By Kartik Goyal - Jul 1, 2011
India’s manufacturing grew at the slowest pace in nine months after the central bank raised interest rates by the most in a decade to tame prices.
The Purchasing Managers’ Index fell to 55.3 in June from 57.5 in May, HSBC Holdings Plc and Markit Economics said in an e-mailed statement today. A number above 50 indicates expansion.
Factory output has weakened in India and China, the fastest-growing major economies, as policy makers tightened borrowing costs to curb price gains. India’s inflation may quicken after the government increased diesel prices last week, Goldman Sachs Group Inc. and Kotak Securities Ltd. said.
“India is not going to see any respite from inflationary pressures after the fuel price hike,” said Suvodeep Rakshit, an economist at Kotak Securities Ltd. in Mumbai. “The RBI will continue tightening despite signs of growth moderating.”
Rakshit expects the central bank to lift borrowing costs for the 11th time since the start of 2010 in the next monetary policy meeting on July 26.
The Bombay Stock Exchange’s Sensitive Index fell 0.2 percent at 11:50 a.m. in Mumbai, and the yield on the 7.8 percent bond due in April 2021 gained three basis points to 8.35 percent. The rupee strengthened 0.2 percent to 44.61 per dollar.
India’s key wholesale-price inflation accelerated to 9.06 percent in May from an 8.66 percent gain in April, according to the commerce ministry.
Diesel Costs
The government’s June 24 decision to increase diesel tariffs for the first time in a year will spur living costs, Goldman said June 27 as it raised India’s inflation forecast to 8.6 percent for the year ending March 31 from an earlier estimate of 8.1 percent.
Policy makers allowed state-run refiners including Indian Oil Corp. to increase diesel costs by 3 rupees (7 cents) a liter, kerosene by 2 rupees a liter and cooking gas by 50 rupees for every 14.2 kilogram bottle. The decision was aimed at reducing government subsidies and help limit losses at companies selling fuels below cost.
Opposition parties including the Bharatiya Janata Party organized protests in the country against the move. Inflation erodes purchasing power in a nation where the World Bank estimates almost three-quarters of the people live on less than $2 a day.
Rate Increase
The Reserve Bank has lifted its benchmark repurchase rate by 275 basis points since the start of 2010.
India’s economic expansion is finding support from exports, which rose 56.9 percent in May from a year earlier to $25.9 billion, according to a statement from the commerce ministry today. Imports rose 54.1 percent to $40.9 billion.
In China, policy makers on June 14 increased lenders’ reserve requirements to drain cash from the economy after consumer prices rose 5.5 percent in May, the biggest jump since 2008. China has so far boosted rates four times since September.
A Chinese manufacturing index fell to the lowest level since February 2009, signaling that the world’s second-biggest economy is cooling as export demand weakens and the government reins in credit to control inflation.
The Purchasing Managers’ Index was at 50.9 in June compared with 52 in May, the China Federation of Logistics and Purchasing said in an e-mailed statement today. A separate survey showed manufacturing output declined for the first time since July 2010, HSBC Holdings said today.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Friday, July 1, 2011
Thursday, June 30, 2011
Sensex momentarily crosses 19K
Markets had a gap up opening with the Sensex starting at 19,026, up 176 points and the Nifty opened with a 44 points gain at 5690. The broader too had a strong opening with the smallcap index starting with a 0.6% gain and the midcap index gained nearly 0.5%.
However, moving ahead the markets succumbed to profit booking and the BSE benchmark index is currently up 69 points at 18,915 and the Nifty id at 5,662 up 15 points.
All the sectoral indices started in the positive barring the Consumer Durables index. Realty gaining 1.4% is the top gainer in the opening trades followed by MEtal, PSU and IT indices adding in the range of 0.6-0.8%.
Overnight in the US markets, the stocks rose pushing the Dow Jones Industrial Average to a fourth consecutive quarterly rise. The index gained 1.3% in a span of four days. The S&P 500 Index rose 1%, to 1,320, leaving it down 1.8% for the month and off 0.4% for the just-ended quarter. The Nasdaq Composite Index climbed 1.2%, to 2,773.52, down 0.3% for the quarter and off 2.2% since June began.
The Asian markets also started in the green with the Seoul Composite and Jakarta Composite leading the gains, up 1% followed by Taiwan Weighted, Nikkei and Straits Times gaining 0.6% - 0.7%. Meanwhile, Shanghai Composite was trading flat with a positive bias though Chinese trade data-Purchasing Managers' Index slipped to 50.9 in June from 52.0 in May.
Back home, the top gainers among the Sensex stocks are ONGC up 3% followed by Sterlite, DLF, Jaiprakash Associates, Bajaj Auto and ITC gaining 1-2%
Bharti Airtel down 2% continues to be the top loser for the second consecutive day. Maruti Suzuki, Hindustan Unilever and Reliance Industries losing 0.6-0.9% are some of the other significant losers.
The market breadth is positive. 1344 stocks advanced while 367 declined on the BSE.
However, moving ahead the markets succumbed to profit booking and the BSE benchmark index is currently up 69 points at 18,915 and the Nifty id at 5,662 up 15 points.
All the sectoral indices started in the positive barring the Consumer Durables index. Realty gaining 1.4% is the top gainer in the opening trades followed by MEtal, PSU and IT indices adding in the range of 0.6-0.8%.
Overnight in the US markets, the stocks rose pushing the Dow Jones Industrial Average to a fourth consecutive quarterly rise. The index gained 1.3% in a span of four days. The S&P 500 Index rose 1%, to 1,320, leaving it down 1.8% for the month and off 0.4% for the just-ended quarter. The Nasdaq Composite Index climbed 1.2%, to 2,773.52, down 0.3% for the quarter and off 2.2% since June began.
The Asian markets also started in the green with the Seoul Composite and Jakarta Composite leading the gains, up 1% followed by Taiwan Weighted, Nikkei and Straits Times gaining 0.6% - 0.7%. Meanwhile, Shanghai Composite was trading flat with a positive bias though Chinese trade data-Purchasing Managers' Index slipped to 50.9 in June from 52.0 in May.
Back home, the top gainers among the Sensex stocks are ONGC up 3% followed by Sterlite, DLF, Jaiprakash Associates, Bajaj Auto and ITC gaining 1-2%
Bharti Airtel down 2% continues to be the top loser for the second consecutive day. Maruti Suzuki, Hindustan Unilever and Reliance Industries losing 0.6-0.9% are some of the other significant losers.
The market breadth is positive. 1344 stocks advanced while 367 declined on the BSE.
Nifty on a roll, likely to cool off ahead of Q1 show
MUMBAI: Power and construction shares may beat the Nifty in July if trends in the rollover of June derivatives contracts are any indication of what is in store for investors. However , scandal-hit telecom stocks will remain under pressure. The Nifty might cool off in the July series ahead of the quarterly results . The Nifty witnessed 67% positions from June derivatives getting shifted to the July series against 60% seen in the previous expiry.
Market-wide rollovers were at 77% compared with 73% in last expiry. This is in line with the average of 76% rollovers seen in the past four expiries. "Some amount of cooling is expected in the July series after the recent rise and the Nifty may continue to trade in range between 5400-5730 levels ahead of the first quarter corporate results," said Yogesh Radke, head-quantitative research, Edelweiss Securities.
In the past five trading sessions , foreign institutional investors have poured more than Rs 3,500 crore into Indian equities. The Nifty has risen 7% in the past one week. "This is a very difficult market to trade," said a broker. "Exchange traded fund money has not yet come into the system, if that happens Nifty will touch 6000 in less than a week," he said.
However, a section of the market continues to be cautious after the recent surge. "The Nifty is forming a lower top pattern and the fall could be severe all the way down to 5000 levels. Traders squared off their short positions and did not roll them over, so the view remains skeptical as the Nifty may remain volatile in the coming days with more bias on the downside," T Harihar, head-institutional derivatives , ICICI Securities, said. Sectors that can perform well include defensives such as the FMCG sector.
Market-wide rollovers were at 77% compared with 73% in last expiry. This is in line with the average of 76% rollovers seen in the past four expiries. "Some amount of cooling is expected in the July series after the recent rise and the Nifty may continue to trade in range between 5400-5730 levels ahead of the first quarter corporate results," said Yogesh Radke, head-quantitative research, Edelweiss Securities.
In the past five trading sessions , foreign institutional investors have poured more than Rs 3,500 crore into Indian equities. The Nifty has risen 7% in the past one week. "This is a very difficult market to trade," said a broker. "Exchange traded fund money has not yet come into the system, if that happens Nifty will touch 6000 in less than a week," he said.
However, a section of the market continues to be cautious after the recent surge. "The Nifty is forming a lower top pattern and the fall could be severe all the way down to 5000 levels. Traders squared off their short positions and did not roll them over, so the view remains skeptical as the Nifty may remain volatile in the coming days with more bias on the downside," T Harihar, head-institutional derivatives , ICICI Securities, said. Sectors that can perform well include defensives such as the FMCG sector.
Wipro can apply for vendor status: WB
NEW DELHI: The World Bank on Thursday said Wipro is now eligible to apply for becoming a vendor, as the four-year ban imposed on the software major ended this month.
"Wipro has served their full four-year sanction period (June 13, 2007 to June 12, 2011) for the sanctionable practice of providing improper benefits to Bank staff," a World Bank spokesperson said from Washington.
The multilateral lender had banned Wipro in June 2007 from doing business with the group under its corporate procurement programme. The ban, however, came to light only in January 2009.
Wipro had denied allegations of providing improper benefits to Bank staff.
The spokesperson said Wipro till date has indicated its ongoing interest in doing business with the World Bank, "but they are not in discussions with us".
"Wipro has not reapplied for vendor status with the Bank; however, should they do so, the Bank's own vendor registration process will evaluate their eligibility with an appropriate level of diligence applied to the issue of governance," he said.
Queries to Wipro on whether the company is interested to become a vendor again remained unanswered. "Our inability to get future business from the World Bank will not adversely affect our business and results of operations," Wipro had said after the debarment was made public.
The World Bank had banned Wipro after finding that the company was "non-responsible" under the group's vendor eligibility policy.
In the latest list of "non-responsible vendors", there are eight Indian entities, including Satyam Computer Services and Megasoft Consultants.
"Wipro has served their full four-year sanction period (June 13, 2007 to June 12, 2011) for the sanctionable practice of providing improper benefits to Bank staff," a World Bank spokesperson said from Washington.
The multilateral lender had banned Wipro in June 2007 from doing business with the group under its corporate procurement programme. The ban, however, came to light only in January 2009.
Wipro had denied allegations of providing improper benefits to Bank staff.
The spokesperson said Wipro till date has indicated its ongoing interest in doing business with the World Bank, "but they are not in discussions with us".
"Wipro has not reapplied for vendor status with the Bank; however, should they do so, the Bank's own vendor registration process will evaluate their eligibility with an appropriate level of diligence applied to the issue of governance," he said.
Queries to Wipro on whether the company is interested to become a vendor again remained unanswered. "Our inability to get future business from the World Bank will not adversely affect our business and results of operations," Wipro had said after the debarment was made public.
The World Bank had banned Wipro after finding that the company was "non-responsible" under the group's vendor eligibility policy.
In the latest list of "non-responsible vendors", there are eight Indian entities, including Satyam Computer Services and Megasoft Consultants.
Wednesday, June 29, 2011
Indians lead among emerging markets in charity
MUMBAI: India has emerged as one of the leaders in charitable giving among emerging markets, compared to other nations such as China and Brazil. In 2010, Indians gave 50% more since 2006 as a percentage of GDP at approximately $5-6 billion, up from $2 billion in 2006, according to a report released by global consultancy firm Bain & Company.
Private charity contributions were largely dominated by money pumped in by foreign funds with individuals constituting only 26% of the overall $5-6 billion. In the US, on the other hand, individual philanthropy totals up to as much as 75% of all private giving while in the UK it stands at 60%.
The report, which includes a survey of over 300 wealthy individuals, said there was optimism that philanthropy is poised to rise further in India as the population of rich individuals grows and more advanced systems come into place to help people give more. The report added that 40% of wealthy Indian individuals plan to increase philanthropic donations over the next five years.
Talking to TOI, Bain & Co's Arpan Sheth, author of the report, said, "In the last 18 months private philanthropy has gone up primarily due to an increase in wealthy individuals, a shift in attitude of high net worth individuals, and the younger generation of entrepreneurs increased their intent to give."
Although, India's private charitable donations between 0.3% and 0.4% of the GDP in 2010 was up by 0.2% in 2006, it's still far behind the developed countries. While in the US, private philanthropy accounted for 2.2% of the GDP in 2009, in the UK it was 1.3% in 2010.
"The culture of each market is different from the other. In the developed markets, the institutions for giving are also much advanced unlike here in India. But the real disparity is because individual donations in India still constitute only 26% of all private charitable contributions," said Madhur Singhal, the co-author of the report, here on Wednesday. In contrast, individual philanthropy mounted to 75% of all private giving in the US while in the UK it stood at 60%.
The most popular causes for philanthropy were education, housing and shelter, and food with the majority of 40% saying education was the top cause of donation. The survey also pointed out that wealthy Indians are giving away between 1.5-3% of their annual household income into charity however, the wealthiest of Indians are donating much less as compared to their US counterparts who contribute about 9% of their income.
Singhal from Bain & Co added that Indian corporates will have to lead the way as far as private giving goes to up the contribution. The report said individual contributions from current estimates of $1.5 billion to as much as $4.6 billion by 2015.
Private charity contributions were largely dominated by money pumped in by foreign funds with individuals constituting only 26% of the overall $5-6 billion. In the US, on the other hand, individual philanthropy totals up to as much as 75% of all private giving while in the UK it stands at 60%.
The report, which includes a survey of over 300 wealthy individuals, said there was optimism that philanthropy is poised to rise further in India as the population of rich individuals grows and more advanced systems come into place to help people give more. The report added that 40% of wealthy Indian individuals plan to increase philanthropic donations over the next five years.
Talking to TOI, Bain & Co's Arpan Sheth, author of the report, said, "In the last 18 months private philanthropy has gone up primarily due to an increase in wealthy individuals, a shift in attitude of high net worth individuals, and the younger generation of entrepreneurs increased their intent to give."
Although, India's private charitable donations between 0.3% and 0.4% of the GDP in 2010 was up by 0.2% in 2006, it's still far behind the developed countries. While in the US, private philanthropy accounted for 2.2% of the GDP in 2009, in the UK it was 1.3% in 2010.
"The culture of each market is different from the other. In the developed markets, the institutions for giving are also much advanced unlike here in India. But the real disparity is because individual donations in India still constitute only 26% of all private charitable contributions," said Madhur Singhal, the co-author of the report, here on Wednesday. In contrast, individual philanthropy mounted to 75% of all private giving in the US while in the UK it stood at 60%.
The most popular causes for philanthropy were education, housing and shelter, and food with the majority of 40% saying education was the top cause of donation. The survey also pointed out that wealthy Indians are giving away between 1.5-3% of their annual household income into charity however, the wealthiest of Indians are donating much less as compared to their US counterparts who contribute about 9% of their income.
Singhal from Bain & Co added that Indian corporates will have to lead the way as far as private giving goes to up the contribution. The report said individual contributions from current estimates of $1.5 billion to as much as $4.6 billion by 2015.
Tuesday, June 28, 2011
Markets open higher, metals shine
Markets edged higher in opening trades following firm global cues as expectations increased that Greece would avoid a default. The S&P CNX Nifty gained 30 points, at 5,575 and the benchmark Sensex added 105 points, at 18,598.
Asian markets were trading mostly higher in the morning session on improved investor sentiment. The European Union and International Monetary Fund approved 78 billion euros or $111.4 billion in additional austerity and accelerated asset sale to help Greece differ bail out. Resource related shares edged higher after commodity prices surged overnight. Japan's Nikkei Stock Average was up 1% led by exporter shares. Hong Kong's Hang Seng added 0.3%, but Shanghai Composite bucked trend and edged lower by 0.3%.
Also government's decision last week to raise prices of diesel and cooking gas has increased optimism among the investors that the government may go ahead with its pending reforms giving fillip to the markets. Kishor Ostwal, CMD from CNI Research said that if 5,500 will be maintained until expiry than markets may rise 10% in the next couple of months.
Rollovers on Nifty were in line with previous expiry. Emkay in the morning note said rollovers stood at 40.9% as against 37.2% seen two days before expiry in May. The marginal increase in rollover is largely on account of a decrease in base open interest said Emkay.
Among the sectoral pack metal shares were leading the gains following firm international prices. Among the prominent gainers were Welcorp, up 3.4%, Jindal Saw climbed 3% and Sesa Goa was up 1.5%.
BSE IT shares were trading higher; the index was up 1%. Infosys advanced 1.2%, TCS gained 0.9% and Patni Computers was up 0.7%.
Top gainers on the Sensex were Sterlite, up 2.1%, BHEL added 1.6% and Jindal Steel was up 1.4%. Top losers Bajaj Auto slipped 1.8%, L&T declined 0.2% and ONGC was down 0.2%.
From the broader markets midcap index added 0.5% and smallcap index gained 0.7%.
In the broader market 988 stocks advanced for 362 stocks which declined.
Asian markets were trading mostly higher in the morning session on improved investor sentiment. The European Union and International Monetary Fund approved 78 billion euros or $111.4 billion in additional austerity and accelerated asset sale to help Greece differ bail out. Resource related shares edged higher after commodity prices surged overnight. Japan's Nikkei Stock Average was up 1% led by exporter shares. Hong Kong's Hang Seng added 0.3%, but Shanghai Composite bucked trend and edged lower by 0.3%.
Also government's decision last week to raise prices of diesel and cooking gas has increased optimism among the investors that the government may go ahead with its pending reforms giving fillip to the markets. Kishor Ostwal, CMD from CNI Research said that if 5,500 will be maintained until expiry than markets may rise 10% in the next couple of months.
Rollovers on Nifty were in line with previous expiry. Emkay in the morning note said rollovers stood at 40.9% as against 37.2% seen two days before expiry in May. The marginal increase in rollover is largely on account of a decrease in base open interest said Emkay.
Among the sectoral pack metal shares were leading the gains following firm international prices. Among the prominent gainers were Welcorp, up 3.4%, Jindal Saw climbed 3% and Sesa Goa was up 1.5%.
BSE IT shares were trading higher; the index was up 1%. Infosys advanced 1.2%, TCS gained 0.9% and Patni Computers was up 0.7%.
Top gainers on the Sensex were Sterlite, up 2.1%, BHEL added 1.6% and Jindal Steel was up 1.4%. Top losers Bajaj Auto slipped 1.8%, L&T declined 0.2% and ONGC was down 0.2%.
From the broader markets midcap index added 0.5% and smallcap index gained 0.7%.
In the broader market 988 stocks advanced for 362 stocks which declined.
NSE gets Sebi nod to launch S&P 500, Dow Jones futures
Rupee-denominated contracts will be traded from 9 am to 5 pm.
The National Stock Exchange (NSE) has got regulatory approval to launch futures contracts on benchmark US indices S&P 500 and Dow Jones Industrial Average (DJIA), paving the way for Indian investors to bet on the world’s most influential stock market.India’s leading stock exchange also plans to seek approval from the Securities and Exchange Board of India (Sebi) to launch options contracts on these two US indices.
The rupee-denominated futures contracts, which are going to be launched on NSE soon, will be traded from 9 am to 5 pm from Monday to Friday. This will be the first time an Indian stock exchange will utilise the entire permitted market hours for an equity derivatives product. At present, trading in the cash and derivatives segments of both NSE and the Bombay Stock Exchange (BSE) happens between 9 am and 3:30 pm.
“The S&P and Dow Jones industrial average have displayed historic resilience in holistically capturing the movements of the US market. We hope that bringing them to an Indian trading platform on NSE will help Indian investors diversify their portfolio and take exposure to the US markets, without taking any foreign currency risk, and at low cost," a spokesperson for NSE said.
NSE will launch four quarterly futures contracts on S&P 500 and DJIA having expires in March, June, September and December. The expiry date for these contracts will be the third Friday of the respective contract month.
“These products make a lot more sense for domestic investors than foreign institutional investors,” said T S Harihar, co-head of institutional derivatives at ICICI Securities. “Even though Indian investors can invest up to $200,000 a year to buy shares in overseas markets, there are too many restrictions in doing that. It will be easy for domestic investors to bet on US markets through derivatives on S&P 500 and Dow,” he added.
Apart from the maximum investment limit per year, Indian investors are only allowed to invest in the cash market in overseas stock exchanges at present, and not in derivatives.
The S&P 500 index includes 500 leading companies of the US economy, capturing 75 per cent coverage of US equities. The DJIA index comprises 30 blue-chip US companies and represents about 28 per cent of the float-adjusted market capitalisation of the US stock market.
“These instruments will give global diversification to Indian investors. In principle, they will be useful to almost all domestic investors. But, of course, the products have to be liquid and there needs to be depth,” said Jayanth Varma, professor of finance at Indian Institute of Management, Ahmedabad. “It may take time for these products to become popular in India and for people to figure out where they fit into their asset allocation,” he added.
NSE is likely to appoint market makers, who provide both bid and ask quotes, for bringing liquidity in S&P 500 and DJIA derivatives on its platform. Early this month, Sebi allowed stock exchanges to use market makers in the equity derivatives segment. In March 2010, NSE had signed a cross-listing agreement with the CME group, which gave it exclusive rights to launch futures contracts on S&P 500 and DJIA in India. Following the cross-listing arrangement, the CME group launched dollar-denominated E-Mini and E-Micro futures contracts on NSE Nifty on the CME Globex electronic trading platform in July 2010.
The National Stock Exchange (NSE) has got regulatory approval to launch futures contracts on benchmark US indices S&P 500 and Dow Jones Industrial Average (DJIA), paving the way for Indian investors to bet on the world’s most influential stock market.India’s leading stock exchange also plans to seek approval from the Securities and Exchange Board of India (Sebi) to launch options contracts on these two US indices.
The rupee-denominated futures contracts, which are going to be launched on NSE soon, will be traded from 9 am to 5 pm from Monday to Friday. This will be the first time an Indian stock exchange will utilise the entire permitted market hours for an equity derivatives product. At present, trading in the cash and derivatives segments of both NSE and the Bombay Stock Exchange (BSE) happens between 9 am and 3:30 pm.
“The S&P and Dow Jones industrial average have displayed historic resilience in holistically capturing the movements of the US market. We hope that bringing them to an Indian trading platform on NSE will help Indian investors diversify their portfolio and take exposure to the US markets, without taking any foreign currency risk, and at low cost," a spokesperson for NSE said.
NSE will launch four quarterly futures contracts on S&P 500 and DJIA having expires in March, June, September and December. The expiry date for these contracts will be the third Friday of the respective contract month.
“These products make a lot more sense for domestic investors than foreign institutional investors,” said T S Harihar, co-head of institutional derivatives at ICICI Securities. “Even though Indian investors can invest up to $200,000 a year to buy shares in overseas markets, there are too many restrictions in doing that. It will be easy for domestic investors to bet on US markets through derivatives on S&P 500 and Dow,” he added.
Apart from the maximum investment limit per year, Indian investors are only allowed to invest in the cash market in overseas stock exchanges at present, and not in derivatives.
The S&P 500 index includes 500 leading companies of the US economy, capturing 75 per cent coverage of US equities. The DJIA index comprises 30 blue-chip US companies and represents about 28 per cent of the float-adjusted market capitalisation of the US stock market.
“These instruments will give global diversification to Indian investors. In principle, they will be useful to almost all domestic investors. But, of course, the products have to be liquid and there needs to be depth,” said Jayanth Varma, professor of finance at Indian Institute of Management, Ahmedabad. “It may take time for these products to become popular in India and for people to figure out where they fit into their asset allocation,” he added.
NSE is likely to appoint market makers, who provide both bid and ask quotes, for bringing liquidity in S&P 500 and DJIA derivatives on its platform. Early this month, Sebi allowed stock exchanges to use market makers in the equity derivatives segment. In March 2010, NSE had signed a cross-listing agreement with the CME group, which gave it exclusive rights to launch futures contracts on S&P 500 and DJIA in India. Following the cross-listing arrangement, the CME group launched dollar-denominated E-Mini and E-Micro futures contracts on NSE Nifty on the CME Globex electronic trading platform in July 2010.
PTC to benefit from its high growth, low risk model
Growth in power trading volumes due to capacity addition will benefit the Power Trading Corporation (PTC). The monetisation of its investments in the second half of 2011 will further unlock value. In the past two years, PTC's trading volumes have grown from 10,000 million units to 24,500 million units at a compounded annual growth rate (CAGR) of 35%. This has helped PTC's topline to grow at a CAGR of 33% to Rs 9,063 crore in FY11.
Further, its operating margins have also improved by 70 basis points to 2.5%, aided by the change in trading margins as per CERC regulations last year. As a result, the company's earnings grew by 50% in the past one year to Rs 140 crore.
For short-term trades, the margin is fixed at maximum 0.07 for electricity traded at higher than 3 per unit and 0.04 for electricity traded at lower than 3 per unit. For long-term trades, there is no margin cap as they are generally traded at a lower price than short-term trades. For PTC, long-term trade accounted for only 5% in FY11, which mainly is linked to its 2,100 MW projects. By FY13, the company will be adding another 6,000 MW, which will increase the volume. Given this, plus the overall capacity growth in the power sector, will allow the company to sustain is growth momentum.
Its 60% subsidiary PTC Financial Services will get around 160 crore on monetisation of its stake in Indian Energy Exchange and Ind Bharat project, which will fetch a pre-tax IRR of 76% and 30%. This will further unlock value for PTC. PTC's return on equity has gradually improved in two years to 6.5%. The stock has corrected by 40% in past six months. It is currently trading at price to earning multiple of 16, which is below its three year average multiple of 28.4. Given the high growth and low risk business model, the company provides a safe investment opportunity in the power sector, where most of the other companies are struggling with high fuel cost and low merchant tariffs.
Further, its operating margins have also improved by 70 basis points to 2.5%, aided by the change in trading margins as per CERC regulations last year. As a result, the company's earnings grew by 50% in the past one year to Rs 140 crore.
For short-term trades, the margin is fixed at maximum 0.07 for electricity traded at higher than 3 per unit and 0.04 for electricity traded at lower than 3 per unit. For long-term trades, there is no margin cap as they are generally traded at a lower price than short-term trades. For PTC, long-term trade accounted for only 5% in FY11, which mainly is linked to its 2,100 MW projects. By FY13, the company will be adding another 6,000 MW, which will increase the volume. Given this, plus the overall capacity growth in the power sector, will allow the company to sustain is growth momentum.
Its 60% subsidiary PTC Financial Services will get around 160 crore on monetisation of its stake in Indian Energy Exchange and Ind Bharat project, which will fetch a pre-tax IRR of 76% and 30%. This will further unlock value for PTC. PTC's return on equity has gradually improved in two years to 6.5%. The stock has corrected by 40% in past six months. It is currently trading at price to earning multiple of 16, which is below its three year average multiple of 28.4. Given the high growth and low risk business model, the company provides a safe investment opportunity in the power sector, where most of the other companies are struggling with high fuel cost and low merchant tariffs.
US, India vow to deepen economic engagement
WASHINGTON: India and US on Tuesday vowed to deepen bilateral and multilateral engagement in order to fully capitalise on economic opportunities in the two countries.
"Through stronger collaboration and coordination amongst our economic and financial policymakers, this partnership has sought to deepen US-India bilateral and multilateral engagement in order to fully capitalize on the wealth of economic opportunities between our two nations," a joint statement issued at the end of the conclusion of second India-US Economic and Financial Partnership said.
Finance minister Pranab Mukherjee attended the meeting with US treasury secretary Timothy.
In their joint statement, Geithner and Mukherjee said they discussed the challenges that both economies face in ensuring a strong recovery and price stability in the short term, as well as the range of policies necessary to reach growth at their full potential domestically.
"The United States is committed to making the investments in technology, skills, and infrastructure necessary to maintain and enhance US competitiveness in the global economy. India intends to take steps to marshal private and public saving to meet the infrastructure needs of a rapidly growing Indian economy," it said.
"The United States and India will work together to expand trade and investment links between our two economies, and to develop and strengthen our financial systems. India and the United States will also work together in the G20 on an effective mutual assessment process to bring about strong, sustained, and balanced global growth," the statement said.
"Through stronger collaboration and coordination amongst our economic and financial policymakers, this partnership has sought to deepen US-India bilateral and multilateral engagement in order to fully capitalize on the wealth of economic opportunities between our two nations," a joint statement issued at the end of the conclusion of second India-US Economic and Financial Partnership said.
Finance minister Pranab Mukherjee attended the meeting with US treasury secretary Timothy.
In their joint statement, Geithner and Mukherjee said they discussed the challenges that both economies face in ensuring a strong recovery and price stability in the short term, as well as the range of policies necessary to reach growth at their full potential domestically.
"The United States is committed to making the investments in technology, skills, and infrastructure necessary to maintain and enhance US competitiveness in the global economy. India intends to take steps to marshal private and public saving to meet the infrastructure needs of a rapidly growing Indian economy," it said.
"The United States and India will work together to expand trade and investment links between our two economies, and to develop and strengthen our financial systems. India and the United States will also work together in the G20 on an effective mutual assessment process to bring about strong, sustained, and balanced global growth," the statement said.
Poor worst affected by price rise
NEW DELHI: The recent rise in income levels has helped the middle class cope with higher prices, but the poor have been adversely affected. What also helped the middle class and the upper middle class was the lower spend on food as a proportion of their total income. In some segments, such as consumer durables, there has been a decrease in prices.
"The middle class population spends a bulk of their income on discretionary items like TV, oven etc and therefore benefit from the price decline across these categories... Given that poor households spend (a) higher proportion of their income on food related articles, WPI inflation understates inflation faced by poor households," a study by rating agency Crisil said.
And, the evidence is before us. Several poor households had to give up on consuming dal, when prices rose, and have had to cut down on milk purchases given the rise in prices.
"It suggests that the government is pro-rich and anti-poor," said a top government economist.
Economists, however, did not agree with the report completely. "I would be skeptical about these numbers. We would have to see how these have been modeled. Savings-consumption trade-off depends on a variety of factors," said Pronab Sen, senior advisor in the Planning Commission and the former Chief Statistician of India.
"The middle class population spends a bulk of their income on discretionary items like TV, oven etc and therefore benefit from the price decline across these categories... Given that poor households spend (a) higher proportion of their income on food related articles, WPI inflation understates inflation faced by poor households," a study by rating agency Crisil said.
And, the evidence is before us. Several poor households had to give up on consuming dal, when prices rose, and have had to cut down on milk purchases given the rise in prices.
"It suggests that the government is pro-rich and anti-poor," said a top government economist.
Economists, however, did not agree with the report completely. "I would be skeptical about these numbers. We would have to see how these have been modeled. Savings-consumption trade-off depends on a variety of factors," said Pronab Sen, senior advisor in the Planning Commission and the former Chief Statistician of India.
Monday, June 27, 2011
Larsen May Seek Partner for Electrical Business to Add Products
By Ganesh Nagarajan - Jun 27, 2011
Larsen & Toubro Ltd. (LT), India’s biggest engineering company, may seek a partner for its electrical and automation business to expand its portfolio of switchgears, energy meters and control systems.
“By entering into a joint venture with a foreign company, we enhance our product range,” K.V. Rangaswami, a director on Larsen’s board, said in a June 24 interview in the southern Indian city of Chennai. “A lot can happen once there is a successful partnership.” Some companies have made initial contact, he said without naming them.
Shareholders of the Mumbai-based company last month approved a plan to spin off the division making electrical meters, switchgears and industrial automation products into a separate entity. A foreign partner will be able to tap Larsen’s existing customers, said Rupesh Kumar, an analyst at KR Choksey Shares & Securities Pvt. in Mumbai.
“Demand for electrical equipment in India is very high,” said Kumar, who has a “buy” rating on the stock. “So finding a technology partner is very easy. They can get anybody.”
Chairman A.M. Naik on April 19 denied Larsen had plans to sell its electrical business. The company is in talks to sell its electrical and electronics unit for $3 billion, Reuters reported, citing two people with knowledge of the matter, in April.
Schneider Electric SA and Eaton Corp. were among the possible buyers, Reuters reported.
Plan to Decentralize
Larsen, which has 64 businesses including finance and computer software, plans to split itself into nine units and five subsidiaries to speed decisions and boost growth. This step will help the company focus on each business and simplify its structure, Kumar said.
Negotiations with possible partners may take time, said Rangaswami, who also is president of Larsen’s construction business and is due to retire this month.
Larsen gained 2.7 percent to 1,786.5 rupees at the 3:30 p.m. close in Mumbai yesterday. The stock has declined 9.7 percent this year, compared with a 10.2 percent fall in the benchmark Sensitive Index of the Bombay Stock Exchange.
The electrical and automation business posted a profit before interest and tax of 3.9 billion rupees ($86 million) on revenue of 36.8 billion rupees in the year ended March 31, 2010, according to a company statement on April 6.
To contact the reporter on this story: Ganesh Nagarajan in Chennai at gnagarajan1@bloomberg.net
To contact the editor responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Larsen & Toubro Ltd. (LT), India’s biggest engineering company, may seek a partner for its electrical and automation business to expand its portfolio of switchgears, energy meters and control systems.
“By entering into a joint venture with a foreign company, we enhance our product range,” K.V. Rangaswami, a director on Larsen’s board, said in a June 24 interview in the southern Indian city of Chennai. “A lot can happen once there is a successful partnership.” Some companies have made initial contact, he said without naming them.
Shareholders of the Mumbai-based company last month approved a plan to spin off the division making electrical meters, switchgears and industrial automation products into a separate entity. A foreign partner will be able to tap Larsen’s existing customers, said Rupesh Kumar, an analyst at KR Choksey Shares & Securities Pvt. in Mumbai.
“Demand for electrical equipment in India is very high,” said Kumar, who has a “buy” rating on the stock. “So finding a technology partner is very easy. They can get anybody.”
Chairman A.M. Naik on April 19 denied Larsen had plans to sell its electrical business. The company is in talks to sell its electrical and electronics unit for $3 billion, Reuters reported, citing two people with knowledge of the matter, in April.
Schneider Electric SA and Eaton Corp. were among the possible buyers, Reuters reported.
Plan to Decentralize
Larsen, which has 64 businesses including finance and computer software, plans to split itself into nine units and five subsidiaries to speed decisions and boost growth. This step will help the company focus on each business and simplify its structure, Kumar said.
Negotiations with possible partners may take time, said Rangaswami, who also is president of Larsen’s construction business and is due to retire this month.
Larsen gained 2.7 percent to 1,786.5 rupees at the 3:30 p.m. close in Mumbai yesterday. The stock has declined 9.7 percent this year, compared with a 10.2 percent fall in the benchmark Sensitive Index of the Bombay Stock Exchange.
The electrical and automation business posted a profit before interest and tax of 3.9 billion rupees ($86 million) on revenue of 36.8 billion rupees in the year ended March 31, 2010, according to a company statement on April 6.
To contact the reporter on this story: Ganesh Nagarajan in Chennai at gnagarajan1@bloomberg.net
To contact the editor responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, June 26, 2011
Bank of America Sees Overseas Takeovers by India Companies Curbed by Rates
By George Smith Alexander and Ruth David - Jun 26, 2011
Overseas acquisitions by Indian companies may stay subdued in 2011 as the highest interest rates in more than two years deter chief executives from borrowing for expansion, Bank of America Corp. (BAC) said.
At the same time, inbound deals are likely to rise as foreign companies seize on low interest rates in Europe and the U.S. to buy assets in Asia’s second-fastest growing major economy, said Bala Swaminathan, vice chairman of corporate and investment banking at Bank of America’s Indian unit.
Foreign acquisitions of Indian companies are outpacing outbound transactions this year for the first time in at least a decade, after the central bank raised interest rates 10 times since the start of 2010, data compiled by Bloomberg show. The difference in yields between India’s AAA-rated corporate bonds and similar-maturity U.S. notes touched the highest in at least six years earlier this month, according to the data.
“Why would an Indian company want to borrow at a very high interest rate to buy into markets which are not growing?” Swaminathan said in a June 21 interview in Mumbai. “The way interest rates are poised, international companies can borrow at one or two percent and use that money to come and buy into India.”
While India’s economy grew about four times the pace of the U.S. in the quarter through March, the local benchmark stock index has slumped 11 percent this year, narrowing the valuation gap with the Standard & Poor’s 500 Index. That’s providing added incentive for foreign companies to attempt acquisitions in the nation of 1.2 billion people.
Valuations Fall
Companies on the Bombay Stock Exchange Sensitive Index trade at 14.8 times estimated full-year earnings, the lowest level in more than two years, data compiled by Bloomberg show. That compares with 13 times projected profit for the S&P 500.
The value of mergers involving Indian companies has slumped 32 percent this year to $25 billion, according to Bloomberg data. Inbound deals accounted for 62 percent of the total, up from 27 percent in the same period a year earlier, the data show.
Indian corporate owners’ limited ability to reduce their controlling stakes further may deter multibillion-dollar takeovers abroad, Swaminathan said. He predicted most deals could be in the $50 million to $500 million range.
“Expansionary capital, more than anything else, is sentiment-driven and right now the sentiment in corporate India is not very buoyant,” said Swaminathan, who joined Bank of America from Standard Chartered Plc in August last year.
“Discretionary expenditure on expansion is being deferred until such time as there is clarity.”
Reliance Industries Ltd. (RIL), controlled by billionaire Mukesh Ambani, sold stakes in 23 oil and gas areas in India to London- based BP Plc in February for $7.2 billion, the biggest inbound transaction in more than four years.
TPG Capital and Carlyle Group are among private equity companies in talks for buying a stake in Reliance Communications Ltd.’s mobile-phone towers unit, three people with knowledge of the matter said earlier this month. Reliance Communications is controlled by Anil Ambani, Mukesh Ambani’s brother.
Financing Support
Indian companies seeking acquisitions are increasingly asking banks to help finance the deals, according to Swaminathan.
“Wherever we are doing a transaction on the buy side, it’s reasonable to expect that if there is leverage in the transaction we will part of the leverage,” he said. Bank of America has “significantly” expanded its balance sheet in India since 2010, Swaminathan added without providing details.
The Charlotte, North Carolina-based lender is boosting staff in investment and corporate banking in India, the executive said, declining to give figures for hiring.
More Indian companies may sell divisions to free up cash for expansion, Swaminathan said. J.B. Chemicals & Pharmaceuticals Ltd., based in Mumbai, sold its over-the-counter cough and cold medicine brand in Russia, Doktor Mom, to a unit of Johnson & Johnson in May.
To contact the reporter on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net Ruth David in Mumbai at rdavid9@bloomberg.net
To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Overseas acquisitions by Indian companies may stay subdued in 2011 as the highest interest rates in more than two years deter chief executives from borrowing for expansion, Bank of America Corp. (BAC) said.
At the same time, inbound deals are likely to rise as foreign companies seize on low interest rates in Europe and the U.S. to buy assets in Asia’s second-fastest growing major economy, said Bala Swaminathan, vice chairman of corporate and investment banking at Bank of America’s Indian unit.
Foreign acquisitions of Indian companies are outpacing outbound transactions this year for the first time in at least a decade, after the central bank raised interest rates 10 times since the start of 2010, data compiled by Bloomberg show. The difference in yields between India’s AAA-rated corporate bonds and similar-maturity U.S. notes touched the highest in at least six years earlier this month, according to the data.
“Why would an Indian company want to borrow at a very high interest rate to buy into markets which are not growing?” Swaminathan said in a June 21 interview in Mumbai. “The way interest rates are poised, international companies can borrow at one or two percent and use that money to come and buy into India.”
While India’s economy grew about four times the pace of the U.S. in the quarter through March, the local benchmark stock index has slumped 11 percent this year, narrowing the valuation gap with the Standard & Poor’s 500 Index. That’s providing added incentive for foreign companies to attempt acquisitions in the nation of 1.2 billion people.
Valuations Fall
Companies on the Bombay Stock Exchange Sensitive Index trade at 14.8 times estimated full-year earnings, the lowest level in more than two years, data compiled by Bloomberg show. That compares with 13 times projected profit for the S&P 500.
The value of mergers involving Indian companies has slumped 32 percent this year to $25 billion, according to Bloomberg data. Inbound deals accounted for 62 percent of the total, up from 27 percent in the same period a year earlier, the data show.
Indian corporate owners’ limited ability to reduce their controlling stakes further may deter multibillion-dollar takeovers abroad, Swaminathan said. He predicted most deals could be in the $50 million to $500 million range.
“Expansionary capital, more than anything else, is sentiment-driven and right now the sentiment in corporate India is not very buoyant,” said Swaminathan, who joined Bank of America from Standard Chartered Plc in August last year.
“Discretionary expenditure on expansion is being deferred until such time as there is clarity.”
Reliance Industries Ltd. (RIL), controlled by billionaire Mukesh Ambani, sold stakes in 23 oil and gas areas in India to London- based BP Plc in February for $7.2 billion, the biggest inbound transaction in more than four years.
TPG Capital and Carlyle Group are among private equity companies in talks for buying a stake in Reliance Communications Ltd.’s mobile-phone towers unit, three people with knowledge of the matter said earlier this month. Reliance Communications is controlled by Anil Ambani, Mukesh Ambani’s brother.
Financing Support
Indian companies seeking acquisitions are increasingly asking banks to help finance the deals, according to Swaminathan.
“Wherever we are doing a transaction on the buy side, it’s reasonable to expect that if there is leverage in the transaction we will part of the leverage,” he said. Bank of America has “significantly” expanded its balance sheet in India since 2010, Swaminathan added without providing details.
The Charlotte, North Carolina-based lender is boosting staff in investment and corporate banking in India, the executive said, declining to give figures for hiring.
More Indian companies may sell divisions to free up cash for expansion, Swaminathan said. J.B. Chemicals & Pharmaceuticals Ltd., based in Mumbai, sold its over-the-counter cough and cold medicine brand in Russia, Doktor Mom, to a unit of Johnson & Johnson in May.
To contact the reporter on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net Ruth David in Mumbai at rdavid9@bloomberg.net
To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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