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Friday, 29 February 2008

Budget: Who are the gainers

Finance Minister P Chidambaram presented the Union Budget for 2008-09 in the Lok Sabha on Friday. A look at who are the gainers.

  • Rs 60,000-cr package for farmers
  • IT sector to get Rs 1,680 crore
  • Power sector to get national fund for transmission, distribution reforms
  • NHDP allocation rises to Rs 12,966 cr from Rs 10,866 cr
  • Education & health to get Rs 34,4000
  • Bharat Nirman allocation rises to Rs 24,603 cr
  • About 6,000 high quality schools to be built by 2009
  • 3 IITs to be set up in Bihar, AP, Rajasthan
  • 16 new Central universities to be built
  • 22 Sainik schools get Rs 44 crore
  • 300 more ITIs to be upgraded with an investment of Rs 750 cr
  • Bhopal and Tripura to get one IIScR each and 2 colleges of art
  • Healthcare allocation to be raised by 15%
  • Rs 85 crore sanctioned for scholarships to students
  • NRHM to get Rs 1,250 cr budgetary allocation
  • Allocation for ICDS increased to Rs 6300 crore
  • A national programme for the elderly for Rs 400 crore
  • Rs 992 crore for national AIDS programme
  • NREGS outlay at Rs 16,000 cr
  • Sanitation to get Rs 1,200 cr
  • Rajiv Gandhi drinking water mission to get Rs 7,300 cr
  • Schemes for woman to get Rs 11,460 cr this fiscal
  • Child related schemes to get Rs 33,434 cr
  • Allocation for ministry of minorities doubled to Rs 1,000 cr
  • National Horticulure Mission to get Rs 1,100 cr
  • National Agri Insurance scheme get Rs 640 cr
  • Tea Research association gets Rs 20 cr

Thursday, 28 February 2008

India Must Ease Foreign Investor Rules to Spur Growth

India must ease foreign investment rules in retail, sell state-run companies and improve the nation's roads and power supply to accelerate growth, a finance ministry report recommended before tomorrow's budget statement.

``An appreciation of the rupee, a slowdown in industry and infrastructure constraints remained of concern,'' the annual Economic Survey for 2007-08 prepared by officials advising Finance Minister Palaniappan Chidambaram said. ``Raising growth to double digits will therefore require additional reforms.''

Prime Minister Manmohan Singh has faced resistance from his communist allies to allow greater overseas investment in retail and insurance and sell state assets. India's economic growth may slow this year for the first time since 2005 because of weaker local demand and exports after the central bank raised interest rates to control inflation and the currency gained.

``There is a risk of growth slowing and that makes reforms critical,'' said Ramya Suryanarayanan, an economist at DBS Bank Ltd. in Singapore. ``India is in a phase where it needs to increase the speed of reforms.''

Easing restrictions on foreign investment since 1991 has helped per capita income growth in India double to 7.2 percent a year since 2003 as the economy's annual expansion averaged 8.7 percent, the quickest in the nation's history.

Accelerating economic growth will double per capita incomes in a decade and further reduce poverty, today's report said. The World Bank estimates 52 percent of India's 1.1 billion people live on about $2 a day.

``Growth is of interest not for its own sake but for the improvement in public welfare it brings about,'' the report said.

India's $906 billion economy, Asia's third-largest, may expand 8.7 percent in the year ending March 31, from 9.6 percent in the previous year, according to a statistics department forecast. Singh's government is aiming for growth of as much as 10 percent by 2012.

Tax Cuts

The benchmark Sensitive index fell 0.3 percent to 17779.65 at 1 p.m. on the Bombay Stock Exchange, while the yield on the benchmark nine-year bonds dropped 1 basis point to 7.59 percent.

``It will be my priority to continue to provide a conducive investment climate and manage the macro economy to facilitate non-inflationary growth,'' Chidambaram told reporters in New Delhi after tabling the report in parliament. ``If you wish me to sum up in one phrase the outlook for 2008-9, I would say optimism but with caution are the watchwords.''

Economists expect Chidambaram, who will unveil the budget for the financial year starting April 1 at 11 a.m. in New Delhi tomorrow, to reduce corporate, income and excise tax rates to revive consumer demand and spur growth.

Chidambaram may remove levies amounting to 3.9 percent imposed in addition to the company tax rate, effectively reducing corporate tax liability to 30 percent, Goldman Sachs Group Inc. economist Tushar Poddar said.

Excise Duties

JPMorgan Chase & Co. senior economist Rajeev Malik expects a cut in excise duties on consumer goods, such as two-wheelers, besides an increase in the income tax exemption limit to 125,000 rupees ($3,132) from 110,000 rupees in a nation where only 32 million of the population of 1.1 billion pay taxes.

While today's finance ministry report did not comment on reductions in tax rates, it listed policy reform options before the government to speed economic expansion.

The report, authored by Arvind Virmani, chief economic advisor to Chidambaram, said the government must allow a share of foreign equity in all retail trade. India, which has permitted overseas investment up to 51 percent in single-brand retail outlets, must raise the limit to 100 percent, it said.

The report also suggested the foreign investment ceiling in insurance be increased to 49 percent from 26 percent and allow private companies in coal mining.

It also called on Singh's government to list all unlisted state-run companies by selling a minimum 10 percent equity in them to the public.

Ports, Roads

Congested ports and roads and ageing power plants in India, where most utilities were built in the first two decades after the country's independence in 1947, add to the cost of operations for companies and shave 2 percentage points from the nation's growth, the finance ministry estimates.

``Despite efforts to accelerate the pace of infrastructure development the demand for infrastructure services has grown faster than the supply so that the constraints have become more binding,'' today's report said. ``There is therefore heightened urgency to augment and upgrade infrastructure.''

Still, for the moment, slower economic growth may have a ``temporary dampening effect on capital flows'' that have pushed the rupee up by 11.3 percent in the past year, hurting exports. Capital inflows surged as overseas investors bought more stocks to profit from India's record expansion.

Capital Flows

``Any reduction in excess capital flows from the high levels in 2007 may affect the equity markets in the short term, but will make the task of monetary management easier,'' the report said.

Over the past two years, Reserve Bank of India Governor Yaga Venugopal Reddy has battled overseas capital flows, which increase money supply and stoke inflation, currently at a six- month high of 4.35 percent.

Reddy has raised interest rates nine times since October 2004 and ordered commercial banks to place more deposits with it five times since December 2006 to prevent excess cash in the economy from stoking inflation.

``Overall inflation is likely to remain moderate in the coming months, as the policy measures taken during the course of the year work their way through the system,'' the report said.


Indices end flat ahead of union budget

Equities erased most gains to end flat on Thursday as positive data from the pre-budget economic survey was overshadowed by poor global cues.

Bombay Stock Exchange’s Sensex closed at 17,866.61, up 40.62 points or 0.23 per cent. It touched a high of 17,921.51 and low of 17,690.16.

National Stock Exchange’s Sensex closed at 5,297.40, up 29 points or 0.55 per cent. It touched a high of 5,302.85 and low of 5,227.15.

BSE Midcap Index ended 0.06 per cent lower at 7,719.19 and BSE Smallcap Index closed at 7,719.19.

While buying was seen in metals and auto stocks, realty and oil stocks remained laggard.

Biggest Sensex gainers were Hindalco Industries (up 4.31%), Mahindra& Mahindra (3.7%), Bajaj Auto (3.61%), BHEL (3.41%), HDFC (3.38%), Cipla (2.48%) and Wipro (2.25%).

Reliance Energy (down 2.41%), DLF (2.38%), Reliance Industries (1.91%), Ambuja Cements (1.38%), Infosys Technologies (1.32%) and State Bank of India (1.18%) were the losers.

Market breadth was negative with 1,423 declines against 1,298 advances.

Will PC too have a Chak De Budget?

Railway Minister Lalu Prasad wanted every child to say "Chak de Railways." Will Chidambaram, too, follow suit by presenting a "Chak de Budget?"

Lalu could afford to say "Chak de" because the Railways has been faring well, adding to its profits year after year. But can Chidambaram have that luxury?

Prices of essential commodities are rising, unemployment is mounting and agrarian crisis is aggravating leading to farmers’ suicides. Besides, global as well as domestic economies (including corporate earnings) are heading for a slowdown. Therefore, to address the issues concerning the "aam aadmi" and to sustain the present momentum of 8-9 per cent economic growth, Chidambaram, unlike more comfortably placed Lalu, will have to take some unpopular measures which may not be in the best interst of political expediency.

But if lalu has stolen the show by presenting a please-all Budget, can Chidambaram be far behind? By giving in to the compulsions of an election year, PC may avoid any new taxes in his Budget and offer sops by way of income tax relief and customs duty cut.

The expectations from Chidambaram are high. People look for personal and corporate income tax cuts, excise duty relief, a hike in the income-tax exemption limit, a higher ceiling for tax-saving investments, rejig in tax slabs, simplification of taxes, massive funds for social sector projects and for rural health and power sectors. Farmers expect package for debt-relief, irrigation sector and farm production.

Lalu won over women by offering sops in the form of 50 per cent deduction in fares for women senior citizens, five per cent reservation in Railway jobs, etc. Chidambaram, too, has to do something to command their loyalty like measure to contain price rise and duty reliefs for consumer durables.

Since the middle class forms a big chunk of the electorate, Chidambaram can ignore them only at heavy political cost. The salaried class has been demanding an additional deduction of Rs 1 lakh under Section 80C for long-term investments in life insurance premium/pension/annuities.

Employees in the IT sector who are required to work in different foreign tax jurisdictions have been pressing for abolition of double taxation of the fringe benefit on ESOPs.

The increasingly assertive, too, is demanding its pound of flesh. There has been demands from organizations such as FICCI to accord infrastructure status to social sectors like health and education. The SMEs which have been hit hard by recent want the tax holiday to be extended beyond 2009.

So unlike Lalu, Chidambaram will have a more unenviable task to balance the compulsions of politics and economics.

Wednesday, 27 February 2008

Nifty rollovers gather steam

The markets opened on a buoyant note and sustained the high levels on strong global cues. The broader indices advanced further in afternoon trades, but pared some of the gains before close. The Sensex finally closed at 17,806 (up 156 points), while Nifty closed at 5,270 (up 69 points). Buying was witnessed across the board.

The market wide rollovers picked up further, with about 48 per cent of the positions being carried forward into the March series. The roll cost continued to remain under pressure, hovering around 50-55 basis points. In line with expectations, the Nifty roll cost (cost for carrying over positions) expanded further to 30-31 points as against yesterday’s 20-25 points.

The Nifty March futures contracts witnessed aggressive rollover of 54 per cent, up from the 33 per cent yesterday. Of the total Nifty open interest of 44.03 million shares, 23.93 lakh shares were rolled over. The market wide rollovers were up 46 per cent from 33 per cent yesterday.

There were aggressive short positions in the market due to lack of direction and high volatility, according to a derivative analyst at Edelweiss Research. He expects the volatility to continue and Nifty roll cost to expand albeit marginally.

The Nifty PCR strengthened further to 1.02 from 0.99 yesterday on account of aggressive buying of Put options. The ratio for the March options was higher at 1.94. However, the buying was confined to out-of-money puts at 4,700-5,000 strike prices, indicating that players were protecting down sides rather than going long.

R-Power: Costliest power stock

Reliance Power, which announced a three-for-five bonus on Sunday, is the costliest power sector stock in India.

The company’s share prices closed at Rs 430.40 on the Bombay Stock Exchange on Monday, taking the total market capitalization to Rs 108,000 crore.

The company’s per megawatt value works out to Rs 68 crore considering that it will have a total capacity of 1,500 MW in 2010.

The company plans to have a capacity of 28,200 MW by 2016. Based on this, the eight-year forward valuation per megawatt will be Rs 3.63 crore.

In comparison, the state-owned National Thermal Power Corporation (NTPC) commands a per MW valuation of Rs 5.92 crore.

Its current power generating capacity is 28,000 MW and the company’s proposes to produce 66,000 MW by 2017. Its 10-year forward valuation is hence Rs 2.51 crore per MW.

Tata Power is currently valued at Rs 12.18 crore for its current capacity of 2,300 MW. The company will be adding 10,000 MW of capacity more by 2012.

Thus, it will have a capacity of around 12300 MW by 2012-end. The means the seven-year forward per MW valuations for the company is only Rs 2.39 crore.

On Monday, shares of Reliance Power, which had a dramatic fall in prices since listing on February 11, on Monday closed above its issue price of Rs 450 — for the first time after two weeks — as investors cheered the liberal bonus issue by the promoters.

Reliance Power closed at Rs 450.40 a share, up 8.05 per cent from Friday’s close, gaining the most since listing two weeks ago.

World`s largest hedge fund firm now in India

Renaissance Technologies, the world’s largest hedge fund firm handling assets worth $35.4 billion (Rs 1,41,600 crore), has received approval from the Securities and Exchange Board of India (Sebi) to operate in the Indian stock markets as a foreign institutional investor.

Renaissance is the latest — and the biggest — among several hedge fund players that entered India following a liberal approach taken by the Indian regulator on hedge fund participation in the booming Indian stock market.

Others that recently entered include Vikram Pandit-founded Old Lane, DE Shaw (the world’s fifth-largest hedge fund with $29 billion or Rs 1,16,000 crore worth assets) and Och-Ziff Capital Management (the seventh largest with $28.6 billion or Rs 1,14,400 crore in assets), according to the Sebi website.

Renaissance, founded by 69-year-old Jim Simons, is based out of Manhattan, the US, and is perhaps the most interesting hedge fund. It has more than 260 employees — many of them are PhDs and not conventional analysts from management schools.

The hedge fund major’s Medallion Fund uses trading algorithms to invest across the world markets.

It returned more than 50 per cent in the first three quarters of 2007, according to a Bloomberg report. It had about $6 billion (Rs 24,000 crore) in assets as of July 1.

Renaissance’s returns stand out as the turmoil in the US credit markets and the meltdown in stock prices across the world took a knock on many hedge funds. Bear Stearns, for instance, saw two of its mortgage-related hedge funds falling into bankruptcy.

Others such as Goldman Sachs’ Global Alpha Fund, which competes with Renaissance’s funds, lost more than 25 per cent in the same period.

The approval, which was given in January, follows efforts by Sebi to get hedge funds and other overseas investors to register and participate directly in the Indian markets instead of through Participatory Notes or P-notes, which are offshore derivative instruments used by investors that are not registered with Sebi to invest in Indian securities.

Sebi had tightened the rules for trading through P-notes in October last year to arrest the surge in foreign inflows.

“It is good. At the end of the day, it is money and Sebi has made the inflow of money into our markets more transparent,” said Prabhat Awasthi, head of equity research and managing director (equities) at Lehman Brothers.

According to Hedge Fund.net, which tracks the hedge fund industry, January was tough for hedge funds that have emerging market strategies, though many believed that India and China’s fast growing economies could withstand shocks to other parts of the international business system.

Sensex up 20 point at 17826; Nifty ended flat at 5268

Markets slip from day's high on nervousness in European market on account of UBS EGM, uncertain economic statements from U.K.'s biggest mortgage lender, HBOS. Market clocked highest turnover of the month for third consecutive day. Sensex was up 20 point at 17826. It slipped 311 points from day’s high. Nifty ended almost flat at 5268. Market slipped 100 pts from day’s high. CNX Midcap Index was up 0.6%, BSE Small cap Index was up 0.3%.

BSE Capital Goods Index was up 2.4%; Siemens was up 3.8%, BHEL was up 3.8%, L&T was up 3.3%, Suzlon was down 3% BSE Auto Index was up 0.6%; M&M was up 4.5%, Maruti was up 2.4%. BSE Oil & Gas Index was up 0.4%; GAIL was up 1.5%, ONGC was up 1%. BSE IT Index was down 2.2%; Satyam was down 2.9%, Infosys was down 2.6%, TCS was down 2.3%. BSE Metals Index was down 1%, Nalco was down 3.8%, Sterlite was down 3.1%. Crude Oil Futures hit a record high of $102.08/bbl, Gold hits a record high of $965/oz. Rupee strengths 30 bps to Rs 39.78/$. Pharma stocks buying was seen in stocks like Sun Pharma was up 5.2%, GSK Pharma was up 4.6%, Ranbaxy was up 3.5%.

Other Index Gainers & Losers:
Grasim Ind was down 4.9%, REL was down 3.9%, Tata Comm was down 3.8%. Non Index Gainers was stocks like Punjab Tractor was up 10.1%, CESC was up 7.8%, Shree Renuka was up 7%, Indraprastha Gas was up 6.6%, Lanco Infra was up 6.3%. Non Index Losers were stocks like Gujarat NRE Coke was down 8.7%, Bajaj Hind was down 8.6%, Gateway Dist was down 3.7%, Indian Cement was down 3.7%
NSE Advance Decline is 6:5. Total Turnover at Rs 82,406 Cr Vs Rs 72,389 Cr yesterday.

FNO Snapshot
Rollovers strong in the initial half of trade, Marketwide Rollover at 62%, Nifty Rollover at 58%, Cement, Textiles, Metals and Pharma see strongest Rollovers, Infrastructure stocks see rollovers pick up, Nifty Short rollover cost reduced from 25 points to 20 points.

Top Rollovers:
Top Rollovers were stocks like S Kumars 88.6%,Bharat Forge 87%,GTL 87%,Hindalco 86%,Aban Offshore 85%,Jindal Stainless 84%,India Cem 84%,Sun Pharma 83%.

Fresh Longs/Long Rollover:
Fresh Longs/Long Rollover were seen in Textiles stocks like S Kumars, Century Text, Metals stocks like Hindalco, Jindal Stainless, Cement stocks like India Cem, ACC, Infrastructure stcoks like Lanco Infra, IVRCL Infra, Power stocks like Power Grid, CESC. Pharma stocks like Ranbaxy, Orchid Chem. Misc stocks like Punj Lloyd, Edelweiss Capital.

Short Rollovers:
Short Rollovers were seen in stcoks like Siemens, Sun Pharma, HUL, Unitech.

Global Market:
Asian markets gained taking cue from U.S. mkts on back of IBM's 15-bn buyback overshadowing poor economic data. Hang Seng was up 3.2%, Shanghai was up 2.2%, Taiwan was up 1.8%, Nikkei was up 1.5%, Straits Times was up 1.1%. Commodities surged to new all-time high as dollar index has hit an all time low.

Currency Movement:
Dollar fell to a record low of $1.5/ euro on speculation that Bernanke will indicate more interest rates cuts today, Yen appreciates by 56 bps at 106.4, Rupee apprecaites by 44 bps at 39.7.Hang Seng index was up over 3% after Financial Sec unveiled a series of tax cuts that are expected to increase disposable income.

Taiwan Flows:
FIIs figures of Taiwan showed net buy equities worth $ 657 Million in today’s trade, Provision, FIIs had bought equities worth $ 1.8 billion in last 3 days, Reports that the govt to reduce corporate income tax rate to 17.5% from 25%.

Data To Watch:
UBG EGM is taking place right now, U.S. Fed Chmn Ben Bernanke delivers semi-annual testimony on monetary policy, U.S Durable Goods Orders, U.S. New Home Sales, U.S. EIA Petroleum Status Report.


Tuesday, 26 February 2008

Winning Trading Systems

FII & DII trading activity on NSE and BSE on Capital Market Segment

The following is combined FII trading data across NSE and BSE collated on the basis of trades executed by FIIs on 26-Feb-2008.

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category Date Buy Value Sell Value Net Value
FII 26-Feb-2008 2327.66 2359.65 -31.99



Domestic Institutional Investors trading activity on NSE and BSE on Capital Market Segment

The following is combined Domestic Institutional Investors trading data across NSE and BSE collated on the basis of trades executed by Banks, DFIs, Insurance and MFs on 26-Feb-2008.

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category Date Buy Value Sell Value Net Value
DII 26-Feb-2008 1250.15 738.82 511.33