Morning Brief - 16/August/2007

Markets

Over the past two days, the global indices crashed, this morning the Nikkei reached its 8 month low, the Dow lost over a 1%, the KOPSI (South Korea) lost almost 4%. Expect the Sensex to touch the 14400 levels.

So what exactly is the issue? In the short term lending market, where financial institutions lend money to each other for periods ranging from a day to a few months, the players simply do not trust each others credit record. Those with surplus funds are not sure if those who require the cash are exposed to the US Subprime lending market. The lenders have no way of ascertaining whether the borrowers have exposure to the market or now. This makes lenders reluctant to lend money. Causing a credit crunch. This fear was further accentuated because a leading subprime lender in the US is likely to go bust. Global markets crashed on the back of a worry that there will be an impending credit crunch.

Meanwhile, Indian bankers do not expect a replay of the Sub-prime housing market worries here.

Corporate Watch

M&M is starting operations in Brazil and Egypt. While Tata Motors wants to gain a foothold in Europe, M&M cleverly has decided to focus on markets similar to the Indian market. Its range of rugged UVs (which will run on everything from kerosene to diesel, what ever the quality) will be ideally suited for such markets.

TRAI Vs Mobile Service Operators. Over what else? Price fixing. TRAI should launch an investigation to see if the operators have formed a cartel, rather than trying to hold prices firm.

In TN, all parties have now opposed the Tata project, never before has any industrial project faced such opposition. While Tata insists the project is on track, the Amma of Poes garden, aided by desperate for the limelight Ramdoss is opposing the project.

AI ground staff have once again gone on a flash strike, over payment arrears. Looks the carrier needs more than just handholding.

Chinese manufacturing quality is under cloud, after Nokia recalled batteries, Mattel recalled toys.

Struggling Indian financial institution IFCI is looking for a strategic partner to pick up 26% stake. Hope this ends IFCI’s woes.

Reliance plans to open 500 hypermarts and 1000 fresh stores. And some are planned in the communist bastion of West Bengal.

Economy

Fin Min is desperate for money, they just haven’t resorted to begging yet, soon they will get there I guess.

The plans for regional airlines has hit a roadblock, while more discussions are on regarding the new policy.

Bengal wants STPI extended. Being a latecomer, it needs STPI to attract further investments.

Tourism Ministry is using Youtube to promote India.

Ministry allows Cements without BIS nod. Looks like my earlier post on poor quality housing might come true

FM has mooted a gradual approach to rupee convertibility.

Technorati Tags: Global markets, Credit Crunch,Tata Steel,Tuticorin,Aviation Policy, Retail

Morning Brief- 13/August/2007

Market News

The global markets continued their downward tumble. Both the European and American market are facing a liquidity crunch. The European Central Bank has pumped in a little over USD 200 billion over the last week to assuage the liquidity crises. Despite this European Stocks fell on Friday. The Dow also fell on Friday, despite the Fed pumping in money to reduce the liquidity crunch.

Meanwhile, the Japanese growth is slower than expected, which means rates will either remain unchanged or be reduced.

Liquidity pressures back home has lead to the Sensex losing almost 2% in the past week.

How does this affect the SENSEX? More liquidity in the global system leads to a higher risk appetite and with a positive growth story from India; it means that the FIIs will invest more in Indian equities. They certainly seem to be having a high risk appetite, with massive investments in the realty stocks, despite concerns over their valuations.

The global liquidity crises seem to have raised concerns about some leveraged buy-outs. This might increase the cost of funds for numerous Indian acquisitions, like the TATA-Corus deal, or the Aban-Sinvest buy out.

The current mortgage market crises, has lead to some grim outlook for global growth by economists. India might be affected, but if its domestic consumers might be able to limit the damage to just export-oriented sectors.

Corporate Watch

Bajaj Auto is now focussing its energy on the premium motorcycle segment, the 150cc or higher capacity and expects higher margins from this segment. Hero Honda, the undisputed leader in the commuter class bikes is facing a pressure on margins due to higher interest rates.

ICICI bank has decided to raise USD 1.5 billion via External commercial borrowings.

WIPRO has decided to launch operations in China to tap into east Asian markets of Japan, South Korea and Hong Kong.

Financial Service provider, Motilal Oswal fixes IPO price band at Rs 725-825 per share, whose face value is Rs 5. the promoters are expected to reap in Rs 800 crs via the IPO.

Infosys seems to have taken a long to medium term outlook on the rupee appreciation. The srupee is likely to further appreciate against the dollar and hedging against an appreciating rupee in the medium to long term is the right strategy.

General Motors is selling a form of maintenance insurance for its Chevrolet brand of cars. Customers can now buy maintenance packages for their cars for a period of three years. This is a first of its kind for cars, but is not new to the Indian consumer, who have experienced this through the Annual Maintenance Package offered by various companies in India.

Economy

The cabinet has approved converting the existing 4 lane highways to 6 lanes.

Industrial growth for Q1 stands at 11%

The IRDA is now checking the mis-selling of ULIPs. Often agents sell ULIPs as mutual fund-cum-insurance products, with customers unaware of the details.

India has just 31.5 million or 3.15 crore tax payers, that’s optimistically 3.15% of the total population, and the government has decided to squeeze them further to fund its socialist policies.

Morning Brief: 10/August/2007

I’ve been busy over the past few days, therefore have not been posting my usual round up of news.

One more subprime lender has gone bust, this time its BNP Paribas which has thrown in the towel. Now, Goldman Sachs has also joined BNP Paribas, while AIG is now predicting doom. Damodaran believes that linking the Indian stockmarkets volatility to subprime woes is an oversimplification. I wish he was right, then it would me more interesting for investors. But this statistic from Businessworld, does not support Damodaran’s views. Everyone knows Damodaran is just trying to assuage the sentiments of the market, it seems no one is willing to admit the emperor is naked!!!

Meanwhile, its still unclear if ICICI is exposed to the US subprime housing mortgage market. Apart from this FIPB now wants to look into ICICI’s holding pattern, while the Government is set to raise FBI Cap on banks

SEBI, meanwhile is considering reducing the number of independent directors. Looks like India does not have enough Independent directors

IT and ITES firms whining to the government about the rising rupee seems to have spurred the government into action.

While Novartis has magnamiously decided not to challenge the Madras High Court verdict, it has gone to its big brother (the Swiss Government) which is now trying to forge closer cooperation with the Indian Govt on IP protection. This no doubt is to swing a deal in Novartis’s favour.

The government has lifted the freeze on SEZ applications, granted the Maha Mumbai SEZ another year, while also cleared 6 more projects.

India and Israel have agreed to form closer economic cooperation. This is a step in the right direction as India needs to look beyond traditional markets of US and EU.

FinMin is desperate for money, especially to fund populist policy largesse, and is now pushing for revised pricing of 2G spectrum pricing.

14 days, that’s the time given to a GoM lead by Pranab Mukarjee to fix the KG basin gas price.

Reliance Communication has sold a stake in its telecom tower business. This follows Barathi’s outsourcing deal of its infrastructure. Operators are now moving towards leasing the infrastructure rather than buying it outright.

Only in AI: they buy stimulators, but cant find the space to house them.

ADB has once said that income inequality is on the rise and it is a worrying trend. Is anyone even listening to them? Sigh, they attach too much importance to themselves.

Tata Sky targets 8 million users by 2010, if they follow a scheme of renting the equipment, they can meet this target much faster.

Telecom operators are now working to establish a Do Not Call registry. Does this include intrusive SMS from one’s own operator? I get one such spam SMS every day.

Essar and GSPC have decided to bid for an oil block in Syria.

Puravankara IPO gets oversubscribed a paltry 1.91 times. At an issue price of Rs 400, its overvalued is my guess. Retail investors would have stayed away and Institutional investors would have mopped up the shares.

Government launches a new airline license called regional airline, interesting times ahead for the aviation industry, especially in the low cost carrier segment.

Morning Brief

Tata, Bajaj and Renault might have made a winning bet by backing the $3000 car, as small cars are set to grab 25% of the two-wheeler market. I am still sceptical on the success of this car.

With falling revenues from domestic flights, Jet has now started operations to New York. I wonder how long before fares in this sector to start falling with Kingfisher also set t start operations.

The mineral rich states are now throwing a tantrum over the national mining policy. Hmmm, I wonder is Navin Patnaik is upset at being sidelined over POSCO.

In a surprising ranking, HAL or Hindustan Aeronautics Limited is among the top 100 defence firms globally. Its ranked 34.

WIPRO has made the largest acquisition by an Indian IT firm through its acquisition of Infoprocessing Inc for USD 600 million.

M&M has started operations of its its pick up business in Chile. Wise move concentrating on such developing countries where the market has future growth potential and does not have strong players.

Yesterday it was the textile exporters, today it’s the IT and ITES sector which is asking for government subsidy to offset the rupee appreciation.

While mobile operators in the US are engaged in a dispute with Google over revenue sharing, Airtel has signed an agreement with Google to carry Googles services on its network.

With increasing number of loan defaults, Dena bank has joined with Crisil and Care implement credit rating for its potential borrowers.