Thursday, November 5, 2009
Stock markets bounce back
Stock markets bounce back
Business Standard, November 5, 2009, Page 1
BS Reporter / Mumbai
Stimulus assurance, global cues pull back Sensex, Nifty.
Stocks rose the most in three months, snapping the Bombay Stock Exchange Sensitive Index’s biggest losing streak in a year, after Finance Minister Pranab Mukherjee said the government will not withdraw stimulus measures.
Global cues were also positive. Asian bourses had a field day and India turned out to be the top performer. European markets traded firm and the Dow futures are also exhibiting strength, ahead of the Fed's policy statement later in the day.
Siddharth Bhamre, head - investment advisory and derivatives, Angel Broking, said, "Today's rally was driven by decent global cues and short-covering activity. The bounce-back could take the Nifty to the 4800/4850-levels.
Tentative and volatile to begin with, the markets picked up steam soon enough today. While the Nifty ended at well above the 4,700-mark, the Sensex closed just shy of the 16,000-mark.
The Sensex ended at 15,912, stronger by 507 points, or 3 per cent, more than making up for the previous day's losses..
There was broad-based buying in index heavyweights. Reliance alone catapulted the Sensex by more than 113 points, while Infosys contributed 64 points and ICICI Bank 60-points. All sectoral indices ended in the green, led by realty, metal and IT stocks.
The stocks in the limelight were Jaiprakash Associates (stronger by 9 per cent at Rs 212), Hindalco (higher by 9 per cent at Rs 119) and DLF (up 8 per cent at Rs 365). Sterlite gained 6 per cent at Rs 770, Reliance added 5 per cent at Rs 1,840 and Tata Steel put on 5 per cent at Rs 1,920.
Sun Pharma, Grasim and Tata Power were laggards, shedding up to 1 per cent at Rs 1,375, Rs 2,167 and Rs 1,307 respectively.
The market breadth was strong. Out of 2,778 stocks traded on the BSE there were 1,770 advancing stocks and 950 declines.
Realty funds prepare for action as interest in sector revives
Realty funds prepare for action as interest in sector revives
Business Standard, November 5, 2009, Section II, Page 1
Vandana / Mumbai
After hitting a five-year low in fund-raising globally, real estate funds are back on track. A number of new and existing real estate funds are planning to tap domestic and offshore markets to raise funds.
The revival of sentiment globally and in the real estate sector has led to funds chasing high net worth individuals (HNIs) and ultra HNIs flush with liquidity. Domestic real estate funds are using this opportunity to expand their existing funds or do a fresh round of fund-raising.
The Piramal group-promoted Indiareit Fund Adviors is planning to raise a Rs 500-crore real estate fund. ASK Investment Advisors, which raised a domestic real estate fund recently, is planning to raise a $250-million offshore real estate fund. Dewan Housing, a player in the housing finance segment, is planning to raise a $250-million real estate fund. Sources said ICICI Ventures was also looking at launching a real estate fund by the fourth quarter of this year. Morgan Stanley, which has a global real estate fund in India, might also look at raising an India-focused real estate fund by the end of this year, sources said.
Sunil Rohokale, executive director, ASK Investment Holdings, said: “At this point in time, investors are looking to park money in growth assets. Real estate prices have corrected sharply in some pockets. Although there is a lot of liquidity in capital markets, developers are still starved for funds. That is where real estate funds have a role to play. Real estate players have a huge land bank. However, the capital needed to kick off these projects is not there.”
According to a Motilal Oswal report, one of the key signs of recovery in the sector is asset prices. Since June, residential real estate prices in cities such as Mumbai and New Delhi have increased by 15-20 per cent on an average. Since February, the global real estate investment trust market has seen a record equity infusion of $16 billion. “Equity infusion by investors at this point in the cycle suggests they see value at current price levels,” said the report.
“There is a good appetite among HNIs and super HNIs for real estate investments. But, they have become more conscious about the fund strategy and the kind of fund managers they choose to be with. They are also increasingly focusing on exits. HNIs are also looking at direct investments,” said a wealth manager who did not wish to be named.
Real estate funds typically invest at project level. For example, Milestone Real Estate Fund, a Sebi-registered venture capital fund, recently invested Rs 110 crore in a residential project in Kolkata. Milestone is developing the project along with Godrej Properties.
Experts say a major reason behind HNIs investing in real estate funds is low ticket sizes. Prior to 2006, real estate funds were beyond the reach of HNIs as entry barriers were too high. However, with ticket sizes coming down to as low as Rs 25 lakh and even Rs 10 lakh in some cases, HNIs and ultra HNIs can easily invest in these funds.
“There is selective appetite among ultra HNIs to invest in income-yielding real estate assets. A number of people are investing to hedge against inflation. Internationally, investors hedge through commodities. In India, they do so through real estate. Having said that, investors have become very choosy on who the fund manager is. They are also looking at execution risks in projects,” said Satyanarayan Bansal, CEO, Barclays Wealth.
Montek warns against reforms letup
Montek warns against reforms letup
The Economic Times, November 5, 2009, Page 10
Our Bureau NEW DELHI
AKEY policymaker on Wednesday warned against reconsidering financial sector reforms in the wake of the global meltdown, saying the gradual measures taken by the country to open up its financial sector would not lead to any instability.
“It would be an extremely serious mistake to stop financial sector reforms only because there is a global economic crisis,” Planning Commission deputy chairman Montek Singh Ahluwalia has said.
Mr Ahluwalia, a close aide to the prime minister, also made a strong pitch for aggressive disinvestment of public sector undertakings (PSUs) and said the proceeds from the sale should be used for new investment projects.
Speaking at the Economic Editors’ Conference, Mr Ahluwalia said that if the world wants to invest in India, it was a good thing. “I think we can absorb those foreign investment flows. Obviously we will remain watchful on flows of short-term debt and so on, but a revival of foreign investment flows is very welcome,” he said.
Foreign direct investment in the first half of the 2009-10 (April-September) stood at over $15 billion, almost equivalent to portfolio investments in the same period.
The deputy chairman’s comment is significant given the ongoing debate in the government on the pace of economic reforms in the back-drop of the global financial melt-down that affected the more liberalised Western world more than the relatively conservative economies like India.
The Planning Commission also wants the government’s disinvestment drive to pick up pace. “First of all we should be aggressive and secondly it (proceeds from disinvestment) should be used for new investment,” Mr Ahluwalia told reporters.
When asked whether the disinvestment proceeds should be used for reining in fiscal deficit which is expected to increase to 6.8% of the GDP next year, he said that it was for the finance ministry to decide as the modalities for expediting disinvestment and utilising the proceeds in new projects are to be developed by them.
The government has already reduced its shareholding in PSUs, including Oil India Limited and NHPC, this fiscal through disinvestment.
Disinvestment of NTPC, Sutluj Jal Vidyut Nigam and Rural Electrification Corporation is in the pipeline.
On the issue of rising food prices, Mr Ahluwalia said that the government was concerned about it because if price rise went out of control, it would affect the common man. He said that with prospects of a good rabi crop, food price inflation was expected to come down.
The deputy chairman added that while it was important to keep food prices down, farmers must also get good prices. “The fact that the government has given attractive procurement prices is something positive as it lays the foundation of strong agriculture performance,” he said.
Montek differs with FM on reforms
Montek differs with FM on reforms
Financial Express, November 5, 2009, Page 10
fe Bureaus, New Delhi
A day after finance minister Pranab Mukherjee said the government would only undertake key financial sector reforms in pensions and insurance only after achieving a political consensus within and outside the UPA coalition, deputy chairman of the Planning Commission Montek Ahluwalia sounded a warning that any move to stop financial sector reforms ‘would be a serious mistake.’
Ahluwalia’s comments also assume significance as the Reserve Bank of India (RBI) and the finance ministry have differences of opinion with the financial reforms agenda espoused by the Prime Minister’ economic advisor Raghuram Rajan. As reported by FE on Wednesday, the finance ministry and the RBI have scotched a series of recommendations by the Rajan committee report on financial sector reforms.
“Rajan’s recommendations are not new. You may ask if this is the right time or should we shut down financial reforms. We have learned a lot from the global financial crisis. But none of the reforms we are talking about lend themselves to create systemic instability that led to the crisis. It would be a great mistake to stop financial reforms… a lot remains to be done,” Ahluwalia said.
Referring to the pending insurance and pension bills, Mukherjee had said on Tuesday, “Ours is a system where we have to carry people with us. Legislation requires both houses of Parliament to approve them. If we don’t have consensus there, it will be difficult to get Bills passed. Our intention is not enough, it has to converge with the views of other political parties, within the coalition and outside the coalition. We shall have to persuade and try to come up with a consensus. At the earliest opportunity, I would like to get it done.”
Stating that India has been implementing financial sector reforms in a calibrated manner, Ahluwalia said, “The real lesson of the global crisis is that opening up the capital account in an unrestricted manner to highly mobile short-term capital flows could add volatility. So we have followed the principle of keeping the capital account restricted and freeing foreign direct investment and institutional investment flows.”
“In the coming year, capital inflows will rise again as the world recovers from the financial crisis. People want to come and invest in India and that’s a good thing. Excessive capital flows may be a problem, but RBI knows how to handle them,” the Plan panel deputy chairman pointed out.
“The financial reforms agenda must continue. Any assumption that we should stop reforms in view of the global financial crisis would be a very serious mistake,” Ahluwalia underlined.
Reacting to concerns about rising food prices, Ahluwalia said that this time next year, food prices won’t be as high. He also called for tempered debates on the food price inflation as the interests of urban consumers cannot be used against increasing farm incomes by raising minimum support price. “We must acknowledge that 50% of our country depends on the farm sector for their livelihood,” Ahluwalia pointed out.
Govt aims to award contract for 12,000km highways by June ’10
Govt aims to award contract for 12,000km highways by June ’10
The Economic Times, November 5, 2009, Page 10
Our Bureau NEW DELHI
WITH the government ready to make the bidding process for infrastructure projects more investorfriendly, the road transport and highway ministry is hopeful of awarding contract for 12,000 km of highways by June 2010. The ministry, however, will miss the target date of March 2010 for completing the awards as the “irritants” in the bid documents had kept away serious investors.
“There has been a delay in awarding the contracts. Now that big irritants (in the bidding process) have been removed, we will be able to award contracts for 11,700 km of highways by June next year,” road transport and highways minister Kamal Nath said here at the Economic Editors’ Conference.
The proposed highway development would require an investment of close to Rs 1,00,000 crore.
The minister pointed out that the cabinet committee on infrastructure (CCI) had accepted the recommendations of BK Chaturvedi committee, which addressed problem issues like exit clause and conflict of interest clause that prevented a special purpose vehicle (an entity created by two or more companies) for bidding for a project if it had more than 5% stake in any other SPV also bidding for the same project. The Chaturvedi panel recommended increasing the cap to 25% in a bid to allow more developers to participate in the country’s over $80-billion highway sector. “We have now decided to correct the conflict of interest clause which will attract more private firms. The matter has been referred to law ministry,” he added.
The minister also said that an empowered group of ministers (EGoM) would meet later this month to explore financing options for highways projects. The panel would see how external commercial borrowings (ECBs) can be accessed for the road and highways sector at easier terms.
The minister said that government had set a target of building 7,000 km of highways annually or 20 km a day. Following consultation with state chief ministers, the Centre has proposed to set up committees under the chairmanship of state chief secretaries to expedite the process of land acquisition for highway construction.
“We have decided to reduce land acquisition time to eight months from 18 months now. In the May-September period, we built 6.5 km a day. In July, 10 km of highways were constructed, but the process slowed down due to the monsoons. Slowly, we are heading towards 20 km a day,” Mr Nath said.
The ministry has also created an expressway division within National Highways Authority of India (NHAI) to spruce up high-speed highway corridors in the country. It has proposed to set up expressway authority on the lines of the existing apex highway development body.
Credit growth still slow, but bankers see revival
Credit growth still slow, but bankers see revival
Financial Express, November 5, 2009, Page 1
fe Bureau, Mumbai
One month into the fiscal’s second half and the slow credit off-take in the banking sector appears to belie early signs of economic recovery. Off-take of bank credit grew below 10% up to October 23--the sharpest slowing in its expansion in 12 years. Analysts say the decline is primarily because of a continued sluggishness in the demand for loans, rather than the bankers’ reluctance to lend. Many of them see a pick-up in the remaining months of the financial year.
According to RBI data, credit growth stood at 9.66%, or Rs 2,52,585 crore, on a year-on-year basis through October 23, against 10.75% recorded up to October 9. Deposit growth has also fallen further to 19.02%, or Rs 6,63,819 crore, in the same period, against 19.98% up to October 9. For the first time, bank loans in absolute terms also dropped by Rs 21,750 crore in the fortnight ended October 23. Loans had shown an increase of Rs 17,160 crore in the fortnight ended October 9.
Bankers have attributed the further fall in credit growth to the slowdown in overall credit demand from the manufacturing sector, which is reflected in the decline of commodity prices and drawdown of inventories. Corporates were able to access non-bank domestic sources of funds and external financing, which had almost dried up during the crisis, at lower costs.
“A significant amount of bank finance has gone to the corporate sector through banks’ investments in units of mutual funds. Banks have also reined in credit to the retail sector due to perceived increased risk on account of the general slowdown,” noted a research report from Crisil.
As on August 28, though the growth in bank credit to agriculture increased sharply to 25.6% from 18.6%, credit to the housing sector decelerated to 5.4%, compared with 12.4%.
Credit growth to industry slowed to 17.9% from 32.9% last year. However, while credit growth remains slack, bankers say they are slowly seeing a pick-up with the start of the busy season. “We have sanctions worth Rs 26,000 crore in the pipeline. Our retail and SME credit is growing, and we hope to see some improvement in credit growth in the next six months,” said Bank of India CMD Alok K Misra.
Dena Bank CMD DL Rawal concurred. “We have huge sanctions of Rs 11,000 crore to be disbursed to various sectors like steel, infrastructure, cement, telecom and power, of which we have already disbursed Rs 2,000 crore during the quarter,” he said, adding that his bank had seen growth of 15-16% in the housing segment.
However, speaking to FE after the credit policy review last week, RBI governor D Subbarao said after discussions with bankers, RBI had reduced the credit off-take target for banks. The central bank had noted that credit growth is unlikely to meet the 20% target, but projected a growth of 18%.
At the same time, aggregate deposits of scheduled commercial banks are projected to grow by 18%. However Subbarao had urged bankers to step up their efforts towards credit expansion while preserving credit quality, which is critical for the revival of growth.
Crisil, a subsidiary of S& P, believes credit growth will pick up in the fiscal’s remaining months, as there are signs of a revival in the economy with higher IIP numbers. Crisil expects overall credit growth at 16-18% in 2009-10, against 17.3% in 2008-09.
Sensex bounces back, surges 507 pts on FM stimulus talk
Sensex bounces back, surges 507 pts on FM stimulus talk
Financial Express, November 5, 2009, Page 5
fe Bureau, Mumbai
The domestic equity bourses, led by index heavyweights, snapped its six-day loosing streak to post its highest gain in the last five months with the finance minister saying that the government would not withdraw the stimulus package. The 30-share Sensex of the the Bombay Stock Exchange (BSE) registered a solid gain of 507.19 points or 3.29% to end the trading session at 15,912.13 points, completely erasing its loss suffered in the previous trading session. On the other hand, the broader 50-share Nifty of the National Stock Exchange (NSE) ended the day at 4,710.80 points, up by 3.22% or 146.90 points.
Besides reassurance from the government on stimulus measures, experts attribute the sharp recovery in the equity market to short covering by traders ahead of the key policy statement by the US Federal Reserve on Wednesday. Further weakening of dollar against major currencies also helped emerging market equities attract more funds.
“After yesterday’s steep fall in the domestic market, some amount of bounce back was expected. But the sharp recovery in share prices was also on account of short covering in the derivative segment ahead of the US Federal Reserve's statement on interest rate and economy later in the day,” said Gopal Agarwal, head of equity, Mirae Asset Global.
“This was a technical pullback as some amount of short covering has to happen as the markets were in an oversold territory after Tuesday's trading session,” said Sashi Krishnan, CIO, Bajaj Allianz Life Insurance.
UBS Investment Research, in a note to its clients said the recent correction in the market provides good buying opportunity. "We believe that the recent correction in the Indian equity market presents an excellent buying opportunity. We increase our exposure to autos and telecom and introduce an overweight on pharma."
The domestic equity market started its declining trend after the Reserve Bank of India (RBI) had signalled its exit from the accommodative monetary policy by a 1% hike in the SLR last week. This gave a clear indication to market participants that there would be further monetary tightening either during this year-end or at the beginning of the next year.
Global investors are keenly awaiting the policy statement from the US Federal Reserve on interest rate after the Australian Central Bank raised its key policy rates for the second month in a row, according to market participants.
SBI rules out any immediate change in home loan rates
SBI rules out any immediate change in home loan rates
Financial Express, November 5, 2009, Page 13
Press Trust of India, Mumbai
State Bank of India on Wednesday said it did not have any immediate plans to revise its home loan rates, including that of the 8% special scheme originally slated to end this week.
“We have decided to keep the rates at the same level in the immediate future (including the 8% scheme). The current rate structure will continue,” SBI chief general manager P Nandakumar said.
The bank was responding to media reports that SBI may withdraw the special home loan scheme, which offers 8% fixed interest rate for loans upto Rs 5 lakh for five years.
It also offers loans upto Rs 50 lakh at 8% for the first year and at 8.5% in the second and third years. The scheme was supposed to end on November 7.
The bank had sanctioned Rs 17,537 crore under the scheme and provided loans to 1,16,174 people from February to September this year.
The bank has achieved a 30.6% growth under the scheme during the period compared to its earlier projection of 24%.
State Bank is understood to have plans to come with some special offers on home loans in the near future.
The bank had seen a 23.40%growth in its home loan portfolio in the quarter ended September 30.
On the back of a healthy growth in net interest income and core fee income, State Bank clocked a 10.19% jump in its standalone net profit at Rs 2,490-crore in the second quarter of the current financial year.
SBI witnessed a healthy credit growth of 16.39% in the quarter and is optimistic about achieving a growth rate of 22% for the full financial year.
The lender’s advances grew to 5,80,237-crore, up 16.39% as compared to Rs 4,98,513 crore in the second quarter of the last fiscal.
Its car loans grew by 44.45% in the quarter, large and mid-corporate loans and education loans grew by 14% and 42.23%, respectively.
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