tata’s plans to boost Tata Motors’ overall engineering effort, the company is forming closer links with several small UK-based technology businesses. For instance, it has taken a minority stake in Bladon Jets, a maker of small “micro-turbine” engines that use ideas borrowed from jet engines to provide greater thrust. It is also collaborating with Torotrak, which is developing new gear boxes.