Sunday, November 21, 2010
Year-end profit taking may continue to weigh on the domestic bourses in the near term. Volatility may rise over the next few days as traders roll over positions in the derivatives segment from the near-month November 2010 series to December 2010 ahead of the expiry of the November 2010 futures & options (F&O) contracts on Thursday, 25 November 2010.
The People's Bank of China (PBOC) announced that it would increase the banks' reserve requirement ratio by 50 basis points (bps) effective November 29 to strengthen liquidity management and control credit distribution. This was the fifth increase in the reserve ratio by the Chinese central bank. China's official reserve requirement ratio for most banks will rise to 18.5% from Nov. 29. The reserve ratio may vary among banks. The move comes after China's consumer price index (CPI) rose 4.4% in October from a year earlier, its fastest pace in two years. The PBOC last raised banks' reserve requirement ratio by half a percentage point on Nov. 10 as part of its efforts to tighten liquidity. This followed a combined interest rate and reserve requirement hike in September.
The global economic recovery is losing momentum as the US economy has nearly stalled while growth in emerging countries is also moderating, the Organisation for Economic Co-operation and Development (OECD) said. In its twice-yearly report, the Paris-based agency said that several factors suggested that its outlook might be downgraded further, citing among others global currency tensions and a possible debt crisis in Europe. The OECD, in its latest economic outlook, said it now expects GDP across its member nations to expand by 2.3% in 2011 and 2.8% in 2012. Earlier this year, the OECD forecast 2011 growth of 2.8%.
Dabur India Ltd. announced that its wholly owned subsidiary Dermoviva Skin Essentials, USA has entered into Unit Purchase Agreement to acquire 100% membership units in leading personal care Namaste Group Companies viz - Namaste Laboratories LLC, USA and its three subsidiaries for total consideration of US$100mn. The transaction is subject to customary conditions, including regulatory reviews and approvals and is expected to close by the end of the 2010 calendar year. The current management team, led by Namaste founder and CEO Gary Gardner, will continue to run the operations of the Namaste business. The sales team, including broker representatives, will remain in place, and existing relationships with retailers, wholesalers, distributors and suppliers will not change. Namaste will continue to operate in its current facility in Blue Island, IL, with business as usual and without interruption.
Vedanta Resources Plc announced that it has entered into financing agreements for US$6bn with a consortium of leading banks to fund the Vedanta Group's proposed acquisition of 51-60% of Cairn India Ltd. for an aggregate consideration of approximately US$8.5bn to US$9.6bn. Vedanta proposes to acquire 31%-40% and Vedanta's subsidiary Sesa Goa Ltd. will acquire a 20% stake in Cairn India. Anil Agarwal, Chairman of Vedanta Resources plc, said, "The financing announced provides the group with funding flexibility. We are delighted to announce US$6 billion of commitments from leading international banks, a testament to the strength of the Vedanta story."
India's GSM telecom operators (excluding RCOM and Tata Tele) added close to 15 million new subscribers in October with the total base crossing the 500mn milestone, data released by the Cellular Operators Association of India (COAI) showed. The telecos offering GSM services saw their base increase by 14.69mn new users last month as against the addition of 12.42mn new users in the previous month, the COAI data showed. With this, the overall GSM subscriber base now stands at 508.73mn versus 494.04mn at the end of September.
Bharti Airtel added the most number of new users in October at 3mn, followed by Vodafone Essar with 2.48mn, according to the COAI data. State-run BSNL and new entrant Uninor added 2.48mn new subscribers in the month under review. Idea Cellular added 1.81mn new users in October while Videocon and Aircel saw their customer base increase by 1mn new users. Bharti Airtel now has the most number of subscribers at 146.29mn followed by Vodafone at 118.04mn. Idea has a total customer base of 76.02mn, and BSNL has more than 75mn customers.
India's food inflation fell sharply in the first week of November but remained above the double-digit mark and non-food inflation increased, data released by the Government showed. Annual inflation in the Food Articles space stood at 10.3% in the week ended November 6 as against 12.3% in the previous week, the Commerce & Industry Ministry said. It was at 13.99% in the comparable period last year. The WPI for the Food Articles group declined by 0.6% to 178.8. Inflation in the Primary Articles group stood at 13.3% in the week under review versus 14.87% in the week ended October 30, the Commerce Ministry said. It was at 12.17% in the week ended November 7, 2009. The index for this major group declined by 0.1% to 180.6 from 180.8 in the previous week.
India will return to a more sustainable pace of growth as a sharp rebound in agricultural output slows, the Organisation for Economic Cooperation and Development (OECD) said. India has avoided an inflationary spiral due to slowing gains in food prices the Paris-based agency said in its twice-yearly outlook report. Still, the RBI needs to tighten monetary policy further because fuel prices remain high, credit demand is strong and capacity is scarce, it added. Strong business investment and personal consumption will support the Indian economy, which is projected to expand 8% next year and 8.5% in 2012, according to the OECD. Economies in the Asia-Pacific region will continue to recover in the next two years thanks to solid domestic demand and exports, but many countries need higher interest rates to counter inflation, the OECD said.
Capital is flowing to emerging economies in the region because their growth prospects are better than those of major economies, leading some countries to intervene in the currency market or introduce capital controls, it said. A certain amount of appreciation in Asia-Pacific currencies would help correct economic imbalances, and countries should refrain from currency intervention as it could encourage protectionism, the OECD said. "The challenge for most monetary authorities will be to exit from exceptional stimulus in a way consistent with macroeconomic developments," the OECD said. "Some countries have been reacting to capital inflows through unilateral measures. Protracted unilateral action of this sort is likely to have little or even counterproductive effects."
The Telecom Regulatory Authority of India (TRAI) recommended cancellation of 69 licences of six telecom operators for non-compliance of the rollout obligations. The companies under the scanner are Etisalat DB (earlier Swan) that has failed to roll out services in 15 circles, Videocon Communications (earlier Datacom Solutions) in 10 circles, Uninor (Unitech-Telenor JV) in 8 circles, Loop Telecom (earlier Shipping Stop Dot Com) in 20 circles, Sistema-Shyam in 11 circles and Aircel in 5 circles. Uninor, Sistema-Shyam and Loop Telecom claimed they had complied with the network rollout obligations and so far had not received any notice from either the Government or TRAI.
Bad news appears to be outweighing the good news these days, with the market tanking in the past two weeks after reaching within striking distance of the all-time highs on Diwali. The rising political temperature over the 2G spectrum scam, fiscal troubles in Ireland and China's monetary tightening have combined to dent investor confidence in recent days. The slowing FII inflows are also not helping either.
The Supreme Court asked the UPA government to file an affidavit by Saturday on behalf of the Prime Minister explaining why Dr. Manmohan Singh he took close to a year to respond to a request for the prosecution of former Telecom Minister A Raja for allegedly committing various impropriety in the allocation of new 2G spectrum licences in early 2008. A bench comprising Justices G S Singhvi and A K Ganguly granted time to the Centre to file the affidavit after Solicitor General Gopal Subramanium said that he was in a position to place before it the entire record on the issue.