Liquidity management on top of RBI`s agenda

Liquidity management is expected to top the agenda in the first quarter review of the monetary policy by the Reserve Bank of India (RBI) tomorrow.

The immediate task at hand for the RBI would be to convey whether it is still in the tight monetary policy mode, irrespective of an extended pause in interest rate increases.

Flush liquidity, apart from softening short-term money market rates, poses inflationary risks and also threatens to push credit growth back towards the peak of around 30 per cent witnessed in the previous three years.

The liquidity has been largely on account of the RBI’s purchases of dollars from the market to check the rupee’s sharp rise. Though foreign fund inflows into equities have remained strong, overseas borrowings and foreign direct investment have equally contributed to a glut in inflows.

Read more at Business Standard

Credit Policy Impact: Re moves up to 40.38/$

The rupee rallied sharply today on buying by global investors as the Reserve Bank of India lifted the daily borrowing limit for money market operations. A surging stock market also attracted inflows, dealers said.

The rupee ended at 40.38 per dollar rising from Monday's close of 40.54 per dollar, and moved within the striking distance of last week's peak of 40.20 per dollar.

Reliance Power bags Sasan

Matches Lanco-Globeleq price.

The three months of uncertainty over the 4,000 Mw Sasan ultra mega power project is finally over. Anil Dhirubhai Ambani Group (ADAG) company Reliance Power Limited (RPL) has bagged the project after matching the tariff of Rs 1.196 per unit quoted by the original winning bidder, a consortium of Singapore-based Globeleq and Hyderabad-based Lanco Infratech, which was disqualified.

After an hour-long meeting, the empowered group of ministers (EGoM) today awarded the Rs 20,000 crore project in Madhya Pradesh — the country’s largest thermal power project — to Reliance Power.

“Sasan Power Limited had received revised offers from three bidders that included Jai Prakash Associates, NTPC Limited and Reliance Power Limited and the revised bid of Reliance Power quoting a levellised tariff of Rs 1.196 per unit was the lowest,” said Power Minister Sushilkumar Shinde, who also heads the EGoM.

The EGoM has asked Sasan Power to award RPL the letter of intent (LoI) for the project, the minister said. Sasan Power Ltd is the shell company floated by the Power Finance Corporation to pilot the Sasan project. Read more at Business Standard

Everonn Systems to list Wednesday

MUMBAI: Everonn Systems India Ltd, issue price of which was fixed at Rs 140 per share, will list on the boursesWednesday.

The company had entered the capital market to raise Rs 50 crore. The 100% book build IPO was subscribed 131.47 times. The shares were offered in the price band Rs 125-140 per share.

Qualified institutional buyers portion was subscribed 92.94 times, non-institutional investors portion was subscribed 277 times and retail portion 123 times.

Everonn Systems is a fully integrated knowledge management, education and training company that offer services like creating globally relevant educational training content, designing and executing learning initiatives.

The company will use the proceeds of the issue for capital expenditure in its two strategic business units--institutional education & IT infrastructure services, and virtual & technical enabled learning solutions.

Everonn will also utilise the proceeds for mergers & acquisitions, investing in the proposed subsidiary to retail educational aids, tools and other products.

Govt rules out auction of 2G spectrum

NEW DELHI: The government on Tuesday denied any move to auction spectrum for second generation mobile services - a shift from the current subscriber-linked allocation policy.

"There is no question of that (2G auction)... I am not having any such intention," Telecom Minister A Raja today told reporters here.

The Department of Telecom had earlier said a CDMA operator had written a letter to the government seeking auction of additional spectrum against the current subscriber- led allocation.

As per the present policy, a GSM operator receives up to 6.25 MHz, while a CDMA operator gets up to 5 MHz, on meeting the specified subscriber base criteria. An additional allocation is made on the basis of the operator's subscriber base.

As per the unified access licence, the government had not committed more than 6.2 Mhz to GSM players and, therefore, any subsequent allocation may be auctioned, the CDMA player is believed to have said.

However, the GSM operators have opposed the demand

BSNL to issue new GSM tender: Raja

NEW DELHI: Bharat Sanchar Nigam Ltd will float a new tender for installing 40-50 million GSM lines, to be completed within 8-9 months, to expand its telecom services, the telecoms minister said on Tuesday.

"I am told that they are ready to go for a larger tender ... 40-50 million lines," A Raja told reporters. Earlier, BSNL had said it did not have plans to issue a fresh tender as it was still finalising an existing order.

BSNL has ordered 14 million 2G GSM lines from Ericsson and Nokia, the first phase of a 23 million line order that will be done in two steps, but was waiting for the companies to respond.

The firm cut the size of its original tender to 23 million lines from 45.5 million lines after Raja asked it to negotiate a lower price.

Reliance KG gas pricing in with Doc

NEW DELHI: RIL’s gas pricing formula, which has been the focus of the ongoing gas debate, is being independently examined by the PM’s Economic Advisory Council (EAC) chairman C Rangarajan.

It is understood the PMO had asked EAC to look into the formula even as the committee of secretaries (CoS) deliberates on the larger issue of pricing and allocation of natural gas.

Senior officials involved in examining RIL’s pricing say the end-price of $4.33 per million British thermal units (mmbtu) is reasonable in terms of prevailing rates of natural gas in the domestic and global markets. But they have some reservations over the formula, devised by RIL to derive the value of the gas. They say almost 97% of the component in RIL’s formula is the fixed component.

Read more at Economic Times

Tata Steel hums a new tune on Corus

MUMBAI: Tata Steel said on Monday that it will increase the size of its contribution to the purchase of Corus by about $800 million to $7.4 billion in order to cover some extra costs and take on the working capital of the Anglo-Dutch steel maker.

Mumbai-based Tata Steel, which became the world’s fifth-biggest steel company following the Corus purchase, said it will increase the size of its proposed convertible preference share issue to about Rs 6,000 crore from the earlier Rs 4,350 crore. It will raise the remaining amount through a GDR or an ADS.

Tata Steel announced the acquisition of Corus in April for a net acquisition value of about $12.9 billion. This was to be funded by Tata Steel UK’s debt of about $6.14 billion, and equity contributions from Tata Steel India and Tata Steel, Asia, a 100% subsidiary of the Indian company.

But the acquisition amount of $12.9 billion referred to the value of what was being paid for and did not include the continuing debt (working capital) of Corus. After the acquisition, the enterprise value, including all the debt and the costs, is estimated at about $13.7 billion.

Read more at Economic Times

Tata Motors net up 22 pc, despite sales drop

NEW DELHI: Country's largest automobile manufacturer Tata Motors Ltd said on Tuesday its net profit in the April-June period rose 22 per cent from a year ago, despite a drop in sales of cars and trucks.

Tata's net profit grew to Rs 4.7 billion in the fiscal first quarter from Rs 3.8 billion in the same period last year, the company said in a statement.

Revenue from sales was estimated at Rs 60.1 billion, up 5.3 per cent from a year ago.

Profit grew faster than sales, because of a foreign exchange gain of about Rs 2 billion. The company gained from the weakening of the US dollar against currencies in markets that buy Tata products.

Tata sells cars, buses, trucks and utility vehicles in Africa, the Middle East, and in Asia and Australia.

Unit sales totaled 128,095 vehicles in the April-June quarter, up just 1 per cent from a year.

Read more at Economic Times

RIL may become India's first $100 bn mkt cap firm

MUMBAI: Reliance Industries, India's most valued firm, may become the first in the country to achieve a market capitalisation of $100 billion, international brokerage and equity research major Morgan Stanley said on Tuesday.

Morgan Stanley's India-based analysts said in a research note sent to the firm's institutional clients that they were raising the consolidated earnings forecasts for RIL in the current and next fiscals.

They also revised upward their one-year price target for RIL shares, while projecting a 35 per cent surge from the current levels in its "base case" scenario.

Morgan Stanley further said in "bull case" scenario, the shares could rise by about 37 per cent, which when translated into market capitalisation would amount to over $100 billion.

Read more at Economic Times

RBI hikes CRR rates by 50 basis pts to 7 pc

NEW DELHI: The Reserve Bank Governor Dr Yaga Venugopal Reddy has hiked cash reserve ratio by 50 basis points to 7 per cent while the CRR repo and reverse repo rates as well as the bank rates remain unchanged.

Inflation target for 07-08 remain at 5 per cent according to the first quarter credit policy review unveiled on Tuesday. GDP forecast for FY-08 has been set at 8.5 per cent. The new CRR rate will come into effect from August 04.

The RBI has also removed 3000 crore reverse cap from August 06 The other highlights of the policy are as follows:

• Hedge funds pose significant risks to the markets says credit policy.

• Financial stability to add to market stance says RBI.

• Inflation targeted at 4 to 4.5 % in the medium term. Holding inflation within 5.0 per cent in 2007-08 assumes priority in the policy hierarchy, while reinforcing the medium-term objective to condition policy and perceptions to reduce inflation to 4.0-4.5 per cent on a sustained basis.

• CRR to be used for managing liquidity.

• Domestic outlook was favourable.

• Monetary stance spelt out in February 2007 continues.

• Credit policy guided by domestic policy.

Securitisation market makes a comeback

With interest rates softening and credit demand easing, banks have revived their interest in asset securitisation. According to sources, public sector banks (PSBs) are receiving offers from private banks keen to sell a part of their portfolio through the securitisation route.

Recently, Icra had rated about Rs 1,800-crore securitised paper of ICICI Bank, which had personal loans as its underlying asset. This is the largest pool of personal loan securitised by a bank in the Indian market.

“Most banks have booked loans at very good rates. Going forward, if rates soften or even if they remain stable, securitisation market will gain momentum,” said Prasad Koparkar, head of structured finance at Crisil. “Besides, yields on a ‘AAA’ securitised paper are 50-75 basis points higher compared with other ’AAA’ paper,” he added.

Read more in The Economic Times

NSE may reintroduce pre-opening session

The National Stock Exchange (NSE) is considering the reintroduction of the pre-opening session for order matching after rectifying loopholes that had led to its discontinuation earlier.

Pre-opening session has a specified duration and, as the name suggests, takes place before trading for the day commences. A questionnaire sent to the exchange did not elicit any response.

NSE used to have a pre-opening session where weighted average price of bids placed by traders would form the basis for opening prices of those stocks. However, the exchange discontinued the practice, and brokers feel this could have been triggered by the feeling that some players were availing of the facility to manipulate opening prices by making artificially high or low bids.

Read more in The Economic Times

Investment bankers pay heavy price for China’s broking pie

Overseas banks keen for a piece of China’s red-hot brokerage sector will have to swallow some rich prices to buy into domestic securities firms, which are in no hurry to make deals as they focus on their own share listings. But for investment banks such as Citigroup and JPMorgan, a strategic partnership with a local securities house is a must in the long run, if they want to cash in on China’s rapidly growing stock markets, whose capitalisation has reached nearly 20 trillion yuan ($2.65 trillion), exceeding Hong Kong.

Besides Citi and JPMorgan, banks including HSBC and Credit Suisse are shopping for Chinese partners. Even Morgan Stanley, which launched China’s first such investment banking joint venture in 1995, is eyeing its second deal, banking sources said. “You cannot ignore China if you want to explore new profit streams in emerging markets,” said Philip Leung, a Shanghai-based partner for Ernst & Young.

Mainland China is on track to overtake Hong Kong, as Asia’s biggest centre for initial public offerings this year. Analysts have said, they expected fund-raising by Chinese firms via domestic IPOs to hit 400 billion yuan this year, up from 165 billion yuan in 2006 as Beijing encourages more Hong Kong-listed firms to sell shares at home. Most overseas banks will miss out on the current IPO boom — except for Goldman Sachs, UBS and Morgan Stanley, which established partnerships in China when the industry was still mired in a severe downturn.

Read more in The Economic Times

ADB in talks with India on currency swap

The Asian Development Bank (ADB) is in talks with India about a currency swap that would help fund infrastructure projects without adding to the inflows that are complicating monetary policy, senior officials said on Thursday.

Officials from the Manila-based ADB told the media on a visit to Mumbai a dollar-rupee currency swap could help fund India's infrastructure development needs, now estimated at $475 billion over five years, without currency risk to the end-user.

India's strong rate of economic growth and soaring stock market is attracting billions of dollars in direct and portfolio foreign investment, pushing up the rupee and causing a monetary policy headache for the Reserve Bank of India (RBI).

Read more in The Economic Times

ONGC’s Q1 net rises 11.9%, beats forecast

India's top oil producer, Oil and Natural Gas Corp, said on Wednesday quarterly net profit rose 11.9 per cent, beating forecast, as lower discounts to state-run refiners offset the impact of a stronger rupee. State-run ONGC said net profit rose to 46.1 billion rupees (USD 1.1 billion) in the fiscal first quarter to end-June, from 41.2 billion rupees reported in the same period a year ago. A Reuter’s poll had forecast a net profit of 38.7 billion rupees.

The company has been weighed down by discounts it is forced to give state-run refiners to keep local fuel prices low.

Since ONGC bills its customers in US dollars, a stronger rupee that has gained about 10 per cent so far this year also squeezed earnings.

Shares in ONGC, India's second-most valuable listed company at USD 48 billion, rose 2.7 per cent during the June quarter, lagging the benchmark BSE index's 12.1 per cent gain and its sector index, which rose 19 per cent.

RBI's hands-off strategy irks IT industry

India's IT industry, the flag bearer of a resurgent economy, wants the government to step in and check the rupee's unprecedented rise to nine-year highs in an effort to protect their earnings.

The rupee has gained almost 10 per cent this year and 14 per cent over the past 12 months against the dollar, denting the earnings of an industry that gets two-thirds of its 50 billion dollars in annual revenue from the US.

"It's not a market driven by market forces alone," said Kiran Karnik, president of the National Association of Software and Services Companies (NASSCOM), in an interview here. "These are not normal times."

Read more in The Economic Times

Re closes at 40.34/35 vs dlr

The rupee on Thursday closed barely steady at 40.34/35 against the US dollar in a two-way movements on alternate bouts of buying and selling.

In active trade at the Interbank Foreign Exchange (Forex) market, the Indian currency opened at 40.34/35 per dollar but recovered in late morning deals to a high of 40.27 a dollar on firm equity markets where the benchmark Sensex was up by nearly 113 points in early trade.

However, dollar purchases by state-run banks on behalf of the Reserve Bank of India (RBI) after afternoon pulled the rupee down to close at the opening level of 40.34/35 a dollar, barely steady against Wednesday's close of 40.35/36 a dollar.

Read more in The Economic Times

Oil Prices Rise Above $75 a Barrel

Oil prices rose Friday, reversing some losses from the previous session when crude fell nearly $1 a barrel on worries a slowing U.S. economy would cut petroleum consumption.

Light, sweet crude for September delivery rose 60 cents to $75.55 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.

The contract had dropped 93 cents to settle at $74.95 a barrel Thursday as global stock troubles deepened. Street suffered one of its worst losses of 2007 amid worries about the U.S. mortgage and corporate lending markets, and the Dow Jones industrials closed down more than 310 points.

Some analysts said the market was concerned that the plunge could hurt oil demand.

Read more in Financial Express

Asian Investors Rattled by Dow's Plunge

Most Asian markets tumbled Friday in the wake of one of Wall Street's biggest drops of the year, although European markets rebounded modestly from sharp losses the previous day.

Japanese stocks fell to nearly three-month lows, Philippine stocks marked their steepest decline in 10 years, and South Korea's benchmark index - which had hit a record Wednesday - sank 4.1 percent, its biggest slide in more than three years. Chinese stocks, however, ended the day flat.

Investors in Asia were rattled after U.S. and European markets plunged Thursday amid worries over the U.S. mortgage and corporate lending markets. Those woes could cause global liquidity to dry up as international investors pull out of riskier assets, including Asian emerging markets, analysts said.

Read more in Financial Express

ITC Q1 net profit up 20%, beats forecast

Country's top tobacco firm, ITC Ltd, reported on Friday a 20 percent rise in quarterly net profit on the back of higher cigarette prices and robust growth in its packaged foods and hotels businesses.

ITC, 31.7 per cent owned by British American Tobacco Plc, has entered personal care, apparel, retail and snack foods recently, but cigarettes make up two-thirds of revenues.

The Kolkata-based company said net profit rose to 7.83 billion rupees ($193 million) in the fiscal first quarter to end-June from 6.52 billion a year earlier, beating a Reuters forecast of 7.10 billion.

A value-added tax of 12.5 per cent imposed on cigarette sales from April has pushed up prices, and ITC has said it was concerned taxes and tight regulations can affect revenues.

ITC shares, valued at $15.6 billion, gained 3 per cent in the quarter, trailing a 12 per cent rise in the main index and a 5 per cent rise in the sector index.

Ranbaxy ends patent dispute

Ranbaxy Laboratories Ltd has won 180 days of exclusive rights to sell a generic form of GlaxoSmithKline’s Valtrex in the United States after resolving a patent row, sending its shares up as much as 10 per cent on Thursday.

The country’s biggest drug maker by sales expected strong gains after resolving the patent litigation with Glaxo, and also expected to win similar exclusive rights for at least one drug every year for the next four years, chief executive officer Malvinder Singh said.

“There is a very big upside. It is a $1.3 billion product today and growing at the rate of 20%,” Singh said of Valtrex, which is used to treat herpes infections.

Read more at Financial Express

Sensex sheds over 380 points at open

The Bombay Stock Exchange benchmark Sensex tumbled over 380 points on Friday on heavy selling by funds, triggered by weak global markets.

The BSE-30 shares index, which closed 76.98 points up on Thursday, lost 380.13 points at 15,396.18 in the first five minutes of trade.

Similarly, the National Stock Exchange's Nifty toppled 139.20 points at 4,480.60.

The selling was sparked by reports of a major slide in leading global markets. All the index related stocks in Nifty and Sensex were in red.

Inflation rises to 4.41 per cent

Wholesale prices-based inflation rate increased to 4.41 per cent for the week ended July 14 from 4.27 per cent the previous week mainly on higher prices of fruits and vegetables, ragi, wheat, jowar, condiments and spices.

The inflation numbers are still within the five per cent annual target of the Reserve Bank, which is due to review the monetary policy on July 31.

The annual rate of inflation was 4.62 per cent in the corresponding week last year.

Among the primary articles, prices of vegetables rose sharply by 7 per cent during the week, while those of cereals rose by 0.9 per cent.

In the non-food articles category, prices of fibre rose by 2.2 per cent.

Read more at Financial Express

Mutual funds bank on stock mkt boom

With all stock market indices, even the sectoral ones, on the rise to new highs, making even the die-hard risk-averse individuals eye buying into shares, mutual funds are looking to make a killing of their own, by unveiling their equity-oriented NFOs.

However, MFs are not too much into buying lately. The Sensex and Nifty have climbed into a rarefied space, recording highs in intra-day trading of 15,683 and 4,601 birthing billions of rupees in profits. While most of the bull frenzy is being fuelled on the back of huge investments by foreign institutional investors, mutual funds have not been net buyers of equity. They have instead been more willing to book profits, as they have emerged as net sellers in recent times. However, returns by most mutual funds have been good with banking funds in the vanguard of profit delivery, and the growth is seen in the rise of BSE Bankex by as much as 60% over the year.

But that is an aside, what rising markets bring with it is investor confidence and optimism. That means they are willing to put their money on the stock markets expecting fancy returns. The retail investor, dragged in by the irresistible lure of quick profits, has also funneled increasing amounts into equity, mostly via mutual funds.

FII & MF Investments In Equity during days of last week:

(Rs m)	MFs	FIIs	Total
13-Jul	2,958	23,464	26,422
16-Jul	(3,719)	16,601	12,882
17-Jul	(1,030)	9,464	8,434
18-Jul	(1,748)	12,337	10,589
19-Jul	1,116	8,831	9,947
Total	(2,423)	70,697	68,274

Source: Equity Master

FII investments since January 2007:

Date	Purchase (Rs cr)	Sale (Rs cr)	Net (Rs cr)
July1	58791.1	37340	21451.1
June	49249.5	47606.8	1642.7
May	47254.2	43155.4	4098.8
April	48141.2	41462.1	6679.1
March	50678.5	51760.3	-1081.8
Feb	55803.9	48564.2	7239.7
January	45052.2	44560.1	492.1

¹Up to July 20

Retail investors just love Mutual Fund NFOs, something they may be associating with new listings by companies post-IPOs, some of which have a tendency to gain hugely, like Vishal Retail, but many do not script a dream run (Read All About It: IPOs: the marker itself is below the mark).

However, many NFOs may be looking at new opportunities that have been revealed lately, but by now there are some 170 diversified equity schemes and so many other categories that one wonders if new ones are required. Well, the requirement is by MFs—for your money. They need new collections and the easiest way is through NFOs.

Of course, the basic premise for investment in MFs is that you derive long-term gain, and that short-term profits should not really be eyed as there is usually an early exit load payable and it is very, very difficult to predict where the markets will be even one month down the line, even though over the long-term, there is uniformity of opinion that the Sensex and the rest will be virtually doubling, or more, in valuation in the years to come. Nevertheless, in an environment of rising markets, Indian and foreign, it will be very difficult for investors to stop themselves from plopping down their money in MF accounts.

As such, July has seen a number of asset management companies launch their NFOs. Among them are UTI MF, SBI MF, Reliance MF, and JM MF.

Scheme	NFO Opens	NFO closes
UTI India Lifestyle Fund	2-Jul-07	25-Jul-07
Sundaram Capital Protection Oriented Fund (Series 1-3 yrs)	9-Jul-07	7-Aug-07
Sundaram Global Advantage	16-Jul-07	31-Jul-07
JM Contra	16-Jul-07	14-Aug-07
SBI Short Horizon - Short Term - RP	19-Jul-07	26-Jul-07

Before you take out that cheque book and sign on the line with a flourish, be sure you understand what you want, when you want and whether it will meet your requirements.

All the NFOs of 2007:

Schem-e Name	Close Date	Structure	Category	Nature
ABN AMRO Sustainable Development - Dividend	05/04/2007	Close Ended	Diversified	Equity
AIG India Equity Fund - Institutional – Dividend	31/05/2007	Open Ended	Diversified	Equity
AIG India Equity Fund - Regular – Dividend	31/05/2007	Open Ended	Diversified	Equity
Birla Sunlife LongTermAdvantage-S1-Dividend	18/05/2007	Close Ended	Diversified	Equity
Can Multicap Fund – Dividend	04/01/2007	Close Ended	Diversified	Equity
DBS Chola Hedged Equity Fund – Dividend	30/03/2007	Open Ended	Diversified	Equity
Fidelity International Opportunities - Dividend	30/04/2007	Open Ended	Diversified	Equity
Franklin India High Growth Companies-Dividend	29/06/2007	Open Ended	Diversified	Equity
HDFC Mid-Cap Opportunities Fund - Dividend	08/06/2007	Close Ended	Diversified	Equity
HSBC Unique Opportunities Fund - Dividend	26/02/2007	Close Ended	Diversified	Equity
ICICI Prudential Fusion -Series II - Dividend	16/03/2007	Close Ended	Diversified	Equity
ICICI Prudential Fusion-Series II-Institutional - D	16/03/2007	Close Ended	Diversified	Equity
JM Small & Mid-Cap Fund-Institutional-Dividend	07/04/2007	Open Ended	Diversified	Equity
JM Small & Mid-Cap Fund - Regular - Dividend	07/04/2007	Open Ended	Diversified	Equity
JPMorgan India Equity Fund – Dividend	18/05/2007	Open Ended	Diversified	Equity
Kotak Emerging Equity Scheme - Dividend	16/03/2007	Close Ended	Diversified	Equity
Lotus India Arbitrage Fund – Dividend	20/04/2007	Interval	Diversified	Equity
Lotus India Contra Fund – Dividend	15/03/2007	Open Ended	Diversified	Equity
Lotus India Mid Cap Fund – Dividend	30/03/2007	Close Ended	Diversified	Equity
OptiMix Multi Manager Equity Fund - Dividend	30/03/2007	Open Ended	Diversified	Equity
Principal PNB Long Term-3 Year Plan - Series I	21/02/2007	Close Ended	Diversified	Equity
Principal PNB Long Term-3 Year Plan - Series I	21/02/2007	Close Ended	Diversified	Equity
Reliance Equity Advantage– Retail-Dividend	10/07/2007	Open Ended	Diversified	Equity
SBI Infrastructure Fund - Series I - Dividend	11/06/2007	Close Ended	Diversified	Equity
Sundaram BNP Paribas Multiplier - Dividend	31/01/2007	Close Ended	Diversified	Equity
Sundaram BNP ParibasSelectSmallCap	24/01/2007	Close Ended	Diversified	Equity
Taurus INFRA TIPS – Dividend	05/03/2007	Open Ended	Diversified	Equity
Source: www.mutualfundsindia.com