Rupee down 38 paise; over 1-year low against dollar

MUMBAI: The rupee today fell by 38 paise to trade at over one-year low level of Rs 46.94 against the US currency in early trade, amid weakness of the euro and other Asian currencies against dollar.

Dealers said a slide in the euro, which hit a six-month low against the US dollar and a lower opening in the domestic stock market mainly kept pressure on the rupee.

The rupee had tumbled by 37 paise to close at a fresh one-year low of Rs 46.56/57 against the American currency in the previous session on Friday due to a steep fall in local stocks amid a firm dollar overseas.

Meanwhile, the Bombay Stock Exchange benchmark Sensex fell by 287.27 points, or 1.70 per cent, to 16,579.70 in opening trade today.

 

ANIMA SINHA

PGDM 3rd Sem

Eurozone preparing for growing possibility of Greek default

PARIS: The resignation of the top German official at the European Central Bank could hardly have come at a worse time for euro zone policymakers as they grope for a way out of the deepest crisis in the single currency's 12-year history.

The ECB is the one institution that has kept the euro zone afloat in the sovereign debt crisis and prevented a bond market meltdown. The European Union has no federal government or common fiscal authority and speaks with many dissonant voices.

Juergen Stark's departure from the ECB's Executive Board in despair at the policy of buying government bonds to prevent the crisis spreading comes as policymakers in Berlin and beyond are preparing for the growing possibility of a Greek default.

It seems bound to complicate the next round of crisis management because it has injected the poison of inter-state politics as well as ideological division into the independent central bank. "It's the ECB that is holding the show together, so anything that weakens the ECB is bad news," said an EU official involved in financial crisis management.

Stark's walkout will further sap the ECB's credibility with Germany's conservative financial establishment, which saw the bond-buying as an improper means of financing government debt, and among voters in Europe's largest economy.

That could make greater fiscal integration in the euro zone politically harder to achieve at a time when Chancellor Angela Merkel is coming to realise that a big leap forward in economic governance is needed to preserve the single currency. It risks importing a north-south divide, between self-styled virtuous creditor countries and peripheral states seen as profligate and feckless, into the central bank.

At worst, Stark's departure may constrain the ECB's ability to act decisively in the coming months when the debt crisis enters an even more dangerous phase.

HAMSTRUNG

"This comes at a very, very bad time and it's certainly serious," said Jean Pisani-Ferry, director of the Bruegel economic think-tank in Brussels.

"If the ECB is shackled in its ability to buy Italian and Spanish bonds and at the same time we have to do a real restructuring of Greece's debts, with a proper haircut, we risk a contagion shock spreading to other countries. If the ECB is hamstrung by a lack of consensus, that is the risk."

A growing number of policymakers, as well as market economists, are convinced it is only a matter of time before Greece, which keeps falling behind on its fiscal targets, will have to default.

A source at this weekend's G7 finance chiefs' meeting in Marseille said the troika of EU, ECB and IMF inspectors, who suspended talks with Athens last week, would probably find a formula in its progress report to allow the next 8 billion euro ($11 million) tranche of bailout funds to be paid in October.

PRABHAKAR MANI PGDM 3 SEM

Domestic car sales dip 10.08%, bike sales up 15.43% in August

NEW DELHI: Domestic passenger car sales declined by 10.08 per cent to 144,516 units in August, 2011, from 160,713 units in the same month last year.

According to figures released by the Society of Indian Automobile Manufacturers (SIAM) today, motorcycle sales in the country grew by 15.43 per cent during the month to 839,772 units from 727,542 units in the corresponding month last year.

Total two-wheeler sales grew by 16.1 per cent to 1,111,340 units last month from 957,236 units in August, 2010, as per the data.

Sales of commercial vehicles grew by 22.62 per cent to 64,248 units in the month under review from 52,394 units in the year-ago period, SIAM said.

Total sales of vehicles across categories registered a growth of 11.85 per cent to 1,412,945 units in August, as against 1,263,239 units in the same month last year, it added. 

PRABHAKAR MANI 

PGDM 3 SEM

Auto component industry growth to slow down at 12-15% in FY12

Indian auto component industry is expecting a slowdown in growth to 12-15 per cent in 2011-12 from over 34 per cent in the previous fiscal, Automotive Component Manufacturers Association of India said on Tuesday.

Notwithstanding this slowdown, the industry is likely to see an investment of about $ 3 billion during the fiscal to enhance capacities across the country.

"The first quarter of 2011-12 witnessed some slowdown in vehicle consumption in India and this seems to suggest the growth in the auto component industry in the current fiscal will be in the range of 12-15 per cent," Automotive Component Manufacturers Association (ACMA) President Srivats Ram told reporters here.

The component industry had witnessed a growth of 34.2 per cent in last fiscal, taking its total turnover to $ 39.9 billion (about Rs 1,82,127 crore),

comments:-
it is good shigne of indian industry

Nitesh :- Nitesh ranjan
pgdm/10/12 

Ficci asks RBI to cut key policy rates

Amid fears of slowdown and declining business confidence, industry body Ficci today asked the Reserve Bank of India (RBI) to cut key policy rates in its forthcoming mid-quarterly review of credit policy.

"A cut in interest rates at this juncture would boost corporate India's confidence, including exporters, which has taken a hit," the chamber said in its 'Economy Watch'.

The RBI has raised interest rates 11 times since March 2010 by 475 basis points to tame inflation, which is hovering over 9 per cent.

RBI's next mid-quarter monetary policy review is scheduled for September 16.

Ficci said that there is now an increasing apprehension that the government may miss the fiscal deficit target of 4.6 per cent for the year 2011-2012.

Name :- Nitesh ranjan
pgdm/10/12

Try debt as short-term inflation hedge, but turn to equities for long-term bet

We are in unusual times, spending a lot of our time and energy tracking inflation, besides the US economy, global equity markets, domestic bond yields, crude, and gold prices, among others. This obsession with inflation is not unfounded: it is an outcome of the incessantly high inflation, which took us by surprise last year, when the year-on-year WPI inflation reached 8.86% in January 2010.

In fact, on a month-on-month basis, the wholesale price index has inched up for 28 months at a stretch - since February 2009, when it was at 123.3, to 153 in June 2011 - an absolute rise of 24% in 28 months.

For our investments, we always look for avenues that will give us the highest real returns, ie, nominal returns less the prevailing inflation rate. In other words, inflation is one of the "causes" of the return we get on our investment. But, in the current unusual circumstances, inflation has in a way become an "effect", ie, we are now compelled to choose those investments that will help us at least cover inflation, if not beat it.

All investment asset classes can be broadly divided into two segments: a) Those that will help us grow our wealth, and b) those assets that will help us at least beat inflation marginally so that our wealth does not erode. In the first category, which I would term as growth assets, I would include real estate, equity and art, going by the past decade's data available on International and Indian markets.

Data relating to the Indian stock market since April 1979 show that Sensex has given a return of 16.4% over 32 years, against the average inflation of 7% during the period. This translates into a real return of 9.4%, which means that 1 lakh invested in 1979 would have become 1.29 crore today in nominal terms.

And please note that this amount is 1.2 crore more than any other investment you would have made, which would have given return equivalent to inflation. In other words, your "net wealth" would have grown by the above amount, justifying the tag of growth asset, which equity has proved to be.

The returns in other growth assets like real estate and art are equally impressive over the long term.

Other popular asset classes that help you beat inflation are commodities (mainly gold) and debt schemes. Most investors are happy to simply get 1-2% returns more than the prevailing inflation, because their time horizon of investment is short (say 1-3 years), or they do not want to take on the psychological pressure associated with the erosion of capital in short term.

At present, inflation is on the verge of hitting the double-digit mark, and there are plenty of debt schemes like fixed maturity plans (FMPs) of mutual funds yielding approximately 9.5%, 3/5/7-year NCDs and bonds yielding returns in the range of 10% to 12%, and corporate deposits giving 11-12% per annum over two to three years. One can, therefore, try and benefit from inflation arbitrage.

In all probability, inflation is likely to peak in the next 1-2 quarters and should be around 6-7%, or even lower, by the end of this fiscal year. Once that happens, interest rates should also peak out, thereby making this an ideal time to lock in money at high interest rates for a period of 2-3 years, so that when inflation begins to ease in say six months from now, you would enjoy an extended period of very attractive real returns.

Commodities such as gold are considered good investments at the start of an inflationary cycle, but not towards the end of it. Even the global commodity prices are showing a weakening trend in the light of the anticipated slowdown in growth in the developed as well as developing economies. In such an environment when incremental demand is likely to decelerate, commodities are only expected to moderate.

Investing in them for the purpose of hedging against inflation can be counterproductive at this point in time. Having said this, gold has continued to surprise everyone, giving a return of 21% per annum over the last three years. Optimists continue to expect high double-digit returns from gold in the coming years due to the continuously high global risk.

To conclude, it is important to recognise the phase of inflation cycle we are in, before deciding upon an investment that will help us beat inflation. Based on the present situation, it is better to benefit from the potential of "inflation arbitrage", apart from focusing on growing your wealth in real terms over the long term.

So, debt investments for a period of 1-3 years (for inflation arbitrage) and equity investments for long-term wealth creation (3 years or beyond) seem to be the ideal combination for investment
PRABHAKAR MANI
PGDM 3 SEM

In emergency avail gold loans from private banks like HDFC Bank, ICICI Bank or NBFCs like Manappuram Finance and Muthoot Finance

Gold is the ultimate tender. The yellow metal is considered to be one of the most liquid assets in the world. The reason for this is simple - it is accepted as a universal currency and finds a buyer in virtually any corner of the earth.

So, when you do wish to borrow in case of an emergency, the yellow metal provides the easiest option. The traditional way of borrowing has been pledging your ornament to the jeweller and borrowing from him. The jeweller keeps the ornament with him and lends you a certain amount, depending on the valuation. Typically, he would lend you an amount equivalent to 50% of the value of gold you pledge with him and charge you a hefty rate of interest. The rate of interest could start from 30% and go to as high as 50%.

However, today there are several different options available to investors. Investors can avail gold loans from private sector banks such as HDFC Bank, ICICI Bank or even from NBFCs. Manappuram Finance and Muthoot Finance specialise in gold loans and claim to offer you quick loans with minimum documentation.

All you need is either of these - a voter ID, passport, ration card or driving licence, and you could walk away with emergency cash needed. In fact, some NBFCs are also open on Sundays and claim to give a higher percentage of loan against ornaments.

While banks would typically not give more than 75% of the gold value as loan, NBFCs' lending could go as high as 95% in case of high-purity gold. Gold loans are typically sanctioned against pledged gold ornaments. Based on its value, a personal loan is sanctioned on the basis of income and repayment capacity of the applicant.

The interest rate could depend on the tenure and amount of loan. It could vary from 12% to 18% in the case of banks, while for NBFCs, it could even go up to 24%, depending on the scheme you opt for.

There is no minimum period for the loan and, if need be, you can return the loan amount the very next day you took it.

PRABHAKAR MANI

PGDM 3 SEM