Thursday, 2 October 2008

The Global Financial Turmoil Series

A lot has changed since I last posted on my blog. Top 5 i-banks of US are part of history now. Few months ago, there were all sorts of statements, that "the US is in the middle of bad period" or "the bad is over", etc etc... However, in my some previous articles, I maintained that US has just entered the first chapter of financial turmoil, and I maintain so. I personally believe that the present situation is worst ever faced by US and the event has just started.

The situation to me looks scary, and few more "Big Brands" would collapse. Its a vicious cycle, and only financial companies are not part of it. The auto majors would soon follow them. I can see few major auto companies would sell off...

$ 700 Billion blank cheque by Mr. Paulson is a bad plan. The US financial foundation, the model, has collapsed. Repairing it (with proposed $ 700 Bn.) would temporarily save things, but in long run, situation would worsen, and I believe that that situation would be like a Tsunami, nobody would be spared from it.

I would try to present the economic impact or condition of various countries, due to the financial turmoil happening in US.

Wednesday, 18 June 2008

The surf's up at Gateway !!!

Rain has just hit Mumbai, and here's what it has done to the Gateway of India.

Sources: DNA

Saturday, 24 May 2008

China: The Earthquake impact.

Here's how the recent earthquakes will probably impact China.

Due to the earthquake, China has lost huge amount of human capital, fertile land, natural resources, etc. It will impact the agricultural production drastically. The production would be less and the ability to deliver products in the market will reduce. This will result in demand supply mismatch. The increased demand would put pressure on the existing prices.

The affected area will require rebuilding and redevelopment. For this huge capital and resources would be required. Demand for resources like Oil, petrol, energy which are already scarce will push the crude oil imports. With crude oil touching life time highs, this can further add woes for the government.
Also the material and different services required for the redevelopment of affected areas will have a negative impact on the prices.
And while all this happening, maintaing high growth would be difficult. Add to it difficult global markets scenario.
Controlling measure for the government could be to restrict price rise or artificially freeze prices of commodities, in order keep a check on inflation. But, this can not be the ultimate long term solution. The earthquake has caused a real increase in demand and a real decrease in supply. How can price freezes possibly eliminate the disequilibrium? It explores both the difficulty of keeping prices at current levels – shortages and an increasing fiscal subsidy – and the difficulty of letting prices rise – the inflationary impact.

Friday, 23 May 2008

Zimbabwe - The Unbeatables!

The Indian people and the government are both quaking with fear with inflation hovering at around 8%. The people can barely make two ends meet with prices soaring, and the government knows that if prices don't fall, the government will.
But India is not the only nation grappling with rising inflation. The entire world is. So which is the nations with highest inflation rates?
Zimbabwe: 355,000%!
The inflation in Zimbabwe for the month of March 2008 rose to 355,000%! Yes, 355,000 per cent! It more than doubled from the February figure of 165,000%.
Economists say that it is a miracle that the Zimbabwean economy is still surviving and prices have been rising to unprecedented proportions. Inflation surged between February and March following the sudden rise in money supply that flooded the economy to finance the 2008 elections. Apart from this food and non-alcoholic beverages continued to drive up inflation.
Almost 80% of the nation is unemployed. The Zimbabwean central bank has introduced $500 million bearer cheques (or currency notes) for the public, and $5 billion, $25 billion, $50 billion agro-cheques for farmers. Just last fortnight the nation had introduced $250 million bearer cheques.
A sausage sandwich sells for Zimbabwean $50 million. A 15-kg bag of potatoes cost Zimbabwean $260 million. But then, Zimbabwean $50 million is roughly equal to US$ 1!

Thursday, 22 May 2008

An unusual China!

China is known for its censorship and how it keep media at bay. The way it polices the internet is all known. There has been instances where the government has detained reporters and correspondents for trying to report from the spot on an explosion that killed many children in a school in Jiangxi province, in 2001. The country is very particular about what gets printed in the media about the country.

Yet this time, there is something unusual that has happened, in terms of openness and press access. As the country got struck by earthquake, I could see pictures flooded all over the news channels from morning to evening, live right from area where the event took place.

May be this might be an historic turning point for China, on its journey towards modernity and openness. I have never seen so many pictures on the media ever before from the ground china.

Now, the openess to media may have raise doubts on the preparations for Olympics, why the government was not able to recognise the event early, corruption, why the structures that collapsed didnt meet the standards, etc. But in a way this will also help China by getting aid from other parts of world, like this time, if such event occurs. Also, openess to media would help to install transparency and reduce corruption in the country.

Tuesday, 20 May 2008

Financial "Weapon of mass destruction" by Buffett

It was not so long ago when the Oracle of Omaha, Warren Buffett described derivatives as ‘financial weapons of mass destruction’ and warned against the extraordinarily high risks hidden in those instruments. He rightly said that those who are holding derivatives hardly understood the risks, a fact that was very evident during the recent credit crisis. That was when financial derivatives were not even a fraction as popular as they are now.
Having said that, we would have expected Buffett to stay clear of derivatives. But, contrary to popular wisdom, Buffett is not all that risk-averse – the stock portfolio of his company Berkshire Hathaway is very concentrated, for example. Unlike others, he is quite clear about the risk he is taking and that is the major reason for his superior and consistent performance. In other words, better risk awareness helps him prevent the huge losses others suffer once in a while.
Given that, markets were quite surprised when Berkshire declared a huge $1.6 billion loss on derivative contracts for the first quarter of this year. Most of these losses were on account of put options on the S&P 500 index. It seems Buffett was a bit too bullish on the markets! Credit default swap, which protects bond investors against default by issuers, contracts accounted for the rest of the losses.
Then again, these are non-cash losses and Buffett is unruffled. In his letter to shareholders he says he is not ‘bothered by these swings even though they could easily amount to $1bn or more in a quarter’. Since the end of the quarter, Berkshire is said to have recovered close to $0.5 billion of the non-cash losses as stock markets have recovered since April.
Clearly, derivatives, F&O, are something which has a huge amount of risk. And it requires lot of experience to understand and structure your positions so that the risk exposure gets reduced. One must not just jump in the F&O segment just by looking at the potential gain it can give.

Sunday, 18 May 2008

IPOs - Relief to investors.

Investors no longer have to wait for weeks for refund of their IPO application money.The application money earmarked for an IPO will now remain in the applicant’s bank account till the allotment is finalised, thus eliminating the refund process. This means that the money marked for the IPO will not be used for any other payment obligation during that period. At the same time, the applicant will enjoy the interest payable on the amount.This would also reduce the burden on registrars and merchant bankers. But bankers to the issue can no longer enjoy the floating interest. Most important of all, investors would not have to wait for their refund money. It also ensures that a liquidity crisis such as that of January 2008 does not occur again. At that time, many investors were unable to buy scrips which were at attractive lows, as their money was locked up in the Reliance Power and the Future Capital IPOs.

Still a lot of reform work is required in primary markets.

Wednesday, 14 May 2008

Naam mein kya rakha hai bhai!

A couple of days earlier Shiv Sena's student's wing, Bharatiya Vidyarthi Sena (BVS), targeted establishments that still have Bombay in their names, including the city's prestigious school, Bombay Scottish, a Bombay Dyeing showroom and offices of The Times of India, whose city supplement is called Bombay Times.

Now, the list also includes Shiv Sena's demand to remove Bombay from Bombay Stock Exchange.
Every party wants some fancy issues rather than solving some existing serious ones. I dont want to take a political stance here, my views are completely objective. On one side Mr. Raj Thackeray and his followers try to be in limelight by targeting Amitabh Bachchan. And now Shiv Sena is trying to cook some irrelevant issue of Bombay versus Mumbai. How are the farmers of Maharashtra going to be benefited out of this ? Or is it going to solve the power problem of the state?

Bombay Dyeing is a corporate entity, a company registered under Company Act 1956. Now, why should a company change its name, just because of change in the name of the city, whose name matches with part of its name? Two years hence, politicians in UP or Bihar may not allow the company to open its stores there, just because it doesnt say "Patna Dyening" or "Lucknow Dyeing". It really sounds funny. I wonder what the advisors to the politicians do?
BSE has created a brand for itself over a period of time. Now it is a globally recognised name. What's the point in changing the names?

My serious suggestion: Politicians should focus on issues like primary education, good health and medical facilities, sufficient power, infrastructure, farmers and farmer loans problem and also check the crime in the state.

Friday, 9 May 2008

Cashing the real estate!

Chennai-based Indian Overseas Bank is planning to sell its properties to self-promoted special purpose vehicle, thus realising the entire profit and then ploughing it back to its Tier-I capital. IOB will do a leaseback deal of properties that it had sold to the SPV.
According to the bank's estimates, the prices of its property has appreciated nearly 200 per cent over the last couple of years.

IOB has sought the approval of the finance ministry for implementing the idea, according to a top bank executive. If approved by the ministry, the government-owned bank's profit will soar by Rs 6 billion and the amount will be ploughed back to its Tier-I capital.

Banks are allowed to use 40 per cent of the rise in assets valuation to accrue to their Tier-II capital. In the current case, however, the bank will show the transaction as a sale and not revaluation. Hence the entire value of the property is accruable to its Tier-I capital.

The move followed a substantial depletion in the bank's capital adequacy ratio in the previous financial year as it had to comply with Basel-II norms. The capital adequacy ratio of the bank was 11.13 per cent as on March 31 compared with 13.27 per cent in the same period a year ago. The Tier-I capital stood at 7.31 per cent. The decrease in CAR of IOB has happened as Basel-II norms includes attaching higher weights to various risky assets.

So net net the bank would make profits virtually and make its balance sheet look healthier just by doing some paper work. Kudos, Ye hai India meri jaan.

Sources: Business Standard

Wednesday, 7 May 2008

News in pics.

A revisit on what the sub prime lending fallout and real estate bubble burst has done to people in US and parts of Europe.

Housing drought hits sales of multi-million pound homes in London as consumer confidence hits four-year low. Almost half of all consumers surveyed believe the economy will worsen further in six months time, twice as many people showing pessimism than a year ago.
I believe this was due and expected and this event will have far reaching effects. One should not expect that we will be out of it very soon!

Monday, 5 May 2008

Is the world jealous of Indian middle class prosperity?

The US President George W Bush, on 2nd May 2008, sought to put the blame of the rising food prices on increase in demand of better nutrition from the burgeoning Indian middle class. Earlier, the Secretary of State, Condoleezza Rice, had also made a similar remark on the rising food prices, wherein she argued that improvement in diets of people in India and China has been responsible for this.

Explaining the reason for rise in food prices to a Japanese-American who posed a question to Bush on this issue at a function in Maryland Heights in Missouri, the US President said: ''Just as an interesting thought for you, there are 350 million people in India who are classified as middle class. That's bigger than America. Their middle class is larger than our entire population.''Bush said: ''When you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up.'' He, however, did not subscribe to the notion that ethanol is the main cost driver for the food prices going up. In fact, besides Bush and Rice, during the past one week, several similar statements have emanated from US leadership in which they have tended to attribute the rising food prices to the increase in food demand from India and China.

In response to such serious allegations, Chandrajit Banerjee, director general, CII, in the statement, "The entire issue of food prices needs to be seen in a global perspective and not just seen as an issue emanating from specific countries. There is a need for greater flow of global information on food production and consumption and cuts in food wastage."

I think Bush should concentrate more on war related issues rather than such economic issues. Or is he worried of US being over thrown by India and China, as world's greatest economies? Suddenly, people subscribing to such opinion forgot that there are several world events happening causing food prices to escalate. There was a drought in Australia, production has reduced in several European countries, grain stocks has reduced in many countries including India and China. Exporting countries as diverse as Argentina, China, India, Russia, Ukraine, Kazakhstan and Vietnam have placed additional taxes or restrictions on exports of grains, rice, oilseeds and other products. By reducing supplies available for world commerce, these actions has led to an incraese in global commodity prices. This is in addition to the jumping crude oil prices and worldwide weather production problem. I would say it was a careless statement made by Mr. Bush and Indian politians are too busy in forthcoming domestic election, to comment on such issues.

Saturday, 3 May 2008

Vodafone - Can this bring a new revolution in the telecom industry?

Vodafone is offering unlimited internet access as a standard feature of its new monthly mobile price plans, driven by an increasing amount of people accessing social networking sites and e-mail from their phones.
The Newbury-based group is the first mobile phone operator in the UK to offer the unlimited deal with all its monthly tariffs, although O2 currently offers an unlimited deal for its iPhone customers.

Vodafone hopes the new flat rate policy will fuel use of the internet on mobiles, as operators search for additional ways to generate revenue in a saturated market.
Earlier this year the group announced it was cutting 450 middle management jobs and hiring nearly 500 sales and retail staff as it attempts to increase its share of the competitive mobile internet and broadband market.

Take up of internet on mobiles has been hampered by complicated pricing structures which limit the amount of data you can download. Because few people know what a megabyte actually means in terms of internet usage, customers have been nervous about wracking up hefty bills through browsing.

The launch of the iPhone towards the end of last year saw a surge in mobile data traffic, with Google confirming in February it had received 50 times more searches from the iPhone than from any other mobile handset. Apple’s new 3G version of the iPhone, which could be launched as soon as next month, is expected to boost mobile internet use further as it will provide access to the faster 3G network.

Al Russell, head of mobile internet and content services at Vodafone, said: “Many people already have phones that can browse the internet so they don’t need to buy new ones. A lot of people are worried about how to use the internet on their phones. Our staff will put the phones in their hands and show them how to do it in two minutes. And they don’t have to worry about the cost.”
Vodafone, the world's largest mobile phone company by revenue, said internet access would be automatically bundled in with all its new pay plans for no extra charge, with prices starting from £25 per month. Until now customers had to buy an additional internet bundle for £7.50, with a cap of 120 megabytes per month.

However, Vodafone’s “unlimited” package does in fact have a limit: it is subject to a “fair usage policy” of 500 megabytes per month. Users will not be penalised if they overstep the limit but the company said excessive abusers would be contacted.

The top three internet sites on Vodafone Mobile Internet are Facebook, Google and the BBC, while the top three searches by customers are Facebook, Bebo and eBay.

With this new offer, clearly Vodafone is sending signals to the industry that it is ready to take up the competiton aggressively. Can this change the face of telecom industry. Whatever may be the outcome, customers, surely, are going to smile the way.

Tuesday, 29 April 2008

Oil speculators pushing prices to new levels - Part 2

Lehman Brothers, the investment bank, has estimated that fuel is 30 per cent overpriced because of an influx of money into the oil market from investment funds.

It believes that hot money accounts for between $20 to $30 of the recent increase in oil prices and that about $40 billion (£20 billion) has been invested in the sector so far this year — equal to all the money pumped into oil last year.

The price hit a record of nearly $120 a barrel on 28th April 2008, after North Sea production was shut down because of the Grangemouth refinery strike. In early trading, the price of US light crude rose $1 to $119.93. Prices later retreated to settle up 23 cents at $118.75 a barrel.

The situation may get even worse in the coming months. Chakib Khelil, the Algerian Energy Minister and president of Opec, said that crude could reach $200 a barrel.
The price rise comes despite a 400,000 barrel-a-day reduction in physical demand from the United States, which is consuming less because of its economic slowdown. This has been more than offset by funds seeking alternative investments to the falling US dollar.

Michael Waldron, energy analyst for Lehman Brothers, said: “There has been an increase in financial demand as many funds have poured into oil as a hedge against inflation and the weakening US dollar. This has been the main factor in driving the price in recent months. We do not think the fundamentals justify oil at $120 and, without financial demand, we think it would be trading at $20 to $30 below that level.”
Analysts fear that the price will rise even higher as supply shortages get worse in the coming months while both physical and financial demands increase.
On the supply side, shortages may occur if there is a bad hurricane season in the Gulf of Mexico and because the oil industry typically saves maintenance work at fields such as the North Sea for good weather.
Rapid economic growth in the Middle East has led to a large increase in energy consumption, which is diverting oil and gas away from export markets to feed domestic needs. This has exacerbated the effect of rising energy demand in the region.
Yesterday’s increases came as the workers at Grangemouth, which is operated by Ineos, a chemicals company, began the second day of a two-day strike over pension benefits.
This forced the closure of the 700,000 barrel-a-day Forties pipeline and sparked fears that Scotland and the North of England could face petrol shortages. Grangemouth supplies 10 per cent of the UK’s petrol but also produces power for BP’s Kinneil plant, which processes the oil from the Forties pipeline.

The impact:
The high price of oil is having an impact on the global economy, with airlines failing and drivers paying more to fill their cars. Eos, the business-class-only airline, went into Chapter 11 bankruptcy protection yesterday and joins at least six other carriers that have also been grounded in the past two weeks by high costs.


Though the report is not all conclusive, and I would further investigate into the matter but seems as of now is:

  • Lot of fund managers are putting money in Oil to hedge against weakening dollar and recession.
  • Lack of sentiments in equity market world over is driving money towards Oil & Oil bonds.
  • When the physical demand for oil would join the financial demand, the prices would accelerate northwards without any brakes...all leading to a bubble.

Monday, 28 April 2008

Mars and Buffett bid $23bn for Wrigley.

Mars, the world's largest chocolate maker, and the investor Warren Buffett confirmed on 28th April 2008 that they would pay $23 billion (£11.5 billion) cash for Wrigley in an agreed deal with America's largest chewing-gum maker. A combined Mars-Wrigley entity would overtake Cadbury Schweppes as the world's biggest confectionery company.
Shares in Wrigley rose 23.5 per cent to $77.13 after the $80-a-share cash deal was announced.
Mars is offering a substantial premium for Wm Wrigley Jr, which had a stock market value of about $17.3 billion at Friday's $62.45 closing price. The offer price represents a 28.1 per cent premium. Under the terms of the agreement, Wrigley will become a standalone subsidiary of Mars.
Berkshire Hathaway, Mr Buffett's investment vehicle, has agreed to provide financing to Mars for the deal alongside Goldman Sachs and JPMorgan, and will take a minority equity stake in the Wrigley subsidiary. Mr Buffett is well-known for his preference for strong consumer brands; however, he usually embarks on acquisitions without a partner.
Analysts said that if the deal went ahead, Mars would be the biggest player in the global confectionery industry with a market share of 14.4 per cent, overtaking Cadbury's 10.1 per cent.

Warren Buffett tells investors ' The party is over'.

Warren Buffett, the world’s third-richest man, declared that the insurance “party is over”, as his Berkshire Hathaway investment vehicle reported that fourth-quarter insurance underwriting profit fell 46 per cent to $465 million (£235 million), while insurance investment income rose 12 per cent to $978 million.
Mr Buffett, who typically makes about half his profits from insurance companies such as Geico and National Indemnity, said that Berkshire Hathaway had been reducing new underwriting as rising competition in the absence of any disaster since Hurricane Katrina in 2005 pushed rates down, especially on coastal properties.
He also gave warning that, after two years with no significant disasters, it was only a matter of time before one happened, affecting claims.
“That party is over,” Mr Buffett said in his annual letter to Berkshire Hathaway shareholders. “It’s a certainty that insurance industry profit margins, including ours, will fall significantly in 2008. Prices are down, and exposures inexorably rise . . . So be prepared for lower insurance earnings during the next few years.”
The decline in underwriting revenues dragged down the group’s fourth-quarter net income from $3.58 billion to $2.95 billion. However, for all of 2007, Berkshire’s profits rose by 20 per cent to $13.21 billion.
Mr Buffett, 77, whose Berkshire Hathaway owns 2.9 per cent of Tesco, 4.8 per cent of Coca-Cola and 2.2 per cent of Johnson & Johnson, said that he had drawn up a shortlist of four candidates to succeed him when he finally retires. He would not name names.

Brand TATA, biggest Indian brand in the world!

Tata, one of India’s biggest group of companies on an acquisition spree, has emerged as one of the largest global brands, according to a UK-based independent consultancy firm. Valued at $11.4 billion, Tata is ranked 57th among top 100 brands listed by Brand Finance, an independent company focused on the management and valuation of brands. Coca-Cola heads the list followed by fellow American companies Microsoft, Google, Wal-Mart, IBM and GE while UK’s HSBC is placed 7th.

Expressing his happiness, Tata Sons executive director R Gopalakrishnan said it was a first for an Indian brand to be listed among the world’s largest. “For the first time, an Indian brand has got into the list of the largest global brands, although it is number 57 and they have valued it at $11.4 billion,” said Mr Gopalakrishnan who is also a member of the Tata group corporate centre.

Tata has three biggest acquisitions in value, the Anglo-Dutch steel company Corus is the biggest. When completed and approved, Ford’s Jaguar and Land Rover will be second and the third will be Tata chemicals’ purchase of General Chemicals. The total amount of acquisitions done by Tata is probably around $25 billion in the last 4-5 years.
Hats off to you guys!
Sources: ET

Sunday, 27 April 2008

Oil Rally - a bubble in the making! Part 1

It started with financial asset bubble burst in Japan with the Collapse of banking system, followed by Technology bubble burst then with recent and most devastating real estate bubble burst. I believe oil rally is yet another bubble in the making, which would burst and would impact several economies severely.

Oil's meteoric rise to near $120 a barrel looks like more than just another economic bubble - growing demand and tighter supplies are likely to keep prices high. Some analysts say even $200 a barrel would not be out of the question.

The latest price surge - pushing crude to record heights in recent weeks, and to nearly double its level a year ago - has some key components of a classic bubble, when market prices climb far above their intrinsic value. The burst comes when investors realise the assets are overvalued. But growing worldwide thirst for crude, in large part from the rapidly developing economies of China and India, means frustrated consumers probably won't get any relief.

"We can do our homework, but prices are going to go where they want to go at this point," said Jeff Spittel, an analyst at investment bank Natixis Bleichroeder.

Oil came close to $120 a barrel on 25th April 2008, on news that a ship under contract to the US Defence Department fired warning shots at two boats in the Gulf that may have been Iranian. The markets were also weighing the effects of a pipeline attack in Nigeria and a looming refinery strike in Scotland. Retail gas prices, which at times rise in tandem with crude oil, moved further into record territory near $3.60 a gallon.
The Organisation of Petroleum Exporting Countries - which supplies about 40 per cent of the world's crude - insists it's supplying more than enough oil. Instead, many observers blame speculative traders for bidding up the price as a hedge against inflation and as protection from the sinking dollar. Some see that as evidence of a bubble.
It's also becoming harder and more expensive for oil companies to find and tap new petroleum reserves - a troublesome scenario given forecasts that the world's energy needs will escalate by more than 50 per cent in the next two decades. Toss in the weak dollar and political instability in some oil-producing countries, and it seems unlikely that oil will fall below $100 a barrel anytime soon, if ever.
Widely watched oil price prognosticator Goldman Sachs has said oil could average $110 a barrel by 2010, up from a previous forecast of $80, and that a spike as high as $200 a barrel is possible in case of a major supply disruption.

Cell phones still fiercely opposed on plane!

The very idea of airlines allowing passengers to talk on cell phones during flights reminds frequent flier Alvin Kolchins of the movie Snakes on a Plane.
"I'm not sure which would be worse, but my vote goes to . . . cell phones," said Kolchins, a Penn Valley resident who sells life insurance and annuities. "At least with the snakes, they are quiet and can only bite and kill you."

Kolchins is one of millions of airline customers and employees who were horrified at a recent report that the European Union had cleared the way for carriers to allow the use of cell phones while planes are in the air.
"What a horrible thought," said Priscilla Sharpless, a travel agent who lives in Phoenixville. "Flying is miserable enough these days without having to listen to people yakking on their cell phones at close quarters."
The FCC ban - originally adopted in 1961 and later updated - was meant to prevent any interference with a plane's navigational instruments or disruption of phone service on the ground.
U.S. airlines aren't clamoring to change the rule. Flight attendants in particular are adamantly opposed to ending the ban, fearful that without it, confrontations between passengers would become common. And just in case an airline were to consider it, members of Congress are introducing legislation to enshrine the FCC ban in federal law.
The broad opposition may be a telling sign of the times. A dozen years ago when private cell-phone use was exploding and talking anywhere was considered a convenience more than nuisance, trade groups for the airline and electronics industries were expressing hope for easing of the rules due to traveler demand. But recently conducted survey showed that more than three dozen others who responded said they were opposed. None was in favor of lifting the ban.
"Cell phones on planes. . . . Four words that strike fear in my heart," wrote Wendy Earle, a marketing specialist from Kulpsville. "Who hasn't experienced the blowhard whose loud end of the conversation can be heard from 100 feet away? Wouldn't you just love to be sitting near him [or her] on a plane?"
Although cell phones increasingly are used for silent text-messaging and e-mailing, it was the prospect of gabby, one-sided conversations popping up throughout a confined aircraft cabin that elicited dread.

Don Goldkamp, a frequent business traveler who lives in Cedars, Montgomery County, called cell phones on planes "invasive to other passengers. I can't imagine why the airlines would want to make flying less pleasant than it already is," he added.
Objections to changing the rule started soon after the E.U. said on April 9 that midair cell-phone usage could start as soon as airlines could install onboard base stations in their planes. Passengers could turn on phones once a flight has reached 10,000 feet, when other electronic devices such as laptops are allowed.

After the E.U.'s decision, a bipartisan group of members of the U.S. House Transportation Committee quickly decided not to take a chance that the airlines would seek to change the regulation. They introduced the HANG UP Act - for Halting Airplane Noise to Give Us Peace - that would ban the practice.

"In far too many easily foreseeable operational scenarios, cell-phone use could be worse than a mere nuisance," Friend said. "It could have catastrophic effects on aviation safety and security."
The Air Transport Association, which represents the major carriers, hasn't taken a stand on the European Union decision. Were the restriction to be lifted in this country, "the airlines would have to weigh the benefits," spokesman David Castelveter said. "But you don't want to benefit a few and annoy the many."
Among the reasons airlines should not want to change the rule would be a loss of business from some customers, one of them added.
"The thought of allowing cell-phone use on planes terrifies me," said Earle, the traveler from Kulpsville. "If it happens in the U.S., that will be the final straw. If I can't get there by car or train, I ain't going!"

Source: world news network

Monday, 21 April 2008

Las Vegas experiencing the economic downturn.

MGM Mirage Inc., the largest casino operator on the Las Vegas Strip, told that more than 400 middle management employees would be terminated immediately in a cost-saving move. The decision will save $75 million annually and came after the company saw weakness since August at its properties, which include Bellagio, MGM Grand, Mirage and Mandalay Bay, spokesman Alan Feldman told The Associated Press recently.

The move is the largest and swiftest by a casino operator in the current economic downturn, although the use of so-called "extra board" employees such as dealers and busboys who take fill-in shifts as needed has been down citywide.Budget-tight guests have shown a tendency to spend less in all major segments of the business, Feldman said."Instead of four days, people stay for three. Instead of a five-star experience, they are going for four stars. Instead of two shows, they're going to one," he said. "There certainly is the possibility that there are people who are also making a decision to gamble less."

My take:

This was bound to happen. The sub prime has badly hit the investing upper class. Huge capital is eroded. So, the expenses on luxury will come down drastically. Las Vegas Mirage loss is just one of the many companies and sector that would soon follow the trend.

Sources: Detroit News.

Friday, 11 April 2008

My views on Various setors.

With increasing national and international issues affecting the Indian capital markets and the sentiments, here's a look and my views on various sectors. Updated 11/04/2008.

Thursday, 10 April 2008

Could an economic lesson from Sweden work in the U.S.?

As U.S. officials hunt for solutions to what many economists are calling the most serious financial crisis since the Depression, they might draw lessons from another painful and costly banking emergency.
In the early 1990s, a massive Swedish real estate bubble burst, littering the Nordic economy with broken finance companies, failing businesses and jobless workers. It was the first systemic banking crisis in an industrialized country since the 1930s and it saw the Swedish economy actually shrink for three straight years — something that hasn't happened in the United States since the rapid demobilization after World War II.
The Swedish and American crises share many traits: Both followed periods of financial deregulation, and both featured newly daring banks relying upon bookkeeping maneuvers to take on unsustainable amounts of debt. Happily, despite economic conditions that were far worse than in the USA today — and unlike a similar episode in Japan — Sweden quickly recovered.
Yet, it did so in a manner that would be highly controversial in the United States. Sweden used taxpayer money — and lots of it — to rebuild its wounded banks. "In Sweden's case, the solution ultimately ended up on the government's balance sheet. … The government ended up recapitalizing the system," says economist David Rosenberg of Merrill Lynch. "There's a lesson here."
Sweden's successful crisis management may offer a road map for U.S. officials. But the Swedish cleanup wasn't cheap. It cost the public an estimated 6% of annual economic output; an equivalent bill for the U.S. today would be nearly $850 billion. And Sweden was able to implement a free-spending government rescue only because of a broad political consensus that is difficult to imagine amid the hyper-partisan atmosphere of a U.S. presidential election year.
Sources: usatoday

Helping Farmers or Hurting them?

Swaminathan Iyer took the words out of this bloggers mouth. The UPA government, he write “has suddenly shifted from protecting Indian farmers against cheap imports to protecting the consumer by cheapening imports”. He is referring to the ban on rice exports (which follow the export of wheat late last year, followed by the ban on export of maize and pulses).

The April 2008 issue of Pragati called for the government to free the farmers. The UPA government did just the opposite—far from allowing Indian farmers to benefit from selling their produce at record prices, the government is forcing them to sell at artificially low prices. So who is hurting the farmer? And next year, when farmers find themselves unable to repay their loans, the UPA government—if it is in power at that time—will simply increase payouts and write-offs.
In the end the consumers pay the farmers: only the government gets itself into the equation causing unnecessary leakage and wastage.
Unnecessary? Why, isn’t it at least helping curb inflation? Not quite. As Mr Iyer explains:
The lesson is clear. Curbing exports is a form of national hoarding. If every country tries to hoard food, food prices will naturally rise. Governments would like to believe that hoarding by traders is terrible, whereas hoarding by governments promotes the public interest. But the impact on prices is exactly the same in both cases. Indeed, when governments start to hoard food out of panic, the panic itself stokes further inflationary fears.
That is why I am not optimistic about the Indian government’s anti-inflation package. The government thinks it is improving domestic supplies and hence bringing down prices. In fact the government is adding to the global hoarding problem, and stoking panic too. So, expect food inflation to keep rising in coming months.

It’s all very well, you say, but what should the government do when poor people can’t afford food? Well, it should buy food grain at market prices and distribute it to those who need it. That way it will least distort the price signals that farmers receive and allow them to benefit from the good times. And by spending taxpayers money in a targeted manner—only the poor will enjoy cheap food—it will spend less. That is, if the government actually wanted to address the policy challenge, and not flail about paranoid of losing votes.
But if we look another angle of the story, State Governments are trying to do exactly same as suggested above. They buy at little more higher price and try to give it to poor at lower price through ration shops. What really happening is no farmer is willing to give Rice to govt and they smuggle it to neighbouring states where they can fetch higher price. It is every day story in TN where Rice is smuggled to AP and kerala. Real problem lies in distribution systems and storage. Untill these problems get sorted out, export restrictions will not work.
Sources: TOI

Wednesday, 9 April 2008

Inflation, Climbing high and fast!!!

ASSOCHAM on Saturday, 5th April 2008, predicted that it would continue to soar for next three to four months, and may even touch the 7.5 per cent mark."The Wholesale Price Index (WPI) based inflation rate which is already at the highest in the last three years, could even surpass the 7.5 percent mark," predicts ASSOCHAM President Venugopal Dhoot.
In order to check inflation, the Cabinet Committee on Prices (CCP) chaired by Prime Minister Manmohan Singh on Monday, decided to abolish import duty on all crude edible oils, including palm and soya, and banned the export of non-basmati rice and pulses to contain inflation. The Central Government also decided to raise the Minimum Export Price of basmati rice to 1,200 dollars per ton from 1100 dollars, to balance the demand " supply in the domestic market and to cut import duty on butter and clarified butter (ghee) from 40 per cent to 30 per cent, besides, the 15 per cent import duty on maize was abolished, applicable on import of up to five lakh tons. The CCP also advised states to impose limits on stocks of commodities under the Essential Commodities Act, besides asking steel producers not to raise prices. The study done by the business conglomerate also reveals that the Central Government's efforts to contain inflation will come start-yielding results by August when inflation is likely to fall at of four per cent.
Experts believe that after all possible measures taken by the government, now, everyone is waiting for Reserve Bank of India's (RBI) annual credit policy that will be revealed on April 29 2008. The industry body has asked the RBI to increase the interest rates, specifically the Cash Reserve Ratio (CRR) to restrain liquidity. The problem of inflation doesn't seem to be India-centric with China too struggling with a rising inflation rate of over nine percent.
According to analysts, the announcement of Sixth Pay Commission recommendations, and provisions for enhanced expenditure on social sectors in the Budget 2008-09 coupled with rising crude oil prices have also raised expectations about high inflation.

Tuesday, 8 April 2008

Anmol Vachan - 1

"An error does not become truth by reason of multiplied propagation, nor does truth become error because nobody sees it" - "To give pleasure to a single heart by a single act is better than a thousand heads bowing in prayer" - Mohandas Karamchand Gandhi

Indian Economy Latest Updates :April 2008

  • Infrastructure Sector Latest Updates:
    No takers for Rs 4,000-cr government aid
    Nagaland signs 2 pacts with Korean co
    Core sector grows by 8.7% in February
    Chopper Class: Govt plans airports for helicopters
    Green tilt in energy balance
    Nagarjuna, Maytas Infra to develop Karnataka airports
    IVRCL bags orders worth Rs 484 cr
    India set to sign transport project agreement with Myanmar

  • Finance Updates April 2008 :
    Foreign fund restrictions to boomerang: Raghuram panel
    Grant Rs 5,000 cr for setting up SEZs in JK: Assocham
    CRR hike may leave banks with little to lend
    10 lakh backward class families benefit from NBCFDC loans
    JPMorgan's John Coyle joins Permira
    Indian investors get more room to diversify abroad
    WB, ADB may lend directly to urban bodies
    India raises overseas investment limit for funds
    'India needs $500 nn investment to sustain growth'
    Centre releases Rs 65 cr to revive lakes in J&K
    Refund claims may rise on derivatives losses
    'India important source of FDI in US'
    Microcredit raises hopes for farm widows
    Retail sector may get service tax relief
    BJP seeks Rs 1,000 cr relief package from Centre
    CST phaseout to miss deadline
    Repo rate, CRR hike on cards
    DA announced for Punjab employees

Monday, 7 April 2008

The US Sub prime - In graphics

The US sub-prime mortgage crisis has lead to plunging property prices, a slowdown in the US economy, and billions in losses by banks. It stems from a fundamental change in the way mortgages are funded.

Traditionally, banks have financed their mortgage lending through the deposits they receive from their customers. This has limited the amount of mortgage lending they could do.
In recent years, banks have moved to a new model where they sell on the mortgages to the bond markets. This has made it much easier to fund additional borrowing. But it has also led to abuses as banks no longer have the incentive to check carefully the mortgages they issue.

Sunday, 6 April 2008

Defence Pensions : Worrying Signs

The total strength of the defence employees has risen from nearly 362,000 in 1960 to 1.3 million today. The defence pensions bill, which is over 50 percent of the central government’s pensions bill, has also risen exponentially since the 1960s. It has grown nearly tenfold from Rs. 1670 Crore in 1990-91 to Rs. 15,244 Crore in 2007-08; and is currently over two-thirds of the military salary expenses. The subterfuge of removing defence pensions expenditure from the overall military expenditure, in vogue since 1985, has turned the spotlight away from this issue.

More than three percent of defence employees retire every year. The bulk of this group is of soldiers, who constitute 85 percent of the defence forces. There is an average in-service death rate of 1.2 percent for the defence employees, largely due to counterinsurgency operations. Early induction age and early retirement age implies a younger age cohort for 90 percent of the defence employees compared to their civilian counterparts.
Due to early retirement, the defence employees do not fulfill the government criteria of 33 years service to earn a full pension. This ought to reduce the defence pensions bill significantly. However, the high ratio of 1.68 defence pensioners per defence employee implies an extended period of pension payments, which offsets the lower rates of defence pensions. The other civil departments, incidentally, have a ratio of 0.55 pensioners per employee.
Moreover, Indian population above 60 years of age is growing at a rapid pace, at an annual growth rate of 3.8 percent per annum in the period 1991-2001, as against the annual growth rate of 1.8% for the general population. The improved health care and increased life expectancy will skew the pensioners to employees ratio even further.

The recommendations of the Sixth Pay Commission are likely to push the defence pensions bill further northwards, if the example of Fifth Pay Commission is anything to go by. The implementation of Fifth Pay Commission recommendations had led to an increase in the defence pensions bill from 4947 Crore in 1997-98 to 10770 Crore in 2000-01.

It is believed that the defence pension bill has the potential to reach an unsustainable level, and perhaps even exceed the wage bill. This is borne out by the recent trends and is indicated by realistic assessment of such liabilities in the future years. The government has decided against introducing pension reforms in the defence services.

There is an immediate need to reduce the defence pension bill, which will otherwise continue to be a big drain on the national exchequer. This can be achieved by reducing the minimum military service requirements, pushing for early retirements with lateral absorption schemes and identifying a new model for defence pension reforms. These are desirable not only on the grounds of fiscal prudence and equity, but also to keep the military lean and young.

Thursday, 17 January 2008

The Rs.10 Coins.

In India, you get to see currency notes with all sorts of dirt, Holi colours on it, some pieces held together with adhesive tape, something scribbled on them, from numbers to names, to places, etc. Sometimes you are not able to read numbers printed on the note. They are found with several folds, carried as per the holder’s convenience.

When I was some 11 or 12 years old, I use to get fascinated by new rupee notes. Even today I stop for a moment when I see a fresh new currency rupee, as it is difficult to find fresh notes in circulation. I use to collect them, the clean clean and kadak kadak notes of rupee, mostly in ones, twos, fives and tens of denomination. At that time, I thought that probably I would never spend them.

I also use to get fascinated by coins with different impressions, like those with some leaders picture impression on coins or Indian flag, or something or the other. I witnessed history, when Rs. 5 coins were released in India for the first time. I planned to collect all the Rs. 5 coins present in India at that point of time. I even converted few of my 10s and 50 rupee notes into Rs. 5 coins. I use to scan my mummy’s purse and take all the Rs. 5 coins. (It was also a trick to increase my pocket money.)

I feel great that I witnessed something new as it happened back then. And here’s another change to witness history. The Government is planning to roll out Rs 10 coins during Diwali. The finance ministry will soon invite global tenders for manufacturing 30 crore pieces of Rs 10 coins amounting to Rs 300 crore. The coin will be of 17-mm diameter, an alloy of copper and nickel (cupro-nickel) while the rim will be of Al-Bronze (aluminium, copper and nickel). It is believed that only foreign suppliers will be able to supply these coins due to their unique composition.

Let’s collect them all!

Monday, 14 January 2008

Economics and US Presidential Candidates

As the US enters recession, I believe it has already, and I would be substantiating it in my subsequent posts, and as the US elections campaigning is charging up, I see a contrasting difference between how elections are fought in India and in US. Though as US is a developed country the political parties never have roti, kapda or makaan on their agenda. Surely, they do not have to promise such basic necessities to their citizens.
In India, elections are mostly fought luring voters by giving them liquor, money or increasing quotas to gain minority vote banks. You see different shades in different region in India. In recent past, you get to hear 'India shining' as the buzz word. Infrastructure Development is the fresh dish on the menu in Indian political scenario. Increased corporate support, encouraging entrepreneurs, favorable policies can be seen as trump cards now. With elections coming in 2009, surely all parties are gearing up.
On the contrary, in US you can see candidates promising high speed internets, cut in power bills and heat bills or even support to families that are finding difficult to pay their obligations.

I read an article which asked the candidates about their understanding of ‘Economics’. It’s a surprise that they are so blind about the issue. This is because Americans focus more on trying to divine the candidates’ characters by scrutinizing their tone of voice and facial expressions. Let’s see what some of the candidates feel about their economic policy.

John McCain admitts that economics isn’t his thing. “The issue of economics is not something I’ve understood as well as I should,” he says. “I’ve got Greenspan’s book.”
Alan Greenspan is the same person who refused to regulate the subprime lending.

Rudy Giuliani's answer to the economy’s short-run problems is a huge permanent tax cut, which he claims would pay for itself. Surely, he wants the entire American to get broke.

Mike Huckabee — well, what can you say about a candidate who talks populist while proposing to raise taxes on the middle class and cut them for the rich?

According to Mitt Romney, Republican, low taxes and a pro-business environment is what he feels would solve the problem. Safe bet isn’t that. But in the long run US economy would never be able to recover if his proposals are accepted.

John Edwards, Democratic Party, proposed aid to unemployed workers, aid to cash-strapped state and local governments, public investment in alternative energy, and other measures.

Hillary Clinton offered a broadly similar but somewhat larger proposal.

Mr. Obama seems to be very confused. Initially proposing for tax cut, as a measure for recession then came out with offerings similar to that of democrats.

Its fun to know what the “going to be president” of largest economy feels about economy. It would have been a better article if I would have discussed about their tone, facial expressions, their hair style or clothes.

Friday, 11 January 2008


News - Politics & Economics:

  • Indian companies raised a record US$17.14 bn through private equity deals in 2007, according to data from Grant Thornton. (BS)
  • Within a week of the Tamil Nadu goverment’s threat of nationalisation, private cement manufacturers have offered to make available 20 lakh bags of blended cement every month in all districts of Tamil Nadu at a subsidised price of Rs200 per 50 kg bag. (BS)
  • BSP chief Mayawati has threatened to withdraw support to the central government while alleging that some Congress leaders are planning to kill her. (FE)
  • Liquor might cost the same across country as the States have agreed on uniform duty structure. (ET)
  • Supreme court has ruled that ESOPs cannot be considered taxable income and the company is not obliged to deduct tax at source on the same. (BS)
  • Government has denied that it has any plans to sell the Dabhol power plant. (BS)
  • Government has accorded low priority to natural gas utilization by new power plants. (FE)
  • Beer consumption has grown just 14% in the first nine months of FY08 as against 28% in the last financial year. (ET)
  • Cement sales for the December quarter were up 2.1% YTD. (BS)

One Lakh Car - Reations from Industry.

Jagdish Khattar, former managing director Maruti Suzuki,
"The car is good to look at. There is a space in the market between two-wheelers and the 800 (Maruti's small car). It will be a success if they deliver what they promised. And I see no reason why they can't."

Ramesh Suri, Chairman Subros,
"The best thing is that they have kept the price at levels promised at concept stage. It is good to look at. I can't say about the driving experience as I have not taken a trial."

Shinzo Nakanishi, Managing Director of Maruti Suzuki India Ltd,
"We cannot make a cheaper car. We don't know how to make a Rs 1 lakh car unless we sacrifice something. We won't go below the 800 in our product line-up, but this car may impact some of our Maruti 800 sales"

Anand Mahindra, Managing Director, Mahindra & Mahindra Ltd,
"I think it's a moment of history and I'm delighted an Indian company is leading the way."

Venu Srinivasan, Chairman & Managing Director, TVS Motor Co,
"It is fantastic, outstanding engineering. It helps redefine the sector in the country. It has established new grounds."

P Sam, Group Head, Marketing & Sales, Yamaha Motor India Sales Pvt Ltd,
"The Rs 1 lakh rupee car is not going to impact our potential customers. Our customers would buy our products for the sheer joy of riding."

Onkar Kanwar, Apollo Tyres Ltd,
"I congratulate Tata. He has delivered what he promised."

Ashok Singh, Delhi Police Constable,
"It is a dream come true. I look forward to buying that car. My wife will be really happy."

G Colquhoun, Reader in Manufacturing Systems, School of Engineering, Liverpool,
"This is an important step for Asian markets. I look forward to this car being introduced in European markets."

Karan Agrawal,
" Tata Nano is value for money. At this price you cannot ask anything else. It is going to be a big hit."

Tata Nano - Launched.

Thursday, 10 January 2008

Exclusive Report - One Lakh Car is a realty!

Mr. Ratan Tata unveiled Rs 1 lakh car, 'Nano' at the 9th Auto Expo Show in Delhi. With this a new segment is created in the auto industry. Tata Motors now offer from trains to trucks to even the most affordable car of the world!

"That's what drove me -- a man on a two-wheeler with a child standing in front, his wife sitting behind, add to that the wet roads - a family in potential danger," Mr. Tata wrote on the company website.

''Since, promise is a promise the standard dealer version will cost Rs 1 lakh,'' said Tata Sons Chairman Ratan Tata. He also said that that the car is eight per cent smaller bumper to bumper, than the Maruti 800 but at the same time 21 per cent larger in its interiors and can sit up to four people. Talking about the safety of the car, Tata said, ‘‘the car has passed the full-frontal crash and the side impact crash''.

The car will be available in many variants, which will include one standard version and two deluxe versions with AC.

Small Wonders - features:
* 624 cc engine
* Mileage of 20 kilometers per liter
* Passed full frontal crash test, the offset and side-crash test
* Legroom is expected to be 21 pc more than Maruti 800.
* The car meets the Bharat 3 (Euro 4) emission standards.
* The car that will come in two variants - AC and non-AC
* Will comes a dealer price of Rs one lakh plus VAT and transport charges.
* Commercial launch in mid 2008-09

BOSCH - Alternator; Brakes; Fuel injection system; Ignition system. LUMAX AUTOMOTIVE - Headlamps. RICO AUTO - Engine blocks. NK MINDA - Switches; horns. SONA GROUP - Steering columns. GABRIEL - Suspensions. KINETIC ENGINEERING - Gears. FEDERAL-MOGUL GOETZEE - Engine pistons. JK TYRES - 12-inch tyres.

What is missing in the car apart from a reasonable luggage space is power steering. The car also said to have one wiper instead of the customary two.

Tata Motors has gone all out to make sure Ratan Tata's plan of a rupees one lakh car is fulfilled.

Surely, owning a four wheeler has now become affordable in India.

Tuesday, 8 January 2008

Rupee near record

The rupee climbed again today to reach its highest level in almost a decade as the benchmark stock index rose to a record, raising expectations global funds will buy more local equities. The rupee gained for the fourth successive day after Citigroup and Deutsche Bank said in research reports that the Bombay Stock Exchange's Sensitive Index, or Sensex, will add to gains for the seventh year in a row as a near-record pace of economic growth boosts company earnings. Prime Minister Manmohan Singh today said ``conditions are favorable'' for the nation to sustain a growth rate of between 9 percent and 10 percent in the next five years. The currency gained to 39.275 against the dollar at the 5 p.m. close in Mumbai, the highest since Feb. 26, 1998, according to data compiled by Bloomberg. It closed at 39.295 yesterday. The rupee, which last year posted the biggest annual gain since at least 1974, may reach 39 this month according to many observers.

Monday, 7 January 2008

ICC New Rules

(1) Ricky Ponting – (THE TRULY GENUINE CRICKETER OF THE CRICKET ERA AND WHOSE INTEGRITY SHOULD NOT BE DOUBTED ) should be considered as the FOURTH UMPIRE. As per the new rules, FOURTH UMPIRE decision is final and will over ride any decisions taken by any other umpires. ON-FIELD umpires can seek the assistance of RICKY PONTING even if he is not on the field. This rule is to be made, so that every team should understand the importance of the FOURTH UMPIRE .

(2) While AUSTRALIAN TEAM is bowling, If the ball flies anywhere close to the AUSTRALIAN FIELDER(WITHIN 5 metre distance) , the batsman is to be considered OUT irrelevant of whether the catch was taken cleanly or grassed. Any decision for further clarification should be seeked from the FOURTH UMPIRE. This is made to ensure that the cricket is played with SPORTIVE SPIRIT by all the teams.

(3) While BATTING , AUSTRALIAN players will wait for the ON-FIELD UMPIRE decisions only (even if the catch goes to the FIFTH SLIP as the ball might not have touched the bat). Each AUSTRALIAN batsman has to be out FOUR TIMES (minimum) before he can return to the pavilion. In case of THE CRICKETER WITH INTEGRITY , this can be higher.

(4) UMPIRESshould consider a huge bonus if an AUSTRALIAN player scores a century. Any wrong decisions can be ignored as they will be paid huge bonus and will receive the backing of the AUSTRALIAN team and board.

(5) All AUSTRALIAN players are eligible to keep commenting about all players on the field and the OPPONENT TEAM should never comment as they will be spoiling the spirit of the AUSTRALIAN team. Any comments made in any other language are to be considered as RACIALISM only.

(6) MATCH REFREE decisions will be taken purely on the AUSTRALIAN TEAM advices only. Player views from the other teams decisions will not be considered for hearing. MATCH REFREES are to be given huge bonus if this rule is implemented.

(7) NO VISITING TEAM should plan to win in AUSTRALIA. This is to ensure that the sportive spirit of CRICKET is maintained.

(8) THE MOST IMPORTANT RULE : If any bowler gets RICKY PONTING - "THE UNDISPUTED CRICKETER WITH INTEGTIRY IN THE GAME OF CRICKET" more than twice in a series, he will be banned for the REST OF THE SERIES. This is to ensure that the best batsman/Captain will be played to break records and create history in the game of CRICKET.
These rules will clarify better to the all the teams VISITING AUSTRALIA.


Thnx a lot whoever composed it.

Sources: Got through a mail.

Saturday, 5 January 2008


NEWS section would focus mainly on big news that would have some impact on Economy, Markets, etc.

  • The Government is all set to remove the cap on the number of partners in partnership firms as well as in banking companies regulated under the Company Law. (ET)
  • There would be no dilution in the minimum number of independent directors on the boards of listed PSUs. Sebi Chairman M Damodaran has ruled out any change in corporate governance norms for PSUs as regards independent directors on their Boards. (BL)
  • Crude oil traded at $100 per barrel for the first time on Wednesday on concerns that violence in Nigeria may further cut output. (BS)
  • Sebi has said it would allow institutional investors to start short selling, which was banned way back in 2001 in the aftermath of the Ketan Parekh scam, from February 1. (BS)
  • With prices of cement in Tamil Nadu soaring, the state government has said that it may take over private cement factories in the state, if price hikes were not controlled. (BL)
  • The Government is considering an increase of Rs.4 and Rs.2 per liter in the price of petrol and diesel, respectively. (ET)

Friday, 4 January 2008

The People's Car!!!

The people's car is all set to be displayed on Jan 10th 2008, in The Delhi Auto Expo. This is Mr. Ratan Tata's dream project.

The vision of the car is to fill the gap between two wheelers and lowest priced four wheeler. The possibility of manufacturing a car for one lakh rupees has already been denied by the likes of Mr. Jagdish Khattar, the recently retired MD of Maruti Udyog. Biggies like Honda, Suzuki, Toyota and Hyundai still lives in the denial of possibility of a rupees one lakh car.

But, in a recent interview to the McKinsey Quarterly, Mr. Ratan Tata said: “If you could position an all-weather car that was not a glorified scooter or a stripped down car, then I believe there would be market potential for one million cars a year.”

And Tatas have bigger plans. Even before the launch of the car, Tata motors has submitted an application to Thailand’s Board of Investment (BoI) for an investment of around Rs 800-900 crore in Thailand for the same project. Now, that is what you call an aggressive strategy! The company already has a good presence in Thailand with its Ace, a one ton mini-truck. This would help company to further leverage its presence in the asian market.

Advertising Agency: The Diwan Arun Nanda-promoted Rediffusion has managed to bag the project. The fight was between the three Tata Motor agencies, the Piyush Pandey led O&M, Anil Kapoor's FCB Ulka and Mr Nanda's Rediffusion. Both O&M and Rediff are WPP agencies, while FCB Ulka is 100% Omnicom owned agency.

Distribution and after sales services is already present for Tata Motors. The target customers are also identified. So, if all goes well, including no technical faults, and inflation under control, there is no problem why the project won't be successful.

The car is supposed to be available during Diwali festival time.

My take: The car would do well!!!

Anil Ambani and his fancy!

A lot of huulla is going on in the market regarding the IPO of Reliance Power. The issue has raised brows right from the day, it was announced by younger Ambani. Even SEBI has to look into the matter.

Few facts:
1. Promoters contribution to Reliance Power is US$ 250 million for 100% stake. 50% would be held by Reliance Energy and 50% that is US$125 million is contributed by Anil Ambani. Of this, around 10% would be off loaded in IPO i.e. US$ 25 million for US$ 2.5bn. This would lead to world's biggest investment appreciation of 100 times in 5 months from date of inception of the company. This would be India's biggest IPO ever, beating DLF.

2. The issue is trading in grey market at Rs. 400-Rs.420 i.e it would get list at around Rs. 850-Rs. 870 levels.

3. No project has been completed till date.

Surprisingly, I have not come across any expert recommending to bet on the issue.

I am not sceptical about the issue or the abilities of younger ambani, but it would have been a lot better if he would have completed some projects and then floated the company. I am sure the issue would be a great success and the the management would rope several JVs and ties up or even acquire expertise for execution.
So, surely listing would be at 100% premium.

My call is buy as much as possible.

Reliance Power has called an analyst's meet today i.e., Friday, 4th January 2008.
Venue: The Crystal Room, Hotel Taj Mahal.
Time: 6.45 pm.
Service: Cocktail & Dinner.
Will update on the issue after the analyst's meet.

Thursday, 3 January 2008

The Tatas

The center of attraction for January 2008 in automobile sector, surely, would be Tata Motors. The company is inching closer and closer to bag the two iconic brands, Jaguar and Land Rover.
Secondly, the most eagerly awaited One Lakh car would be displayed in Delhi Auto Expo on 10th January. The car is believed to be Chairman of Tata Group, Mr. Ratan Tata's dream project.

Last year, Tata group was again in news, when Tata Steel announced to acquire Corus Steel. Though it all started with a friendly bid, went on to finish with a hostile takeover.

Surely, Tatas have drawn a road map for each of its companies to go global, and things are unfolding slowly but steadly.


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