Market Matrix: Economic News Coverage and comments as on 7 Oct 2007

By krsna Khandelwal - A veteran market analyst

Friends,

Of late, I find that some papers are mostly giving hopeful reports and drawing only the rosy picture of the market. Press although free, can not be said to be balanced in reporting on their on account or otherwise. Let us see what was reported last week, which I have selected for reporting to you, you find my own opinion thrown in here and there by way of loud thinking.

MSCI's emerging market index was almost up 25% mid week last week since Fed cut rates.

Vishwanathan Anand, one time world champion, once again won the Chess World Championship title on the 1st Oct 07.

Some thirty private agricultural mandis are going to come up in India at the initiative by some of the state govts.

The loan portfolios of banks have just grown by Rs 54908 Crs till 14th Sept 07 (@3.6%) while in the same period last year, it had grown by Rs 147657 Crs (@10.5%). The target of 25% growth for the entire 07-08 will be missed it seems.

Deccan Aviation, the parent company of Air-Deccan has 57% higher loss of Rs 173 Crs for the forth quarter ended Jun 07.

Exporters are mulling over rupee billing option for exports to certain countries. I think exporters should insist on rupee billing, as the rupee is now more stable currency.

Sept 07 sales of Maruti are up just 13.5%.

India has 0.9% share in global forex trade volumes this year, which is 3 times higher over last years' share.

SBI is looking for a foreign partner in general insurance business and would finalise in three-four months.

Alumimium companies reduced prices again this year for the seventh time, as LSE advices are weaker. The price fixed are Rs113000/- for a tonne. The rupee rise and poor London advices have put aluminium companies under pressure.

Alloy units are facing power shortage around the country and therefore are operating only in the range of 40 to 70% of capacity.

Default on insured mortgages increase in US. There have been record issues of notices (numbering 108716) of default, auction or repossession. The share prices of the mortgage insurers are plummeting.

PSU Banks are more dependent on interest income and lesser on fee etc. while their peer in private sector have grown their non-fund based income by over 29% in last financial year. I think that the PSU Banks have dearth of such staff and lack of such approach as would give them an edge. Some of the private banks may actually cross SBI in all the spheres of banking. After all India too has to catch with the world's other big banks. It has already done so in many of the manufacturing areas.

The govt. is keen to have Mittals stake in HPCL's 15 m/t Vshakhapatnam refinery and BPCL's 6 m/t Bina refinery. I think this is also a good way of expanding business for the public sector industry but only if the project size is big enough. In big projects, both are expected to have a balancing effect in style of operations and without the fear of going overboard. The small investor also would find the investing in such ventures very promising and comfortable.

India’s' trade deficit enlarged to $6.8 b in Aug 07 against $5 b in July 07 due to higher imports maintaining growth at 32.6% against export growth at 18.9%. Imagine the plight of rupee if the dollars had not been raining here for the simple reason that it is seen as a better destination than others for investment are.

Indian tourists spent more than Japanese counterparts did by spending total GBP 139 million.

Citibank warns of 60% possible fall in profits for the third quarter. What better proof of the affliction being grave on account of sub-prime crisis.

Economic Advisory Council Chairman Mr. C Rangrajan contends that India would have virtually no unemployment in two to three years and the concern would rest on wages (perhaps on working environment). I can see that happening, as the domestic help in my own house is difficult to organise due to non-availability of such hands. The surge in middle class holds has resulted in too much demand for such help and the crossing over from the Rajasthan border by people in search of work has lessened. We are going to see a jump in sales of white good for this reason.

It is ten years now that the south Asian currency melt down happened. India came out unscathed that time due to the fact that its economy was not integrated to the world to the extent of other economies. It is much more integrated now. That time the capital controls saved but this time only the freeing of rupee would save us and control would jolt us if not done away with. The building pressures should have a system of release through market mechanism. The markets do not carry any pressure without immediate redressal. Why the foreign money is coming into India, have you ever thought? It is because of higher interest rates than justified as per the availability of capital around the world. The entry of capital has been barred in so many ways but the stock market rout is kept open hence there is flooding in that area. Why not let the domestic companies to raise debt through issues here at their desired coupon rates and let the investors from around the world participate and let the rating agencies do their work of guidance. The willing would come and the nation would move ahead with flurry of economic activity. There is also a need to lower down the intermediation gains for the banks as IT has brought the cost substantially down. Govt should ensure better returns to savers than to the banks.

Cement companies have raised prices by 3 to 4 rupees a bag.

Railways hold some 48000 hectares of land bank across India. They may develop it along with some private parties in Bandra, Mumbai VT and Mumbai Central. This seems to a blatantly wrong move. This would congest the vicinity. In fact, such land should only be used for parking and for playgrounds for its own staff and for people and passengers. Again big money seems to be chasing the Netas and Baboos to have a hand in sugar pie, did they not do the same in the name of SEZs. There is further concern that FSI allowed would be four. What a care for the environment. Why not the Mumbai sink for such sins being committed there. Why not the public suffer for the keeping silence over such matters.

BHEL would pay an amount of Rs1050 crs for the acquisition of BHPV as govt has refused to write off loan of Rs 402 crs plus its interest.

Jet fuel price (ATF) has been raised to Rs39768/kl (+4.2%).

A Thompson Financial report says Oct-Dec 07 mop up through IPOs would total Rs 33 K Crs (22% up over in Jan- Sept 07). China would have still more of IPO activity.

Bajaj and TVS, together have lower sales in Sep 07 by 9.4% yoy to 1.69 million units, only Hero Honda has improved sales by 4.5%.

MF assets have grown to Rs. 4.77 lac crores against Rs 3.37 lac crores in the beginning of the year; however, only 2.11% was added in Sep 07, may be due to advance tax related payments.

The world m/cap stood at $60613 b on 2 Oct 07 (India’s share 2.19% and China’s 5.7%).

F&O turn over crossed Rs 100056 crs in 1395000 trades.

According to a report, the mobile users are three times as affluent as non-mobile users. Why should the telemarketers not make their lives hell by calling them, having more money has a price to pay too?

I think time has come to remove financial and trade barriers completely and pay attention to only securing the physical boundaries, which have been infringed in the past with impunity.

India beats China in off shore deals (M&A).

RBI proposes measures like sectoral ceilings and lock in for foreign private equity funds. RBI wants to classify PE as a separate category of foreign investment or have sub limit under FDI so that better monitoring of funds flowing in through this route is possible.

Rupee hit high of 39.45 to a dollar this week.

SEBI wishes to control financial advisors and investment consultants as a single regulator.

Gold has given paltry returns of just 6% over the year. Gold imports this year will be around 850 tonnes.

Rainfall this season remained 5% above normal.

Indian internet users drop to 9.22 million this quarter (9.27 m previous qtr) but web access through mobile is now 38 million people (31 million previous quarter). Convenience is supreme, I think.

Market Stabilisation Scheme (MSS) used for sterilisation of forex inflows has a ceiling of Rs.1.5 lac crores and is being raised to Rs. 2 lac crores. The buying of dollars and other currencies by RBI results in increased cash in markets and MSS is used to mop up this liquidity through borrowing and issue of bonds. These bonds qualify for the SLR requirement.

China tops the world in output of steel, cement, TV sets, cotton fabric and has mobile phone users numbering 515 million. The Chinese statistics are becoming overwhelming. India should not participate in the race with China but should have an eye on every thing i.e. environment, distribution of wealth, rule of law , appropriate technology, regional balance, sensible exploitation of resources, agricultural needs, least shifting in base of people, health matters, working environment, law and order and the like.

Hari Om

BIRDINFO Stock Rx - A prescription for stock market