Sensex surges over 300 points; realty, banks up

MUMBAI: Indian markets bounced back, after a sharp correction in past few sessions, aided by pull-back in global equities on hopes that European nations may come out with solutions to prevent Greece from debt default. All the sectoral indices were in the positive terrain with rate sensitives like realty and banks leading the rally.

At 11:30 am; Bombay Stock Exchange's Sensex was at 16374.43, up 323.33 points or 2.01 per cent. The 30-share index touched intraday low of 16282.74 and high of 16385.

National Stock Exchange's Nifty was at 4940.30, up 104.90 points or 2.17 per cent. The broader index touched a high of 4942.70 and low of 4905.15 in trade so far.

"The trend continues to remain negative but looking at the current development we believe that Nifty future is not willing to close below 4735 and therefore it seems that from a short term trading perspective one can buy with a stop-loss of 4700 for a minimum target of 5040.

Buying on decline is sensible with a stop-loss of 4735 and if Nifty future manages to hold above 4930 then possibly we could see a level of 5040," said Nirmal Bang report.

BSE Midcap Index was up 1.62 per cent and BSE Smallcap Index gained 1.54 per cent.

Amongst the sectoral indices, BSE Realty Index rallied 2.68 per cent, BSE Bankex gained 2.37 per cent and BSE IT Index moved 2.16 per cent higher.

Shares of realty and banking stocks gained momentum after being beaten down badly as traders took positions on hopes that rate hike cycle may be nearing an end in near future.

Shares if IT companies continued to move higher following recent correction in rupee against the dollar. However, the partially convertible rupee was at 49.24/25 per dollar against previous close of 49.44/45 on the back of dollar inflows in capital markets.

Jaiprakash Associates (5.64%) Tata Motors (5.58%), DLF (3.77%), ICICI Bank (3.55%) and Sterlite Industries (3.45%) were amongst the major Sensex gainers.

Sun Pharma (-0.19%) was the only loser.

Market breadth was positive on the BSE with 1770 gainers against 626 losers
PRABHAKAR MANI
PGDM 3 SEM

High-flying gold crashes in record $100 freefall

NEW YORK: Gold crashed more than $100 lower on Friday as a slide turned into a freefall, with weeks of volatility, renewed strength in the dollar and talk of hedge fund liquidation wrecking its safe-haven status.

Widespread talk of possible selling by big hedge funds covering losses in other markets set off one of the biggest routs on record. Silver futures, which had attracted even more speculative funds over the past year, closed 18 percent down, the biggest daily loss since 1987.

Mounting fears this week of a global recession and a deepening Greek debt crisis made investors treat precious metals like any commodity, ignoring the safe-haven appeal that had made them a must-have in times of trouble.

Gold slumped more than 6 percent at one point -- its biggest slide since the financial crisis in 2008 -- to hit early-August lows as this week's losses accelerated. The selloff came even as stock and oil markets stabilized after Thursday's rout.

Adding to Thursday's losses, gold is down almost 9 per cent over the last two days, while silver has lost nearly 25 per cent. In the case of gold particularly, it was the third-sharpest daily loss in the past 20 years.

"I'm sure talk of hedge fund liquidation is helping to pressure things, though there's no confirmation of any single fund selling," said Jonathan Jossen, an independent COMEX trader.

Despite its steep losses this week, gold remained up 16 per cent year-to-date, thanks to gains from earlier months. But silver turned negative, with the spot price down almost 1 per cent for the year.

By 2:45 p.m. EDT (1845 GMT), the spot price of bullion was down 5.5 per cent at $1,641 an ounce, after falling to a session low under $1,628. The move was more than 5 standard deviations beyond the normal one-day change. At $127 an ounce, the intraday move was the biggest on record in dollar terms.

US gold futures' benchmark December contract on COMEX settled down 6 per cent, or more than $101, at under $1,640 an ounce.

Spot silver was down 14 per cent at a seven-month low below $31 an ounce.

Benchmark silver futures closed down nearly $6.50 at around $30.10 an ounce.

"We're making new lows and the bull case for gold is on pause for the near term," said Adam Klopfenstein, senior market strategist for precious metals at MF Global in Chicago.

"In the near term, the flight-to-quality interest in owning gold is also out of the window as people are not interested in buying it even in the face of fears in the economy. Until it stabilizes, I'm staying out of this market."

Gold appeared detached from almost every market, ignoring a mild dip in the US dollar index as the selling accelerated. The plunge took out several key technical supports, including the 100-day moving average for the first time since February.

name- deepak kumar jha pgdm (3rd) 2010-12

Eurozone crisis and its impact on Indian companies

The European Monetary Union was a moment of triumph for nations used to holding on to the coat tails of a superpower like the US. But in the rush to create a common currency, many potential trouble points were swept aside by nations basking in euro glory. The 2008 meltdown has exposed those fault lines. ET Intelligence Group reviews the impact of the crisis on Indian companies with significant exposure to Europe.

If you thought recent economic data emanating from the US was bad, look over to the other side of the Atlantic and you'll see things are a lot more worrisome there. And what's worse is that India Inc as a whole appears to have greater exposure to the euro zone than to the US going by our exports. As of March 2011, 10% of our total exports were to the US while 18% were to Europe.

When Winston Churchill called for a "United States of Europe" little did he think that this unification would be so disastrous!

In an effort to form a monetary union among European Union member states, the European Central Bank was established in 1999. Thereafter, a single currency - the euro - was introduced which replaced other regional currencies completely. Over time, several member states joined the exchange rate mechanism by bringing their currencies and monetary policies in line with the euro.

But when this single currency was created, it now appears that, the founding members had not fully taken into account the ramifications, if any, of uniting strong and weak countries alike. A crisis of the magnitude we are seeing today was not envisaged at that time, and therefore, no process for correction was evolved. As a result, all EU member countries find themselves in a mess today -regardless of the strength of their economies -as the stronger ones have no option but to keep bailing out the weaker ones.

All was well till the global economic crisis of 2008 showed that the fault lines in the over-leveraged economies of Europe - a result of weak governance - ran very deep.

By late 2009, Greece had announced that its budget deficit was actually 15.4% of its gross domestic product (GDP) - and not 3.7% as stated earlier. And by mid-2010, this shipping and tourism dependant economy had to seek help from fellow euro zone members and IMF to avoid default.

It soon became apparent that the budget deficits of Ireland, Spain, Portugal and Italy were also in the danger zone. Despite a string of bailout packages and a number of austerity plans from these beleaguered nations, the problems have only worsened.

Most European economies are growing at an extremely slow pace, if at all. Their banks continue to post losses and stock market declines persist. They not only have to deal with high fiscal deficits, but also with pension deficits as a result of an ageing population and low birth rates.

In Germany, the region's strongest economy, GDP growth fell from 4.6% in March to 2.8% in June. Consumer confidence dropped from 110 to 100 since January 2011. In France, GPD growth fell from 2.1% in March 2011 to 1.6% in June, and consumer spending in the manufacturing and retail sectors is also decelerating. In the United Kingdom, GDP growth declined from 4.7% in December 2010 to 4.6% in March 2011. Meanwhile, consumer confidence, industrial production and manufacturing have been rapidly declining.

In such an environment it becomes extremely difficult for businesses to run profitably. And it's not just European companies that will bear the brunt. There are a number of Indian companies that have significant exposure to Europe. If they haven't already been affected, earnings for these companies are likely to be impacted in the future. But the key question is to what extent?

NAME- DEEPAK KUMAR JHA

PGDM(3rd sem) 2010-12

Rupee rises from 2 year low, tracking euro rise; US Fed eyed

MUMBAI: The Indian rupee rose on Wednesday to pull back further from a two-year low touched in the previous session helped by a firm euro and domestic equities.

Traders said the outcome of the US Federal Reserve's two-day meeting which started Tuesday was keenly awaited as the Fed is expected to announce a rebalancing of its portfolio to help push longer-term interest rates lower and boost growth.

At 9:16 a.m., the partially convertible rupee was at 47.89/90 per dollar, stronger Tuesday's close of 48.05/06 when it had hit 48.24, a level last seen Sept. 25, 2009.

The euro was $1.3715, higher from $1.3682 at end of rupee trade on Tuesday, while the index of the dollar against six major currencies was 76.929 points from 77.105 previously.

The local benchmark share index was up more than 0.2 per cent in early trade after jumping more than 2 per cent on Tuesday
PRABHAKAR MANI
PGDM 3 SEM

New Delivery Architecture worth 3,00,000 crore a year is a game changer but faces many issues

A World Bank study released earlier this year enumerated the rot in Indian welfare programmes. About 91% of subsidised grain meant for the poor in Bihar never reached them. Only 32-51 % of the pensions for the elderly, destitute, widows and the disabled reached them.

These are holes that Finance Minister Pranab Mukherjee sought to plug in Budget 2011, when he announced that, in the coming years, all welfare benefits would be deposited into the bank accounts of beneficiaries, starting from June 2012.Seven months on, India's journey towards cash transfers is looking muddled. Too many players. Too many approaches. There is confusion and conflict at each of the four steps to cash transfers: identification, opening bank accounts, payments and transactions.

...and the New Delivery Architecture is Facing Many Issues

Step 1 IDENTIFICATION

Identify beneficiaries correctly Who is doing it? UID was asked to record biometrics for 200 million, National Population Registry for the remaining 1 billion What is the issue? UID wants to do all, by 2017, for 17,000 cr. So does the NPR, which could duplicate expenditure. Unwilling to wait till 2017, some ministries and states are launching their biometric programmes

Step 2 ACCESS

Give them bank accounts or equivalent Who is doing it? The RBI has told banks to open no-frill accounts. Telcos and payment-card companies are pitching for their alternative channels What is the issue? Banks are not keen on no-frill accounts, as they are not viable. And the RBI is not keen on the alternative channels, which also have their own problems

Step 3 PAYMENTS

Authenticate their identity and move the money to their accounts Who is doing it? UIDAI is developing software for both. Banks are moving to full connectivity with each other What is the issue? Accounts managed by banking correspondent (BC) firms for banks are not linked to the overall system. So, how will one know payment has been made to the right person?

Step 4 TRANSACTIONS

Enable them to access their bank accounts Who is doing it? Primarily BCs for now. Others like telcos and payment-card companies want in What is the issue? A village will have only one BC agent, giving him huge clout. Villagers don't have the choice to choose BCs. UIDAI wants a new system where villagers can access their accounts through any agent, any BC, any bank.

Identification issues: UIDAI, NPR and the growing list of identifiers

Ram Sewak Sharma, number two in the government organisation overseeing the national identity drive, cites a family incident to assert the importance of an ID. He comes from a village near Firozabad in Uttar Pradesh, whose government gives Rs 40,000 to a family in the event of its breadwinner's death.

When his cousin passed away, Sharma's sister-in-law received a cheque. But she could not encash it because she did not have a bank account. And she could not open one because she did not have any paper ID-no voter ID, no PAN, no ration card, nothing. "People feel the need for some identity document that is also valid across the country," he says.

The Unique Identification Authority of India (UIDAI), headed by Nandan Nilekani, was conceived to service this need. It would give every Indian a unique number called Aadhaar, which would supercede all existing numbers and forms of identification. After Finance Minister Pranab Mukherjee, in Budget 2011, announced cash transfers as the eventual model to distribute welfare benefits, the UID became the anchor point for this movement of cash: for money to go into the correct person's account, he or she, to start with, had to be identified correctly.

However, increasingly, other arms of the government, both at the Centre and in the states, want their own anchors. The ministry of rural development is planning pilots to test its biometric ID cards for National Rural Employment Guarantee Scheme (NREGS) workers. Orissa and Kerala are using smart cards of the national health programme to identify beneficiaries for other schemes.

The plan to allot UIDs to all Indians is showing scatter, putting under threat its adoption for all cash transfers.

PRABHAKAR MANI PGDM 3 SEM

finance news

Swiss franc edges up versus Euro as Greek anxiety rises

The Swiss franc ticked up against the euro on Monday due to mounting worries about Greece's debt mountain, in what could become the first real test of the Swiss National Bank's resolve not to let the franc appreciate past 1.20 per euro.

After the 'Swissie' gained some 20 percent against the common currency in the space of a few months, threatening to tip Switzerland into recession. With exports slumping and politicians warning of rising joblessness, on Sept. 6 the SNB announced it would set a ceiling on the franc.

There was little impetus for investors to test the SNB's resolve to defend its target last week as there was relatively little news about euro zone sovereign debts spooking investors last week.

But the euro dived to a seven-month low against the U.S. dollar and a 10-year trough versus the yen on Monday, on worries that the euro zone's support for Greece is wobbling and that the country may be forced to default on its debt.

Fears about a Greek default rose after senior politicians in German Chancellor Angela Merkel's centre-right coalition started talking openly about it.

The franc was trading slightly higher against the euro compared with the New York close, at 1.2058 per euro at 0907 GMT. It was marginally weaker against the dollar at 0.8883 per dollar.

"Increasingly tough talk from other European leaders towards Greece in the face of political tension from their own electorates has raised further fears that Greece will be unable, or unwilling to meet the requirements of the next bailout tranche, and thus lose funding, and ultimately default on its debt," Michael Hewson, market analyst at CMC Markets.

The SNB holds its quarterly monetary policy review on Sept. 15. According to a Reuters poll of analysts the SNB is expected to keep rates unchanged and to be able to defend its ceiling on the franc.


NITESH RANJAN
PGDM 3RD SEM

MCX gets SEBI approval for IPO: Spokesman

MUMBAI: The SEBI approved an initial public offering by Multi Commodity Exchange (MCX), the country's biggest commodity exchange, on Friday, its spokesman said on Monday.

MCX will sell 6.43 million shares constituting a 12.6 percent stake in the company through the IPO, its chairman had said in March.

Promoter Financial Technologies will sell a 5.18 percent stake, while State Bank of India will sell a 4.14 percent stake.

 

VIVEK KUMAR

PGDM - 3 rd sem