Gold and Silver: Is your investment safe?

James Turk, a renowned authority on gold and the precious metal markets and co-author of "The Collapse of the Dollar," is founder and chairman of GoldMoney®, a patented gold-based electronic money, transferred over the Internet. Here he discusses how GoldMoney works, and why it’s better than storing physical metal in a bank or purchasing an ETF
Can you explain what "GoldMoney" is? And what is the difference between buying gold bullion and GoldMoney?

JT: GoldMoney is a very convenient, economic and safe way to buy gold and silver on-line and have that gold and silver stored for you in vaults in Zurich or London. A Swiss company called VIA MAT International, which is a major European secure storage and transport company, operates the vaults. And they have specialized bullion vaults where our customers’ gold is stored. Then, you can use GoldMoney as a form of payment or just let it sit there in your account as a form of savings.

There are two ways to view it: it’s like on-line banking but your account is denominated in goldgrams and mills, rather than dollars and cents. In contrast to banking, where the bank has an obligation to you, there’s no liability created by GoldMoney. You do not ‘deposit’ your gold, as you deposit money in a bank. We’re just simply storing in a secure vault gold that you own.

It’s also like PayPal in the sense that you can click gold from your account to someone else’s account, if you want to use it as currency. But you do not need to use that feature and can just use GoldMoney as a savings account, but where you are saving real, sound money – gold and silver.

The key behind GoldMoney is the governance procedures that we put in place. People often ask me what three questions they should be asking before they buy gold. It’s always: "Is your gold safe?" "Is your gold safe?" "Is your gold safe?" You do not want to take risks with your bullion, which should be viewed as the bedrock asset in your portfolio. So what we have done with GoldMoney is that we’ve taken all the steps necessary to provide customers assurances of integrity that, in fact, their gold is safe.

These governance procedures are disclosed on the website. One the most important of these is the regular audits by one of the Big-4 auditing firms, which establishes that the weight of gold and silver in the vault is exactly the amount recorded in customers’ accounts and that there is always this one-for-one relationship. It means that we’re actually storing gold and silver that you own. This audit report is available to our customers upon request.

And regarding your question about the difference between buying gold bullion and GoldMoney, there is no difference. When you buy gold bullion, there are two ways of doing it. You can buy gold in bars and coins and store them yourself, or you can buy them in GoldMoney and have the gold stored for you in vaults in Zurich and London. It’s just a question of diversification, convenience, and economics.

Because of our economies of scale, you get more gold for your money when you’re actually buying it in GoldMoney, plus you have the opportunity to store it in countries where you don’t live. And I do recommend that geographic diversification. However, I also recommend that people consider having some gold where they live, too, because a little bit of gold on hand never hurts just in case.

I do not recommend putting your gold or silver in a bank, however, because you want to keep it some place safe. Banks are not a safe place to store gold and silver, because when gold was confiscated in 1933, the federal government went right to the banks and took all the gold and silver that was stored there.

TGR: With GoldMoney, is there a 1099?

JT: No, because we’re not a U.S. company; we operate in the British Channel Islands, and there’s no reporting outside of the British Channel Islands. In our User Agreement, we say that our user is responsible for complying with any rules or regulations from wherever he accesses GoldMoney. We have customers in over 100 different countries around the world. We couldn’t possibly comply with reporting requirements in all those different countries. So, what we do is comply with the laws in Jersey, Channel Islands, where we operate.

Jersey is a major financial center. It is located in the English Channel, so it’s located in a politically safe jurisdiction. It’s a sovereign country, and we comply with the laws of that country.

TGR: James, whether it’s an ETF or GoldMoney, this is all co-mingled. It’s not like there would be a separate account that had X amount ounces of gold and silver in my name?

JT: Well, let me first of all deal with GoldMoney, and then I will deal with the ETF. All the gold and silver stored in GoldMoney is allocated. What that means is VIA MAT has one account—the account is in the name of the customers of GoldMoney. VIA MAT doesn’t know who those customers are, but they know it is the customers of GoldMoney, and it’s allocated. There are bars with refinery serial numbers specifically allocated sitting in the VIA MAT vault, clearly distinct from other gold and silver sitting in the VIA MAT vault.

And we report those bar serial numbers on the GoldMoney website, so that if you have enough gold or silver in your account to take up a whole bar, you can go to the GoldMoney website and say I want this bar with this serial number. It will be taken out of your account for free, and then VIA MAT, at your expense, will ship it to wherever you want in the world. So, all the gold and silver is allocated, and it is allocated on behalf of GoldMoney’s customers.

With ETFs, on the other hand, because of the absence of the audit, you don’t really know that it’s allocated, and I have some serious reservations about whether it is, particularly with the silver ETF. I have read the custodial agreement, and it is not an allocated bullion storage agreement; it’s a metal account. A metal account is a depository relationship that the ETF would have with the custodian. That’s very different from an allocated bullion storage account agreement. So I have some serious reservations as to whether the silver in the SLV ETF is allocated or not.
There’s a lot of uncertainty about storage when you’re involved in storing metal, as I discussed earlier in regard to the banks, and there’s still a lot of uncertainly with ETFs whether the gold and silver really are there. But even if they are there, you don’t own gold or silver with an ETF. You own shares in a fund that supposedly owns the gold and silver.

That’s different from owning the gold and silver yourself. With GoldMoney, you own the gold and silver; you have access to it 24/7 through your account on-line, and you can have that gold and silver sent to you, if you want, if you have enough gold and silver in your account to take delivery of a bar. Or you can use that gold and silver and go to KITCO and buy small bars or coins with it if you want to have something in hand. But you cannot do that with an ETF.

TGR: Can you give me a rough idea of the number of public companies—gold companies—that use GoldMoney? Do you have a sense of that?

JT: Not a lot, and there’s a specific reason for that. Our operating system isn’t really very friendly from a company point of view, and this is actually something we’re working on over the balance of this year and next year. For example, companies want access with dual passwords, and we do not have that capability. We have been operating for seven years, and we have focused primarily on the retail market rather than the corporate market.

The reason is that the retail market opportunities made more sense in trying to build GoldMoney from scratch the way we have. We’re now storing about $350 million dollars in gold, silver, and recently we have added currency too, because people can put money into segregated funds accounts at our banks in Jersey and earn interest on their money until they’re ready to buy gold and silver.

What we are going to do later this year and next year is what I call corporate enhancements. What this means is we’re going to make GoldMoney more friendly to corporate chief financial officers. It will be more bank-like in that we will have A & B signatures, and dual passwords and those types of things that will make it easier for a corporation to fit it into their treasury function.

Once we have done this additional software development, we will then be talking to gold mining companies about using GoldMoney as a way of paying suppliers, i.e. paying their contractors in gold, rather than by going the expensive way by paying with bank wire transfers.

Recently one of our customers wrote to me and said they had done a wire transfer that ended up costing $55 to do the transaction, which is pretty outrageous. In GoldMoney you can click gold from your account to someone else’s account, and a maximum it will cost you is $2.50 at current exchange rates. And it’s efficient; you can make a goldgram payment 24/7, and payments are completed outside the banking system.

So, the idea is once we have these corporate enhancements in place, we’re going to begin actively marketing GoldMoney among the mining companies, and then eventually among the natural resource companies of all sorts.

Crude Shock: Get ready for Rs 75 per litre of petrol

The impact of zooming crude oil prices that is the most talked about issue across the globe these days is going to hit you soon in India. Fill in more petrol in your cars soon; for the Indian government is all set to hike the prices of petroleum products.

It will not be a simple hike of a few rupees. If officials in the Ministry of Petroleum are to be believed, petrol prices will be hiked anything between Rs 10-Rs20 per litre soon.

If it is hiked so, it will be the first time in history that Indians will get such a huge increase in their fuel bills. In a city like Mumbai, this would mean that you will have to shell out nearly Rs 70 per litre of petrol.

In the past few months, India’s state-owned oil companies have been reeling under the rising crude oil prices across the globe. Companies like Indian Oil, ONGC and Bharat Petroleum have been incurring losses of several hundreds of crores as they continue to dole out subsidsed petrol, diesel and cooking gas to the people.

But now, officials said, the impact of the rising oil prices is such that there is no option but to decontrol petrol prices, a move that may see rates being hiked anything between Rs 10-20 a litre.

In India, petrol is currently being sold at a loss of Rs 16.34 a litre and diesel at Rs 23.49 per litre. Officials said deregulating petrol price would mean that its prices would move in tandem with global crude oil prices.

The rise in global oil prices that last week touched an all time high of $135 a barrel has forced the government to consider options to save state-run firms that expect a revenue loss of Rs 200,000 crore (Rs 2000 billion) this fiscal on sale of petrol, diesel, domestic LPG and kerosene.

Officials said deregulating petrol would lower the revenue losses by just Rs 20,000 crore (Rs 200 billion). Half of the current estimates are on account of diesel rates.

Monsoon, fuel price decision to dictate market trend

The forthcoming week will be keenly watched by market players, not just for news on hike in fuel prices and advance tax declaration from corporate but the onset of monsoon.

If rains hit Mumbai in a couple of days, it will not only give relief to the financial capital which is reeling under hot and humid conditions, but boost stock prices, especially of the FMCG sector.

India Meteorological Department had earlier forecast that the southwest monsoon will hit the Kerala coast on May 29, four days ahead of its normal June 1 onset. Kerala has already experienced a spell of rain but the IMD was waiting for the weather system to be more fully entrenched to declare the onset.

"Traders would probably be looking at two triggers which will decide the trend for the June future & options series--one being the monsoon and second the advance tax figures. The markets should remain positive on these expectations,” said an analyst with a Mumbai-based brokerage firm.
This week, the BSE Sensex and Nifty moved in a narrow range. The 30-share Sensex ended 1.41 per cent lower at 16,316.26 while the 50-share Nifty closed 1.5 per cent down at 4946.55 from the previous week.

On Friday, surprisingly strong economic growth of 8.8 per cent in the Jan-March quarter outstripped forecasts of 8.2 per cent, indicating the country’s momentum still remained intact.

The strong data comes in at a time when the government is debating whether to raise fuel prices to tackle mounting losses of state oil firms -- a move which would also put pressure on prices. The impending decision on fuel price hike is expected to weigh on sentiment, say analysts.

"The market will remain rangebound with a negative bias next week with the decision on fuel price hike dominating sentiment. Also, the market is waiting for the onset of monsoon," said Ambareesh Baliga, head of research at Karvy Stock Broking.

Inflation in the 12 months to May 17 rose 8.1 per cent, up from 7.82 per cent a week earlier. The finance minister expressed his concern on inflation. He said there was no sign of inflation declining and more steps would be taken if needed to arrest inflation.

Meanwhile, the cooling of crude oil price provided some solace to equities across the globe. Crude oil price fell towards $125 a barrel, after having traded near $135 a week ago.

US stock index futures edged up, signalling that Wall Street may extend the previous session’s gains, with the focus on lower oil prices and economic data.

India's food inflation lowest among 15 nations

India has been better off in managing food inflation compared to several other developing countries in 2007-08, even as the government faces public and political anguish over sharp rise in prices.

Prices of food articles rose by 5.8 per cent in India, the lowest increase among 15 developing countries for the period ending February 2007-08, a joint report of the Organisation for Economic Cooperation and Development (OECD) and Food and Agriculture Organisation (FAO) has said.

Food prices showed the highest increase at 25.6 per cent in Sri Lanka, followed by Kenya at 24.6 per cent and China 23.3 per cent, the report entitled ’Agriculture Outlook 2008’ said.

A record foodgrain production estimates at 227.32 million tons during 2007-08, against 217.28 million tons last year has helped India keep food inflation under control, experts said.

However, recent negative yield shocks in key food commodities like pulses and oilseeds have contributed to the price increase, they said, adding that global price rise had a spill-over affect on domestic rates as well.

However, India’s food inflation still remains higher than the developed countries like the US and Japan during the review period, the report said.

Rate of rise in food prices stood at 1.4 per cent in Japan, at 5.1 per cent in the US and at 5 per cent in France, it noted.

For developed countries, where the price rise in food items is moderate and the share of food in the total consumer basket is small, the contribution of food price inflation to overall inflation is correspondingly moderate.

But as would be expected, the impact of food price inflation on overall inflation in developing countries is much larger, the report added.

Bill Gates signals end of computer mouse era

Microsoft is developing a system that could spell the end the use of computer mouse, Microsoft Chairman Bill Gates has said.

"The way you interact with the system will change dramatically," the billionaire said at a conference in Canada, according to a report in The Daily Telegraph.

He said that computer users of the future will control their machines by voice and pen as well as touch.

Users of Windows 7 will issue commands by touching the screen rather than by the traditional keyboard and mouse combination that has dominated since the 1970s.

Windows 7 is due to be released in 2010 and is Microsoft’s attempt to catch up with Apple, whose touch screen iPhone has proved popular.

Touch screens are appearing on a host of other devices, including sat-navs, mobile phones and remote controls. A touchscreen BlackBerry is expected shortly.

CPI(M) says to protest any fuel price increase

India’s main communist party, an important government ally, said on Friday it would protest in the streets if ministers agree to raise retail fuel prices to help ease mounting losses of state oil firms.

India is debating how best to bail out oil retailers and refiners losing tens of millions of dollars a day due to crude oil’s record run while having to sell petrol and diesel at cheap, government-set rates.

The ruling Congress Party-led coalition is widely expected to raise prices over the weekend, but wary of upsetting voters in a year dotted with important elections, the size of the hike is likely to far less than the 15-20 percent increases sought by the oil ministry.

"We will go to the streets if the government does not listen, we are totally opposed to any price rise," said Prakash Karat, head of the Communist Party of India (Marxist), the largest among the left parties.

Congress has lost a string of state elections and has been widely criticised by opposition parties and the left for fast rising food and other commodity prices which pushed inflation over 8 percent in mid-May to a new 3-½ year high.

The country’s oil minister, Murli Deora, said on Thursday some communist leaders had been helpful and cooperating on the issue of raising petroleum prices but Karat ruled out any negotiations over the issue.

The left has proposed a cut in excise and import duties on crude oil and petroleum products to tide over the crisis.

Yusuf Pathan, Ojha in one-day squad

Indian selectors named uncapped Yusuf Pathan and Pragyan Ojha on Friday in a 15-player squad for next month’s one-day tri-series in Bangladesh and the Asia Cup in Pakistan.

The 25-year-old Pathan, who joins younger brother and all-rounder Irfan in the squad, is a hard-hitting batsman and off spinner while Ojha, 21, is a left-arm spinner.

Master batsman Sachin Tendulkar will miss the trips due to a persistent groin injury while leading off spinner Harbhajan Singh has been banned for five one-dayers after being found guilty of slapping compatriot Shanthakumaran Sreesanth in a domestic Twenty20 game.

The selectors ignored former captains and experienced batsmen Rahul Dravid and Saurav Ganguly, who also missed the victorious tri-series campaign in Australia in January.

The Bangladesh tri-series, also involving Pakistan, will be played from June 8-14, with the six-team Asia Cup scheduled from June 24-July 6.

India squad: Mahendra Singh Dhoni (captain), Virender Sehwag, Gautam Gambhir, Robin Uthappa, Yuvraj Singh, Rohit Sharma, Irfan Pathan, Suresh Raina, Praveen Kumar, Piyush Chawla, Yusuf Pathan, Pragyan Ojha, Shanthakumaran Sreesanth, Ishant Sharma, RP Singh.

Malaysia issues new visa rule for Indians, Bangladeshis

Malaysia is introducing new visa rules for Indian and Bangladeshi tourists in an effort to curb illegal immigration, The New Straits Times reported Friday.

Visitors from the two countries will have to obtain a two-week pass and a return ticket before they can enter Malaysia, the report said, quoting Home Minister Syed Hamid Albar.

"The social visit pass replaces the visas-on-arrival (VOA), which was discontinued in April," Syed Hamid said, adding the social visit pass must be obtained in advance from the tourists’ home country.

Malaysia first introduced the visa-friendly programme, allowing visitors from 24 countries to stay for one month when they arrived, in 2006 to boost its tourism industry.

But immigration officials last year called for the programme to be scrapped after many visitors were found to have overstayed.

Media reports have said that most of the overstayers are Indians who remained in Malaysia to work in restaurants and on plantations.

India's per capita income moves up to Rs 32,299

Per capita income of Indians for the first time breached Rs 30,000 mark and has reached to Rs 32,299 during 2007-08 indicating their growing purchasing power.
The revised estimates, which were released by the government today, indicate that per capita income at current prices rose by 12.3 per cent from Rs 29,642 to Rs 32,299 during the year.
At constant prices (1999-2000 prices), which is worked out after taking into account the erosion in purchasing power of rupee, the per capita income moved up to Rs 24,321 representing an increase of 7.8 per cent during 2007-08.
"This is an important aspect of growth... More money is available in the hands of people. It is a very good sign," Finance Minister P Chidambaram told reporters soon after release of the data.
However, there has been a deceleration in the growth of per capita income at current prices, which rose by 12.3 per cent during 2007-08 as compared to an increase of 14.2 per cent during the previous fiscal.
Similarly, in case of per capita income at constant prices, the rate of increase decelerated to 7.8 per cent as compared to 8.1 per cent in the previous fiscal.
According to the estimates, India’s population at the end of 2007-08 has been estimated at 113.8 crore, up from 112.2 crore at the end of the previous fiscal.

India's GDP beats forecasts, inflation still rising

Surprisingly strong Indian growth and a jump in inflation above 8 percent put an interest rate rise back on the agenda on Friday, although many analysts thought the Reserve Bank of India would remain focused on cash management.

The finance minister said there was no sign of inflation declining and more steps would be taken if needed after wholesale price inflation rose 8.1 percent in the 12 months to May 17, its highest in more than 3-½ years.

Annual growth of 8.8 percent in the Jan-March quarter outstripped forecasts for 8.2 percent, showing momentum remained strong in Asia’s third-largest economy in the fiscal second half despite policy tightenings, although economists expected it would lose height in 2008/09.

The strong data comes as the government is debating whether to raise state-set retail fuel prices to tackle mounting losses at state oil firms forced to sell fuel at discounted rates, a move which would also put pressure on prices.

"Monetary policy will continue to remain tight and it seems the Reserve Bank of India’s first priority is to target liquidity," said A. Prasanna, economist at ICICI Primary Dealership in Mumbai."But with inflation continuously surprising on the upside and a fuel price increase in the offing, a repo rate hike cannot be ruled out."

The RBI has left its key lending rate, the repo rate, unchanged at 7.75 percent for over a year. But it has been tightening cash conditions over the past 18 months, most recently in April and May when it raised the cash reserve ratio, the amount of funds banks must deposit with it, by 75 basis points to a seven-year high of 8.25 percent.

The rupee took both sets of data largely in its stride, edging up to 42.52 per dollar, while the benchmark 10-year bond yield rose to 8.11 percent from 8.08 percent shortly before the price data came through.

INFLATION

The WPI is India’s most widely watched price measure and the mid-May reading outstripped forecasts for an annual rise of 7.96 percent and the previous week’s 7.82 percent.

Finance Minister Palaniappan Chidambaram said on Friday price pressures stemmed largely from abroad, particularly oil, and there were no easy solutions. The government has already curbed some exports and lowered duty on some imports to keep domestic supplies up and import prices down.

"We will take more measures if needed," he said. "We will take corrective measures to control inflation."

He expected the economy would grow 8.5 percent in 2008/09 after data on Friday showed 2007/08 growth at 9.0 percent, higher than a first estimate of 8.7 percent.

"The current financial year appears even more difficult than the year that has come to an end, but I am confident we will maintain growth," he said.

Growth for the December quarter was revised up to 8.8 percent and the full-year reading gave India its third successive fiscal year of expansion at 9 percent or above, to be the world’s fastest-growing major economy after China.

"Even though the industrial sector has been hurt by past interest rate hikes, the services sector continues to grow at a fast pace," said Sonal Varma, economist at Lehman Brothers.Varma expected high oil prices, financial market turbulence and slowing world demand would provide headwinds to the economy in the fiscal year to the end of March 2009.

"The question is whether the services sector can sustain this pace, despite industry slowing down. We have our doubts," she said.

Manufacturing grew an annual 5.8 percent in the quarter, slowing from 9.6 percent in the December quarter, while services grew 11.2 percent in the quarter.Farm output grew an annual 2.9 percent in the March quarter compared with 6 percent in the prior three months.

Govt moves closer to fuel price decision

The government is expected to take a decision on whether to raise fuel prices in the next two to three days, with key political leaders expressing a willingness to tackle mounting losses at state oil firms, the oil minister said.

The cabinet was earlier scheduled to meet later on Thursday to discuss a response, which could involve raising fuel prices, cutting taxes on oil products and issuing more bonds to help state firms selling fuels below cost, but the minister, Murli Deora, told reporters the meeting had been postponed.

"Today’s cabinet meeting has been postponed ... The decision can be taken in two to three days," Deora said.

If India raises prices, it would be the latest Asian nation to decide it can no longer shield consumers from crude’s record run, following the likes of Taiwan, Sri Lanka and Indonesia.Deora said Prime Minister Manmohan Singh and Finance Minister Palaniappan Chidambaram were keen to rescue oil firms, which are selling fuel at low state-administered prices and losing tens of millions of dollars a day as a result.

State-run firms, Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd, have said their borrowings were close to the maximum allowed, threatening their ability to import crude in a few months.India imports 70 percent of the oil it consumes.

India’s central bank raised borrowing limits for these companies late on Thursday, but the director for finance at IOC, S.V. Narasimhan, said this was only a short-term measure and the companies needed to reduce their debt in the long run.

Singh and ruling Congress Party chief Sonia Gandhi met in the evening for talks on the issue.India’s leftist parties, key allies of the federal government, have opposed a price rise, but Deora said some communist leaders had been helpful.

"I spoke to some of them. As far as this problem is concerned, they are very cooperative," he said.Congress and its coalition allies are worried that higher petrol and diesel prices could push inflation beyond current 3-1/2 year highs around an annual 8 percent, and upset poor consumers in a year dotted with elections.

But the scale of the losses at state-run oil refiners and retailers may force its hand.Oil ministry officials have described a rise in prices as "inevitable".Oil prices, trading just below $130 a barrel at 1115 GMT, have doubled since last year, but after earlier reductions Indian state oil firms have to sell fuels at prices lower than two years ago as the government is keen to tame inflation.

Wall Street to cut 25,000 jobs

New York City’s financial sector might only slice 15,000 to 25,000 jobs in the current downturn, which could prove shorter than the mayor has predicted, the city comptroller said on Thursday.

In contrast, the financial sector that is such a vital part of the city’s Economy slashed 40,200 jobs in the previous 2000 to 2003 retreat that straddled the September 11, 2001 air attacks, Comptroller William Thompson said in his report.

Battered by profit-gouging subprime mortgage loans, New York Stock Exchange member firms that do business with the public lost $7.3 billion last year, and the current job-losing cycle that began in August 2007 should run through March 2009, the Democrat added.

Though banks and brokerages employ less than 10 percent of the city’s workforce, they earn more than 30 percent of all wages and salaries, he said. And each Wall Streeter helps create 1.5 jobs in other sectors, from restaurants to shops.

The latest job-loss estimates were milder than several others. For example, Wall Street could shed one in five jobs if this cycle in an industry known for its volatility mirrors previous ones, according to a state labor department analyst. That works out to 36,000 of lay-offs.

Similarly, the city’s Independent Budget Office, predicted 33,300 job cuts.

If the comptroller’s new forecasts prove accurate, the city’s overall Economy will still gain a few jobs this year, with employers hiring 3,800 workers. In contrast, Mayor Michael Bloomberg has predicted a loss of 10,700 jobs.

Both politicians, however, see the city of over 8 million people losing lots of jobs in 2009. Some 49,800 people will lost their jobs, according to the comptroller, topping the independent mayor’s prediction of 46,300 cuts.

By 2010, Thompson and Bloomberg also agree that employers will resume hiring, with the comptroller predicting an increase of 29,800 jobs and the mayor forecasting 26,700 additions.

India's GDP Growth Holds at Slowest Pace Since 2005

India’s economic growth held at the weakest pace since 2005 as the highest interest rates in six years discouraged consumer spending and investment.

Asia’s third-largest economy expanded 8.8 percent in the three months to March 31 from a year earlier, matching the revised gain of the previous quarter, the statistics office said today in New Delhi. Analysts forecast an 8.1 percent increase.

Reserve Bank of India Governor Yaga Venugopal Reddy has kept borrowing costs high to slow inflation, which has doubled in the past four months. That’s hurt the nation’s economic expansion, prompting the finance ministry yesterday to ease companies’ overseas borrowing rules to spur investments.

``Both growth and inflation are causes of concern,’’ said Sanjay Peters, an economics professor at ESADE Business School in Barcelona. ``Reining in inflation at the cost of growth is an unviable justification -- growth is key to cutting poverty.’’

India’s benchmark Sensitive index was almost unchanged after the data was released, rising 0.5 percent to 16,404.75 at 11:10 a.m. in Mumbai. The key 10-year bond yield rose to 8.08 percent from 8.05 percent before the report.

India’s economy expanded 9 percent in the year ended March 31, the least in three years, today’s report said. Prime Minister Manmohan Singh wants to accelerate growth to 10 percent by 2012 and sustain that pace to reduce poverty in the world’s second most populous country. The World Bank estimates about half the nation’s 1.1 billion people live on less than $2 a day.

Electoral Losses

Still, India is unwilling to risk an inflation flare-up from lower interest rates at a time when the government is bracing for national elections due by May 2009, analysts said. Singh’s Congress party has already lost ground in nine of 11 provincial polls held since January 2007 amid rising prices.

Higher fuel prices may also stoke inflation. India’s Cabinet is due to meet in coming days to seek ways to cut losses at state-run refiners that have risen to more than $1 billion a week as crude oil costs soar. The meeting will consider ``all options,’’ including an increase in fuel prices, Oil Minister Murli Deora said yesterday.

To boost growth, the finance ministry yesterday raised the limit on overseas borrowing by companies for domestic spending. Infrastructure companies can borrow as much as $100 million overseas, up from a previous limit of $20 million, while other companies can borrow as much as $50 million, compared with an earlier cap of $20 million.

Rising Incomes

India’s expansion, to be sure, is still the second-fastest after China among the world’s major economies, spurred by rising incomes. The South Asian country is growing at more than three times the pace of the U.S. and the nations sharing the euro.

The Reserve Bank of India, whose priority is to keep prices in check, has raised its key overnight lending rate seven times in the past 2 1/2 years and increased the cash reserve ratio, or the proportion of deposits lenders must set aside, seven times since December 2006 to slow money supply and cool inflation.

That’s yet to put a dent in India’s inflation rate, which stood at 7.82 percent in the week to May 10. The Federation of Indian Chambers of Commerce and Industry say relying on monetary tools isn’t the correct way to tackle inflation, which is ``largely driven by supply-side factors.’’

``It is supply shortage that is aggravating inflation in the case of food products, and the inflationary pressure in the case of manufactured products is the result of continuous cost buildups of raw materials and oil products,’’ the trade body said in a report on May 24. ``Rising interest rates, besides curtailing demand, are also adding to the cost of companies.’’

Cars, Motorcycles

Tata Motors Ltd.’s profit in the year ended March 31 gained at the slowest pace in at least five years as steel and other input costs increased and consumer demand diminished. Bajaj Auto Ltd., India’s second-biggest motorcycle maker, expects sales to remain sluggish this year. Industry accounts for a quarter of India’s $912 billion economy.

``The year ahead is a challenging year,’’ said C. Ramakrishnan, chief financial officer at Tata Motors, the Indian automaker that’s buying Ford Motor Co.’s Jaguar and Land Rover units. ``High interest rates, raw material costs and credit availability continue to be challenges.’’

As industry slows, demand for services such as travel and banking, which make up 55 percent of the economy, may also wane. Airbus SAS, the world’s largest planemaker, said this week that India is among the weakest airliner markets right now and the country’s carriers may cancel or delay plane orders in the next 12 months.

The Business Confidence Index, prepared by the New Delhi- based National Council of Applied Economic Research, fell 3.4 percent in the current quarter ending June 30, because of concerns over accelerating inflation hurting the investment climate and slowing the economy.

Reliance Power goes ex-date; share tumbles

India’s economy grew 8.8 percent in the March quarter from a year earlier, led by strong expansion in the services sector, and the pace of growth was faster than market expectations.

The annual growth for India’s fiscal fourth quarter was higher than the median forecast in a Reuters poll of 8.2 percent, and matched an upwardly revised 8.8 percent in the October-December quarter.

That left full fiscal-year growth at 9.0 percent and showed growth was still robust despite tightening of monetary policy and strengthening of the currency in 2007.

The government had earlier estimated annual growth of 8.7 percent for the whole of 2007/08.

Reliance Power goes ex-date; share tumbles

Shares of Reliance Power plunged on Friday as it began to trade ex-date. The street was expecting the stock to quote around Rs 270 per share post bonus issue. However, contrary to market expectation, the stock tumbled even further.

At 10:28 am, the stock was trading at Rs 248.45, down 39.34 per cent from its previous close of Rs 409.55 on the BSE. It may look like a sharp fall, but factoring in the issue of 3 bonus shares for every 5 held, the slide is just 3 per cent.

The cost of 5 shares at Thursday’s closing price would be Rs 2,047.75. Adding 3 bonus shares for every 5 held, the average price of a Reliance Power share turns out to be Rs 256.

For retail investors, who had bought the shares at IPO price of Rs 430, the average price post bonus would have been around Rs 270 per share. However, the stock is down around 8 per cent from the IPO price.

"Since it will take a couple of years for the facilities to become operational, we expect the stock to remain rangebound for the next 6-8 months between Rs 240-Rs 270 per share," said an analyst from a local brokerage firm.

India okays $193 mln foreign investments

India on Thursday approved 14 foreign direct investment proposals totally worth 8.26 billion rupees ($193 million), including in electrical-products maker Havells India Ltd.

Finance Minister Palaniappan Chidambaram approved the issue of shares and convertible warrants by Havells for 2.78 billion rupees, the government said in a statement.

Rupee softens as oil cos buy

The rupee eased on Thursday after global crude prices inched up toward record highs, pushing up dollar demand from oil refiners to meet their month-end import commitments. The partially convertible rupee ended at 42.785/795 per dollar on Thursday off an intraday low of 42.93, and 0.12 percent weaker from its previous close of 42.73/74. It hit a 13-month low of 43.21 last week.

"The rupee weakened due to month-end dollar demand from oil companies, but a lot of state-run banks were selling below the 42.90 level," L. Subramanian, chief currency dealer at ICICI Bank, said. Oil was trading around $130 a barrel on Thursday after hitting a record $135 last week. India imports more than two-thirds of its oil needs and higher prices inflate the trade deficit. Refiners are the biggest buyers of dollars in the local market. A $10 per barrel increase in oil prices widens India’s trade deficit by $6-$7 billion, JP Morgan said.

India’s main stock index ended down 1.3 percent and equity outflows have also weighed on the rupee. Foreigners have sold $3.74 billion of stocks so far in 2008, with the index down 19.6 percent since the start of the year, after pumping in a record $17.4 billion in 2007. "State-run banks are not expected to allow the rupee to depreciate too much and 42.50 to 43 should be the range for the rupee in the next few days," Subramanian said. Dealers also said the central bank may have intervened in the market at 42.75-42.93 levels to prevent the rupee from falling sharply.

Want to attend meeting in two places at one time?

Business executives will soon be able to make presentations in distant countries through their virtual presence in the meeting halls, thanks to Australian telecommunications and media company Telstra’s new technology that can create a person’s hologram.

The company used a hologram to beam its Chief Technology Officer, Dr Hugh Bradlow, live into Adelaide from Melbourne to give a speech at a major function for senior business executives. Dr Bradlow addressed and interacted with the audience for around 15 minutes and conducted a realtime media conference following the function.

He revealed that their Musion Eyeliner System enabled them to beam his mobile three-dimensional image from one city to the other to give a live business presentation. “In Melbourne, we have a high definition video camera which is filming me as I stand here,” Dr Bradlow said. “That signal is being taped across the network and the far end is using a very smart optical projection system to create a holograph, or my virtual presence, in Adelaide.”

Dr Bradlow said that a big, flat panel LCD screen enabled him to see who he was talking to in Adelaide , and thus facilitated the real time interaction. “It has the look and feel of being in the same room together,” he said.

“You can envisage this being used in education, in entertainment, in news media as a holographic system, but the whole class of telepresence systems is going to be across all businesses ,” he added. David Thodey, Telstra’s group managing director for enterprise and government, added: “We’ve all seen this sort of thing in futuristic sci-fi movies, but the reality is that it can be done here.”

He also said that the new technology may start entering business houses in four to five years, and eventually in homes.

“In the next few years, as your broadband speeds start to go faster, a step from there to a hologram is not very far,” Thodey said. “I think it is at least four or five years away (for business) before that will be the case because the technology has to come down in price,” he added. “This next generation network is changing the way we live and work.”

Banking on weak rupee, Indian expats hike remittances

Buoyed by a decline in the value of rupee, Indian expats in Kuwait are turning all stops to send maximum remittances back home. The remittances by Indian expats there have increased substantially in last three weeks, media reports said.

While the rupee jumped by 12 per cent last year, the surge in oil prices and other factors led to its decline by 8.2 per cent in 2008. A Kuwaiti Dinar (KD), which fetched Rs 143.5 in January, is now pegged at Rs 162.

Titus E D, the director and general manager of Bahrain Exchange Company (BEC), said the current situation presented an opportune time for Indian expatriates."This is a win-win situation and NRIs should try to capitalise by remitting maximum money. The depreciation of rupee would not last for long. By the year end, I believe, the currency would rise against the dollar due to poor showing by the greenback," he told ’Arab Times’.

A substantial number of Indians are remitting their money through the door-to-door medium which is an efficient service, Titus said.A contract worker from Bihar said he remitted Rs 50,000 to his bank account in India recently.

"I borrowed KD 100 from friends since I did not want to miss out on this golden opportunity. Thanks to the weak rupee, the purchasing power of my family back home has increased substantially. I am planning to borrow more money to be sent home," he added. Another NRI worker, Mohammad Iqbal, said he had saved around KD 350 for his upcoming vacation and had already sent the entire amount to his bank account in Mumbai to capitalise on the weak rupee.

TDSAT directs BSNL to restore Airtel connection

Telecom tribunal TDSAT on Thursday asked public sector operator BSNL to restore connection to Bharti Airtel in parts of Bangalore, as sought by the latter, on payment of 65 per cent of the disputed sum.

The PSU had disconnected Bharti Airtel from its points of interconnection in Malleswaram, located in north-west Bangalore last week, over non payment of dues of Rs 66 crore.

During the proceedings on Thursday, TDSAT chairman Justice Arun Kumar directed BSNL to restore Airtel’s connection to its network within 48 hours of payment of Rs 35 crore.

BSNL had demanded "Rs 66.30 crore, out of which the petitioner (Airtel) has already paid Rs 4.7 crore... (It) would pay Rs 35 crore within two weeks from today and respondent (BSNL) is directed to restore POIs (point of interconnection)" Justice Kumar said.

If Airtel pays the amount earlier, then BSNL would have to restore POIs within 24 hours.

However, Justice Kumar declined Airtel’s plea for an immediate restoration as BSNL said it would not restore the connection without getting the money.

"It is a matter of disconnection. In such cases there is urgency to every one, even to us," submitted BSNL’s counsel, opposing Airtel’s plea to restore the POIs immediately on submission of an undertaking.

BSNL also rejected Airtel’s plea for restoration after payment of only 50 per cent of the disputed sum.

On this, TDSAT Chairmam told both telecom operators, "do not fight for a few crores".

India may end wheat, basmati rice export bans

India will review bans on exports of wheat and basmati rice, but shipments of other grades of rice will not be allowed at least until November, the country’s farm minister, Sharad Pawar, told Reuters.

India last exported wheat in the 2003/04 fiscal year and became an importer in the past two years, but a bumper crop has helped the government purchase from local farmers a record 24.8 million tonnes of the staple this year.

Pawar said on Thursday that a government panel, called the empowered group of ministers (EGOM), would soon consider lifting the ban on wheat exports.

"We will think. There is an EGOM. We will discuss it in the EGOM," Pawar said.

He said India had 5.8 million tonnes of wheat on April 1 against a target of 4 million tonnes and the record procurement had helped stocks swell so much that the government had enough supplies for 21 months for subsidised supply to the poor and other welfare schemes.

But controls on non-basmati rice exports would continue at least until November, when summer-sown paddy would be harvested as the government would take no chances with domestic supply, Pawar said.

The United Nations’ Food and Agriculture Organisation raised on Thursday its rice output forecast for 2008 by 1 million tonnes to 667 million tonnes on the back of improved outlook from Cambodia, but said food prices would remain high for a decade.

Pawar said he favoured lifting the ban only for basmati rice exports as the premium grade of grain was either exported or consumed by the rich, not used for subsidised supply to the poor.

"If farmers want to earn a little bit of money, basmati is the crop where they can earn some money. Not a single grain of basmati comes to my kitty for the public distribution system."

Pawar said rival suppliers may push out India from the international basmati market if exports were not resumed and that would hurt Indian farmers, who would find it difficult to regain their market share.

He said the government was keen, but not in a hurry, to help neighbouring countries, which have asked the Indian government to supply rice.

"For the time being, no. We are eager to help. I have got requests from many neighbouring countries. Procurement will take at least three months to get completed and then we will access the situation," he said.

Rice prices have eased from record highs set in late April on signs that global supplies will improve and expectations that Vietnam will lift export curbs from July. Cambodia decided on Monday to lift a two-month export ban.

Finance ministry, RBI not in favour of monthly inflation data

The finance ministry and Reserve Bank have reservations on the computation of inflation data on a monthly basis, a senior Government official said ON Thursday.

"Everybody from the committee (on new WPI series) has supported moving to a monthly data, except for the finance ministry and RBI, which want it on a weekly basis," Mr Pronab Sen, Secretary, Ministry of Statistics and Programme Implementation said here.

The Finance Minister, Mr P Chidambaram will have to meet the Reserve Bank to reach a consensus on the committee’s suggestions to have a new series of WPI on a monthly basis, he said on the sidelines of a function to release the results of the Fifth Econo mic Census.

A committee, headed by Planning Commission member, Mr Abhijit Sen that is formulating the new WPI series has advocated a monthly release of data with a two-week lag, Mr Pronab said.

Professing the need for a monthly data, he said weekly figures on wholesale prices released by the Government create huge volatility in both commodities and stock markets.

"Every body is reacting to the current weekly rather than the revised figures, which are a month old, and that creates volatility that is completely unnecessary," Mr Pronab added.

The Abijit Sen committee is expected to submit its report soon. The new series is likely to have a base year of 2004-05 instead of 1993-94, which is followed at present, and the number of items covered under the index would be increased to 900 from 450.

"Increase in the number of items would make the WPI more comprehensive," Mr Pronab added. The Government, in due course also plans to move towards a Producer Price Index, comprising the Wholesale Price Index and the proposed Service Price Index. - PTI

RComm jumps; Macquarie says MTN deal positive

Shares in Reliance Communications, which is in talks with South Africa’s MTN, rose more than 6 percent on Thursday after a brokerage said the deal was positive and it expected a rebound in the stock.

The stock rose as much as 6.5 percent to 587.70, taking it to its highest since last Friday, the last day of trading before the talks about a possible tie-up with MTN were announced. The stock had lost 3.6 percent on Monday.

Macquarie Research analysts referred to media reports of a share swap between Anil Dhirubhai Ambani Group (ADAG), 66 percent owner of Reliance Communications, and MTN, that would see MTN become the largest shareholder in Reliance Communications and ADAG in turn becoming the biggest controlling shareholder in MTN.

"This deal structure would require no equity dilution and/or issuance of new debt at RCOM, which makes the deal doable," Macquarie Research analysts said in a report.

Macquarie has an outperform rating on Reliance Communications stock with a 12-month price target of 865 rupees, 57 percent higher than its Wednesday closing price of 551.6 rupees.

"We see the deal as positive for RCOM due to the ramp-up in non-wireless businesses and we expect the sale of shares to MTN to be at a premium to RCOM’s current price," the report said.

A deal with MTN would help Reliance Communications’ international unit, Reliance Globalcom, to tap emerging markets in Africa and the Middle East for its non-wireless businesses.

If MTN acquired a stake of 15 percent or more in Reliance Communications, Indian law would require it to make an open offer for a further 20 percent.

"We believe the open offer is likely at a premium to RCOM’s current stock price," the analysts said.

Reliance Communications stepped into a gap left by India’s top mobile firm, Bharti Airtel, which said at the weekend it had ended talks with MTN after failing to agree how to structure a deal.

The Macquarie analysts said a merger of Bharti and MTN would have required significant equity dilution and debt issuance by the Indian mobile firm.

Separately, JPMorgan analysts said that given India’s 74 percent limit on foreign ownership in telecom companies, MTN would be able to acquire about 61 percent of Reliance Communications, and in turn ADAG would be able to own 33 percent stake in MTN Group.

India Inc mops $4.2 bn via IPOs in '08

A turbulent stock market notwithstanding, India Inc has raised more than four billion dollars through IPOs in 2008, but had it not been for Anil Ambani-led Reliance Power, this amount would have been just about one-fourth.

The 4.2-billion-dollar raised through 21 IPOs since the beginning of 2008 marks an increase of 62 per cent from 2.6 billion dollars raised through 50 deals in the same period in 2007, according to global deal data provider Dealogic.

However, excluding the Reliance Power IPO, that mopped up a record three billion dollars, the Indian IPO market fell by 52 per cent in volume in 2008 as against the same period in 2007, Dealogic said.

About four billion dollar raised through IPOs in the first quarter of 2008 is also the second highest for a quarter in the Indian capital’s history after over five billion dollar raised in fourth quarter of 2006.

Besides, Deutsche Bank has been ranked as the leading bookrunner of the Indian IPOs, accounting for 16 per cent market share so far in 2008, it added.

Reliance Power IPO issue managers were ABN Amro, Deutsche Bank, Enam Financial Consultants, ICICI Bank, JM Financial, JP Morgan, Kotak Mahindra Finance and UBS.

Although, firms managed to raise 4.2 billion dollars this year also witnessed three IPO withdrawals including that of Emaar MGF, Wockhardt and SVEC Constructions.

The three IPOs had to be withdrawn because of the low response received from investors due to meltdown in the secondary Markets and weak global cues.

Other successful IPOs in the first five months include state-run Rural Electrification Corporation (REC), Future Capital Holdings, Anu Laboratories and Gammon Infrastructure projects.

Meanwhile, a host of firms have filed their draft prospectus with market regulator SEBI recently for entering the capital market and experts believe the coming months may lead to improved situations in the primary Markets.

Around four draft offers have been filed by firms in May itself which include -- Adani Power, retail firm Gini and Jony, Infinite Computer Solutions and Triveni Infrastructure Development Company.

Besides, in April, six firms including Bharat Oman Refinery, Rites Ltd and VRL Logistics had filed their draft offers with the regulator.

Employment grows @ 2.78% in '98-05 period

Employment generation in the country has increased considerably in the eight-year period ending 2005 as compared to 1990-98, says Economic Census released by the government Thursday.

The employment grew at the rate of 2.78 per cent in 1998-2005, which is much higher than the 1.75 per cent recorded during 1990-98, the fifth Economic Census report said.

The report, compiled by the Central Statistical Organisation (CSO), said that Jammu and Kashmir emerged as the state with maximum employment growth of 6.82 per cent followed by Andhra Pradesh (5.87 per cent), Kerala (5.86 per cent) and Haryana (5.35 per cent).

The report further said, Maharashtra and Andhra Pradesh were the two main employment-providing states followed by Tamil Nadu, West Bengal and Uttar Pradesh.

Andhra Pradesh provided maximum employment in the rural areas (13.14 per cent of the total rural employment), followed by West Bengal, Tamil Nadu, UP, Kerala and Maharashtra.

Among the urban-employment providers, Maharashtra topped the list providing the maximum employment at 14.10 per cent of total urban employment.

Referring to the non-agricultural activities, the report observed that such activities in the rural areas were more compared to urban areas, evident by the fact that number of non-agricultural establishments in rural areas was 19.83 million as against 15.92 million in the urban areas.

In non-agricultural activities, the manufacturing sector scored the maximum with 25.48 million workers engaged in it.

This was followed by retail trade (25.14 million workers) and education (7.49 million workers).

Other major area of employment was farming of animals, which employed 9.2 million workers.

Also, the report observed, number of establishments grew significantly during the period. Rural areas showed a higher growth rate (5.37 per cent) compared to urban areas (3.69 per cent).

Pointing out that there was positive growth in all the states except Lakshadweep and Andaman and Nicobar (A&N) Islands, the report said highest growth rate in establishments was marked in Mizoram, Tripura, Kerala and Tamil Nadu which grew above 8 per cent.

Interestingly, Delhi and Goa registered a negative growth rate in rural areas, while Bihar, Nagaland, Lakshadweep and A&N Islands saw a negative growth in urban areas, the report said.

Fuel price hike decision by May 31

A decision on raising retail fuel prices and partly compensating revenue losses of oil firms will be taken by Saturday, even as Prime Minister Manmohan Singh on Thursday assessed the problems caused by the spike in crude prices.

"Hopefully, by day after tomorrow, we will have a solution," Petroleum Minister Murli Deora told reporters after a meeting with the Prime Minister and key ministers in New Delhi.

A meeting of the Cabinet, which was to have taken up the matter, has been postponed, he said.

Any hike in prices would be accompanied by a duty rejig to help state-run oil Companies curtail revenue losses that are pegged at Rs 225,000 crore for this fiscal on account of crude prices touching a record level in the global market.

"The Prime Minister and Finance Minister saw papers of revenue losses and the price increase in the international market. They realised very much that we need to help (PSU oil Companies) on a war-footing," Deora said.

Singh would also discuss the issue with Congress President and UPA Chairperson Sonia Gandhi, the Petroleum Minister said, adding that these decisions (price hike) were outside his jurisdiction.

The Petroleum Ministry has been pushing for a combination of duty cuts and price hike (Rs 10 per litre in petrol, Rs 5 a litre in diesel and Rs 50 per LPG cylinder) to bail out PSUs IOC, HPCL and BPCL that are on the verge of running out of cash in the next 2-3 months to import crude.

"Somethings have been agreed at today’s meeting, but I cannot say what the Cabinet will decide," Deora said after the meeting that was attended by External Affairs Minister Pranab Mukherjee, Finance Minister P Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Prime Minister’s Principal Secretary T K Nair.

Mumbai world's 4th most expensive office mkt

India’s top two cities, Delhi and Mumbai, continue to be amongst the ten most expensive office Markets of the world in the league of other places like London, Moscow, Tokyo, Paris and Singapore.

According to a latest study by realty consultant CB Richard Ellis, Mumbai has been ranked 4th in the list of 50 most expensive office Markets, slipping from its last year’s second position. On the other hand, Delhi moved up a place to 7th from last year’s rankings.

"The drop is not due to rentals in Mumbai falling, but because of a significant increase in rentals in London and Moscow," CB Richard Ellis Chairman and Managing Director (South Asia) Anshuman Magazine said.

He said the positions of Mumbai and Delhi were still very high and was reflective of the tight supply of prime office space and of demand remaining constantly active.

London topped the list of most expensive office Markets, followed by Moscow and Tokyo. In May, the monthly rentals in Mumbai and New Delhi were recorded at 210.97 dollar per sq ft and 145.16 dollar per sq ft respectively. The rentals in London stood at 299.54 dollar a sq ft in a month, the consultant estimated.

Paris, Singapore and Dubai also found places in the list at 8th, 9th and 10th positions respectively.

Besides, Mumbai also found a berth at 8th place in the list of world’s top 50 fastest growing Markets in terms of occupancy costs with 40.7 per cent rise in the last one year.

The top three positions were held by Ho Chi Minh City (94.4 per cent), Moscow (92.7 per cent) and Singapore (86 per cent) respectively, CBRE said.

Bangalore and New Delhi were also included in the list with 22.6 per cent and 15.3 per cent increase in cost, which in turn placed the cities in 22nd and 45th positions, it added.

IOC Q4 net loss at Rs 414 cr

State-run Indian Oil Corp on Wednesday announced a standalone net loss of Rs 414.27 crore for the quarter ended March 31, against a net profit of Rs 1,502.69 crore in the corresponding period last year.

The total income of the company rose to Rs 71,792.82 crore for the quarter under review, from Rs 53,818.75 crore in the same period a year-ago, IOC said in a filing to the Bombay Stock Exchange.

The company’s board has declared a dividend of 55 per cent for the year 2007-08. That is, for every share of face value Rs 10 the shareholder would get a dividend of Rs 5.50.

For the year ended March 31, 2008, IOC reported a consolidated net profit of Rs 7,912.74 crore, against a net profit of Rs 7,867.45 crore in the year-ago period.

The total income rose to Rs 2,32,558.62 crore in FY’08, from Rs 2,02,694 crore in the year-ago period.

IOC announced a standalone net profit of Rs 6,962.58 crore for FY’08, a 7.16 per cent decline over the previous fiscal. The firm had a net profit of Rs 7,499.47 crore in FY’07.

The total income rose to Rs 2,49,169.16 crore in FY’08, from Rs 2,17,533.82 crore in the year-ago period.

Shares of IOC closed at Rs 428, up 1.53 per cent on the BSE.

BCCI moves HC against Rediff's online game

The Madras High Court has ordered notice to Web portal Rediff.com and its owner Mr Sandeep Goyal, on a petition from the Board of Control for Cricket in India (BCCI), seeking the court to restrain the former from using the domain name indianfant asyleague.com, in an online cricket game in Rediff.com.

The BCCI moved the court yesterday praying for restraining the respondent from using the trademark or domain name Indian Fantasy League and a logo depicting a batsman playing a shot in the game, as they were deceptively similar to BCCI’s Indian Premier L eague (IPL) trademark and the logo.

Justice Mr M Sathiyanarayanan, before whom the case came up, posted to June 10, for further hearing in the case.

The BCCI also sought a direction to Mr Goyal and Rediff.com to render a true and faithful account of all profits earned by them by using the impugned trademark "IFL" as well as the logo, and claimed damages to the tune of Rs 10 lakh.

The cash-rich IPL has just entered its last stages, with all semifinalists being spotted with Chennai Super Kings’ win over Deccan Chargers last night. - PTI

6th Pay Commission: Arrears payment in instalment suggested

The Prime Minister’s Economic Advisory Council (EAC) wants the Government to pay its employees in phased manner and deposit part of the estimated arrear of 18,000 crore in their Provident Fund while implementing the Sixth Pay panel report to m inimise its impact on inflation.

"Since the payment of arrears in cash could result in marginal rise in inflation rate due to spurt in demand for various products, EAC has said that the Government should consider depositing part of the arrears due to employees in provident fund and pay the remaining amount in a phased manner," official sources said.

The Council headed by noted economist and former Reserve Bank Governor, Dr C Rangarajan, is of the opinion that the payment of arrears in one go could result in further rise in prices, especially of manufactured goods and consumer products.

"The Government had paid the arrears in a phased manner while implementing the report of previous Pay Commissions, so it can consider it again," Dr Rangarajan had earlier told PTI.

The council, which advises Prime Minister, Mr Manmohan Singh on important economic matters, had earlier said the inflation rate could come down to 5 to 5.5 per cent after about four months following good monsoon and measures taken by the Government.

Inflation, however, has already crossed 8 per cent mark, and the analysts fear that it could soon touch 10 per cent mark if the hike in international crude oil prices is partly passed on to the consumers. - PTI

Microsoft no longer keen to merge: Yahoo

Yahoo Inc Chief Executive Jerry Yang said on Wednesday a potential deal with Microsoft has tremendous power, but the software giant appears no longer interested in a full merger. In his most public comments to date about his thinking on the four-month-old, on-again, off-again Microsoft merger saga, Yang signaled his company remained open to a potential deal, but said Microsoft had ruled out a merger for now.

Earlier this month, Microsoft walked away from a proposal to acquire Yahoo for $47.5 billion, or $33 per share, after Yahoo rebuffed its offer, saying it would only settle for $37 a share."We did not walk away from that proposal. Microsoft did," Yang said during an on-stage interview at the D: All Things Digital conference taking place near San Diego on Wednesday. He said he had felt a combination with Microsoft would have had a "tremendous amount of power."

In mid-May the two Companies said they had begun discussions on an unspecified deal that is short of a merger."Microsoft is no longer interested in buying the company, and we are talking about other things. We definitely have to understand what they’re proposing...they clearly have an interest in Yahoo, and we need to understand more," Yang said.

Last week, a source familiar with the latest round of discussions said Microsoft has proposed buying Yahoo’s search business and taking a minority stake in the Web pioneer, but has stopped stopping short of reinitiating full merger negotiations. As part of such a deal, Yahoo would sell its Asian assets including significant minority stakes in Yahoo Japan and China’s Alibaba Group, while Microsoft would buy a chunk of what remains of the company, the source said.

In an on-stage interview at the "D" conference on Tuesday, Microsoft Chief Executive Steve Ballmer suggested discussions had broken down largely over price. "It became clear there was a difference between the bid and ask," he said, using stock trader terms.In its original unsolicited takeover offer in late January, Microsoft offered $31 a share in a half-cash, half-stock bid, to buy Yahoo, which valued it at $44.6 billion. Yahoo responded by saying it was open to a deal but the offer was too low.

Ballmer repeated on Tuesday that Microsoft had "moved on" but stopped short of saying the mating dance between Microsoft and Yahoo was over. "We are not rebidding for the company," he said, but added: "We reserve the right to do so."

In the Wednesday interview conducted by Wall Street Journal technology columnist Walt Mossberg, Yang said a merger with Microsoft would involve a variety of issues beyond price. He said discussions between the two had never thoroughly explored such non-price hurdles, including regulatory issues.

Yahoo President Susan Decker, appearing alongside Yang on stage, said price had always been the biggest barrier to reaching agreement on a deal with Microsoft."We never got through the price door ... once we could have gone through it, then other issues could have been discussed."

Yang argued a competing deal between Yahoo and Google made sense but no deal had been reached. Last month, the Companies conducted a two-week test where Yahoo hired Google to run advertising sales alongside Yahoo search results.

"It makes a lot of sense, but if we do something, we will talk about it," Yang said, adding the "level at which Yahoo can fully partner with Google has not been fully appreciated by the marketplace." In the wake of the breakdown of the Microsoft takeover talks, Yang defended his one year on the job as CEO and said he believed he was the right person to lead Yahoo into a new era of growth, even if the company must invest heavily to do so.

"I do think I am the best person to lead Yahoo," Yang said. He compared conflicting media reports about who was responsible for the failure to reach a deal to a romance gone bad: "It’s like you break up with your girlfriend in high school ... it pretty quickly becomes ’he said, she said’."

Yang reiterated what the company has been saying over the past year: that it "has a lot of work to do" and needs to make investments to reach management’s vision of a new Yahoo.

Its strategy involves tapping the underlying social connections of its roughly 500 million monthly visitors to become a "must buy" for advertisers.

One audience member complained to Yang she was having a hard time finding Yahoo mobile services on US smartphones. She was apologetic for drifting off the topic of Microsoft.

Yang was only too happy to answer: "Of all the questions I have been getting for the past four months, I am glad to get a technical question."

Impose tax on private oil cos: Left to Govt

Opposing any move to hike petrol prices, the CPI(M) on Wednesday asked the government to impose a ’windfall profit tax’ on private and JV oil firms as well as private refineries and not burden the common people.

"In no case can the UPA government pamper the private oil Companies to make windfall profits and, at the same time, increase the price of petrol and diesel and burden the people further when they are suffering from steep price rise of essential commodities," CPI(M) Politburo said in a statement.

It recommended the imposition of ’windfall profit tax’ on private and joint venture oil producing firms as well as private standalone refineries ‘earning huge profits through import parity policy of pricing’.

“With crude prices exceeding 100 USD per barrel, it is necessary that windfall gains be recovered from all private and joint venture oil producing Companies like M/S Cairns, Reliance, Essar etc. extracting oil and gas in India," the statement said.

It added that when these contractors participated in the New Exploration Licensing Policy, "none of them could have envisaged crude prices beyond 30 USD a barrel."

"It would be a failure on government’s part to allow upstream contractors additional gain of 70-80 USD per barrel without any extra work," the party said, adding that many other countries had "renegotiated their contracts with a threat of imposing windfall taxes on such profits."

"It is time that the government takes charge and recovers unintended gains from upstream contractors," it said.

IndianOil can afford crude only up to Sept

State-run refiner and retailer Indian Oil Corp will only be able to afford to buy crude at the current sky-high rates up until the end of September, company chairman S. Behuria said on Wednesday.

Oil firms are losing millions of dollars each day as they must sell their fuel at discounted rates set by the government and far below oil’s surge to around $130 a barrel on the world market. They have appealed for price hikes and duty cuts.

Rel Money eyes 50% revenues from overseas

India’s Reliance Money, which on Wednesday announced its foray into China and Hong Kong, expects to generate 50 per cent of its revenues from overseas Markets in the next five years.

The financial products distribution firm has embarked on its plans for global expansion with an aim to set shop in about half a dozen locations overseas by the end of the current fiscal.

"Over the next five years, 50 per cent of our revenues will come from overseas Markets," Reliance Money Director and CEO Sudip Bandyopadhyay said in Hong Kong.

The company on Wednesday, launched its bouquet of financial services for retail investors in Hong Kong and China and has also tied up with leading broking firm in the region, Goldride Securities.

"Hong Kong will be our base for the East Asian region and going forward we will like to expand our presence in London and some neighbouring countries of India," Bandyopadhyay said.

"We will utilise the partnership with Goldride to expand our presence in countries such as Philippines and Kazakhstan," he added.

The company’s foray would also help Indian investors to invest in Hong Kong and Chinese Markets in addition to reaching out to the large base of Non-Resident Indians and Persons of Indian origin in the region to transact in Indian financial instruments.

Reliance Money now has a presence in UAE, Oman, Hong Kong and Singapore.

Fed looks ahead to rate increases

Two Federal Reserve policy makers warned on Wednesday that interest rate increases might be needed before too long to curb inflation, even as the United States struggles with a weak Economy.

The remarks solidified expectations that the Federal Open Market Committee has ended an aggressive rate-cutting campaign and could start to reverse its policy course late this year. Dallas Fed President Richard Fisher and Minneapolis Fed President Gary Stern, both voting members of the FOMC in 2008, said they are keeping a close eye on inflation expectations being dialled into financial Markets.

"If inflationary developments and, more important, inflation expectations, continue to worsen, I would expect a change of course in monetary policy to occur sooner rather than later, Fisher said in San Francisco. Rate increases could be made "even in the face of an anemic economic scenario," Fisher told the Commonwealth Club of California, adding that he did not expect a recession.

Fisher said it would be "unacceptable" for the Fed to be viewed as resigned to higher levels of inflation.That is a particular risk as the lagged impact of the Fed’s interest rate cuts starts to kick in, boosting economic growth at a time inflation is already "too high" and commodity prices are being pushed up by strong global demand. Earlier, Stern vowed that the Fed would act in an "appropriate and timely" way.

"The key to maintaining low inflation and inflation expectations is likely to be the timeliness and magnitude of decisions we make to reverse course" on interest rates, Stern told a local business group in Altoona, Wisconsin.

SO FAR SO GOOD?

The Fed monitors inflation expectations as a test of what assumptions are priced into Markets and, by implication, consumer behavior. Central bank officials have expressed concern the United States may face early signs of stagflation, the damaging combination of weak growth and wage-price spiral that hit the world’s biggest Economy in the late 1970s and early 1980s.

Stern suggested the Fed had been able to hold the line. "Inflation expectations have remained reasonably well anchored so far, which is encouraging," he said.

Headline inflation, which includes food and energy prices, "is clearly too rapid for comfort," he said, adding that core measures "have been better behaved."The Fed lowered its federal funds rate to 2.0 percent in April, the latest in a string of cuts started in mid-September, when the rate was at 5.25 percent, to shield the US Economy from the fallout of a housing and credit crisis.

Fisher has been one of the Fed’s most vocal policy hawks this year, and on Wednesday termed inflation "a sinister beast" and the "enemy of capitalism." He has tallied three straight dissents against the FOMC’s decisions to lower interest rates.

"Growth cannot be sustained if Markets are undermined by inflation," Fisher said. "Stable prices go hand in hand with achieving sustainable economic growth."But Stern said the Fed was still walking a policy tightrope given the combination of weak growth and rising inflation pressures, that demands delicate action.

"We are seeing challenges on both sides of that (dual mandate) and I think we are simply going to have to navigate the minefield," he said.In particular, Stern said it was unclear if federal tax rebate checks now being mailed to millions of Americans would have an impact beyond one or two quarters.

Some forecasters fear that the United States faces a "double-dip" slowdown, with growth likely to pick up in the next few quarters on the back of the stimulus package, before fading again in late 2008 or early 2009.

Fisher said figures like Wednesday’s stronger-than-expected April durable goods orders, while hard to view in isolation, were a sign that the most disastrous outcomes predicted for the Economy have not played out.

"We’ll have anemic growth for a while, but to me, inflation is the bigger risk," he said.

ANOTHER ONE BITES THE DUST

Separately, the FOMC will lose a voter with the departure of Frederic Mishkin, effective Aug. 31. The Fed’s usual line-up of seven governors, including the chairman and vice chairman, will dwindle to four because of two vacancies that have been unfilled for months.

"This will mean the departure of an influential dove," said David Sloan, analyst at 4CAST Ltd in New York.Mishkin, seen as an ally to Fed Chairman Ben Bernanke in his support of formal inflation targets, will return to his teaching post at Columbia University’s Graduate School of Business.

Rupee too high but RBI will prop it up

The Indian rupee is overvalued and should fall by 10 percent to about 48 per dollar but the central bank will support it to help state-run oil importers, a member of India’s convertibility panel said on Wednesday.

A.V. Rajwade, member of a 2006 central bank-appointed panel on capital account convertibility, said there was little historical evidence that a stronger rupee was effective in curbing inflation and many exporters were not strong enough to shield themselves from sharp currency gains.

The rupee rose more than 12 percent against the dollar in 2007 and touched its highest level in nearly 10 years at 39.16 per dollar in November.

But it has fallen nearly 9 percent so far in 2008 because of portfolio outflows and higher oil import costs, and hit a 13-month low of 43.21 last week. It stood at 42.85 on Wednesday. "The rupee had become absurdly overvalued in my view, probably around 15 to 18 percent, but the central bank will intervene by selling dollars to arrest the rupee’s fall to help oil Companies," Rajwade said. "They will have to keep intervening if they want to keep the rupee around 43 level or it will keep slipping," he said.

State-run oil retailers are losing millions of dollars a day selling fuel at discounted rates set by the government. The falling rupee has also increased import costs and with oil prices rising, India’s trade and current account deficits are widening. Economists estimate the trade deficit was $90 billion in 2007/08.

"You cannot have the rupee going up when the trade deficit is at $100 billion," Rajwade said.

Traders say the central bank intervened last week to slow the rupee’s fall, but analysts have been surprised that it did not step in sooner while inflation is running at 3-½ year high.

Other central banks in South Korea, Taiwan, Philippines and Indonesia have been propping up their currencies to temper the inflationary impact of rising oil prices. But Rajwade said China’s yuan and Brazil’s real had risen in the past few years and Brazil’s inflation was still 5 percent. "The yuan has appreciated about 15-18 percent and the inflation rate is very similar to India’s, so currency appreciation does not necessarily lead to lower inflation," he said.

The Reserve Bank of India bought $20.3 billion in the first quarter of 2008 to keep the rupee down and has been a net buyer of dollars in the currency market for more than two years. Rajwade said dollar selling by the central bank may drain rupee liquidity from the money Markets at a time when cash is already tight, eventually pushing bond yields higher.

The government gives bonds to oil retailers to compensate them for their losses, but Rajwade said this was inflationary in the long term as it did little to check demand-side pressures. Furthermore, monetary steps would do little to check high commodity prices as this was a supply-driven problem, he said. "None of these are very susceptible to monetary policy as you do not eat less because interest rates go up."

Giving incentives to farmers to produce more would help bridge the supply-demand gap rather than using price controls and subsidies, he said.

India's Economy Probably Grew at Slowest Pace in 2 1/2 Years

India’s economy probably grew last quarter at the slowest pace in 2 1/2 years as the highest interest rates since 2002 restrained consumer spending.

Asia’s third-largest economy expanded 8.1 percent in the three months to March 31 from a year earlier, less than the previous quarter’s 8.4 percent gain, according to the median forecast of 20 analysts in a Bloomberg News survey. The figures are due tomorrow around noon in New Delhi.

Reserve Bank of India Governor Yaga Venugopal Reddy twice last month unexpectedly ordered lenders to set aside more funds amid concern surging global oil and commodity prices may further stoke inflation. Finance Minister Palaniappan Chidambaram says India can afford a moderation in growth and that fighting inflation is now his top priority.

``The government and the central bank will use all possible tools to keep inflation in check,’’ said D. H. Pai Panandiker, president at RPG Foundation, an economic policy group in New Delhi. ``They won’t take a chance with inflation now.’’

Reddy has raised the central bank’s cash reserve ratio seven times since December 2006 and increased its key overnight lending rate seven times in the past 2 1/2 years. That’s yet to put a dent in India’s inflation rate, which climbed to more than 8 percent in March, the highest in almost four years.

Higher borrowing costs are discouraging consumers in the South Asian nation from taking out loans to purchase motor vehicles produced by Maruti Suzuki India Ltd., the maker of half the cars in India, and refrigerators made by Samsung India Electronics Ltd. and other companies.

Rice, Lentils

The 52 percent of the Indian population of 1.1 billion people that survive on less than $2 a day also have less to spend on consumer goods because of the higher prices they are paying for food staples such as rice and lentils.

India’s consumer-goods production fell 0.1 percent in March from a year earlier, after increasing an average 7.2 percent in the previous 12 months. Industrial output gained 3 percent in March, the slowest pace since 2002.

``The biggest drag on growth is industry,’’ said Sujan Hajra, chief economist at Anand Rathi Securities Ltd. in Mumbai.

Still, the slowest economic growth since 2005 may not be enough to prompt the central bank from reducing borrowing costs. India is unwilling to risk an inflation flare-up from lower interest rates at a time when the government is bracing to face elections due by May 2009, analysts said.

Rising prices have already hurt the government’s popularity. Prime Minister Manmohan Singh’s Indian National Congress party this week lost elections in the southern state of Karnataka to rival Bharatiya Janata Party, its ninth setback in the 11 provincial polls held since January 2007.

India’s GDP Forecasts

-------------------------------------------
GDP YoY%
Company Jan-March
-------------------------------------------
Median 8.1%
Average 8.1%
High 8.6%
Low 7.4%
Number of Estimates 20
-------------------------------------------
Anand Rathi Securities 7.8%
Citi 8.3%
DBS Group 8.1%
Dun & Bradstreet Info. 8.1%
Edelweiss Securities 8.1%
Forecast Singapore 8.1%
Goldman Sachs 8.6%
HSBC Singapore 7.5%
ICICI Bank 8.2%
ICICI Securities 8.3%
IDBI Gilts Ltd. 8.2%
JPMorgan Chase Bank 8.2%
Kotak Mahindra Bank 7.9%
Kotak Securities Ltd. 7.4%
Lehman Brothers 8.2%
Securities Trading Corp. Of India 8.0%
Standard Chartered Bank 8.1%
Thomson IFR 8.1%
UBS 7.9%
Yes Bank 8.5%
-------------------------------------------

Indian Rupee Advances on Speculation Exporters Selling Dollars

India’s rupee rose, snapping two days of losses, on speculation the nation’s exporters are taking advantage of its recent decline to convert foreign-exchange earnings into the currency.

he partially convertible rupee rose in early deals on Wednesday on expectations that oil refiners may slow their dollar purchases after world prices retreated from their peaks.

* At 9:19 a.m., the rupee was at 42.88/89 per dollar, stronger than Tuesday’s close of 42.96/97. It hit a 13-month low of 43.21 last week.

* Oil, India’s biggest import, traded around $129 a barrel after hitting a record high of $135 last week. Refiners are the biggest buyers of dollars with their demand tending to peak towards the end of each month.

* Foreigners made net sales of almost $770 million of stocks over the five sessions to Monday, taking their net sales in 2008 to about $3.5 billion.

* Asian stocks fell on Wednesday as a cloudy U.S. economic outlook and lingering inflation fears left investors skittish, despite a drop in oil prices below $129 a barrel.

The rupee gained 0.2 percent to 42.87 versus the dollar as of 9:03 a.m. in Mumbai, according to data compiled by Bloomberg.

SEBI sets Rs 25 cr ceiling for cos to participate in SME exchange

Market regulator SEBI has proposed a maximum post-issue capital of Rs 25 crore for companies to be eligible to participate in the proposed SME (Small and Medium Enterprises) exchange.It has recommended a minimum investment size of Rs 5 lakh in order to have only well informed and financially sound investors at the time of the IPO.

“To facilitate retail participation in SMEs for investors having high-risk appetite, specific allocation through mutual funds may be permitted,” said a SEBI discussion paper on developing a market for SMEs.For the secondary market too SEBI has prescribed a minimum trading lot worth Rs 5 lakh so that smaller retail investors are not drawn in.

The regulator has also proposed only approved merchant bankers for exclusively catering to the needs of the SME companies during the IPO.Merchant bankers/underwriters to the issue may also have to compulsorily act as market makers for the company. The existing DIP Guidelines….“may be completely relaxed for SMEs,” said SEBI.

According to the existing DIP guidelines, an issuer company is required to have net tangible assets of at least Rs 3 crore in each of the preceding three years and a track record of distributable profits for at least three out of the immediately preceding five years.“The trading system in the proposed exchange for SMEs can be order-driven or quote-driven while the settlement may either rolling settlement, trade-for-trade, or call auction basis,” said SEBI.

“The IPO process should be through electronic applications only, eliminating all cost associated with paper printing and processing.”The SEBI Board had, last year, given the go-ahead for setting up an SME exchange. The Chairman of the Board had at that time, said that several exchanges and financial institutions, including NSE and BSE, had shown interest in establishing such an entity.

An SME trading platform, however, would not be new in the country.

Over the Counter Exchange of India (OTCEI) set up in 1989, BSE’s Indo Next in 2005 and the regional stock exchanges which were created to facilitate SMEs to access the capital markets easily, and at a lower cost, did not live up to expectations.

SMEs should have flexible norms to raise capital at affordable cost, said an expert adding they cannot be burdened by huge listings costs and stringent listing requirements as evident from previous efforts at creating such platforms.

Exchanges for the growth/new economy/small and medium companies have been provided for by other nations too. Alternative Investment Market of London Stock Exchange, the Growth Enterprises Market of Hong Kong Stock Exchange and MOTHERS of Japan are examples of trading platforms set up to serve such companies.

Niraj Cements IPO subscribed 17% on day 1

The initial public offer (IPO) of engineering and construction firm Niraj Cements Structurals got subscribed 17 per cent on the first day of its offer today.

The issue received bids for over 5.52 lakh shares against 32.50 lakh shares on offer, latest data available on the National Stock Exchange show. The price band of the issue has been fixed between Rs 175- Rs 190. The issue would close on May 30.

The issue comprises a reservation of 3.25 lakh shares for eligible employees and net issue to the public of 29.25 lakh equity shares.

The company would use the issue proceeds to fund its capital equipment requirement, and also meeting working capital needs. Allbank Finance is acting as the book running lead manager to the issue. - PTI

FII holdings down to 3-yr low; promoters' share rises: Citi

Showing a bearish outlook for Indian stocks, the overseas investors’ holding in the domestic firms has fallen to a three-year low, even as promoters here are rapidly raising their stakes, a study said on Tuesday.

According to a shareholding analysis by global financial services major Citigroup’s equity research arm, foreign holdings in the top 500 firms listed on the BSE stood at 17.8 per cent in the first three months this year almost same as in June 2005.

FII holdings have fallen by nearly two percentage points in the January-March period from December quarter last year. The foreign holdings include ownership through financial institutions and by way of subscription to Indian firms’ American Depository R eceipts and Global Depository Receipts.

According to Citigroup Equity Research Analyst, Mr Aditya Narain, "Foreign institutional investors (FIIs) have been the top sellers in the correction, bucking the trend of rising foreign ownership leading to market performance’’. Even as the drop in pub lic holding was a continuation of the downward trend since March 2001, fall in FII ownership was sharpest over the same period,’’ he said in the report.

The entire foreign portfolio in the BSE 500 stood at $265 billion in the quarter ended March 31, 2008, compared with $292 billion in the December 2007 quarter and shows a definite bias towards large-caps, the report stated.

In contrast, the promoter share of the BSE-500 companies has risen to 58.2 per cent at the end of March quarter, an increase of over two percentage points from the previous quarter, the report revealed, adding that the promoter holding are at the their h ighest level in 32 quarters. - PT

Rise in fuel may lead to Jet hiking fares

With high global crude prices hitting bottomlines of airlines, Jet Airways chief Mr Naresh Goyal sid on Tuesday said the industry, including his own carrier, would have to raise fares to stay away from a crisis.

"The aviation industry has to raise the fares as and when the hikes come. I am not in a business where I should only look for capacity. At the end of the day, I will have to work to give profits to my shareholders,"’ he said here.

Crude prices have been on a record run lately and touched $135 a barrel, immensely increasing the cost of jet fuel (ATF).

Mr Goyal was speaking after taking static delivery of a brand new Airbus A-330-200 at the Berlin Airshow ILA, which started today.

Jet Airways has placed orders for a total of 10 A-330-200 to operate on long-haul routes. To questions regarding acquisition of the world’s largest airliner A-380, Mr Goyal said: "At the moment, we are not ready but we are studying the proposal."

He said Jet Airways was "seriously studying" Airbus Industrie’s A-350 XWB (Extra Wide Body) aircraft whose deliveries would begin from 2013. "We don’t place orders just for the sake of it. For us, frequency is important."

The A-350 XWB are a medium capacity long range aircraft. A-350-800 would carry 270 passengers, while A-350-900 would be able to accommodate 314 and A-350-1000 would have a capacity of 350.

Mr Goyal said though Jet had a "good amount of market share, but that does not mean we have room for complacency." - PTI Related Stories: Air fares go up on turbine fuel price rise

SEBI tightens ODI disclosure norms

Tightening the disclosure norms on offshore derivative instruments (ODIs), market regulator SEBI on Tuesday asked Foreign Institutional Investors FIIs to give an undertaking that these investment tools are not issued to non-resident and resident Indians, who otherwise do not need the FII route.

FIIs and their agents would have to state that "we undertake that we/our associates have not issued/subscribed/ purchased any of the ODIs directly to/from non-resident Indians/resident Indians," SEBI said in a circular.

FIIs and their agents have been allowed to issue ODIs such as participatory notes against underlying securities to those entities that are not registered with SEBI.

"The circular regarding the undertaking is nothing new as SEBI just wants to track how much money is coming from FIIs and from Indian investors separately. It is basically tightening of the norms of disclosure," said Mr D K Aggarwal, director of a domest ic brokerage SMC Global.

Now, he noted, it would be binding on the FIIs to disclose their offshore derivatives investment to the NRIs. NRIs are allowed to invest in the offshore derivatives directly, and they need not come through FII route, he added.

The matter of undertaking by FIIs that they are not issuing ODI to NRIs or resident Indians came into limelight after Securities Appellate Tribunal recently ruled against the SEBI order in the Goldman Sachs’ case.

In the Goldman Sachs case, SAT reversed the SEBI order that imposed a penalty of Rs 1 crore on a Mauritius-based arm of the investment banker for not submitting the information about issuance of ODI in a prescribed format with requisite declarations. - P TI

JPMorgan Lowers Forecasts for Indian Rupee, Predicts Decline

JPMorgan Chase & Co. lowered its forecasts for the Indian rupee, predicting the currency will decline this year as rising crude oil prices double the nation’s current-account deficit.

The rupee, the second-worst performer this year among the 10 most-active currencies in Asia excluding the yen, will weaken almost 5 percent to 45 against the dollar by the end of the year, versus an earlier forecast of 40, the third-largest U.S. bank said in a research note dated yesterday. Slowing capital flows and exporters holding back foreign exchange earned abroad will fuel the currency’s decline, according to JPMorgan.

``Deteriorating balance of payments dynamics led us to reassess our view,’’ wrote JPMorgan’s strategists Siddharth Mathur and Vikas Agarwal. ``We were optimistic of a reversal in the rupee later in the year, driven by a revival of global risk appetite and return of stability to the credit markets. We no longer anticipate rupee strength in the second half of 2008.’’

The rupee fell 0.5 percent to 42.9575 today in Mumbai, according to data compiled by Bloomberg. It may slide to 44 by the end of June, compared with a previous estimate of 42, Singapore- based Mathur and Mumbai-based Agarwal said, confirming the contents of the report.

Goldman Sachs Group Inc. lowered its forecasts on May 23, saying the rupee will drop to 44.10 a dollar in six months, compared with its earlier prediction of 40.30.

The advance in crude oil will almost double the nation’s import bill to $100 billion in the financial year ending March 2009, from $55 billion last year, according to JPMorgan. That will more than double the shortfall in India’s current account, a broad measure of trade and investment flows.

Oil Doubles

India depends on imports to meet three-quarters of its annual energy needs. Oil futures on the New York Mercantile Exchange touched an all-time high of $135.09 a barrel last week after doubling in the past 12 months.

The local currency may also fall as money managers abroad reduce their holdings of the nation’s assets, JPMorgan said. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, has slumped almost 20 percent this year following a 47 percent rally in 2007, Bloomberg data show.

``The outlook for Indian equities remains uncertain as country-specific headwinds are increasing,’’ Mathur and Agarwal said. ``Slowing earnings growth and still weak appetite for risky assets suggests continued weak equity flow for now.’’

Global funds have sold $3 billion more of local stocks than they bought this year through May 26, according to the Securities & Exchange Board of India. They bought a net $17.2 billion of stocks in 2007, a record, helping the rupee complete its best year in at least 34 years.

``The path of local equities remains the most important indicator to watch,’’ the analysts said. ``A return of net flows of $1.5 billion to $2 billion every month might be necessary to reinforce the waning rupee-bullish sentiment.’’

SBI employees call for nationwide strike on June 6

State Bank officers on Tuesday said they would hold a day-long nationwide strike on June 6, protesting against SBI management’s policies on different issues.

Their demands include a review of the existing State Bank pension scheme, recruitment of adequate staff, termination of the contract system and regulated working hours for officers.

"The strike would be observed nationwide. The Government and the Indian Banks Association (IBA), despite having signed an agreement on various issues, have not taken any significant steps to resolve our issues," All India State Bank Officers’ Federation’s General Secretary, G D Nadaf, told reporters in Mumbai.

Nadaf said SBI management, with its decision to go ahead with the merger proposal of State Bank of Saurashtra, was not taking into account the feelings of employees on the matter.

"Such a merger between State Bank and its associates will lead to a plethora of issues, including termination of jobs in different categories. Any such move (of merger) will definitely be met by nationwide protests from the unions," Nadaf said.

Bank unions had struck work early in 2008 to voice their protests on various critical issues including the merger of state-owned banks and one more option for employees to join in the pension scheme.

Later, bank unions and the Indian Banks’ Association had signed an agreement following intervention by the Union Finance Minister, leading to deferral of the two-day nationwide strike called for, just prior to the Budget in February end.

Nadaf charged the IBA with not taking any steps so far to resolve the outstanding issues.

RBI expected to hike CRR, Repo rate

The Reserve Bank is likely to surprise the market by tightening money supply to combat inflation, which would push up interest rates, according to a study by financial services giant Barclays.

"We believe the central bank’s policy (in India) objective will be to contain inflation, and that it will tolerate sub-trend growth if necessary... We expect the RBI to continue withdrawing liquidity via cash reserve requirement hikes of at least 25-50 basis points within the next few months," Barclays said in its emerging market research.

The study also expects ‘possibly more hikes’ in CRR in the second half of this year. Besides, it expects the RBI to follow through with a repo rate hike of 25-50 basis points in the next one to two quarters.

Cash Reserve Ratio (CRR) is the requirements for banks to keep a proportion of its deposits with central bank and repo is the rate at which RBI injects liquidity in the system by buying government securities.

The Reserve Bank has already announced 0.75 per cent hike in CRR to suck out around Rs 27,000 crore from the system to cool down inflation.

A few other studies on inflation by reputed names like IMF, NCAER and Crisil were also put out.

An IMF study puts weekly inflation rate in India at an annualised rate of 3.4 per cent, much below official estimates of eight per cent and caste doubts over the efficacy of current methodology of calculating year-on-year inflation.

Economic think tank NCAER expects that international food prices are unlikely to fall in the immediate future owning to low tradable stocks and lag in supplies of farm produce.

Rating agency CRISIL cautioned the government against using price control measures to soften inflation, saying they would distort resource allocation and create shortages.

The RBI’s belief, according to the Barclays study, is that regardless of whether inflation is supply side driven or not, the endgame is a situation where excess demand pressures are prevalent.

"In addition, we believe the central bank’s perception is that supply-side shocks from oil, food and base metals are not temporary and will persist," it said.

The RBI would utilise the various instruments it has at its disposal to withdraw liquidity and guide market interest rates higher, the study said.

An IMF study, When will inflation subside, said the traditional year-on-year data are contaminated by base effects. As such, it is much better to use week-on-week or month-on-month data.

If this calculation methodology...

Religare acquires 97.76% stake in Hichens

Domestic brokerage firm Religare Capital Markets on Tuesday said it has acquired 97.76 per cent stake in Hichens Harrison & Co Plc following the acceptance of its open cash offer by the UK firm.

Hichens has accepted the offer for 1,70,06,441 shares, representing 97.76 per cent stake in the UK firm, Religare said in a fling to the Bombay Stock Exchange.

Religare Capital Markets, the wholly-owned subsidiary of Religare Enterprises Ltd (REL), had in April announced its decision to make an open offer to UK-based broking firm Hichens Harrison.

REL, the holding company for financial services businesses of the group, had offered 285 pence per share cash and valued Hichens Harrison at around 55.5 million pound.

Post acquisition, Religare is planning to delist Hichens from the London Stock Exchange’s Alternative Investment Market (AIM), the filling said.

The cancellation of the admission of Hichens shares to the AIM Market would significantly reduce the liquidity and marketability of the remaining shares in the company, it said.

Further, Religare Capital Markets International UK, an indirect wholly-owned subsidiary of Religare Capital Markets, intends to re-register the firm as a private company, it added.

Last week Religare had received approval from the UK regulatory body Financial Services Authority (FSA) for completing the acquisition of Hichens Harrison & Co Plc.

Shares of Religare were trading at Rs 396, up 0.97 per cent in the afternoon trade on the BSE.

India's annualised inflation lower than data - IMF

India’s weekly inflation is running at annualised rate of 3.4 percent, within the Reserve Bank of India’s comfort zone and below the official year-on-year rate near 8 percent, according to an internal study by the International Monetary Fund (IMF).

The study comes at a time when latest government data shows preliminary annual inflation, as measured by the wholesale price index, at 7.8 percent in May and an upwardly revised 3-½ year high above 8 percent in mid-March.

The IMF study said using weekly or monthly changes in price data, which were then adjusted for seasonal effects, was better for measuring the rate of change in prices, as year-on-year changes were distorted due to base effects.

The study, made before a revision last Friday showed mid-March WPI above 8 percent, measured price changes in provisional data for the five weeks starting April 5 to May 3 after seasonally adjusting them. It showed inflation for that period running at an implied annual rate of 4.7 percent.

"Inflation has been slowing, quite dramatically," the study concluded.

But it said even if that trend continued, the year-on-year rate was unlikely to subside soon because of unfavourable base effects.

"To the contrary, the yearly rate is likely to climb through June when it could exceed 8 percent," it said.

"And it may not fall to 6 percent until the third or even the final quarter of the fiscal year."

Seasonal adjustment means stripping out seasonal effects such as harvesting and extra working days by using econometrics to examine the underlying data trends.

Joshua Felman, IMF resident representative in India, told Reuters by telephone using provisional data to estimate the rate of change in prices when past data had been revised up sharply may not be very distortionary at the moment as most global commodity prices had stabilised.

Also that stabilisation may take a few weeks to filter into the price index, he said.

Indian policy makers have taken many steps to check price pressures in recent months, including banning some exports and cutting import duties, but the year-on-year readings have stayed well above the central bank’s comfort zone of 5.5 percent.

Felman said what happened to inflation from here depended on a lot of things including government policies.

"I don’t want any one to think I am saying the inflation problem is over and we can go back to sleep," he said.

"The report says 1) that the best way to look at inflation right now is seasonally adjusted weekly or monthly numbers, 2) there are some encouraging signs and 3) because of unfavourable base effects the yearly numbers are going to climb."

Indian oil retailers risk cash crisis - source

State-run Indian oil retailers will run out of money to cover crude imports within a few months unless the government announces a rescue package soon, a senior oil ministry source said on Tuesday.

The firms are losing millions of dollars each day as they must sell their fuel at discounted rates set by the government far below oil’s surge to above $135 on the world market. They have appealed for price hikes and duty cuts.

On Tuesday, Taiwan joined Asian nations Indonesia and Sri Lanka in deciding to raise fuel prices as they can no longer afford to shield consumers from soaring crude oil prices.

"At this rate, Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) can only pay for imports till end- July. Indian Oil (IOC) can only sustain till mid-September," the official, who did not wish to be identified, told reporters.

The three firms plans to raise their borrowing limits, but the official said: "This is not a long-term solution. For how long can you continue to run like this?"

While IOC seeks to double its borrowing limits to 800 billion rupees (nearly $18.7 billion), HPCL and BPCL are also planning to raise their current limits from 200 billion rupees.

HPCL’s director for finance said last week the company was in talks with bankers to raise its borrowing limit.

FUEL PRICE HIKE

The oil ministry has been pitching for a hike of five rupees a litre in the price of diesel, 10 rupees a litre for petrol and a 50-rupee increase in the price of a cylinder of cooking gas.

Analysts say ministers are likely to tone down the proposal to raise fuel prices by 15-20 percent given that inflation is already at 8 percent, a three and a half year high.

The oil ministry is also seeking zero customs duty on crude oil, reducing import duties on petrol and diesel to 2.5 percent from 7.5 percent and halving the excise duty on the two fuels.

Oil minister Murli Deora on Tuesday met Finance Minister Palaniappan Chidambaram, Foreign Minister Pranab Mukherjee, who is also chairman of a ministerial panel on fuel pricing, and Prime Minister Manmohan Singh to discuss ways to stem the losses of oil firms.

The official said oil retailers’ revenue loss worked out at an annual 2,250 billion rupees ($79.59 billion) if the Indian crude basket continued to hover at $125 a barrel.

Even with a proposed government package and other measures including issuing oil bonds, "a gap of 510 billion rupees is still left," the official said.

Reliance Comm and MTN seen favouring share swap

South Africa’s MTN Group and India’s Reliance Communications may swap shares or take big stakes in a new company as regulatory hurdles and both firms’ global ambitions seem to rule out a $66 billion emerging markets telecoms merger.

The companies said on Monday they were discussing a possible combination, just days after India’s top mobile firm Bharti Airtel ended talks with MTN after failing to agree how to structure a deal.

Bharti has said MTN proposed a structure that would have made it an MTN subsidiary, an outcome that was unacceptable to the Indian firm, which has ambitions of becoming a global player.

Analysts said Reliance Communications’ chairman, Anil Ambani, who owns two-thirds of India’s No.2 mobile operator, would also not want to cede control, casting doubt on media reports that MTN, valued at around $38 billion, planned a reverse takeover of Reliance, which has a market value of about $28 billion.

"If the structure proposed by MTN was not agreeable to Bharti, it’s very hard to see them getting Anil Ambani agreeing to it," said one telecom analyst, who asked not to be identified.

MTN has more than 68 million subscribers, while Reliance Communications has around 48 million.

Rishi Sahay, director of Indusview Advisors, said the two firms might transfer shares to a separate entity in which they would both hold significant stakes, or swap shares in a way to get around potential regulatory hurdles.

MTN could take a stake of below 15 percent in Reliance Communications, avoiding having to make an open offer for a further 20 percent, and Reliance could take a minority stake in MTN that avoids regulatory triggers.

"It will most likely be a simple share swap that doesn’t run into regulatory hurdles or require big cash," Sahay said. "No sudden-death M&A type of deal."

The Economic Times, citing unidentified sources, said Ambani may swap his 66 percent stake in Reliance Communications for a one-third holding in MTN. Ambani would retain an indirect holding of nearly a fifth in Reliance Communications.

The Financial Times, citing people familiar with the matter, said such a deal would leave Ambani as the biggest single shareholder in an enlarged MTN.

A banking source said Reliance held informal talks with MTN last year, leading to it conducting due diligence on MTN, sub-Saharan Africa’s leading mobile operator.

"The best outcome would be the formation of an offshore holding entity in a tax-neutral zone with (both) as units," said the banker, who advised Reliance last year and asked not to be named because of the sensitivity of the current talks.

The banker said last year’s talks broke down after the two sides could not agree on a valuation.

"If talks don’t progress as expected, the two could trade minority stakes in each other. Such a move sets the contours for further discussion and kisses a long-drawn bidding war goodbye," the banker said.

NO BIDDING WAR

Indusview’s Sahay said Reliance Communications, which has a track record of buying up smaller, often distressed assets, would not want to risk a bidding war over MTN.It’s in their DNA. They might do due diligence and negotiate but if they feel it’s too expensive, they will just walk away," Sahay said, noting Reliance lost out to Vodafone last year in an $11 billion race for control of smaller local rival Hutchison Essar.

"Their strategy has been to go after distressed assets because they can buy them cheap, then sell stakes at a premium," said Nishna Biyani, telecoms analyst at Prabhudas Lilladher.Biyani said Reliance would want to avoid any deal structure that would issue fresh equity or load on debt, noting the firm had aggressive capex plans -- including more than $1 billion to roll out GSM services across India -- and an IPO lined up for its Reliance Infratel tower unit.

"RComm is the smaller player in this case, so it can’t ask for a majority shareholding in MTN," Sahay said. "But neither will it be willing to be just a subsidiary."

Reliance Communications shares rose 1.5 percent on Tuesday, while MTN was quoted off 4.5 percent at a 4-week low.

Indian Refiner Shares Gain on Plan for Oil Levy on Income Tax

Indian Oil Corp., the nation’s biggest refiner, and its state-run counterparts rose in Mumbai trading after the government said it may consider charging a levy on income tax to partly recover losses from selling fuels below cost.

India will take a decision on fuel prices soon, S. Sundareshan, additional secretary in the Oil Ministry, said today. Officials of the oil and finance ministries discussed increasing prices, rationalizing duties and oil bonds.

Indian Oil gained 10.3 rupees, or 2.5 percent, to 424.35 rupees at 11:07 a.m. local time in Mumbai. Bharat Petroleum Corp. rose 8 rupees, or 2.3 percent, to 355.75 rupees and Hindustan Petroleum Corp. gained 6.5 rupees, or 2.7 percent, to 247 rupees.

India, Asia’s third-biggest economy, imports 70 percent of its oil requirement and is trying to soften the impact of surging crude oil prices. Retail fuel prices are capped in India to help curb inflation, which is running at a 3 1/2 year high.

New York oil futures have increased 24 percent in the past two months and reached a record $135.09 on May 22.

India shares up in cautious trade; Rel Comm rises

Indian shares rose on Tuesday, led by Reliance Industries and bolstered by strong regional markets, but traders were uncertain about the sustainability of the gains amid rising inflation and high oil prices.

Reliance Communications added 1.4 percent to 550.75 rupees, rebounding from a 5.1 percent fall on Monday triggered by news that it and South Africa’s MTN Group had started talks that could create a $66 billion telecoms group.

Traders said the gains reflected hopes that Reliance Communications could engineer a deal that did not excessively stretch its balance sheet.Shares in Reliance Industries, India’s top listed firm, rose 0.6 percent to 2,539.70 rupees as traders saw a buying opportunity after the stock had fallen more than 5 percent in the past three days.

At 11:27 a.m. (0557 GMT), the 30-share BSE index was up 0.33 percent, or 54.15 points, at 16,402.65, with 20 components gaining, having risen nearly 1 percent earlier.

The index is down more than 19 percent in 2008.

"There is a lack of conviction in the market," said D.D. Sharma, vice president at Anand Rathi Securities in Mumbai. "It is still not clear how the authorities will manage inflation and high crude prices."Annual inflation topped 8 percent in March for the first time in 3-½ years, revised data showed on Friday, and analysts said a possible rise in government-set retail fuel prices could push it closer to double digits.

The Indian government will soon take a decision on an oil ministry proposal to raise petrol and fuel prices, a senior official said on Tuesday without elaborating.JM Financial Services said in a technical research report that a pullback of 200 to 500 points was likely in the main index over the next few days after the recent market sell-off.

Tata Consultancy Services Ltd rose 0.4 percent to 963 rupees after India’s top software services exporter said it had signed a five-year deal worth $100 million with privately held European firm NXP Semiconductors. Larsen & Toubro was up 0.9 percent at 2,775 rupees on bargain hunting after the stock fell 8.2 percent in the last three days. India’s top engineering and construction firm is due to report results on Thursday.

In the broader market, 1,470 gainers defeated 802 losers on volume of more than 90 million shares.

The broader 50-share NSE index was up 0.69 percent at 4,908.80.

Elsewhere in the region, Karachi’s 100-share index declined 1.71 percent to 12,369.70, while Colombo’s All-share index was down 0.18 percent at 2,567.42 points.

STOCKS ON THE MOVE

* Omaxe was up 2.7 percent at 216.30 rupees after the real estate firm said it was talking to merchant bankers in India and abroad to raise at least $500 million through an equity placement.

* Sita Shree Food Products Ltd rose 4.9 percent to 44.35 rupees on news the company had won orders from Reliance Fresh for 400 metric tonnes of wheat flour and pulses, higher than a previous order for 160 metric tonnes.

MAIN TOP 3 BY VOLUME

* Ispat Industries Ltd on 5 million shares

* Reliance Natural Resources Ltd on 4 million shares

* IFCI Ltd on 3 million shares

Bush hits '08 trail; do Republicans want his help?

President George W. Bush has made it clear he is excited to get out on the campaign trail this election year to help Republicans keep the White House and retake Congress -- but do they want his help?

Republican presidential hopeful John McCain has said he wants help from Bush, who can haul in enormous campaign cash. But McCain has walked a fine line with the unpopular Bush, backing the president on the Iraq war while bucking him on how to address climate change.Bush will kick off raising money for McCain on Tuesday and Wednesday at three events in Arizona and Utah, but they will only be together at one and it will be out of the public eye. That has raised questions about whether Bush helps or hurts the Arizona senator.

"On the one hand (Republicans) want to keep their distance from the president in order to avoid being cast as a third Bush term, yet at the same time they need to tap into the fund-raising capacity of the president," said Anthony Corrado, a professor of government at Colby College in Maine.

The Reuters/Zogby poll last week found Bush’s approval rating had fallen 4 percentage points to 23 percent, a record low for pollster John Zogby. Congress fared even worse, however, falling 5 points to 11 percent.In a time-honored practice by presidents on the trail, Bush has scheduled non-campaign events on his three-day, five-state trip, which helps defray the enormous costs of hosting the presidential entourage for which candidates must pay.

Despite wrapping up the Republican nomination, McCain has lagged his Democratic rivals in raising money even though they have not finished their contest. McCain raised $18.5 million in April while New York Sen. Hillary Clinton pulled in $21 million and Illinois Sen. Barack Obama attracted $30.7 million."They probably want to do a lot of this now while there’s attention still on the Democratic race," Corrado said, saying Bush will be best used in western and southern states.

PROBLEMS MORE EXTENSIVE FOR REPUBLICANS

While the White House said there may be a Bush-McCain photo opportunity on Tuesday, Corrado said "every shot that comes out through election day where McCain is sharing a podium with the president is going to be a day when more ammunition is provided for the Democrats for the fall campaign."

In addition, Republicans are talking openly about the difficulties they face holding on to the White House and retaking control of Congress in November, noting the unpopular war in Iraq that has lasted years longer than expected.They also point to the teetering economy as well soaring gasoline and food prices. Plus, Republicans in recent months have lost three special elections for vacant seats in the House of Representatives in districts they have traditionally held.

In a sign Bush’s problems likely extend beyond the top of the ticket, the other two fund-raisers the president will attend this week for Republicans seeking seats in the House are also closed to the media."The political atmosphere facing House Republicans this November is the worst since Watergate and is far more toxic than the fall of 2006 when we lost 30 seats," Rep. Tom Davis, a Virginia Republican, said in a memo to fellow Republicans.

Democrats now hold a 236-199 advantage in the House. Republicans have seen some 28 members decide to retire or seek another office, versus seven Democrats. Senate Democrats only have to defend 12 seats versus 23 Republicans must guard.

Bush will help raise money in two key swing congressional districts on the trip: New Mexico’s open first congressional district and Kansas’ third district, where Republicans are trying again to knock out Democratic Rep. Dennis Moore."He is poisoning the well for Republican congressional candidates and for John McCain," said Larry Sabato, director of the Center for Politics at the University of Virginia. "I think McCain’s chances depend in part on whether Bush and his White House team can manage to get Bush up around 40 (percent) again," referring to the president’s approval rating.

Gold pulled higher by oil after pipeline blow-up

Gold opened higher on Tuesday as further supply disruptions in Nigeria, the world’s eighth-largest oil producer, and a weaker dollar, made the precious metal increasingly attractive.

Spot gold stood at $927.00/927.90 an ounce by 0329 GMT, having earlier risen above $930, and up from $925.20/926.60 in New York late last week.

Both Britain and the United States were closed for public holidays on Monday.

A rise in oil prices above $133 on production problems in the North Sea over the weekend and in Nigeria on Monday when rebels blew up a pipeline, drove gold higher on Tuesday.

"I am tracking oil prices for direction. And the dollar is still weakening," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"If gold holds above $910, it could go up to $950. If it falls below $910, it could go back to the $800s," he added.

Oil bellwether NYMEX crude oil was up 97 cents at $133.16 by 0333 GMT, having climbed earlier as high as $133.46 after rebels from Nigeria’s southern Niger Delta blew up a Royal Dutch Shell oil pipeline on Monday, forcing the firm to cut production.

Spot gold rose as high as $935.30 last Thursday, its highest level in a month, on the day that oil prices rose above $135.00.

Non-commercial investors in U.S. gold futures turned bullish last week, hiking their long positions by around 20 percent in the week to May 20, data from the U.S. Commodity Futures Trading Commission showed on Friday.

Non-commercial investors, often referred to as speculators, were net long on 182,119 lots of gold on the New York Mercantile Exchange’s COMEX metals division, up from 152,938 lots a week earlier.

Further adding to bullion’s attractiveness as an alternate currency, the U.S. dollar remained close to one-month lows against a basket of currencies on Tuesday as investors expect economic data and speeches by Federal Reserve officials to provide a clearer picture of the deteriorating economy.

Gold is often seen as an alternative currency when the dollar weakens.

The dollar index was within sight of one-month lows of 71.823 struck last week, as it stood at 71.930 on Tuesday morning.

Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $2.00 to $927.80 an ounce.

Benchmark April gold on the Tokyo Commodity Exchange was up 2 yen at $3,107 yen per gram by the end of the morning session, having settled unchanged on Monday.

Spot platinum rose to $2,176.00/2,196.00 an ounce from $2,156.50/2,176.50 late in New York on Friday.

The most active Tokyo platinum futures contract for April was up another 12 yen per gram at 7,055 yen by the end of the TOCOM morning session, having settled 40 yen higher on Monday.

Silver was largely steady from last week at $18.23/18.29 an ounce, against last Friday’s $18.26 high, which was its highest level since April 18.

Spot palladium was largely steady at $449/$457 an ounce.

Monsoon to arrive in 3-4 days - officials

India’s June-September monsoon rains, vital for the farm economy and overall growth, are expected to reach Kerala in the next 3-4 days, weather officials said in a statement on Monday.

With the strengthening of westerly winds, the southwest monsoon has advanced into more southern and central parts of the Bay of Bengal, the statement said."Thus conditions are becoming favourable for onset of monsoon over Kerala during the next 3-4 days," the statement said.

The Indian Meteorological Department this month said the annual monsoon rains were forecast to reach southern India slightly earlier than normal on May 29.

Officials have forecast rains in 2008 at 99 percent of the long-term average.

Analysts say an early monsoon would help crops like rice, soybean and groundnut, which are sown in June and July, and could help India improve its food security amid global shortages.Fast rising food prices have been a major driver of inflation in recent weeks, pushing the wholesale price rate to its highest in 3-1/2 years above 8 percent, and causing a major headache for the Congress Party-led government facing a string of elections.

Ambani may transfer Rel Comm stake to MTN - paper

A proposed deal between South Africa’s MTN Group and Reliance Communications may result in a transfer of Chairman Anil Ambani’s two-thirds stake in the Indian firm to MTN, the Economic Times said on Tuesday, citing sources.

That would trigger an open offer from MTN for another 20 percent of Reliance Communications, as Indian law mandates such an offer to shareholders after an acquisition of more than 15 percent of a company.

MTN would become a holding company of India’s No. 2 mobile operator, and Ambani would in return get around a third in the South African firm, and keep an indirect holding of nearly 20 percent in Reliance Communications, the paper said, citing sources.

The transaction would be a share-swap deal, the paper said, with the offer to minority shareholders in cash.

"In effect, the Anil Dhirubhai Ambani Group will become the largest shareholder of the combined entity, likely to be christened MTN Reliance," the paper said, citing unidentified sources.

A spokesman for Reliance Communications declined comment.

MTN and Reliance Communications on Monday said they were in exclusive talks aimed at a potential combination of their businesses, that could create a $66 billion telecoms giant.

S.Africa's MTN now talks to Reliance

South Africa’s MTN Group has started talks with Indian mobile operator Reliance Communications that could create a $66 billion emerging markets telecoms group.Indian number two Reliance quickly stepped into the void after bigger rival Bharti Airtel pulled out of talks with MTN at the weekend aimed at taking control of sub-Saharan Africa’s biggest mobile operator.

A combination of MTN, valued at $38 billion at Friday’s close, and Reliance, valued at $28 billion, would create a top ten global industry player to rival Japan’s NTT DoCoMo Inc in market value. In terms of subscribers, a merged group would slot in just below Deutsche Telekom -- as the seventh biggest in the world..

A source with knowledge of the negotiations said Reliance would not be looking for the same structure as Bharti in the deal. Media and analysts had speculated that Bharti was eyeing a 51 percent stake in MTN and Bharti said it had pulled out of talks after the South African firm suggested it become an MTN subsidiary.

Shares in Reliance fell as investors worried about the costs of a deal while MTN stock fell as much as 7.6 percent. Investors were expecting a healthy premium from a Bharti buyout.MTN is seeking new markets outside Africa and the Middle East and will likely push to retain its brand and culture.

"Whatever the shape of the company moving forward, there is little doubt that the retention of the MTN brand and culture would be two of the most important aspects executive management and shareholders should ensure," Frost & Sullivan analyst Lindsey Mc Donald said.

Reliance Communications and MTN said earlier that the two groups had entered into exclusive talks about potentially combining their businesses. A 45-day exclusivity period will be in force, during which neither can talk to any other entity.

Reliance Communications Chairman Anil Ambani, one of India’s richest men, said a deal with MTN could "provide investors, customers and the people of both companies a global platform for exponential growth".

LACKS FINANCIAL MUSCLE

MTN had 68.2 million subscribers as of March, compared with Reliance Communications’ 48 million.

"Reliance Communications is smaller than MTN, and lacks the financial muscle for a takeover, but it is not going to want to be a subsidiary, either," said Ravi Dodhia, a telecoms analyst at KR Choksey Securities.He said the two firms were instead likely to create a new company, with MTN taking a 51 percent stake.

But Rajay Ambekar, a telecoms analyst and fund manager at Cadiz African Harvest in Cape Town said MTN Chief Executive Phuthuma Nhleko and his executives were aggressively looking for growth and sector consolidation opportunities."If MTN is looking to remain listed on the Johannesburg Stock Exchange and remain a South African company and be the aggressor in this deals, having this sort of exclusivity says to everyone else: ’You guys don’t approach us, don’t bother, we are not looking to be acquired’," Ambekar said.

Harit Shah at India’s Angel Broking, said Reliance and MTN might swap shares, as the foreign holding in Reliance Communications was considerably lower than in Bharti Airtel, a factor that was seen as a possible roadblock for Bharti’s attempted deal.

Foreign ownership of Indian telecom firms is capped at 74 percent, and Bharti is 30.5 percent owned by Singapore Telecommunications.

Shares in Reliance Communications, fell as much as 5.7 percent to their lowest since May 12 while in Johannesburg, shares in MTN fell as much as 7.6 percent to 145.11 rand, their lowest since April 30.

"The market is disappointed that MTN has called off its talks with Bharti Airtel," said Garth Mackenzie, a trader at BOE Stockbrokers in Johannesburg.

"The market was anticipating a buyout from Bharti of MTN of a controlling stake. Naturally, Bharti would have to pay a premium to the share price, if shareholders were going to give up their shares," he said.

Analysts had speculated that Bharti Airtel was engineering a merger that would value MTN at up to $50 billion.

Shares in Bharti rose as much as 4.2 percent to 872 rupees, their highest since May 6, when they slumped more than 5 percent on news that Bharti was in talks with MTN.

Reliance Communications bought Ugandan Anupam Global Soft Ltd in February, saying it would launch mobile services in Uganda by the end of 2008 and spend up to $500 million over five years to build a telecom network there.

Last year, it lost the $11 billion race for majority control of India’s third-largest mobile provider to Vodafone Plc, but has made several smaller overseas acquisitions, including a UK-based WiMax operator of 4G services.

India’s wireless market grew 25-fold between 2002-07, ringing up record profits for telecom firms, but that growth is expected to slow as the percentage of the population with a mobile phone tops 40 percent by 2010 from 22 percent now.

In contrast, MTN is present in some of the world’s most lucrative markets, such as Nigeria, Cameroon, Ghana, Zambia and Uganda, and has said it is keen to pursue more expansion opportunities in emerging markets.

Reliance is being advised by Lazard while MTN is advised by Merrill Lynch.

India to join 'economic miracle' group

India is all set to join the 13-member group of ’miracle economies’ that have recorded higher growth in a short span of time, says a UK-based think tank.

In addition to India, Vietnam will also be joining the club of these fast-growing economies, which among others include Japan, Singapore and South Korea, the Commission on Growth and Development said.

The other members of the miracle economies include Botswana, Brazil, China, Hong Kong (China), Indonesia, Malaysia, Malta, Oman, Taiwan (China) and Thailand, the Commission, which is sponsored by World Bank and governments of Australia, the Netherlands and the UK, said.

Indian growth story has characteristics as the miracle economies, the report said.

The miracle economies, it added, shared common characteristics as they are all engaged with the global Economy, had high rates of saving and investment, and credible and capable governments.The Commission, which is headed by Nobel laureate Michael Spence, has Planning Commission deputy chairman Montek Singh Ahluwalia as one of the members. It said India’s multi-party democracy has grown remarkably due to a pragmatic and impartial growth strategy and also the role of government has shifted from dismantling the excesses of the license raj to putting in more endeavours for improving the public infrastructure.

India has been a hub of world-class engineers and scientists for decades and is supplying to global demand for software services. This has helped the country in fulfilling its economic growth need, the think-tank said. Pointing out that India’s civil servant performance has shown an exemplary improvement based on business quality standards formulated by the International Organisation for Standardisation, the Commission said it has significantly contributed to effective governance. It observed that all the miracle economies grew remarkably by importing ideas, technology, and knowhow from the rest of the world and exploiting global demand.

"The inflow of knowledge dramatically increased the Economy’s productive potential; the global market provided the demand necessary to fulfil it. To put it very simply, they imported what the rest of the world knew, and exported what it wanted," the Commission said in its report. All these economies were future-oriented and relied on a functioning market system and decentralised decision-making, promoting entrepreneurial spirit, it added.

Also, the report said, mobility of resources like labour and capital was a prominent feature of all the 13 high-growth economies.

Supreme Court stays SEBI IPO refund

In a major setback to more than 10,000 investors, the Supreme Court on Monday stayed market regulator SEBI’s order asking SVPCL Ltd, a Hyderabad-based stationery manufacturing company, to refund the application money with interest to all the investors who had applied for its IPO in October 2007.

A bench headed by Justice C K Thakker while staying SEBI’s order also issued notice to it and Merchant Bankers UTI Securities Ltd. The issue size of the initial public offer (IPO) was Rs 34 crore.

SEBI in its letter dated May 21 had stated that due to dismissal of the appeal by Securities Appellate Tribunal (SAT) and deemed refusal by National Stock Exchange, SVPCL’s public issue had become void by virtue of Section 73(1A) of the Companies Act, 1956.

"In terms of provision of the Companies Act and disclosure made by you (SVPCL) in the offer document, you are liable to refund the all application money along with the applicable rate of interest and to confirm compliance of the same by May 31, 2008," the market regulator had stated.

Challenging the SAT judgement that dismissed its plea for a direction to BSE to list its equity shares, SVPCL stated that BSE and NSE vide their letters dated May 18, 2007 and June 18, 2007, respectively, had given in principle approval for listing of shares in its Draft Red Herring Prospectus.

Besides, SEBI had also issued acknowledgment letters after asking it to make certain modifications, it said.

According to SVPCL counsel AM Singhvi, the primary ground on which the request for listing by BSE had been turned down was that UTI Securities, the lead manager responsible for post issue compliances, had expressed its inability to give an undertaking as required by BSE under Section 73 of the Companies Act, 1956, it added.

According to Singhvi, NSE could not grant the requisite permission within the stipulated period of 10 weeks as SEBI’s restraint order had made it impossible to proceed further towards listing of shares till the complaint filed by one Srinivas Pandit against the IPO was addressed. SAT failed to appreciate that the fate of SVPCL’s listing on NSE was contingent upon listing of shares of BSE, it said.

The Andhra Pradesh High Court had issued an interim order asking BSE and NSE to allow only the listing but not the trading of the shares at the exchanges. The company also claimed that it had given investors, through a notice on December 3, the option of pulling out of the issue and only small percentage of investors had withdrawn their applications.

The Tribunal while dismissing its plea had stated that the validity of the allotment was dependent on securing the requisite permission of each stock exchange whose permission had been sought. If permission is not granted by the stock exchange before the expiry of 10 weeks from the date of closing of the subscription lists, and upon the expiry of that date, any allotment of shares made by the company becomes void, SAT said, adding "the period of 10 weeks is sacrosanct and cannot be extended for any reason whatsoever nor can any period be excluded therefrom."

As the company had mentioned the names of NSE and BSE in its prospectus when it offered shares to the public for subscription, it was, therefore, necessary that both these exchanges should have granted permission for the listing of the shares within 10 weeks from the closing of the subscription lists which expired on January 4, 2008, it added.

India's Tendulkar Pays $8.2 Million for Bungalow,

Indian cricketer Sachin Tendulkar paid 350 million rupees ($8.2 million) for a Mumbai bungalow, the Mumbai Mirror reported, citing people it didn’t identify.

Tendulkar, who first played for India in 1989 at the age of 16 years and holds the world record for centuries in test cricket, acquired the villa in the north-central suburb of Bandra from Satra Group, the newspaper reported, citing Vijay Satra, a director with Satra Properties India Ltd.

The cricketer plans to demolish the two-storey, 9,000- square-foot dwelling and replace the 80-year-old villa with a new building, the newspaper reported, citing an unidentified person.

Property prices in Bandra have more than doubled over the past three years, according to Knight Frank LLP.

The neighborhood is likely to get a new bridge by January across a strip of sea to Worli in central Mumbai to reduce traffic congestion.

TCS signs $100 mn deal with a European firm

Tata Consultancy Services Ltd said on Monday it had signed a five-year deal worth $100 million with NXP Semiconductors, a privately held European company.

No other details were immediately available.

Shares in the TCS, India’s top software exporter, ended 2.7 percent higher at 958.80 rupees on Monday in a Mumbai market that lost 1.8 percent.

Price of IPL semi-finals tickets to cost fans dear

Tickets for the Indian Premier League semi-final matches, to be held at the Wankhede Stadium in Mumbai on May 30 and 31, are going to cost the cricket fans dear with the rates fixed between Rs 1000 and Rs 12000 for most stands barring the popular East Lower.

The costliest ticket for the matches is the one which gains the fan entry into the Garware club house, the upper tier to the left of the players’ dressing rooms, and is priced at a whopping Rs 12,000, according to information provided by Mumbai Cricket Association sources today.

This is double the amount the fans paid for the league stage of the competition.

Similarly the cost of the MCA Guest Stand ticket has also been doubled to Rs 6,000 while the fans occupying the Sachin Tendulkar stand on the northwestern part of the stadium would have to cough up Rs 2000, four times what they had paid for the earlier ties held at this venue, while the North central stand ticket has been priced at Rs 4000.

The Sunil Gavaskar stand tickets, the upper tier of the East Stand with corporate boxes, would cost Rs 5000 each while tickets for the Vijay Merchant Stand (upper and lower) have been priced at Rs 10000 and Rs 1000 respectively, the sources said.

"We have maintained the price for the East lower stand at Rs 250 and they have all been sold out," the sources said, a surprise considering the fact that the host team - Mumbai Indians - had not yet qualified for the knock-out stage of the Twenty20 League.

Govt seen toning down fuel price hike

The government is expected to significantly tone down an oil ministry proposal to raise fuel prices by 15-20 percent due to an electoral setback for the ruling party and inflation fears, officials and analysts say.

Last week, ministry officials proposed to raise petrol prices by 10 rupees, or 22 percent, and diesel prices by 5 rupees, or 15.8 percent, as crude prices soared to record highs, hammering state oil firms.

State-run refining and fuel marketing Companies import most of their oil but have to sell fuels at heavily discounted rates set by the government.

Analysts say fuel prices may now be raised only 5-10 percent and the government may soften the impact on oil retailing firms by issuing more bonds and cutting customs duty on imported crude, which accounts for 70 percent of domestic consumption.

On Friday, Oil Minister Murli Deora said a decision on fuel prices was expected within a week, but a top government official told reporters on Monday that the government may take longer, partly because the prime minister was not well.

"There is no political consensus on price increase. Ministries are ready but politicians are not," the official, who did not want to be identified, told reporters.

The ruling federal coalition led by the Congress Party suffered a big setback on Sunday as the country’s main opposition party, the Hindu-nationalist Bharatiya Janata Party, won the election in Karnataka, extending a winning streak ahead of a national vote next year.

"Given the political resistance of such a move, the hike, if any, is likely to be much lower than what the oil ministry is seeking," said Sonal Varma, an economist at Lehman Brothers in Mumbai.

Saugata Bhattacharya, economist at Axis Bank, said the government may raise fuel prices by 3-5 percent. "Given the state of cash flows of oil Companies, there will be a rise, but the quantum will be tempered," Bhattacharya said.

Analysts say crude prices, which rose above $133 a barrel on Monday due to lingering supply concerns from key producer Nigeria and a partial shut-in at North Sea oilfields, may rise further.

"We don’t know where prices are headed because the hurricane season is now coming. Any increase will have an impact on the Economy when inflation is rising," said V. Raghuraman, principal energy adviser at the Confederation of Indian Industries.

A. Prasanna, an economist at ICICI Securities Primary Dealership, said the price rise may not be substantial.

"We may see some stop-gap solution, including a nominal price hike," Prasanna said.

Fast rising prices of foods and metals have pushed wholesale price inflation to its highest in 3-1/2 years, topping 8 percent in mid March, and posing a major headache for the government.

Increasing fuel prices, a move being strongly resisted by the administration’s communist allies, would risk further alienating already unhappy voters.

India may reduce some duties on fuel to partly offset an increase in retail prices, the Economic Times reported, citing people it did not identify.

Oil Minister Murli Deora will meet Finance Minister Palaniappan Chidambaram today, the newspaper reported.

Refiners, including Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp., need government protection, the newspaper cited Deora as saying.

India's Rupee Falls on Speculation Importers Selling Currency

India’s rupee fell for a second day on speculation refiners and other importers sold the currency for dollars to settle month-end bills.The rupee declined 0.2 percent to 42.815 a dollar as of 9:10 a.m. in Mumbai,

The partially convertible rupee could edge higher on Tuesday, lifted by a rise in Asian stocks, but dollar buying by oil refiners to meet month-end commitments is expected to check gains.

* India imports most of its oil and refiners are the biggest buyers of dollars in the currency market, with their demand tending to peak towards the end of each month. Oil’s surge to record highs has increased the amount of dollars they need to buy to pay for imports.

* The rupee ended at 42.73/74 per dollar on Monday, off an intra-day high of 42.52 and a shade weaker than Friday’s close of 42.69/70. It hit a 13-month low of 43.21 last week.

* Asian stocks rebounded on Tuesday from the previous day’s dip, as bargain hunters scoured the market after five days of losses, though rising inflation and high oil prices kept investors uncertain about the outlook.

LIC to invest Rs 400 cr in 50-storey office building

LIC will be investing an estimated Rs 400 crore, including the land cost, in constructing a 50-storey office building, the tallest in Eastern India, Mr R.R. Dash, LIC’s Zonal Manager, said here.

LIC had won the bid for acquiring a five-acre plot opposite Science City at Rs 276.2 crore from the Kolkata Municipal Corporation, in what turned out to be one of the costliest land deals in the region at the time.

The proposed building will comprise 7 lakh square feet of rented area, Mr Deb Kumar Banerjee, LIC’s Chief Engineer said. The corporation is expected to earn a rent of around Rs 12 crore per month from the building. “We are expecting a rent of Rs 150-170 per square foot per month when the tower comes up. It is going to be a 150 metre high building, the highest in Eastern India,” he said.

The corporation is in the process of finalising a number of consultants for the project, he added. “Fourteen have been shortlisted. We will choose the final consultants in three months time,” Mr Banerjee said. There can be more than one consultant for the project including a few international consulting companies, he added.

The building may be rented out for malls, offices, IT-ITES companies.

Potato king J.R. Simplot, U.S. fry innovator, dies

J.R. Simplot, the billionaire founder of the Boise, Idaho-based agriculture business that bears his name and who helped make French fries a staple of the American diet and waistline, died on Sunday at the age of 99, officials said.After pioneering the first commercial frozen French fry in the late 1940s, Simplot eventually became a major supplier of Idaho potatoes to McDonald’s, Burger King and Wendy’s. His privately held company, where he was chairman emeritus, reported $3.3 billion in sales in 2006.

An official at the Ada County Coroner’s office said Simplot died at home on Sunday morning of natural causes.Born John Richard Simplot in Dubuque, Iowa in 1909, he left school at the age of 14 to work in the agriculture storage and distribution business. He started his first produce company in 1929, and eventually became a major supplier of dehydrated potatoes to the U.S. military during World War II.In the late 1940s, Simplot’s researchers began experimenting with frozen potato products. His company began producing frozen French fries in Idaho in 1946 and the business thrived with the spread of freezers into American homes.

Simplot’s most well-known business venture began with a handshake. In 1967, Simplot and McDonald’s founder Ray Kroc shook hands and agreed the Simplot Company would provide frozen French fries to the expanding fast-food chain.The company expanded to several potato processing plants in Idaho, Oregon and Washington, and eventually Australia and China. It now grows and processes many other vegetables.The postwar spread of processed American fast food has had a significant impact on the nation’s health, with the popularity of such food contributing to an obesity epidemic.

The Simplot company also operates a feedlot business, with operations in Idaho and Washington turning out about 400,000 head of cattle per year.The company owns and operates fertilizer manufacturing plants in Idaho, and a Simplot company called Grower Solutions has about 70 stores selling agricultural products in the West.In 2001, the plain-spoken businessman told Esquire Magazine luck had nothing to do with his success. "Work honestly and build, build, build. That’s all I can tell you," he said.In 1973 Simplot retired from his company, but remained chairman of the board. He stepped down from that post in 1994 after his children Gay, Don and Scott were named to the board of directors, but retained the title of chairman emeritus.

In 1980, he provided seed money to a small Boise-based computer chip manufacturer, Micron Technology. Micron is now one of Idaho’s largest publicly traded companies.A well-known figure in Boise, Simplot was often seen driving through town in a Lincoln Town Car with license plates that read "MR SPUD."In an interview for the company in 1992, Simplot said he didn’t care how he would be remembered. "Oh hell, I don’t care what they say about me," Simplot said. "I’m not a publicity hound."

RBI: fiscal deficit among highest in world

India’s fiscal deficit continues to be among the highest in the world and underlying pressures are not entirely showing up in headline fiscal numbers, Reserve Bank of India Governor Yaga Venugopal Reddy said on Monday.

India aims to bring down its fiscal deficit to 2.5 percent of GDP for the 2008/09 year compared to 3.1 percent in 2007/08.

India’s fiscal deficit continues to be high and the pressures on the measure are not reflected in the data, Reserve Bank of India Governor Yaga Venugopal Reddy said in New Delhi.

Replicating PMS products for small investors

SEBI recently directed Portfolio Management Services (PMS) firms not to operate pooled accounts. These firms can henceforth offer only separately-managed accounts to their clients. The capital market regulator has also increased the minimum networth required for PMS firms, from Rs 50 lakh to Rs 2 crore.

Both these directives could compel PMS firms to increase the minimum investment size for clients to economise their operations. Importantly, SEBI’s directives could lead to gradual closure of boutique investment firms. These are small-sized PMS firms that have the potential to offer custom-tailored products to small investors. So, where does this leave this class of investors?

This article suggests that portfolio advisors and mutual funds can work together to replicate PMS-style products for small investors. Specifically, portfolio advisors can add value with their manager selection skills — selecting mutual funds in each style universe to construct a portfolio of mutual funds. These advisors can also employ their security selection skills for investors who prefer self-managed custom-tailored portfolios.
Custom-tailored portfolios

PMS firms typically offer custom-tailored portfolios to HNIs. The process starts by risk-profiling the investor. A risk-profile process would probe into areas ranging from whether an investor likes bungee jumping to whether she prefers to invest in term deposits! This process is expected to help the portfolio manager arrive at the client’s risk appetite.

The portfolio manager and the investor then draft the investment policy statement. This statement includes the investment objectives, the expected return, the time horizon, frequency for rebalancing the portfolio and other constraints that the investor may impose. One such constraint may be not taking exposure to companies manufacturing products that harm the environment.

The portfolio manager would custom-tailor a portfolio based on the client’s risk-return preferences. A PMS firm operating pooled-account cannot offer a custom-tailored portfolio as a firm that operates separately-managed account. In some ways then, a PMS operating pooled-account is similar to mutual funds. It is, perhaps, for this reason that SEBI has directed PMS firms not to operate such accounts.

Market for structured products

Mutual funds do not offer custom-tailored portfolios to investors. An asset management firm floats a fund and collects moneys from investors. Often, mutual funds do not clearly disclose the investment style in the offer document. An investor could be, therefore, unintentionally overexposed to an investment style. An investor may, for instance, have exposure to four funds ranging from Opportunity Fund to Equity Growth Fund but with same investment styles.The mutual fund industry has to shed the habit of offering same-genre funds with different names and instead focus on offering newer-generation products.PMS firms’ offer structured products to their clients. Capital guarantee with upside participation in the stock market through exposure in large caps is one such product. Mutual funds should increasingly offer such products so that small investors can construct a style-diversified portfolio that meet their long-term investment needs.Some asset management firms are gradually venturing towards hedge-fund replication products and other structured products. Lotus India Long Short Equity, for instance, is a market-neutral fund that proposes to generate returns on the long and short side of the equity market.The SEBI directive on pooled accounts provides an incentive for mutual funds to offer more such structured products to cater to the broader needs of small investors.

Replicating PMS

Portfolio management is a two-step process in a PMS firm that operates separately-managed accounts. The first step is drafting the investment policy statement. The second step is the portfolio construction process. In a PMS-style replication process, the investment policy statement will be drafted by a portfolio advisor. The portfolio construction process will be facilitated by the advisor and executed by the investor.Specifically, the portfolio advisor would help the investor choose mutual funds that will optimally suit her risk-return preferences. This process involves first choosing various investment styles and then selecting funds in each style universe. The portfolio advisor performs a similar role as a fund-of-funds manager in that she employs her manager-selection skill. The advisor would also recommend individual stocks for those clients who prefer to take direct exposure in equity. These are clients who want custom-tailored portfolios.

The portfolio will be rebalanced at periodic intervals depending on the investor’s needs. The portfolio advisor will receive a fee for providing the advisory services - this will typically be a percentage of the total assets advised.

The primary difference in case of advisory services is that the client maintains her own trading P&L account. In the case of the PMS, the firm provides a monthly performance report to the investor.

The SEBI directive on pooled accounts is a welcome move in that it will increase demand for portfolio advisory services. And if such services take off, the mutual fund industry will be a major beneficiary.

Oil extends gains on supply concerns, weak dollar

Oil rose towards $133 a barrel on Monday, extending the previous session’s gains, due to a supply outage at the large Statfjord oilfield in the North Sea and a weak U.S. dollar.U.S. light crude for July delivery rose 40 cents to $132.59 a barrel by 0017 GMT. It settled up $1.38 at $132.19 a barrel on Friday after striking a record high of $135.09 in intraday trade last week.

London Brent crude rose 30 cents to $131.87."The market is continuing to focus on supply side concerns and the outage at Statfjord fields is an issue," said Gerard Burg, a commodities analyst at the National Australian Bank.Analysts said continued weakness in the U.S. dollar was also supporting oil’s rise.An oil spill at Statfjord shut about 138,000 barrels per day of production on Saturday and triggered the evacuation of workers, operator StatoilHydro said.StatoilHydro said on Sunday the oil spill had been cleaned up, all workers had returned to the platform and preparations were under way to restart production.

Worries that supply would struggle to keep up with demand over the next few years also supported prices.

OPEC Secretary-General Abdullah al-Badri said on Friday he was not worried about reports of faster-than-expected depletion in the world’s biggest oil fields and repeated his position that runaway oil prices were caused by speculation and not by supply problems. A Reuters survey last week showed that non-OPEC production had stagnated and would remain below 50 million barrels per day this year. Oil prices have climbed by around a third since the start of the year as investors seeking a hedge against inflation and the falling U.S. dollar pile into commodities.

Analysts said concern that record oil prices could dent global demand was the key downside risk.

European Central Bank President Jean-Claude Trichet said the potential economic fallout from financial market turmoil, along with rising food and commodity prices, could shock the economy further, while Vice President Lucas Papademos said inflation pressures had intensified due to rising oil prices, which were also dampening growth. In the U.S., data released on Friday showed that highway miles driven in March fell 4.3 percent from a year earlier, the first time this has happened in March since the last major oil shock in 1979.Road travel during the Memorial Day holiday over the weekend was expected to be 1 percent lower than last year, the first such decline since 2002.Crude oil speculators on the New York Mercantile Exchange trimmed net long positions last week, according to data from the Commodity Futures Trading Commission released on Friday.

Net long positions fell to 50,060 in the week to May 20 from 71,767 the previous week.

Equities open in red, Reliance Comm falls

Indian shares opened down 1.1 percent on Monday, tracking regional Markets that fell on worries about rising inflation and record high oil prices, and shares in Reliance Communications fell on news it was in talks with South Africa’s MTN Group.

Reliance Communications opened down 1.3 percent at 565 rupees after it said it was in exclusive talks with MTN, while bigger rival Bharti Airtel opened 3.1 percent higher at 862.50 rupees after saying at the weekend it had ended takeover talks with MTN.

At 9:57 a.m., the 30-share BSE index was down 1.36 percent, or 226.17 points, at 16,423.47, with Bharti Airtel the only stock to rise.

The broader 50-issue NSE index was down 1.33 percent at 4,881.00 points.

Bharti Airtel went up 4% in early trade after the deal has cancelled with MTN, South African telecom company.

Bajaj Finserv listed at Rs 545 and Bajaj Auto at Rs 725 after scheme of demerger.

Take Solutions board approved 10-for-1 stock split. The stock was up marginally.

Asian markets were trading lower. Shanghai Composite was down 2.59% or 89.89 points at 3,383.20. Hang Seng fell 2.01% or 496.81 points at 24,217.26. Nikkei 225 Average slipped 260.33 points or 1.86% at 13,751.87. Jakarta Composite was down 38.24 points or 1.55% at 2,427.71. Straits Times fell 0.77% or 23.99 points at 3,098.16. Seoul Composite went down 1.49% or 27.17 points at 1,800.77. Taiwan Weighted fell 0.74% or 65.36 points at 8,769.37.

US markets stocks fell on concerns about a worsening housing recession and rising crude prices put renewed pressure on a market besieged by worries that inflation will crimp consumption and further weaken the economy. The Dow plunged 145.99 points, or 1.16%, to 12,479.63. The Standard & Poor’s 500 index declined 18.42 points, or 1.32%, to 1,375.93, and the Nasdaq composite index fell 19.91 points, or 0.81%, to 2,444.67.

Indiabulls Trust plans $287 mln in S'pore IPO - source

Indiabulls Properties Investment Trust plans to offer shares within a S$1-S$1.10 price range, to raise up to S$389 million ($287 million) in a Singapore listing, a source briefed on the deal said on Monday.

The projected yield for the trust, sponsored by India’s fourth-largest developer by market value Indiabulls Real Estates, is 4.66-5.12 percent based on forecast income for the year ending March 2009, the source told Reuters.

The group will sell 353.5 million share in the initial public offering, which would be the first test of investors’ appetite for new listing of a real estate investment trust (REIT) since the market went cold in November.

Sources had told Reuters earlier this month that Indian developer DLF Ltd DLF would revive and enlarge an IPO of its property trust in Singapore to raise over $2 billion, likely in June, because it believes market conditions have improved.

However, ratings agency Moody’s only last week had issued a negative outlook rating for Singapore’s REITs over the next 12-18 months, citing weak market sentiment and tighter market liquidity that have impaired their access to capital markets.

Deutsche Bank and Merrill Lynch are handling the deal, which will see Indiabulls inject into the trust two projects with a total of 3.4 million square feet of space, said its prospectus filed earlier this month.

The Mumbai properties, One Indiabulls Centre and Elphinstone Mills, due to be ready by August, are designed for IT and financial firms and retail outlets, and has residential components.

The last two REITs to list in Singapore, Lippo-Mapletree Indonesia Retail Trust on Nov 19 and Saizen REIT on Nov 9, tanked on their debuts and are still trading as much as 31 percent below their IPO price.

The poor market conditions sparked by the U.S. subprime credit crisis had caused Indiabulls, and fellow Indian developers Unitech and DLF, to postpone their planned Singapore REIT IPOs in March.

Analysts say the credit turmoil may force Singapore’s once-booming REIT sector -- which has 20 listed property trusts -- to consolidate in coming months as financially weaker players sell assets or merge with their counterparts.

Rupee weakens as Asian stocks sag

The partially convertible rupee eased on Monday, as losses in Asian stocks and worries about rising inflation and slowing growth at home weighed on foreign investor appetite for local stocks.

* At 9:04 a.m., the rupee was at 42.76/77 per dollar, weaker than 42.69/70 per dollar on Friday. It hit a low of 43.21 last week, a level it last traded in early April 2007.

* Asian stocks fell more than 1 percent on Monday, with regional shares outside Japan hitting a 1-month low, as investors feared rising inflation and sluggish U.S. economic growth would seriously dent consumer demand.

* Annual inflation topped 8 percent in March for the first time in 3-½ years, revised data for March 15 showed on Friday, and analysts said a looming fuel price rise could push it closer to double digits.

* Foreigners have sold more than $3 billion of Indian stocks so far this year and the benchmark stock index is down 18 percent in 2008. Foreigners bought $17.4 billion of stocks in 2007, when the stock market rose 47 percent.

Reliance May Combine With MTN After Bharti Pulls Out

Reliance Communications Ltd., India’s second-largest mobile-phone company, may combine its operations with MTN Group Ltd. after the South African operator’s talks with Bharti Airtel Ltd. collapsed.

Reliance has exclusive negotiating rights with MTN for as long as 45 days, the Mumbai-based company said in an e-mailed statement today. There is no certainty on the completion or the timing of any agreement, it said.

An agreement would help Reliance Chairman Anil Ambani form an operator with a combined market value of more than $65 billion and offer mobile-phone services to 1.7 billion people stretching from the Cape of Good Hope to the Himalayas. New Delhi-based Bharti said on May 24 it ended talks with MTN after failing to overcome differences over control.

``Reliance may be one company that could possibly do it,’’ Apurva Shah, head of research at Prabhudas Lilladher Pvt. in Mumbai, said by phone after Bharti’s announcement. ``If it was tough for Bharti, it will be tough for other Indian companies.’’

Reliance began talks to buy a majority stake in MTN, the Business Standard reported on its Web site on May 24, citing people it didn’t identify

Indian Rupee Has Fifth Week of Losses on Rising Crude Oil Costs

India’s rupee declined for the fifth week, the worst run in almost two years, as record crude oil costs spurred demand for dollars needed to buy the commodity.

The local currency fell to the lowest since April 2007 this week as companies such as Indian Oil Corp., the nation’s largest refiner, paid more for raw materials. Higher oil costs may slow growth of Asia’s third-largest economy, which depends on imports to meet three-quarters of its annual energy needs.

``The pressure on the rupee continues because refiners are looking to cover dollar needs arising in the short term,’’ said Rohan Lasrado, a foreign-exchange trader at HDFC Bank Ltd. in Mumbai. ``Adding to the rupee’s worries will be the inconsistent dollar supply.’’

The rupee declined 0.5 percent this week to 42.705 versus the dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It may fall to 43.25 in next few days, Lasrado said.

The rupee is the second-worst performer this year among Asia’s 10 most-traded currencies, excluding the yen.

The local currency will rise by almost 9 percent through the end of the year as the central bank raises borrowing costs by July to fight inflation that’s at the fastest pace in 3 1/2 years, Fortis Bank SA said.

The currency will rebound from its lowest in 13 months as the Reserve Bank of India increases the repurchase rate to 8 percent from 7.75 percent before its next meeting on July 29, Joseph Tan, Fortis Bank’s Singapore-based strategist, said in an interview.

Tightening Policy

``Economic growth is pretty much intact, but inflation is a new threat and there is no scope for the central bank to have a neutral monetary policy approach,’’ Tan said. ``I am leaning toward believing that the central bank will tighten monetary policy further, despite what the economy is going through, and will also use the exchange rate.’’

Fortis predicts the rupee will rise to as high as 39.4 at the end of this year. It is among the 21 respondents in a Bloomberg News survey, all of whom predict that the currency will rise in 2008.

Goldman Sachs Group Inc. revised its forecasts for the Indian rupee, predicting a 3.2 percent drop in the next six months because rising oil costs will increase the import bill and double the nation’s current-account deficit. Goldman wasn’t part of Bloomberg’s survey.

The broad measure of trade that includes investment flows will widen to 3.5 percent of gross domestic product in the fiscal year ending in March from 1.5 percent the previous year, Goldman’s Tushar Poddar and Pranjul Bhandari wrote in a note.

Caught By Surprise

``The recent large move up in the dollar has caught us by surprise and appears to be driven by the run-up in oil prices,’’ wrote Mumbai-based Poddar and Bhandari, analysts at the world’s largest securities firm by market value. ``The rupee will continue to weaken.’’

Goldman changed its three-month, six-month and one-year forecasts for the rupee to 43.9, 44.1 and 42.2 from earlier estimates of 41, 40.3 and 38.9, respectively.

The current-account shortfall widened to $5.4 billion in the three months ended Dec. 31, from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31. That was after the country imported oil worth $71.8 billion in the year through March 31, 23.5 percent more than a year earlier.

Goldman Revises Rupee Forecast, Sees 3.2% Drop as Oil Rises

Goldman Sachs Group Inc. revised its forecasts for the Indian rupee, predicting a 3.2 percent drop in the next six months because rising oil costs will increase the import bill and double the nation’s current-account deficit.

The broad measure of trade that includes investment flows will widen to 3.5 percent of gross domestic product in the fiscal year ending in March, from 1.5 percent the previous year, Tushar Poddar and Pranjul Bhandari wrote in a note to clients. Goldman differs from all the other 21 economists surveyed by Bloomberg News who forecast a stronger rupee by year-end.

``The recent large move up in the dollar has caught us by surprise and appears to be driven by the run-up in oil prices,’’ wrote Mumbai-based Poddar and Bhandari, analysts at the world’s largest securities firm by market value. ``The rupee will continue to weaken.’’

The rupee traded at 42.73 per dollar as of 2:10 p.m. in Mumbai, according to data compiled by Bloomberg. Goldman changed its three-month, six-month and one-year forecasts for the rupee to 43.9, 44.1 and 42.2 from earlier estimates of 41, 40.3 and 38.9, respectively.

The median forecast of analysts and strategists surveyed by Bloomberg is for 40.5 at the end of June, 40.32 at the end of September and 39.5 at the end of 2008.

Current-Account

The rupee has declined 8 percent this year, making it the second-worst performer among the 10 most-traded Asian currencies excluding the yen. The rupee will also drop as overseas funds cut holdings of the nation’s assets, said the Goldman analysts.

India’s current-account shortfall widened to $5.4 billion in the three months ended Dec. 31 from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31. That was after the country imported oil worth $71.8 billion in the year through March 31, 23.5 percent more than a year earlier.

The share of oil imports out of the total ``will rise due to the forecasted oil price increases,’’ Poddar and Bhandari said. ``Looking at the sensitivities of import bill to oil prices suggests oil imports will grow by 85 percent in the fiscal year ending March.’’

Goldman forecasts oil to rise to as much as $141 a barrel in the second half of 2008. Crude for July delivery was at $131.79 a barrel on the New York Mercantile Exchange. It rose to an all-time high of $135.09 yesterday.

Inflation

Goldman has revised higher its estimate of annual inflation to 7.5 percent from 6.5 percent due to higher oil costs. India is Asia’s third-biggest energy consumer and imports 75 percent of its annual requirements.

``We expect monetary policy to remain on a tightening path,’’ Poddar and Bhandari said. The bias will be towards measures to absorb liquidity through reserve ratio increases rather than through rates.’’

India’s annual inflation rate held above the central bank’s 5.5 percent target for a third straight month, according to a government report today. Wholesale prices rose 7.82 percent in the week ended May 10 from a year earlier, after gaining 7.83 percent in the previous week.

The Reserve Bank of India last month twice asked lenders to set aside more funds, raising the so called cash reserve ratio to 8.25 percent, the highest since March 2001, from 7.5 percent.

MCX IPO gets Crisil’s highest rating

Rating agency Crisil on Thursday rated MCX initial public offering (IPO) at the highest grade of 5/5. The grade indicates that the fundamentals of the issue are strong, relative to other listed equity securities in India. However, the rating is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. It is neither a trading recommendation, nor a comment on the future market price or its suitability.

The exchange officials were not available for comment on when the IPO will hit the market. Mr Chetan Majithia, Head-Equities, Crisil Research, said apart from MCX, Acme Tele Power is the only company to receive the highest rating. Crisil has rated 24 IPOs till date, he added.
Return Indicators

According to the draft red herring prospectus (DRHP), the public issue is for 10 million equity shares of Rs 5 each. The IPO would comprise fresh issue of 6-million shares and another 4-million shares is to be sold by Financial Technologies (India) Ltd and Corporation Bank.

The company is expected to raise Rs 500 crore-Rs 600 crore with issue priced at Rs 500-600 per share. It was for the second time that MCX issue had been cleared by SEBI. Earlier, the company filed a DRHP way back in 2006, but the plans were later shelved.

MCX’s profitability and return indicators have been strong in the past 4 years. Growth is likely to moderate in the short-term due to the impact of the commodity transaction tax (CTT), Crisil said. However, in the medium term, MCX’s strong market position and continuous focus on product innovation would act as growth drivers.
Market leadership

Currently, MCX enjoys market leadership, with a share of 77 per cent in volumes traded on commodities exchanges in India. The company has consciously focused on commodities such as bullion, energy and metals, which are benchmarked to international prices, Crisil said. Of the company’s total turnover, bullion accounts for 53 per cent, metals for 28 per cent, energy for 16 per cent and agricultural commodities account for the rest.

For the year ended March 31, 2007, MCX reported a net profit of Rs 93 crore on a turnover of Rs 200 crore, compared with a net profit of Rs 37.50 crore and revenues of Rs 100 crore in the previous year.

Coke to focus more on non-traditional media

As an effort to get associated with the consumers, beverage giant CocaCola is planning to focus more non-traditional media such as Internet and outdoor activities in India.

"Non-traditional media which accounted for around 2 per cent of our promotional budget in 2004-05 has gone up to 12 per cent in 2007-08 and we would like to continue with this in the near future also," CocaCola India Vice President, Marketing Venkatesh Kini told reporters while announcing the national launch of its innovative 1.25 litre fridge pack.

CocaCola has launched the fridge pack in central and western India market in March 2008 and in a span of around two months the company has sold around five million bottles in the segment.

By seeing the success of the programme, it has now decided to launch it nationally, the company said.

As a part of the initiative to connect with the consumers the company wants its presence felt around all travel channels including highways, dhabas (fast-food joints) and on the back of trucks, in fact it has signed an agreement with the Truck Owners Welfare Society in this regard, Kinni said.

Although he refused to give details about the company’s plan in near future but said, "This would be an ongoing initiative of the firm which could extend to different forms of new media, other than print and TV".

India set to raise fuel price, inflation a worry

India is set to raise petrol and diesel prices to keep pace with crude oil’s record run but the move will fuel inflation, heaping more pressure on a government struggling to calm prices ahead of elections.

Crude oil’s surge has hurt consumers around the world and countries such as Indonesia are being forced to raise state-controlled prices. China said on Thursday it would retain controls on fuel prices, denying rumours about deregulation.

"A fuel price hike is inevitable," Indian Petroleum Secretary M.S. Srinivasan told reporters on Friday, adding that the oil ministry was also seeking tax changes to help Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp, which are forced to sell fuel below cost.

India sets the heavily discounted prices at which fuel is sold in order to help fight inflation and protect hundreds of millions of poor people from price shocks.

It partially compensates oil retailers by issuing oil bonds to them, which they can either hold as assets or sell in the market, while upstream companies share some of the burden.

The government, which faces a string of state elections this year and a national poll by May 2009, is worried that higher fuel prices will stoke inflation, already at its highest level in 3-½ years at nearly 8 percent.

It has strived to contain inflation with tough restrictions on exports of rice and duty cuts on some imports, while steel firms have been firmly told to freeze prices for three months.

But with oil above $130 a barrel and losses at state energy firms mounting, the government has little option but to raise retail fuel prices.

"We need to take immediate steps to save oil companies and I have discussed the issue with the prime minister last night," Oil Minister Murli Deora said. Later, though, he suggested that the government may take a week to act.

The cost of the crude oil India imports has doubled since June 2006 but, after a series of retail price revisions, fuel costs less now than it did two years ago. Prices were last raised in February when petrol was increased by 4.6 percent and diesel by 3.3 percent.

TOKEN REVISION "MEANINGLESS"

The chairman of the prime minister’s Economic Advisory Council, C. Rangarajan, said the government faced a big dilemma over raising fuel prices, but analysts said the government would not be able to skirt the issue.

"We expect a higher fuel price revision. A token revision will be meaningless. It’s completely getting out of hand," said Shubhada Rao, chief economist at Yes Bank in Mumbai.

"If you want fuel companies to survive, a certain amount of hike is difficult and unpalatable, but inevitable," she said.

HPCL’s director for finance, Bhaswar Mukherjee, said on Thursday that the company was in talks with bankers to raise its borrowing limit to bridge the gap between soaring input costs and frozen fuel prices.

Economists said oil firms faced liquidity problems as they had to keep paying their suppliers while government compensation in the form of bonds came with a lag.

"This practice of keeping domestic prices suppressed and not allowing the pass-through of global prices is basically becoming unsustainable," said A. Prasanna, an economist at ICICI Securities Primary Dealership.

The prospect of some relief for the state firms, which are suffering a combined revenue loss of 5.5 billion rupees ($128.5 million) a day, helped their battered shares rise on the Bombay Stock Exchange.

IOC was up 3.7 percent, HPCL was up 4.7 percent and BPCL was up 5.1 percent at 0641 GMT, while the benchmark index had risen only 0.35 percent. The refiners’ shares have fallen by a third to a half this year.

Revised inflation tops 8 pct, seen going higher

India’s annual inflation rate remained at 7.8 percent in early May, data showed on Friday, but analysts were more interested in a revision that took the figure above 8 percent in March for the first time in 3-½ years.

The government said it would take more fiscal steps if needed to calm price pressures and an adviser to the prime minister said inflation would ease in the next three to four months, but analysts said an imminent fuel price rise could push it closer to double digits.

Preliminary data for May 10 showed the wholesale price index rose an annual 7.82 percent, close to the previous week’s rise of 7.83 percent and market forecasts.

But the reading for March 15 was revised sharply upwards to 8.02 percent from 6.68 percent, making it the highest inflation rate since September 2004 and fuelling expectations the central bank would take more steps to contain prices. "It just says we are dangerously close to 10 percent," said Shubhada Rao, chief economist at Yes Bank in Mumbai.

Indian inflation figures are frequently revised upwards. But at the end of 2007 revisions were mostly just 0.1 to 0.2 percentage points, in January they had jumped to 0.5 percentage points and in early March data they hit 1.86 percentage points.

The central bank has not raised interest rates in over a year to avoid slowing the economy too rapidly. Instead it has tightened cash conditions to contain surplus inflation-stoking funds in the system, but surging prices, particularly in food and metals, are making its job difficult.

"Do we live with high inflation or see growth prospects jeopardised in the short and medium term?" Rao said.

The 10-year federal bond yield initially edged up on the data before retreating to its pre-data level of 8.02 percent, while the rupee gained to 42.84/85 per dollar from Thursday’s 42.96/97 close.

FUEL PRICES

Policy makers are debating whether to increase retail fuel prices to stem losses at state-run oil companies, which are selling petrol and diesel below market rates.

Oil prices have surged to record highs above $130 a barrel but the government sets heavily discounted retail prices to help fight inflation and protect the poor.

"With a fuel price hike in the offing, inflation is headed up and we may see inflation hit 8.5 percent by June," said A. Prasanna, am economist at ICICI Securities.

"We expect the central bank to take further liquidity tightening measures to control inflation."

The central bank left its key lending rate at 7.75 percent at a rate review in April but raised its cash reserve ratio, the proportion of funds banks must deposit with it, by 25 basis points to 8.25 percent.

That increase takes effect on Saturday, and many economists expect the central bank to tighten again in coming months.

Economists say there is little the central bank can do to tame rising prices, which stem in part from supply constraints and overseas price increases, although traders say it intervened on the currency market this week to stop the rupee from falling too far against the dollar and inflating import prices.

For its part, the government has curbed some exports, cut a series of import duties and put pressure on cement and steel companies to keep prices down.

"Please be patient. We are watching the situation carefully. More steps will be taken as and when needed," Finance Minister Palaniappan Chidambaram told reporters.

C. Rangarajan, chairman of the prime minister’s economic advisory council, said inflation would remain high for another three to four months but good rains in the June-September monsoon season, as well as grain purchases, would help dampen pressures.

"It may reach even 5.5 percent by the end of the fiscal year," Rangarajan said, referring to the year-end in March 2009.

The wholesale price index is more closely watched than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.

India gold demand low, buyers await falls

Indian gold demand remained weak on Friday due to high prices and on absence of any festivals, dealers said.

"People are now very cautious when they come to buy gold jewellery," said Ashwin Choksi, partner, Jamnadas M. Choksi Jewellers.

Buyers are also waiting to see if the rupee, that had weakened against the dollar, would recover further, helping ease local gold prices, he said.

Most of India’s gold is imported and a weak rupee pushes prices of the metal higher.

Traders are also hoping for good monsoon rains to push up demand for gold, said a dealer with a large private bank.

India’s gold demand may remain sluggish for the next few months and is expected to revive in September, when festivals commence, he said.

Purchases for jewellery and investment fell 50 percent in the first quarter of 2008 in India due to high prices, the World Gold Council has said. India’s jewellery and investment demand stood at 71 tonnes and 31 tonnes, respectively.

Indian shares fall 1.5 pct on inflation worries

Indian shares fell 1.5 percent on Friday to their lowest close in five weeks as inflation worries mounted after a government official said an increase in retail fuel prices was inevitable.

Annual inflation topped 8 percent in March for the first time in 3-½ years, revised data showed on Friday, and analysts said the looming fuel price rise could push it closer to double digits.

"Inflation and crude are key deterrents," said Hitesh Agarwal, head of research at Angel Broking. "If the government raises fuel prices, it adds to inflation. If it does not the fiscal situation deteriorates."

India imports 70 percent of its oil consumption. The cost of the crude oil India imports has doubled since June 2006 but after a series of retail price revisions fuel costs less now than it did two years ago.

Petrochemical giant and refiner Reliance Industries led the decline, losing 2.4 percent to 2,554.80 rupees, its lowest close since May 14.

Tobacco maker ITC dropped 4.2 percent to 213.60 rupees, its worst close in more than three weeks, after its quarterly earnings missed market expectations.

The 30-share BSE index ended down 1.52 percent, or 257.47 points, at 16,649.64 points, its lowest close since April 17, with 25 components in the red. It had been up 0.9 percent in early deals.

The benchmark fell 4.5 percent in the week and is down nearly 18 percent in 2008.

In the broader market, losers overwhelmed gainers 1,925 to 790 on volume of 350 million shares.

Financial stocks were weighed down by concerns the central bank may again tighten monetary policy to rein in inflation.

Top lender State Bank of India fell 2.1 percent to 1,573.25 rupees and rival ICICI Bank fell 1.9 percent to 863.75 rupees.

Top telecoms firm Bharti Airtel, which is in talks with South Africa’s MTN, bucked the trend rising 2.4 percent to 836.30 rupees after smaller rival Idea Cellular sold a minority stake in a unit for $640 million.

Shares in state-run refiners Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp rose between 3.1 and 3.8 percent in anticipation of a fuel price increase.

The refiners have been under pressure because they are forced to sell fuel to retail users at state-set low prices while global oil prices have climbed to record highs.

The 50-share NSE index ended 1.6 percent lower at 4,946.55 points.

Elsewhere in the region, Karachi’s 100-Share index dropped 4.52 percent to 13,011.74 and Colombo’s All-Share index ended 0.51 percent lower at 2,585.78.

STOCKS THAT MOVED

* Explorer Cairn India, a unit of UK’s Cairn Energy, fell 4 percent to 306.45 rupees after several brokerages cut their rating saying the firm was unlikely to announce any large discovery in the next six months and high oil prices would drive up rig demand.

* Idea Cellular ended up 0.14 percent at 107.50 rupees after mobile operator said U.S.-based Providence Equity Partners would a buy a fifth in a unit for $640 million.

TOP 3 BY VOLUME

* Ispat Industries on 35.7 million shares

* IFCI on 16.8 million shares

* Aishwarya Telecom on 11.2 million shares

Indian Rupee Has Fifth Week of Losses on Rising Crude Oil Costs

India’s rupee declined for the fifth week, the worst run in almost two years, as record crude oil costs spurred demand for dollars needed to buy the commodity.

The local currency fell to the lowest since April 2007 this week as companies such as Indian Oil Corp., the nation’s largest refiner, paid more for raw materials. Higher oil costs may slow growth of Asia’s third-largest economy, which depends on imports to meet three-quarters of its annual energy needs.

``The pressure on the rupee continues because refiners are looking to cover dollar needs arising in the short term,’’ said Rohan Lasrado, a foreign-exchange trader at HDFC Bank Ltd. in Mumbai. ``Adding to the rupee’s worries will be the inconsistent dollar supply.’’

The rupee declined 0.5 percent this week to 42.705 versus the dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It may fall to 43.25 in next few days, Lasrado said.

The rupee is the second-worst performer this year among Asia’s 10 most-traded currencies, excluding the yen.

The local currency will rise by almost 9 percent through the end of the year as the central bank raises borrowing costs by July to fight inflation that’s at the fastest pace in 3 1/2 years, Fortis Bank SA said.

The currency will rebound from its lowest in 13 months as the Reserve Bank of India increases the repurchase rate to 8 percent from 7.75 percent before its next meeting on July 29, Joseph Tan, Fortis Bank’s Singapore-based strategist, said in an interview.

Tightening Policy

``Economic growth is pretty much intact, but inflation is a new threat and there is no scope for the central bank to have a neutral monetary policy approach,’’ Tan said. ``I am leaning toward believing that the central bank will tighten monetary policy further, despite what the economy is going through, and will also use the exchange rate.’’

Fortis predicts the rupee will rise to as high as 39.4 at the end of this year. It is among the 21 respondents in a Bloomberg News survey, all of whom predict that the currency will rise in 2008.

Goldman Sachs Group Inc. revised its forecasts for the Indian rupee, predicting a 3.2 percent drop in the next six months because rising oil costs will increase the import bill and double the nation’s current-account deficit. Goldman wasn’t part of Bloomberg’s survey.

The broad measure of trade that includes investment flows will widen to 3.5 percent of gross domestic product in the fiscal year ending in March from 1.5 percent the previous year, Goldman’s Tushar Poddar and Pranjul Bhandari wrote in a note.

Caught By Surprise

``The recent large move up in the dollar has caught us by surprise and appears to be driven by the run-up in oil prices,’’ wrote Mumbai-based Poddar and Bhandari, analysts at the world’s largest securities firm by market value. ``The rupee will continue to weaken.’’

Goldman changed its three-month, six-month and one-year forecasts for the rupee to 43.9, 44.1 and 42.2 from earlier estimates of 41, 40.3 and 38.9, respectively.

The current-account shortfall widened to $5.4 billion in the three months ended Dec. 31, from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31. That was after the country imported oil worth $71.8 billion in the year through March 31, 23.5 percent more than a year earlier.

Angel Broking launches mobile service

Angel Broking has launched ‘Mobile Connect’ service for cell phone users. Those who log on to the mobile connect service can get real time equity, F&O, commodities and mutual funds data on a single platform.

The clients of the broking firm can access their back office data, which can be even downloaded for use, on the cell phone any time of the day.

The mobile connect is available on all Java-enabled GSM handsets with GPRS connectivity.

Mobile connect will also provide market news, corporate developments, commodity news, top 10 local and global indices among other capital markets related news.

Petroleum ministry wants Rs 10 per litre hike in petrol price

The petroleum ministry has sought a Rs 10 per litre increase in petrol and Rs 5 a litre hike in diesel prices, along with a cut in customs and excise duties, to offset the impact of surge in crude oil prices that have touched $135 per barrel.

"The situation is getting to be alarming. We need to stem the rot at the beginning," petroleum secretary M S Srinivasan told reporters after a stock-taking meeting with the heads of public sector oil companies.

Srinivasan, however, said the Cabinet meeting scheduled for Friday will not consider raising fuel prices as the subject needed some more preparation and a note would be moved to the authorities in a day or two.

"We expect a decision in 3-4 days time," he said, adding that the ministry was suggesting a combination of price hike and duty cut to lower the projected Rs 2,00,000 crore (Rs 2,000 billion) under-realisation on sale of petrol, diesel, LPG and kerosene.

"The price hike is inevitable," he said, but refused to say what quantum of hike the ministry was seeking.

Srinivasan said the ministry was seeking a lowering of customs duty on crude from 5 per cent to zero and import duty on petrol and diesel from 7.5 per cent to 2.5 per cent.

Besides, the ministry was also seeking cut on excise duty on the two products.

Petroleum Minister Murli Deora said he had discussed the situation with the Prime Minister Manmohan Singh on Thursday evening and will raise the issue again on Friday to seek and early meeting of the Cabinet.

"We are trying to see that some action is taken immediately," Deora said

Choosing between insurance and investment products

If you have plans to invest in an insurance product, are you confused about whether to take a pure risk-cover (a term plan) or an investment (ULIP)-oriented one? Well, at the initial stages of career when your salary has just inched into to the taxable slab, you can’t take chances because every penny matters. Risk profile and investment objectives differ with each person. You have to do a bit of analysis to see if the ‘combo’ product offered by your insurance agent fits your profile.

Two options At the age of 25-35, if you’ve plans to acquire or have already acquired assets such as a home or a car, your financial commitments may be high. Yet you may want to invest for the future and set up a risk cover on your life so that your family is taken care of, in the event of your demise. With the monthly surplus oscillating, you can’t take up a high financial commitment every month or even every year. This makes it necessary for you to choose your investment/insurance option cautiously so that it doesn’t pinch your pocket later.You can achieve your objective through two means. You can take exposure to a ULIP (a unit linked insurance plan) that combines a life cover with investments in stocks and bonds. Or you can invest separately in a term policy and mutual funds of your choice to meet your two key needs. A cost-benefit analysis should help you decide on the right option.

Insurance

Insurance companies offer a multitude of variants to the basic life insurance product. A life insurance policy could be a term policy or endowment policy or an ULIP. A term policy is a basic policy that offers a risk cover based on the premium paid by the policy holder. In the event of death of the insured during the term, his family gets the sum assured on the policy. You stand to receive nothing if the risk (in this case, death) does not materialise. A term policy could be the cheapest insurance option for youngsters. An endowment policy differs from the above on grounds that if the insured survives the term, he would be given a sum assured plus a bonus for the investment he made over the years. But do note that the premium on endowment policies is much higher than on a pure term policy because of the savings element.

Mutual Funds

If you take the term policy route, you may like take care of your investments though mutual funds. Mutual fund houses offer a host of open-end funds which can be plain vanilla or focussing on specific themes and market cap segments. Low costs (annual charges of 2.5 per cent or less), transparency an good liquidity (you can sell units whenever you want) are the key advantages of mutual fund schemes.

ULIPs

An ULIP (Unit Linked Insurance Plan) is an option that combines the features of a mutual fund and an insurance scheme. The premium paid by you would entitle you for a life cover and for returns from a portfolio created with your premium payments. The insurer here pools the premium collected from the policy holders and invests it in the stock or debt markets. The investors are also given the option of choosing between debt, equity or a combination of both. Though ULIPs might look like an attractive option, the proportionally lower allocation for investment in the initial years of the policy due to expenses and the relatively high premia, are their key limitations.

The annual premium on an ULIP would typically be several times that on a pure term policy because of the investment component. Based on the specific product, a good portion of the first year premium could also be deducted towards charges — initial administration charge, regular administration charge, policy administration fee and fund management charge, which be as high as 25-30 per cent in the first year and fall from the second year. These reduce the corpus invested on your behalf and moderate the final returns. ULIPs usually have a lock-in period of a minimum three years. This limits your ability to redeem units for a financial emergency. Investors also need to compare features across products before zeroing down on a specific investment option.

So don’t just commit yourself to a hefty premium because your insurance agent pushed you. Sign on the dotted line, only after you do your homework.

Fuel price hike not on cabinet agenda - oil minister

The issue of whether to raise domestic fuel prices in the face of surging global crude prices is not on the agenda for Friday’s cabinet meeting, Oil Minister Murli Deora said.

"We need to take immediate steps to save oil companies and I have discussed the issue with the prime minister last night," Deora told reporters. "We are trying to see that some action is taken immediately."

Earlier, Petroleum Secretary M.S. Srinivasan said an increase in domestic fuel prices was inevitable and the government would work out the size of the rise by Friday evening.

Any rise in prices could be politically damaging to a government facing crucial state elections over the next few months.

The cost of the crude oil India imports has doubled since June 2006 but after a series of retail price revisions fuel costs less now than it did two years ago.

Nifty market Find crucial support @ 5000

• 
  
  As shown in the daily chart, the Nifty has just closed above the lower end of the Trend line (5010 – 5000).If it breaks 5010 – 5000 crucial support levels then it may test 4980 – 4940 levels. The immediate resistance remains at 5050 – 5060 levels. On closing basis, if Nifty closes below lowerside Trendline then we see 4800 in coming days.


• 
  
  At 9:56 am, the Sensex was up 125 points at 17,031 and the Nifty up 29 points at 5,054. The CNX Midcap rose 54 points at 6,893.


• 
  
  At 10:40 am, the Sensex was up 73 points at 16,984 and the Nifty up 17 points at 5,042.


• 
  
  5,000 is an important psychological level 5,049-5,050 is not a big deal or 4,900 is not a big deal. But somewhere around those zones you need to find support. So lets see over the next few days whether we can get away with holding those kind of levels because that will be very crucial in determining where the market could be headed from here. The next big move could be decided by the hold of 5,000 or not.


• 
  
  One another take is if 5,000 actually holds out in this kind of an environment it is a very bullish situation for the market because the environment is quite bad right now for equities. Even the bulls will admit that the kind of news flow we are getting is not good and conducive for out performance at all, so if with this kind of news flow you hold out 5,000 Nifty then the market is showing a lot of strength.


• 
  
  So the fact that we are at 17,000 with all that is happening around us or 5,000 with all that is going on is pretty bullish. So if we get away with 5,000 it would be great.

Indian Rupee to Climb 9%, Interest Rates to Rise, Fortis Says

India’s rupee will rise 9 percent through to the end of the year as the central bank raises borrowing costs by July to fight inflation at the fastest pace in 3 1/2 years, Fortis Bank SA said.

The currency will rebound from its lowest in 13 months as the Reserve Bank of India increases the repurchase rate to 8 percent from 7.75 percent before its next meeting on July 29, according to Fortis Bank’s Joseph Tan. The bank is among all 21 respondents in a Bloomberg News survey predicting the currency to rise in 2008. The rupee is the second-worst performer this year among the 10 most-traded currencies excluding the yen.

``Economic growth is pretty much intact but inflation is a new threat and there is no scope for the central bank to have a neutral monetary policy approach,’’ Fortis Bank’s Singapore- based strategist Tan said in an interview. ``I am leaning towards believing that the central bank will tighten monetary policy further, despite what the economy is going through, and will also use the exchange rate.’’

The rupee dropped to as low as 43.21 against the dollar yesterday, the lowest since April 3, 2007, before closing at 42.965 in Mumbai, according to data compiled by Bloomberg. It may rise to as high as 39.4 at the end of this year, Fortis predicts.

Inflation accelerated to 7.83 percent in the week ended May 3, the fastest pace since November 2004, as crude oil rose to a record. The central bank last month increased its inflation estimate to 5.5 percent for the year to March 31, from 5 percent.

India’s Growth

``Economic growth should be the main concern only for the U.S. and for the rest of Asia should be inflation,’’ Tan said.

Growth may decelerate to about 8 percent, the slowest since 2005, in the fiscal year that started April 1, according to Finance Minister Palaniappan Chidambaram. The economy expanded 8.7 percent in the 12 months through March, slower than the 9.6 percent growth in the previous year.

India expanded an average 8.7 percent a year since 2003, second only to China among the world’s 20 largest economies. The central bank forecast the $912 billion economy will grow as much as 8.5 percent in the 12 months through March 2009.

The Reserve Bank last month raised for a second time this year the percentage of cash banks must set aside to cover deposits to 8.25 percent, beginning tomorrow, the highest since March 2001. Tan expects the measure, known as the cash reserve ratio, to be raised again by July.

The rupee’s rise will be supported by the easing global credit market slump prompting investments in emerging-market economies, Tan said.

``We must understand that we had more of a crisis of confidence more than a liquidity problem,’’ Tan said.

The world’s largest banks and securities firms have reported more than $300 billion of writedowns and credit losses from defaults in U.S. subprime mortgages.

Oil inches back from profit-taking after $135-high

Oil rose on Friday, recovering from a strong bout of profit-taking in the previous session that pulled prices back more than 3 percent from the record high above $135 a barrel.

U.S. light crude for July delivery was up 44 cents at $131.25 a barrel by 0334 GMT. It surged to $135.09 on Thursday before slumping to settle at $130.81, the first time in five sessions that it settled lower.

London Brent crude was up 74 cents at $131.25.

"Supplies not growing is still the main thing. OPEC can turn the tap but they cannot do it forever, and non-OPEC growth is not enough," said Tony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.

"But demand is important too, and it is not falling as much as expected," he added.

Oil production from countries outside OPEC is stagnating and forecast to remain below 50 million barrels per day this year, at 49.56 million bpd, lower than earlier forecast, a Reuters survey of 12 analysts showed on Thursday.

The failure by non-OPEC producers to increase output has helped drive oil prices up more than a third since the beginning of the year.

It has also sent long-term prices even higher at close to $150 a barrel, as concerns mount that supplies will not be enough to meet demand from developing countries in a few years’ time.

Weekly U.S. inventories data released this week also hiked short-term concerns, with crude oil stocks unexpectedly down by a large 5.4 million barrels, gasoline inventories also down by 800,000 barrels, and a lower-than-forecast 700,000-barrel rise in distillates stocks.

OPEC Secretary-General Abdullah al-Badri on Thursday repeated the group’s stance that it can do nothing to lower oil prices in a "crazy" market, blaming record prices on factors such as geopolitical tensions, speculation and the weak dollar.

The cartel’s view seemed shared by the chief executive of Royal Dutch Shell Plc, Jeroen van der Veer, who told Reuters Television that oil prices are rising due to market sentiment rather than a shortage of supply.

A stronger dollar on Thursday also contributed to lower oil prices as investors have increasingly been using oil as a hedge against the falling currency, setting off inverse trends in the dollar and oil.

The greenback steadied on Friday, but the currency stayed in sight of a one-month low against the euro on worries that inflation could lead to a deeper U.S. slowdown.

Rupee edges higher on firm Asian stock cues

The Indian rupee backed away from 13-month lows on Friday as gains in Asian shares raise hopes of capital inflows to the market, with traders also saying the central bank could step in to check the currency’s fall.

* At 9:10 a.m. the partially convertible Indian rupee was at 42.87/88 per dollar, below 42.96/97 on Thursday and backing further away from an intraday trough of 43.21, its lowest since early April 2007.

* Asian stocks edged higher on Friday, helped by a slight dip in oil prices from record highs, and government bond yields climbed on fears of rising inflation.

* The central bank was seen selling dollars around the rupee’s lows on Thursday, dealers said, estimating its sold $100 million to $150 million. If so, it would be the first time the central bank had sold dollars since March, according to data.

10 rules for a profitable investment portfolio

Asset allocation - the way you divide your capital among different investment options - accounts for more than 90 per cent of your portfolio’s overall return. Which is why it’s so very important to get the asset allocation right in your investment portfolio.

The portfolio’s the thing

Get used to the fact that, at any one time, a few parts of your portfolio will be doing terribly. Over a long enough time period, each and every component will have had a bad year or two. This is normal asset-class behaviour and cannot be avoided. So, focus on the performance of the portfolio as a whole, not the individual parts.

In asset allocation, job one is to pick an appropriate stock / bond mix

This is determined primarily by your risk tolerance. Do not bite off more risk than you can chew - a classic beginner’s mistake. Calmly and coolly planning for a market downturn is quite different from actually living through one, in the same way that crashing a flight simulator is different from crashing a real airplane. Time horizon is also important. Do not invest any money in stocks that you will need in less than five years, and do not invest more than half unless you will not need the money for at least a decade.

Allocate your stocks widely among many different asset classes

Your biggest exposure should be to the broad domestic stock market. Use small stocks, foreign stocks, and real estate investment trusts (REITs) in smaller amounts.

It makes a difference where you put things

Some asset classes, such as large foreign and domestic stocks, and domestic small stocks, are available in tax-efficient vehicles; put these in your taxable accounts. Other asset classes, particularly value stocks, REITs, and junk bonds, are highly tax-inefficient. Put these only in your tax-sheltered retirement accounts.

Don’t rebalance your portfolio too often

The benefit of rebalancing back to your policy allocation is that it forces you to sell high and buy low. Asset classes tend to trend up or down for up to a few years. Give this process a chance to work; you should not rebalance more often than once per year.

These rules apply to tax-sheltered accounts. In taxable accounts, rebalance only with outflows, inflows, and mandatory distributions; here, the rebalancing benefit is usually outweighed by the tax consequences.

The recent past is out to get you

Human beings tend to be most impressed with what has happened in the past several years and wrongly assume that it will continue forever. It never does. The fact that large U.S. growth stocks performed extremely well in the late 1990s does not make it more likely that this will continue; in fact, it makes it slightly less likely. The performance of different kinds of stocks and bonds is best evaluated only over the long haul.

If you want to be entertained, take up sky diving

Investors like to have fashionable portfolios, invested in the era’s most exciting technologies. Resist the temptation. There is an inverse correlation between an investment’s entertainment value and its expected return; IPOs, on average, have low returns, and boring stocks tend to reward the most.

An asset allocation that maximizes your chances of getting rich also maximizes your chances of becoming poor

Your best chance of making yourself fabulously wealthy through investing is to buy a few small stocks with good growth possibilities; you just might find the next Microsoft. Of course, it is far more likely that you will lose most of your money this way. On the other hand, although you cannot achieve extremely high returns with a diversified portfolio, it is the best way to avoid a retirement diet of cat food.

There is nothing new in investing

Knowledge of financial history is the most potent weapon in the investor’s armamentarium. Since the dawn of stock broking in the seventeenth century, every generation has experienced its own version of tech bust. The recent dot-com catastrophe was just one more act in finance’s longest running comedy. Be able to say to yourself, ’I’ve seen this movie before, and I think I know how it ends.’ The only thing that’s new is the history you haven’t read.

A portfolio of 15 to 30 stocks does not provide adequate diversification

The myth that it does results from a misinterpretation of modern financial theory. While it is true that a 30-stock portfolio has no more short-term volatility than the market, there is more to risk than day-to-day fluctuations. The real risk is not that short-term volatility will be too high, but that long-term return will be too low. The only way of minimizing this risk is to own thousands of stocks in many nations. Or a few index funds.

Mkts under selling pressure; Nifty holds above 5K

The markets have recovered some early trade losses following recovery in Asian markets but still witnessing huge selling pressure The Sensex is hovering around its 17000 mark and the Nifty maintained above 5000. Selling continued in banking, auto, capital goods, realty, power, oil, FMCG and metal stocks. Market breadth has improved a bit but still weak. Midcap and small cap stocks also recovered smartly but still in red.

At 11:15 am, the Sensex was down 257 points at 16,986 and the Nifty down 72 points at 5,045. About 1323 shares have advanced, 1590 shares declined, and 190 shares are unchanged.

Tata Motors, Reliance Infra, ICICI Bank, Suzlon Energy and BPCL were top losers while TCS, Satyam, Infosys, Cairn India and Dr Reddy’s Labs gainers.

BSE Bankex lost over 2%; Auto and Capital Goods down close to 2%; Power and Realty down over 1.5%. BSE Oil & Gas, Metal and FMCG slipped over 1%.

However, major technology stocks were on buyer’s radar barring Wipro, MphasiS and HCL Tech. BSE IT Index up marginally by 0.22%. The Indian Rupee was trading around 43.15 per dollar.

Tea stocks like Harrisons Malay, Jayshree Tea, Ledo Tea and Tata Coffee, Bombay Burmah, CCL Products, Asian Tea, Dhunseri Tea and Goodricke Group were witnessing buying interest.

Amonst the small cap stocks, KGN Industries resumed its trading again today and locked at 5% upper circuit after yesterday’s unrealistic trading price. Sylph Technologies was up 65,525% at Rs 525 as against earlier close of 80 paise. There is no circuit filter for the stock.

Infosys sees higher wages to keep staff

Infosys Technologies Ltd, India’s No. 2 software services exporter, is seeing greater competition for talent, and expects higher salaries to help prevent attrition, a top company official said on Wednesday.

Infosys, which plans to add 25,000 employees in 2008/09, has made 18,000 offers to students at engineering colleges, and will also hire about 330 business school graduates, Nandita Gurjar, group head of human resources, told reporters.

"At business schools, we are competing with financial services firms -- they are the ’in thing’ now," she said.

"But at engineering colleges, where we compete with other software firms, we get in at Day Zero or Day One."

The Bangalore-based firm, which trails leader Tata Consultancy Services, has said wage increases of 11-13 percent will impact margins by 2.3 percent in the June quarter.

But higher wages were essential to retain talent in an industry where attrition levels are at 14-16 percent, she said.

"Our attrition rate is 13.4 percent, and we’d like to get it back to single digits -- the level we were at in 2004.

"But that will be hard," Gurjar said.

India’s $64 billion software services sector has been hit by slower growth at battered banks and financial firms, sectors that contribute most to revenues.

But that has not affected Infosys’ compensation strategy, Gurjar said.

"We are in fact, offering bigger raises than others, whose wage increases are in the single digits," she said.

"We haven’t changed our strategy because of the slowdown, as we need to hire and retain the best talent."

Oil knocks rupee past 43/dollar to 13-month low

The partially convertible rupee weakened past 43 per dollar to its lowest level in 13 months in opening deals on Thursday, as record oil prices raised worries of a widening trade deficit.

As long as the currency pair holds above Rs 43, there would be the possibility of a move higher to Rs 43.53 or Rs 43.82. A decline below Rs 42 would imply that the near term trend has turned negative and that the currency pair could move towards Rs 41.6 or Rs 41.2.

Supports – 42.2, 41.9, 41.3

Resistances –, 43.2, 43.5

Indian Stock Mkts crack Sensex below 17K

The markets have opened on a weak note following negative cues from Asian and US markets as Crude has hit a new all time high of USD 135 a barrel. Selling in banking, metal, realty and auto stocks is also putting pressure. The Sensex dipped below its psychological level of 17000 while Nifty is still holding above 5000 mark.Market breadth is unhelpful. Midcap and small cap stocks also caught up in negative terrain.

At 9:56 am, the Sensex was down 185 points at 17,057 and the Nifty down 51 points at 5,066. The CNX Midcap fell 55 points at 6,901.

BPCL, PNB, M&M, Unitech, HDFC Bank, Tata Motors, L&T, Nalco, ICICI Bank, Tata Comm, Rel Infra, ONGC and HUL were gainers while Satyam, Infosys, Cairn and Ambuja Cements gainers.

Asian markets were trading lower following weak US markets cues. Shanghai Composite fell 1.42% or 50.48 points at 3,493.71. Hang Seng slipped 2.435 or 617.45 points at 24,842.84. Nikkei 225 Average fell 0.91% or 126.42 points at 13,799.88. Jakarta Composite was down 1.05% or 26.08 points at 2,468.63. Straits Times fell 40.57 points or 1.27% at 3,156.33. Seoul Composite slipped 1.47% or 27.24 points at 1,820.27. Taiwan Weighted lost 71.30 points or 0.79% at 8,944.27.

US markets tumbled, posting their biggest losses in two weeks. The Federal Reserve signaled it is done cutting interest rates and record oil prices threatened to reduce profits at consumer companies. The Dow tumbled 227.49 points, or 1.77%, to 12,601.19. The Standard & Poor’s 500 index declined 22.69 points, or 1.61%, to 1,390.71, while the Nasdaq composite index plunged 43.99 points, or 1.77%, to 2,448.27.

Crude oil shot up by 4% and hit a high of USD 135 per barrel on the Nymex

India's consumer goods firms hike prices on rising costs

India’s consumer goods companies are hiking prices across categories as they battle rising costs of commodities such as steel, copper and oil, which are inputs for their products, company officials said on Wednesday.

Videocon Industries, Mirc Electronics, which owns the Onida brand, Whirlpool of India and Samsung India are among home appliance makers who have either raised prices or plan to do it in coming weeks.

"We are taking the opportunity of price increases but there will be a limitation to what extent you can pass on to the consumer because of competitive pressures and consumer purchasing patterns," Tamal Kanti Saha, vice president, sales at Whirlpool.

India’s growing middle-class and rising incomes have attracted consumer goods companies, but rising inflation could hurt consumer spending and put pressure on profit margins.

Crude prices have increased about 35 percent so far this year and copper is up around 24 percent. Global steel prices rose 40 percent since the beginning of the year.

Import costs are also rising with India’s weakening rupee that hit a 13-month low of 42.92 last Friday. The inflation rate rose to 7.83 percent in the 12 months to May 3, the highest since November 2004.

But, price increases alone may not suffice, officials say.

"The current situation might force companies to innovate better and squeeze out inefficiencies," Ashish Nanda, Partner Business Advisory Services, Ernst & Young said.

"Because you’re in an inflationary environment you cannot necessarily pass on the price increase to the consumer. Beyond a point of time the consumer is going to stop accepting that."

Whirlpool plans to hike prices across categories between 2-5 percent in July and said in April it will hike prices 2-3 percent in April-June.

Mirc Electronics plans to hike prices 5-7 percent in the next few days while Videocon Industries will increase prices of its consumer durables by 5-10 percent in two weeks.

Samsung India, owned by Korea’s Samsung Electronics Co Ltd is holding prices, but hiked refrigerator prices 2-3 percent in March, said Ruchika Batra, General Manager-Corporate Communications of Samsung South-West Asia Headquarters.

"It’s the peak selling period in air-conditioners. We don’t want to disturb the consumer sentiment," she said.

India’s consumer electronics market is expected to grow 32.2 percent annually between 2007-2012, touching almost 2 trillion rupees, according to Euromonitor International’s estimates.

"In the longer term perspective, the overall growth story is still good for the key players who are investing in strong brands," Ernst & Young’s Nanda said.

India's Rupee Weakens Past 43 a Dollar as Oil Increases Costs

India’s rupee weakened past 43 a dollar for the first time in more than 13 months as crude oil’s advance to an all-time high increased demand for dollars needed to buy the commodity.

The rupee fell for a third day on concern the 40 percent increase in oil prices this year will slow growth in Asia’s third-largest economy and widen the nation’s current-account deficit from last year’s record. The local currency is the second-worst performer this year among the 10 most-traded Asian currencies excluding the yen.

``There are fundamental reasons for the rupee to fall given our dependence on imports to meet energy requirements,’’ said Ravindra Babu, a currency trader at state-owned Andhra Bank in Mumbai. ``There are growing concerns about the current-account deficit widening which may cause the rupee to decline further.’’

The rupee dropped as much as 0.9 percent to 43.21 against the dollar, the lowest intraday since April 3, 2007, before trading at 43.1525 as of 10:06 a.m. in Mumbai, according to data compiled by Bloomberg. It may fall to 43.50 in the next few weeks, Babu said.

The rupee’s decline gathered pace after a government report on May 12 showed the annual pace of growth in factory output more than halved to 3 percent in March from 8.6 percent the previous month.

Paring Advance

The local currency is headed for a fifth weekly loss and has slid 8.6 percent this year, erasing more than two-thirds of its 12.3 percent gain last year. India imported oil worth $71.8 billion in the 12 months through March, 23.5 percent more than a year earlier.

The current-account shortfall widened to $5.4 billion in the three months ended Dec. 31 from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31.

Growth in Asia’s third-biggest economy may decelerate to about 8 percent, the slowest since 2005, in the fiscal year that started April 1, according to Finance Minister Palaniappan Chidambaram. The economy expanded 8.7 percent in the 12 months through March, slower than the 9.6 percent growth in the previous year.

Oil hits high above $135 after U.S. crude stock fall

Oil galloped to a high above $135 on Thursday, extending this month’s near 20 percent rally after a sharp drop in U.S. crude stocks and the weakening U.S. dollar triggered short covering by investors.

The climb in prices, which have marked new record highs in 10 of their last 14 sessions, has set off alarm bells around the world, although OPEC has maintained that the market remains well supplied with crude and that prices are beyond its control.

The U.S. July crude contract extended Wednesday’s more than $4 surge to reach a high of $135.04 early on Thursday. By 0333 GMT it was trading up $1.41 or 1 percent at $134.58 a barrel, taking gains so far this year to over 40 percent.

"Prices are going in one direction. They are up all the way," said Gerard Rigby of Fuel First Consulting in Sydney. "The primary mover is the fall in the U.S. oil stocks, and this started a series of short covering."

U.S. crude stocks fell 5.4 million barrels to 320.4 million barrels last week, counter to expectations of a small rise in inventories, intensifying concerns about supplies in the world’s biggest consumer just ahead of the start of summer.

The drop was caused by a fall in imports to their lowest in five weeks and a pick-up in demand from refineries, the Energy Information Administration said.

U.S. gasoline supplies fell 800,000 barrels against a 700,000-barrel build forecast, while stocks of distillates -- which has been one of the market’s biggest driver this month -- rose 700,000 barrels but were 12 percent below last year.

Heating oil for June delivery reached a fresh record high of $3.9704 a gallon on Thursday, having climbed nearly 25 percent since the start of this month Heating oil for June delivery reached a fresh record high of $3.9704 a gallon on Globex on Thursday. It settled 13.34 cents or 3.53 percent higher at a record $3.9084 a gallon on Wednesday.

Investors have been drawn into oil by a weak U.S. dollar, which has made commodities relatively cheap for holders of other currencies.

The dollar fell to a one-month low versus the euro on Wednesday after the Federal Reserve cut its 2008 growth forecast and warned of higher unemployment, reducing prospects of an interest rate hike later this year.

The market has been convinced to buy oil amid a series of bullish forecasts, while the outlook for the dollar is weak, traders said.

Investment bank Goldman Sachs has said it thinks oil prices will average $141 a barrel in the second half of this year and could top $200 a barrel by 2010.

U.S. investor Warren Buffett, the world’s richest person, said on Wednesday he expects the dollar to keep falling as policies needed to correct the slide had yet to be implemented.

U.S. Energy Secretary Sam Bodman said record oil prices fairly reflect tight supplies and strong global oil demand, and speculators were not at fault for pushing up petroleum costs.

Rupee weakens past 43/dlr to 13-mth lows

The partially convertible rupee weakened past 43 per dollar to its lowest level in 13 months in opening deals on Thursday, as record oil prices raised worries of a widening trade deficit.

At 9.02 a.m., the rupee was at 43.10 per dollar, a level it last traded on April 6, 2007. It had closed at 42.83/84 on Wednesday.

The rupee will climb from a 13-month low as the end of a worldwide credit market slump encourages investors to buy emerging-market assets, corporate treasurers in India said.

JSW Steel Ltd., the nation’s third-biggest steelmaker, predicts the currency will rise almost 7 percent in the next year to 40 per dollar, Finance Director Seshagiri Rao said. Grasim Industries Ltd., the No. 3 cement maker, and Larsen & Toubro Ltd., the largest engineering company, say India’s growth and rising company earnings will fuel the rupee’s recovery.

``Which other countries are growing at 8 percent or so? Very few,’’ Yeshwant M. Deosthalee, chief financial officer at Mumbai-based Larsen, said in an interview. ``Investors have been holding back due to risk aversion. Once such concerns ease, they’ll have to look at India. The rupee’s tendency to appreciate will resume.’’

India expanded an average 8.7 percent a year since 2003, second only to China among the world’s 20 largest economies. The central bank forecast the $912 billion economy will grow as much as 8.5 percent in the 12 months through March 2009.

The rupee may advance to 39.50 against the dollar by the end of the year from yesterday’s close of 42.83 per dollar in Mumbai, according to the median forecast of 21 analysts surveyed by Bloomberg.

Short-Term Weakness

``The rupee’s weakness is only for the short-term,’’ Mumbai-based JSW’s Rao said in an interview. ``Indian companies are doing well and may show an average 20 percent growth in the year ahead. That should help the stock market rebound’’ and create demand for the rupee, he said.

The currency slid 8 percent this year, after rising 12 percent in 2007, on concern that rising energy costs will widen India’s record current account deficit. The broad measure of trade and investment flows was negative $5.4 billion in the fourth quarter, compared with a shortfall of $4.7 billion the previous three months. A wider deficit means the nation needs more dollars to finance the gap.

``Exporters could use the situation now to convert some dollars if they think the rupee won’t weaken further,’’ said Robert Prior-Wandesforde, a senior economist at HSBC Holdings Plc in Singapore.

The rupee is the second-worst performer among the 10 most- traded currencies in Asia after the South Korean won. It reached 42.915 per dollar on May 16, its weakest since April 12, 2007.

Less Pessimistic

A flight from all but the safest government assets led funds based abroad to sell $2.1 billion more of Indian stocks and bonds than they bought this year, after purchasing a net $19.5 billion in 2007, according to data compiled by the Securities and Exchange Board of India. The Bombay Stock Exchange’s Sensitive Index, or Sensex, is down 15 percent in 2008 after rising 47 percent last year, when the rupee had its biggest gain since 1974.

International investors became less pessimistic on global equities this month as concern that the world economy is slipping into a recession eased, a Merrill Lynch & Co. survey showed on May 14. Money managers who oversee $615 billion favor emerging markets, the survey of 191 fund managers conducted between May 2 and May 8 showed.

An advance in oil prices may cause the rupee to extend a three-month decline as demand for dollars to pay for crude increases, according to Mumbai-based Essar Group, which owns oil, steel and shipping businesses. Crude climbed to an all-time high of $135.04 per barrel today, and imports rose to a record $8.6 billion in March, government data show.

Easing Curbs

``The rupee may fall as low as 43.25 before the end of the month as oil prices keep rising to new records,’’ said N.S. Paramsivam, head of treasury at Essar.

Offsetting that may be India’s plan to ease nine-month old curbs on overseas borrowings, said D.D. Rathi, chief financial officer at Nagda, Madhya Pradesh-based Grasim.

The government imposed limits on such borrowings in August to slow capital inflows after the rupee’s surge threatened to erode export earnings. Indian companies borrowing more than $20 million overseas need the central bank’s permission to bring the funds back into the country.

``Any further loss in the rupee should not be sizeable,’’ Rathi said. ``Some of the factors that contributed to its decline, such as the curbs on external borrowings, may ease.’’

Inflation to fall in a few months - Ahluwalia

The deputy chairman of India’s planning commission, Montek Singh Ahluwalia, on Wednesday said inflation would fall within a few months.

The latest government data showed annual wholesale inflation at 7.83 percent on May 3, a 3-½ year high, continuing a sharp rise that has been fuelled largely by food and metal prices.

The ruling coalition, under pressure to check prices ahead of state and national polls this year and next, has lowered import duties on a series of items, and curbed some exports to keep domestic prices down and supplies adequate.

Current inflation level totally unacceptable’

The target for inflation expectation is in the range of 4-4.5 per cent Dr Y.V. Reddy, RBI Governor.

Terming the current high level of inflation as “totally unacceptable”, Dr Y.V. Reddy, Reserve Bank of India Governor, today indicated further measures to rein in inflation.

The central bank had hiked Cash Reserve Ratio by 25 basis points to 8.25 per cent last month.

Speaking at a seminar in Singapore today, Dr Reddy said, “The current high level of inflation is totally unacceptable, especially in terms of impact on inflation expectations.”

Inflation has touched 7.83 per cent as on May 3.

Dr Reddy said “Monetary policy in India accords appropriate priority for price stability in recognition of its significance for the large segment of the poor who have no hedge.”

Going ahead, the target for inflation expectation is in the range of 4-4.5 per cent, so that it is possible to achieve a medium term inflation of 3 per cent.

“In the event of new adversities emanating in the domestic and global economy at any point of time, RBI is in readiness to respond swiftly and appropriately,” he said.

Mr D.K. Joshi, Principal Economist, Crisil, felt that dealing with the current inflationary situation would call for a closer co-ordination of fiscal and monetary policy.

While the central bank could use interest rate and other monetary weapons to constrain demand pressures, the Government, through a prudent fiscal policy, should ensure no runaway increases in its spending that would boost consumption.
Customs duties

The Government could also use fiscal policy to remove supply-side bottlenecks through reductions in customs duties. “The reductions in import duties has to some extent worked in edible oils and even steel and cement.”.

Mr Joshi was, however, sceptical about a third option of ‘physical policy’, involving ban on exports and futures trading, imposition of stock limits, price controls, etc.

“Price controls on petro-products, for instance, have sent wrong signals by boosting consumption. If the sector had been de-controlled, prices would have gone up gradually and, at the same, consumers would have got the right signal to conserve energy”, he added.

Mr Saumitra Chaudhury, Member of the Prime Minister’s Economic Advisory Council, said that the Government should concentrate on improving efficiency of its utilities and cutting down on procedural delays impeding creation of new production capacities.

“In cement, the coming up of additional capacities towards the end of last fiscal has had a sobering impact on supplies.

“Similarly, by expediting coal linkages to power projects and also augmenting availability of electricity from the grid, it can help manufacturers to reduce costs by relying less on expensive genset-based power at Rs 8-9 a unit”, he noted

India's highest paid CEOs

Mukesh Ambani

Reliance Industries Ltd has given its chief Mukesh Ambani, the country’s richest person, a hefty pay hike of about 45 per cent to take his annual remuneration to over Rs 44 crore or ($10 million).

Mukesh Ambani, chairman and managing director of Reliance Industries, got a total payout of Rs 44.02 crore (Rs 440.2 million) in financial year 2007-08, marking an increase of about Rs 13.5 crore (Rs 135 million) from the previous fiscal.

In fiscal 2006-07, Ambani’s annual remuneration had increased to Rs 30.46 crore (Rs 304.6 million), from Rs 24.77 crore (Rs 247.7 million), previously.

However, a large part of Ambani’s full-year pay cheque comes in the form of commissions that the company pays to select executives as a ratio of its net profits.

According to the company’s annual report being sent to shareholders, Ambani got a salary of Rs 60 lakh (Rs 6 million -- Rs 500,000 per month -- and another Rs 48 lakh (Rs 4.8 million) -- Rs 400,000 per month -- in the name of ?perquisites and allowances.?

In addition, he got Rs 18.75 lakh (Rs 1.875 million) under the head of ?retiral benefits? and Rs 42.754 crore (Rs 427.54 million) toward commission on net profit, taking his total to Rs 44.021 crore (Rs 440.21 million) for 2007-08

Indian rupee nears 13-mth lows, trade gap in focus

The partially convertible Indian rupee fell towards 13-month lows on Wednesday as record oil prices raised worries of a deteriorating trade deficit against a backdrop of slowing capital inflows.

At 9:38 a.m. (0408 GMT), the rupee was at 42.75/76 per dollar, 0.3 percent weaker than Tuesday’s close of 42.635/640. It hit 42.92 last Friday, its weakest since mid-April 2007.

"Dollar/rupee opened up today because of oil, but there seems to be some good selling at higher levels. Exporters may come in later," said Indrajit Sengupta, a currency dealer at state-run Canara Bank.

"It seems to be an interbank play for now. The rupee should be in a 42.60-42.80 band for the day, and if it breaks above 42.80, then the rupee may easily fall to 43 per dollar."

Oil CLc1, India’s biggest import, has surged to record highs over $129 a barrel, raising the risk of a widening trade deficit which could put downward pressure on the rupee.

India imports more than two-thirds of its oil needs, and crude refiners are the biggest buyers of dollars. The country’s oil import bill shot up by more than a third in 2007/08 because of soaring oil prices, and the trade deficit widened by a similar percentage.

Added to that, capital inflows into stocks have slowed down significantly, with foreigners being net sellers of $2.7 billion of shares so far in 2008, after buying a record $17.4 billion in 2007.

28 mn US citizens need food aid to eat

Nearly 28 million US citizens depend on Coupons to eat, a situation constantly increasing because of unemployment and the high price of food, said Virginia, US newspaper- USA Today.

USA Today said difficulties to subsist are so many, that even people with a high cultural level cannot escape from then. "It is inconceivable to see myself in such a condition, especially when you have a pride," said Ohio resident Philomena Gist, a woman with a Master Degree in Psychology.

The newspaper said no one of the millions of people needing help to eat, should be placed in such a category, and the number of needed people goes over the record established in 1994.

While these US citizens are fighting for taking their homes something to eat, politicians are discussing other topics and economists debate if they are on a recession or not, said the US influential newspaper.

The costs of food and fuel are increasing since 2006, and now these phenomena are combined with loss of jobs, and the standstill of salaries, which rocketed the number of US citizens urged on a support.

US citizens depending on coupons to eat, represent nearly 10 percent of the US total population

UTI plans to relaunch $500 mn IPO

UTI Asset Management, India’s second-largest mutual fund firm, plans to revive a roughly $500 million IPO that had been delayed from earlier this year, with management scheduled to meet investors next week to gauge market interest, according to people familiar with the deal.

UTI executives will meet investors on Monday in Mumbai and on Tuesday in Singapore, followed tentatively by presentations in Hong Kong, London and New York.

UTI had hoped to complete its domestic listing in April but delayed the deal as India’s stock market went into freefall, with the benchmark Sensex plunging 23 percent in the first three months of the year. Since the start of April, however, the index has risen 10 percent.

IPO volumes from India have nearly doubled so far this year from the same period last year, according to Thomson Financial data, although Reliance Power’s nearly $3 billion January listing accounts for most of the $3.8 billion raised from 18 offerings.

Citigroup, Enam Securities and JM Financial are sponsoring the deal. No terms or deal schedule were immediately available.

UTI managed 8.34 million accounts worth 568.54 billion rupees ($13.3 billion) as of the end of December.

RBI approves HDFC Bank's Centurion buy

India’s HDFC Bank said the central bank has approved its acquisition of Centurion Bank of Punjab, with effect from May 23.

The combined entity would have a nationwide network of 1,167 branches and a net advances of 890 billion rupees ($21 billion) and deposit base of 1.22 trillion rupees, it said in a statement issued late on Tuesday.

HDFC Bank agreed to buy smaller rival Centurion in February in all-share deal worth $2.4 billion at that time.

Indian shares open 0.96 pct lower

Indian shares opened 0.96 percent lower on Wednesday and quickly extended losses past 1 percent, with the fall led by Reliance Industries Ltd.

The markets have opened on a weak note following weak cues across the globe due to shot up in crude price and inflation worries in US. Profit booking has seen in banking, capital goods and technology. Midcap and small cap stocks are under selling pressure. Market breadth is weak.

Losers were HDFC, BHEL, Unitech, HDFC Bank, Maruti, ACC, Infosys, ABB, Wipro, Satyam, TCS, BPCL, Tata Comm, PNB and Zee Ent while Cairn India continued its uptrend (Nymex crude was trading above USD 129 per barrel).

At 9:56 am, the Sensex was down 163 points at 17,067 and the Nifty down 38 points at 5066. The CNX Midcap slipped 58 points at 6845. Market breadth is weak; about 1400 shares have advanced, 1521 shares declined, and 179 shares are unchanged.

Asian markets were trading sharply lower. Shanghai Composite was down 1.87% or 64.33 points at 3,378.83. Hang Seng fell 158.77 points or 0.63% at 25,010.69.

Nikkei 225 Average was down 259.25 points or 1.83% at 13,900.84. Jakarta Composite fell 27.46 points or 1.09% at 2,483.50. Straits Times fell 0.8% or 25.69 points at 3,174.19. Seoul Composite slipped 18.12 points or 0.97% at 1,855.03. Taiwan Weighted lost 15.65 points or 0.17% at 9,053.24.

US markets slid after oil prices jumped above $ 129 a barrel and a key inflation gauge rose more than expected. The Dow tumbled 199.48 points, or 1.53%, to 12,828.68. The Standard & Poor’s 500 index declined 13.23 points, or 0.93%, to 1,413.40, and the Nasdaq composite index fell 23.83 points, or 0.95%, to 2,492.26.

OPEC's Badri says worried by oil price speculation

OPEC Secretary General Abdullah al-Badri said on Tuesday he was "worried" because supply and demand factors were not behind high oil prices.

In an interview with Reuters during a visit to Venezuela, Badri said oil prices could keep rising if non-market factors such as the weakening dollar continue to put pressure on prices but that OPEC would only act when market fundamentals showed a need to do so.

Rupee drops towards 13-month lows, oil hurts

The Indian rupee headed towards 13-month lows on Wednesday as record oil prices raise concerns of a widening trade deficit, and losses in Asian stock markets raise concerns about foreign demand for local stocks.

* At 9:04 a.m. the partially convertible rupee was at 42.77/78 per dollar, weaker than Tuesday’s close of 42.635/640. It hit a low of 42.92 last Friday, its weakest since mid-April 2007.

* Asian stocks fell for a second consecutive day on Wednesday, feeding a rally in government bonds, as fears about consumer demand in the face of high oil prices rattled investors.

* Oil, India’s biggest import, has surged to record highs over $129 a barrel, raising the risk of a widening trade deficit. India imports more than two-thirds of its oil needs, and crude refiners are the biggest buyers of dollars.

Market-based FX can't be policy tool: RBI

The Reserve Bank of India (RBI) chief said on Tuesday that countries that allowed exchange rates to be determined by Markets could not then use the currency as a policy tool to fight inflation.

"If the exchange rate is to be market-determined, you cannot use it as an instrument for some policy or the other," RBI Governor Y.V. Reddy said at a seminar.

Reddy was responding to a question on why many countries were not using currency appreciation to rein in inflation.

India attracts $25 bn FDI in 2007-08

Foreign Direct Investment into India has surged to over USD 25 billion in 2007-08 and the country’s Foreign Exchange Reserve crossed USD 341 billion as of today, Ashwani Kumar, Minister of State for Commerce and Industry has said.

Addressing the two-day India Investors’ Summit organised by Financial News in association with Dow Jones and The Wall Street Journal in London, Ashwani Kumar highlighted the initiatives of the UPA government in making growth more inclusive and the emphasis laid on education and health in the context of providing skills and better quality of life.

He said the next wave would be in the skill-based manufacturing sector.

Nearly 500 delegates from business and industry registered for the event which discussed the current social, financial and economic dynamics of doing business with India.

Ashwani Kumar gave a background to the reform process in India and the key drivers of India’s growth.

To support his argument of the sustainability of GDP growth of over 8 per cent in the long run, he observed that India had the advantage of a huge young workforce (24 per cent of the population are below the age of 28 years, 54 per cent of the population are in the working group) and a very high savings and investment rate (over 35 per cent of GDP).

Domestic demand and investment are the key drivers of growth and therefore insulate the Indian Economy to a large extent from the sub-prime crisis.

Inflation, though a major concern, could be contained. The growth potential of services sector in India was enormous at USD 200 billion offering employment to 40 million people, he said.

Kumar was positive about sustainability of India’s growth saying no reform measure had been reversed even though six different government had been in office after the reform process began.

Lord Mayor of the City of London, David Lewis, who had visited India recently, was very optimistic about the growth prospects of India but felt that liberalisation of the Indian financial and legal services sectors could have been faster.

The High Commissioner of India to the UK Shiv Shanker Mukherjee and the UK minister of State for Trade and Investment, Lord Digby Jones, also addressed the gathering. The summit concluded on Tuesday.

Oil Rises to a Record After Pickens Says Prices May Reach $150

Crude oil rose above $129 a barrel in New York for the first time after billionaire hedge-fund manager Boone Pickens said that oil will reach $150 a barrel this year.

Prices will climb because supply isn’t keeping up with demand, Pickens, the founder and chairman of Dallas-based BP Capital LLC, told CNBC today. Oil advanced on May 16 when Goldman Sachs Group Inc. boosted its estimate for the second half of the year to $141 a barrel, from $107, citing supply constraints.

``There is so much momentum in the market that it doesn’t take much for prices to reach new records,’’ said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``We rose today after Boone Pickens basically parroted the Goldman line on prices.’’

Crude oil for June delivery rose $1.82, or 1.4 percent, to $128.87 a barrel at 9:25 a.m. on the New York Mercantile Exchange. Futures reached $129.31, the highest since trading began in 1983. Prices are 98 percent higher than a year ago.

Credit Suisse Group AG and Societe Generale SA raised their oil prices forecasts for 2008 and 2009 in reports today, citing investor flows and supply limitations.

Brent crude oil for July settlement rose $2.05, or 1.6 percent, to $127.11 a barrel on London’s ICE Futures Europe exchange. The contract touched a record $127.49 today.

Oil prices also rose because the dollar weakened against the euro, prompting investors to buy commodities as a hedge against the currency’s decline. The euro gained after an adviser to the German government said European policy makers may increase interest rates as soon as the financial crisis ends.

German consumer prices rose 2.6 percent in April from a year earlier after jumping 3.3 percent the previous month, the most in 12 years. German producer-price inflation accelerated to 5.2 percent in April, the fastest in almost two years, the Federal Statistics Office said today. The European Central Bank aims to keep inflation in the euro region just below 2 percent.

``Oil is up because the dollar is being pounded on the bigger-than-expected increase in German inflation,’’ said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``The likelihood that the ECB will cut rates to be more in line with those in the U.S. is reduced by the German inflation numbers.’’

StanChart Bank expects Re to hold 43/$ levels

Agum Gupta, Head Forex, Standard Chartered Bank, believes that if crude goes above USD 130 per barrel, then sentiments will immediately take a beating and the market will run towards Rs 43 per dollar. On the other hand, he feels that if there are steady capital inflows into the country, then sentiments can change and a slightly stronger rupee in the short-term can be expected.

Excerpts from CNBC-TV18’s exclusive interview with Agum Gupta:

Q: Do you think that this Rs 42.80 resistance for the rupee will hold and should we quite firmly not cross the Rs 43 mark at least in the next couple of weeks?

A: The resistance is more like at Rs 42.93 or Rs 42.95, that’s where we traded up to on Friday. Rs 42.80 is no longer a resistance level. We expect Rs 43 to hold this week.

Q: What can turn the tide, would you say that any adverse news, for instance oil going up by a couple of dollars, can turn the table or balance completely?

A: If oil goes at about USD 130 per barrel, then definitely sentiments will immediately take a beating and the market will run towards Rs 43.

Q: What can turn the balance in favor of the rupee?

A: Capital inflows. If we start seeing some steady capital inflows in the country, then the sentiments will slightly change and we will be again looking at a slightly stronger rupee in the short-term.

Q: What’s the advice for an importer and exporter at this juncture?
A: At the moment, we look to be in this new range of Rs 42.45-42.95. So, exporters can sell close to Rs 43 and importers should buy on dips close to Rs 42.5. So, we are trading in a short-term range at the moment.

Source : MoneyControl

Nifty Outlook for coming days

Nifty Outlook for coming days

The Nifty is likely to consolidate between the range of 5000 to 5200 levels in coming trading session.Market is waiting for trendline breakout.On the higher side it may face resistance around 5200.Once it breaks upperside trendline next target 5400.On the lower side it may face resistance around 5000.Once it breaks lowerside trendline next target 4800.On the downside 4800-4700levels is an immediate support

India's Rupee Falls as Rising Oil Increases Demand for Dollars

India’s rupee fell on speculation crude oil near a record high will increase demand for dollars needed to pay for the commodity.

The local currency extended a four-week decline as companies including Indian Oil Corp., the nation’s biggest refiner, stepped up dollar purchases after oil became costlier by almost 33 percent this year. Energy costs may also widen the nation’s current-account deficit as Asia’s third-largest economy ships in three-quarters of the oil it needs from overseas.

``Importers are more aggressive in buying dollars due to the rapid increase in oil,’’ said Indrajit Sengupta, a currency trader at state-owned Canara Bank in Mumbai. ``Since there is no matching dollar supply, the rupee will be under pressure in the near term.’’

The rupee declined 0.2 percent to 42.595 per dollar at the 5 p.m. close in Mumbai, from 42.5125 on May 16, according to data compiled by Bloomberg. Markets were closed yesterday for a holiday.

The value of oil imports in the 12 months through March climbed 23.5 percent to $71.8 billion from a year earlier, helping widen the trade deficit to $80.4 billion. The current- account shortfall widened to $5.4 billion in the three months ended Dec. 31 from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31.

Exporters Purchase

Crude oil traded above $127 a barrel in after-hours trading on the New York Mercantile Exchange after touching an all-time high of $127.82 on May 16.

The local currency pared losses on speculation exporters purchased the currency as it traded near a 13-month low. A weaker currency increases the income of exporters when they repatriate their earnings.

``The dollar was finding it difficult to rise beyond a point which probably prompted exporters to sell,’’ said V. Rajagopal, chief currency trader at Kotak Mahindra Bank Ltd. in Mumbai. ``That helped the rupee recover some ground.’’

The local currency fell 2.3 percent in the week through May 9, the most since 1998, and extended its decline by 2.2 percent last week, Bloomberg data show.

Indian rupee trims early losses, outlook bearish

The Indian rupee trimmed early losses on Tuesday after a sharp slide to 13-month lows last week was seen by some investors as overdone, but the outlook remained bearish because of high oil prices.

The partially convertible rupee ended at 42.635/640 per dollar, 0.23 percent weaker than Friday’s close of 42.53/54. Markets were closed on Monday for a holiday.

The rupee hit a low of 42.92 on Friday, its weakest since mid-April 2007.

"The dollar/rupee buying by oil refiners was not sustained and some selling at higher levels by exporters and banks pushed it down," said V. Rajagopal, head of currency trading at Mumbai-based Kotak Mahindra Bank.

Oil CLc1, India’s biggest import, has surged to record highs near $128 a barrel, raising the risk of the trade deficit widening. India imports more than two-thirds of its oil needs, and crude refiners are the biggest buyers of dollars.

Standard Chartered said it expected the rupee to remain weak due to slowing growth and widening trade deficit, while Goldman Sachs sees next support at 43.82. A Reuters poll showed