RBI hikes overnight rates by 0.25 per cent; home loans expensive

The Reserve Bank of India (RBI) today hiked the repo rates by 25 basis points each, which, in turn, is all set to make home loans expensive. The reverse repo rate has been increased by 25 basis points to 6.0 per cent and the repo rate has also been increased by 25 basis points to 7.0 per cent. In the quarterly review of the annual statement on monetary policy, the apex bank kept unchanged the long-term rates at which it lends to commercial banks at 6 per cent.
However, the RBI has kept the bank rate and cash reserve ratio unchanged. While presenting the first quarter review of its annual policy, RBI Governor Dr Y V Reddy apparently chose a cautious approach, considering the Indian economy is still on a recovery path and inflation is ruling at above seven per cent. ''Inflation movements continued to be driven by supply shocks in the first quarter of 2006-07,'' the RBI said in a report on macro-economic and monetary developments, referring to a spike in prices of global crude oil, India's biggest import. The cash reserve ratio (CRR) and bank rate have been left unchanged at five per cent and six per cent, respectively. With the hike in the repo rates, majority of the bankers felt that it (hike) is bound to put some pressure on the rate of interest on deposits. All the same, they said they we will have to wait and watch for some time before final view is taken and any announcement is made.
The repo rate is the rate at which RBI lends to banks in the short term to manage liquidity in the system, while the reverse repo is the rate at which the apex bank borrows from banks to suck out excess liquidity from the system.

Market may reach 11500 level

Amit Dalal of Amit Nalin Securities says that the markets will first touch the 10,500 to 10,650 levels for some time and after that it will definitely reach the 11,500 level in the next 20 days of trading.

He says that this time the markets have corrected to 9,000 level, EPS growth has been about 14% and everyone is talking about a deviation from the fair value.

He adds that perhaps looking at the P/E chart for the whole of last year on a day to day basis, assuming an EPS of FY06 March and doing the same thing this year will be a good indicator of the highs and lows that one can expect to see as a trading pattern for the next month or two.

He says that when the markets correct and there is a basic disinterest both ways. There aren't many people who have bought at low levels, so then there aren't that many sellers when the markets ride up and the valuations always look cheaper, relative to the price that has been seen earlier for any stock by stock pattern.

He feels that certain events like the Tata Steel preferential issue excited people, although it has absolutely no bearing on the secondary market price of Tisco, which again helped the Index to move up a little. Hence, he would not be averse to thinking that the retail participation or trader participation has again come back with a little more optimism than it was fortnight ago.

He does not think that this year the markets will be able to delink themselves from the global markets because the global cues and the global factors are what really brought the fall in May. He says that the experience is not going to go away from people's mind and it is going to be a global market kind of leading where our market will go in the time to come.

He states that psychologically, we have now assumed that 15 PE is what is considered a fair value and a deviation upwards or downwards is based on the sentiment and expectations. The EPS for the Index forecast is about Rs 555-557. Given that, he says that in the past one or two months, there has been a huge cleansing of large positions in the market and a lot of the selling from the institution is behind us, and the earnings are expected to be quite encouraging the first quarter atleast.

Moreover he says that the markets might see a deviation, perhaps even higher than 10%, from what one would consider a fair value. But he states that anything more aggressive than that, or markets testing previous highs, given the global environment would be an extremely dangerous position for the market.

About the two stocks in news, that is Videocon for the acquisition it has done and HMT, Dalal does not track HMT and he did track Videocon a lot when they did the Thomson acquisition. Going on the pattern with which they did that acquisition, he feels that a lesson to be learnt here is that these assets worldwide are available at very throw away prices.

The reason for that is the change in technology that is taking place, which is levying this to become a very low-margin market. In his view, everybody is moving into flat-screen, plasma and LCD displays and therefore, these assets don't come at a heavy price to the buyer.

He says that there is no choice for Videocon and they have to make these acquisitions if they want to remain in a capacity, which is completely perhaps profitable in the future, if they want to remain where they are with the technology that they have. They are capitalising on their glass-shell technology in India and perhaps, he feels that this acquisition will allow them to bring out more capacity from their domestic operations.

Bank Of Japan Raises Rates for First Time in Almost Six Years

The Bank of Japan raised interest rates for the first time in almost six years, forecasting sustained growth in the world's second-largest economy and an end to a decade of deflation.
Governor Toshihiko Fukui and his policy-board colleagues increased the benchmark overnight rate between banks to 0.25 percent from almost zero, the bank said in Tokyo today.
The central bank is raising rates, still the lowest among the Group of Seven nations, to avoid the excesses of the 1980s bubble economy that was followed by a collapse in land prices and three recessions. Bonds rose and the yen fell as the central bank said it may keep rates ``very low'' to support growth driven by the fastest pace of corporate spending in 16 years.
``There's a very real risk that the Japanese economy could overheat,'' said Glenn Maguire, chief Asian economist at Societe Generale in Hong Kong. ``We'll see a very gradual, sustained upward adjustment in interest rates.''
Sixteen central banks raised borrowing costs in June as record oil and metal prices fueled inflation. The U.S. Federal Reserve increased rates to 5.25 percent from 1 percent in June 2004. The European Central Bank lifted its key rate to 2.75 percent, its third increase since December.
Today's decision was unanimous. All 16 economists surveyed by Bloomberg News expected the move and nine of them consider today's increase will be the last for this year. Eight said the key rate will be capped at 0.75 percent or below by the end of next year.
Second Rate Increase
The yen traded at 115.78 against the dollar at 10:39 a.m. in London, after falling to a two-week low of 116.16, and from 115.39 late in New York yesterday. Yields on Japan's benchmark 10-year bond fell 5.5 basis points to 1.855 percent.
``Maintaining the zero-rate policy could cause large swings in the economy and prices in the future,'' Fukui said at a press conference. ``Future adjustment of interest-rate levels will be made gradually'' with consideration to the economy and prices, which the bank expects to keep rising, he said.
The central bank has been under pressure from government officials including Finance Minister Sadakazu Tanigaki who are concerned that higher borrowing costs will hamper government efforts to stop the expansion of public debt, forecast to reach 151 percent of gross domestic product by March.
A one percentage point gain in 10-year bond yields would increase the government's annual debt-servicing costs by 1.6 trillion yen, according to the Ministry of Finance.
Corporate Burden
It's too early to discuss the timing of another rate increase, Tanigaki said today, adding that the government will closely watch the effect of the move. Today's decision was ``appropriate,'' Chief Cabinet Secretary Shinzo Abe said.
The government opposed the bank's last rate increase in August 2000. Seven months later, the bank had to cut rates back to almost zero as an Internet-led global economic boom faltered.
Fukui said in an interview on May 31 that the bank must ``carefully gauge the impact the first rate increase will have on the burden for companies'' and the overall economy before increasing rates again.
The Bank of Japan on March 9 ended a five-year deflation- fighting policy of pumping up to 35 trillion yen ($303 billion) into the banking system. Consumer prices have now racked up seven months of gains, unemployment is at an eight-year low and lending by banks grew at the fastest pace in a decade in June.
Car Factories
Japan's economy expanded for 53 months through the end of June, the longest since 57 months of growth from 1965 to 1970. The government forecasts the economy will expand 2.1 percent in the year ending March 31, 2007.
``It's a welcome sign that Japan is on the road to normality. Japan has come out of its deflation trip,'' said Thomas Mayer, chief European economist at Deutsche Bank AG in London. ``The Bank of Japan's move is a sign that this is clearly the case.''
Japan's largest companies plan to increase investment this year at the fastest pace since 1990, the central bank's Tankan business confidence survey showed last week.
Toshiba, the nation's biggest chipmaker, will build its fourth flash memory factory in Japan next year. The Tokyo-based company cut by more than half its interest-bearing debt in the past five years.
Honda Motor Co., the nation's third-largest automaker, is constructing its first car plant in Japan in 30 years and Matsushita Electric Industrial Co. is erecting the world's biggest plasma display factory.
Discount Rate
``The zero-rate policy was an abnormal condition,'' said Kunio Nakamura, chairman of Matsushita. ``Japanese companies have made efforts to decrease debt in the past 10 years so many companies won't be affected by the rate hike.''
The bank also raised its discount rate, with which it makes overnight loans directly to financial institutions, to 0.4 percent from 0.1 percent. The decision was made by a 6 to 3 majority. Direct lending by the central bank is a last resort for credit for commercial banks.
Six of seven economists, who gave their forecast for the discount rate, said the central bank would increase it to 0.5 percent from 0.1 percent. One said the rate would be raised to 0.4 percent.
The central bank today said it will keep buying 1.2 trillion yen in government bonds from commercial banks, a policy tool that has been used to provide funds to the banking system and which has helped avoid gains in bond yields.

Retail industry the next big recruiter in India

The retail industry is fast becoming the next big recruiter in India and we're not talking about a few thousand jobs, but millions of jobs.

Shopping is becoming a good way to pass time and it is also becoming one of the largest job generators in India. As the retail sector booms, India needs to gear up for the next round of job offers, over 10 lakh of them.

10 lakh is the number of employees the retail industry hopes to add by 2010. This will make retail the second largest employer in the country, close on the heels of the IT industry that is expected to add about 15 lakh jobs in that time.

And already just two players account for 60% of the expected hiring. Reliance has started with 2,000 on its rolls. CMD, Reliance Industries, Mukesh Ambani says, "This number would soon swell to 10,000 professionals and 500,000 young boys and girls over the next few years."

Chairman, Future Group, Kishore Biyani, "We are 20,000 people now and we will be 100,000 by 2010."

From manning shop floors to analysing consumer trends, to building relationships with suppliers, as malls mushroom, retailers will need large numbers of middle and lower management staff. But the challenge lies in training them. While most will look for on campus training, Reliance hopes to do it differently.

Mukesh Ambani says, "Our plan is to train them through e-learning, in an earn while you learn framework, in 1,500 cities around the country."

And there's a lot of earning to be done. Retailers say they are already paying the senior management amongst the highest salaries in the country. As recruitment picks up speed, attrition will force salaries to go up. So here's a sweet thought, by 2010, retail may not only be the biggest recruiter but also the highest paymaster.

moneycontrol.com

Market plunges 200 points in opening

The markets opened weak on Friday due to weak Asian markets. This was on the back of Bank of Japan (BoJ) move to up interest rates by 0.25 per cent and end the zero-rate policy. The Sensex plunged over 200 points trading at 10,655, in the opening trade and Nifty was 52 points down at 3,116. Nikkei was down almost 200 points down at 1.5 per cent.

The gobal cues are negative. U S stocks plunged for a second straight session yesterday. The Dow Jones slid 166.89 points, or 1.52%, to 10,846.29. Asian markets were trading lower as Bank of Japan is widely expected to raise interest rates. Japan's Nikkei share average lost 216.99 points or 1.44% at 14,880.96.

Mid and small-cap indices were down nearly 1 per cent. ONGC was a big stock that traded up at 1.34 per cent. Rest of the Sensex pack stocks were in the red in the morning trade. Top losers were Dr Reddy's, Hindalco, Grasim, Tata Motors and Maruti.

The technology stocks were very soft down almost 1.34 per cent. Infosys was down 1.56 per cent, Satyam Computers down 2 per cent , Wipro down 2.36 per cent and TCS traded 1.11 per cent.

A total of 180 stocks advanced while 601 declined, so the market breadth was negative.

Maruti to set up JV with Bellsonica

Maruti Udyog Ltd has informed BSE that Bellsonica Corporation on July 12, 2006 announced that it will set up operations in India through a joint venture Company with the Company. While the Company will hold a 30 per cent stake in the venture, Bellsonica will hold 70 per cent stake. The total paid-up capital of the joint venture will be Rs 120 million. The name of the joint venture will be Bellsonica Auto Component India Pvt Ltd (BACI). The India operation, being set up by Bellsonica on the recommendation of Suzuki Motor Corporation of Japan, is expected to go on stream in November 2007. The Company's proposal has been approved by Foreign Investment Promotion Board. The joint venture Company, BACI, will manufacture body metal components, including high tensile strength steel, for the Company's vehicles. Its plant will be located in the same campus as the Company's new car plant in Manesar, Haryana. Bellsonica has been providing technical support since 1995 to Jay Bharat Maruti Ltd (JBML), a leading auto component supplier in which, too, the Company holds a minority stake. After the formation of BACI, the relationship between Bellsonica and JBML will continue. Bellsonica's support to JBML, in terms of skill upgrade in areas like new processing technology, will be maintained.

Maruti Udyog has resistance at Rs 810-820

"Tata Motors and Maruti both were looking good but they are both now hitting major resistance zones and they could slide a bit.Maruti Udyog has major resistance zone at Rs 810-820. Buy it above Rs 820 or again on the fall where back to around Rs 760-740 level."

Source BSE

Infosys rallying Sensex

Infosys is boosting the confidence in market, denying all the speculations about market weakning on Wednesday by Mumbai Blast.

Infosys results are out and its Q1 net profit up by 17.9%, making its stocks a good buy for Long Term.
Experts believe that if Infy crosses 3500 mark it may reach to the levels of 4400 in mediam term.
Hold on Infosys.

Infosys Guidance for Q2 & FY07

Its Q2 revenue is expected to range between Rs 3257 crore (Rs 32.57 billion) to Rs 3280 crore (Rs 32.80 billion).

Its FY07 EPS is seen between Rs 124.51 - Rs 125.74.

Company's highlights

S Gopalakrishnan redesignated as President, COO & Joint MD
Nandan Nilekani to remain CEO & MD
Benefited from rupee movements
Acquires Progeon for Rs 530 crore (Rs 5.30 billion), holds 96.96% stake now
To hire 25,000 employees this year
Margins maintained despite of increase in salaries & Visa cost


See infosys viz a viz Sensex Chart

Market is expected to absorb the Mumbai shock

Infosys Added 60 Points in Sensex. It may nullify. If Infosys start fallling, Market is likely to fall heavily.so be cautious !!! sell nifty at higher level !!! keep booking profit at every rise don't expect too much on your long positions !!!

Infosys Net Beats Estimates, Rises 50% on New Clients (Update1)
July 12 (Bloomberg) -- Infosys Technologies Ltd., India's second-largest computer-services company, posted a better-than- expected 50 percent increase in its first quarter profit after adding customers.
Net income rose to 8 billion rupees ($173 million), or 28.27 rupees a share, in the three months to June 30, from 5.32 billion rupees, or 19.08 rupees, a year earlier, Bangalore-based Infosys said in a statement to the Bombay Stock Exchange today. Eight analysts in a Bloomberg News survey had a median forecast of 7.21 billion rupees. Sales rose 46 percent to 30.15 billion rupees.
Infosys, which competes with bigger rivals such as the International Business Machines Corp., increased its profit as the size of contracts rose.

The company's first-quarter sales rose from 20.72 billion rupees a year earlier. The figures are based on Indian accounting standards.
Shares of Infosys rose 5.9 percent to 3,335.6 rupees at 10:09 a.m. on the Mumbai stock exchange. The stock gained 43 percent in 2005, the second-best performer among India's top four software exporters. Shares of fourth-ranked Satyam Computer Services Ltd. advanced 80 percent.

Why FARALLON is bullish on Indiabulls

February 10, 2004 Farallon Capital buys 3 percent equity of Indiabulls for Rs 7.11 crore. This could not make headlines then, very few people could read between the lines and picked the clue "why third largest hedge Fund in the world is interested in investing an Indian company with market capitalisation less than a billion dollars". Since then slowly, gradually Farallon Capital Management LLC alongwith its two investment arms FIM and Oberon has pumped in crores in Indiabulls group of companies. Again on June 18, 2006 Farallon makes a big buy, Oberon(a special purpose vehicle owned by Farallon) buys preference shares up to Rs 644 crores.
Bringing pieces together, India's leading Business Magazine "Business Today" publishes a very well knitted article on bonding between Farallon and Indiabulls group, why a hedge fund sees long term prospects for fledgling firm, in its July 16, 2006 issue.

Reproducing it here "Why Farallon likes Indiabulls?"

"FARALLON CAPITAL MANAGEMENT LLC is the third largest hedge fund in the word, managing the assets worth $ 17.5 billion (80500 crore). Since February 2004, the firm that’s earned a reputation for managing fund of college endowments and educational functional foundations has been particularly bullish on India. Actually make that Indiabulls, a fledgling financial service group with interests in broking and real estate, with a turnover of Rs. 211crore, net profit of Rs. 74 crore ,and which got listed on the Indian exchanges in September 2004. Since February 2004, when Farallon entered Indiabulls via a pre- IPO placement, it has along with its associates like FIM (a Mauritius based investment arm of Farallon) and Oberon (a special purpose vehicle owned by Farallon) have invested over Rs. 1000 crore in various Indiabulls firms (six at last count). The biggest investment came last fortnight when Oberon bought preference shares worth Rs. 644 crore in Indiabulls financial services (IFSL).

Promoted by three IITians- Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal- Indiabulls is in a business dominated by established universal banks, traditional broking houses and foreign companies. So, why is a San Francisco-headquartered hedge fund betting big capitalization of less then a billion dollars? Promoted by one Tom Steyer, Farallon is registered as an investment advisor with the Securities Exchange Commission (SEC) in the US. It manages equity capital for institutions and high net worth individuals, and has investments in distress assets, starts-ups and real estate. And, of course, in Indiabulls. Two individuals of Indian origin – Rajiv Pant and Ashish Pant-sit on Farallon’s investment committee, which takes the decisions on investment allocations.

FARALLON’S INDIAN FLAVOUR The fund and its associates have invested eight times in Indiabulls in the past two years.
ACQUISITION DATE	INDIABULLS COMPANY	ACQUIRER
Feb. 10, 2004	Indiabulls financial Services	Farallon Capital buys 3 percent equity for Rs.7.11 crore
Jan. 3, 2004	Indiabulls Credit services	Farallon Capital buys 33.3 percent equity for Rs. 88 crore
Oct. 21, 2005	Indiabulls Real Estate	FIM Ltd. Acquires 60 percent for Rs. 5.1 crore
Jan. 14, 2006	Indiabulls Housing Finance	Farallon Capital announces investment of Rs. 112 crore in its equity capital
Jan. 14, 2006	Indiabulls Credit services	Farallon announces investment of Rs.89 crore as a follow-on equity
Feb. 16, 2006	Indiabulls Infrastructure	FIM Ltd. buys 60 percent equity for Rs. 15 crore
June 3, 2006	Indiabulls Buildcom	FIM Ltd. buys 36 percent equity for Rs. 15 crore
June 18, 2006	Indiabulls financial Services	Oberon Ltd. buys preference shares up to Rs. 644 crore
FIM and Oberon are investment arms of Farallon Capital Management LLC Source: company

“We approached Farallon for investment in our company way back in early 2000 and since then the relationship has only grown stronger and stronger,” explains Gagan Banga, Director,IFSL. But what market watchers find a bit strange in Farallon’s rather long-term commitment to Indiabulls. After all, hedge funds are globally known for playing the arbitrage game in different markets, and aren’t exactly known for holding on to stock for too long. Concedes Banga: “Though hedge funds are known for getting in and out pretty fast they hav stayed put in Indiabulls.” Then, as a primary market expert asks: “How come one of the biggest hedge funds in the world is interested only in Indiabulls, and in no other Indian stock?” You could argue that Farallon saw potential in Indiabulls. And that faith has translated in to returns. At today’s prices, Farallon’s close to 2 percent holding in IFSL has appreciated a little over 10 fold from Rs. 7.12 crore to Rs. 73.24 crore. Doubtless Farallon-Indiabulls is a win-win proposition. So far. "

Find a gift for woman in your life

A few times a year I'm always looking for gifts for the females in my life.
I have finally discovered a foolproof method to finding the right gift: Buy jewelry.
Simple, yes? But also effective. No more searching around for something
I hope they like, and diamond jewelry works even better.

Videocon set to acquire Daewoo Electronics

Videocon is on the verge of signing on the dotted line to acquire South Korean chaebol, Daewoo’s consumer electronic business worldwide.

According to informed sources, all major glitches in the deal have been sorted out and the announcement is due shortly. Though the details of the deal could not be ascertained immediately, sources say it could be in the region of $500-600m.

When contacted, Videocon group chairman, VN Dhoot only reiterated that his company’s bid was shortlisted and that the final decision is yet to come. But he did point out the importance of the company he has bid for. “Our core business has a clear synergy with Daewoo’s electronic business,” he told ET.

Other bidders in the fray were Haier, LG and a couple of investment funds. Given Daewoo’s various financial obligations, it wasn’t surprising that the deal took close to six months to crystallise.

The acquisition would bring Daewoo’s consumer electronics business including LCD TVs, plasma TVs and components into Videocon’s fold strengthening its position in the industry. It would also have a strategic fit into the group as it would find a consuming partner for its recently acquired Thomson’s picture tube business.

The Videocon group’s brand portfolio in India now includes Videocon, Sansui, Akai, Kenstar, Hyundai, Toshiba, Electrolux and Kelvinator. Mr Dhoot had at the time of the bid, reportedly said that Videocon’s internal accruals were sufficient to make a good proposal. That has worked, a source said.

“We want to figure amongst the top ten consumer electronics company and the initiative should be seen in that context,” Mr Dhoot said airing his vision for the company.

Last year, the Videocon group struck a series of deals in consumer electronics, home appliances and components space to emerge as a formidable player in the industry.


Source Economic Times