With Indian equities in an absolute free fall and virtually everyone, from the Armani-clad expert on TV to the paan-chewing neighborhood broker prophesying an impending apocalypse, things couldn’t have looked bleaker for the small retailer investor. With virtually all doomsayers predicting a four-digit Sensex in the near future, the capitulation is clearly visible. But considering that the majority has always been proven wrong in financial markets, may be it’s the apt time to load up your portfolio, what with valuations of even the bluest of the blue chips of India Inc at mouth-watering levels. But it is not just some chest-thumping last-ditch attempt at motivating the bleeding bulls but some raw data and technical facts that point towards the possibility that the worse may be over for the Indian equity market. Less than two years back, in the summer of 2006, the situation was exactly the same. After closing at a then all time high of 3,754 on the May 10, the Nifty went for a bungee jump losing 29% before finally bottoming out at 2,633 on June 14.
This loss of 1,121 points was a 78% retracement of the rally that had started on October 28, 2005 at a level of 2,316 on the Nifty. In technical analysis, the 78.6% retracement is seen as a significant support level and the fact that it was not violated augured well for the Nifty. The result? All doomsayers were thrown out of the window as the Nifty went on to make a new lifetime high within the same calendar year, gaining more than 50% from its lows. What is significant though is the precise similarity that the current crisis has with the correction of May-June 2006. After hitting a new all time high of 6,357 on January 8, the Nifty is witnessing a savage correction losing 29% by close on March 17, which is exactly the same that it lost before bottoming out during the correction of 2006. But the point that is of more importance is that this loss of 1854 points is an exact 78.6% retracement of the rally that had started from the lows of August 17, 2007 at a level of 4,002 on the Nifty. And so, if the closing levels of March 17 are not violated, we may be headed for the mother of all bull runs. So, if you believe in history, this may be once in a lifetime opportunity to buy Indian stocks as the Nifty may just have bottomed out on Monday. Moreover, with things looking slightly brighter in the US, over-exuberant Dalal Street’s bears may soon be in tears.
Wednesday, March 19, 2008
Monday, March 10, 2008
Cash-rich mutual funds may turn buyers, finally
Mutual funds, which have raised about Rs 20,000 crore through new fund offerings (NFOs) in the last three months, have remained net sellers in the market. But the trend is likely to be reversed now as funds feel the valuations are attractive now.
A slew of funds, including Mrgan Stanley ACE Fund, Birla Sun Life Pure Value Fund, Mirae Asset India Opportunities Fund and Standard Chartered Mid- and Small-Cap Fund closed recently. The NFOs of DSP ML Natural Resources and New Energy fund, which are currently open, close on March 27.
In March, mutual funds turned net sellers, selling equities worth Rs 935.9 crore. In January and February this year, funds bought around Rs 183.5 crore and Rs 100 crore respectively.
But Madhu Kela, head, equity investments, Reliance Mutual Fund, said the fund has started deploying money that it collected from the NFO.
“These are attractive levels to look at. We are very comfortable at these levels,” he said. The fund house recently raised as much as Rs 5,660 crore through the Reliance Natural Resources Fund NFO that closed on January 30.
The BSE Sensex has fallen by more than 4,000 points or 21.5 per cent since January. The data on the Bombay Stock Exchange (BSE) website indicate that so far domestic institutions such as mutual funds, insurance companies and banks have largely stayed away from domestic markets
Domestic institutional investors (DIIs) have bought equities worth Rs 21,234.02 crore in 2008 compared to FIIs, who have sold equities worth Rs 35,742.3 crore in the calendar year.
Typically, mutual funds launch NFOs to raise money since the mutual fund penetration in India is low. Consequently, the money that comes into an NFO is actually money coming from some other mutual fund.
“Very less money comes in as net new sales into a fund. Only the smart money comes into mutual funds at these levels in the market. Unfortunately, the smart money is limited,” pointed a fund manager of a mutual fund that has raised money through an NFO in the last three months.
“Funds might sell some stocks based on redemption pressures that they are facing currently or redemption pressures that they are expecting. For us, it has been quite steady at the current market levels. We do not see too much downside for the markets from here,” said Sandip Sabharwal, chief investment officer, JM Mutual fund.
Most mutual funds expect redemptions on account of advance tax provisioning that corporate houses do at this time of the year.
A slew of funds, including Mrgan Stanley ACE Fund, Birla Sun Life Pure Value Fund, Mirae Asset India Opportunities Fund and Standard Chartered Mid- and Small-Cap Fund closed recently. The NFOs of DSP ML Natural Resources and New Energy fund, which are currently open, close on March 27.
In March, mutual funds turned net sellers, selling equities worth Rs 935.9 crore. In January and February this year, funds bought around Rs 183.5 crore and Rs 100 crore respectively.
But Madhu Kela, head, equity investments, Reliance Mutual Fund, said the fund has started deploying money that it collected from the NFO.
“These are attractive levels to look at. We are very comfortable at these levels,” he said. The fund house recently raised as much as Rs 5,660 crore through the Reliance Natural Resources Fund NFO that closed on January 30.
The BSE Sensex has fallen by more than 4,000 points or 21.5 per cent since January. The data on the Bombay Stock Exchange (BSE) website indicate that so far domestic institutions such as mutual funds, insurance companies and banks have largely stayed away from domestic markets
Domestic institutional investors (DIIs) have bought equities worth Rs 21,234.02 crore in 2008 compared to FIIs, who have sold equities worth Rs 35,742.3 crore in the calendar year.
Typically, mutual funds launch NFOs to raise money since the mutual fund penetration in India is low. Consequently, the money that comes into an NFO is actually money coming from some other mutual fund.
“Very less money comes in as net new sales into a fund. Only the smart money comes into mutual funds at these levels in the market. Unfortunately, the smart money is limited,” pointed a fund manager of a mutual fund that has raised money through an NFO in the last three months.
“Funds might sell some stocks based on redemption pressures that they are facing currently or redemption pressures that they are expecting. For us, it has been quite steady at the current market levels. We do not see too much downside for the markets from here,” said Sandip Sabharwal, chief investment officer, JM Mutual fund.
Most mutual funds expect redemptions on account of advance tax provisioning that corporate houses do at this time of the year.
Recession fears continue to haunt Wall St
The US indices ended lower on Monday led by financial stocks on fears of more credit losses and concerns that the US economy may already be in recession. The Dow Jones industrial average slumped 154 points to 11,740. The Nasdaq dropped 43 points to 2,169.Indian ADRs, too, ended mostly lower. ICICI Bank plunged 4.5% to $41.23. Infosys, Genpact, Satyam, Wipro, HDFC Bank and Dr.Reddy's dropped 2-4% each to $34.80, $12.66, $22.67, $10.28, $93.31 and $13.74, respectively. Patni Computers, however, gained 1% at $10.74.
Recession fears continue to haunt Wall St
The US indices ended lower on Monday led by financial stocks on fears of more credit losses and concerns that the US economy may already be in recession. The Dow Jones industrial average slumped 154 points to 11,740. The Nasdaq dropped 43 points to 2,169.Indian ADRs, too, ended mostly lower. ICICI Bank plunged 4.5% to $41.23. Infosys, Genpact, Satyam, Wipro, HDFC Bank and Dr.Reddy's dropped 2-4% each to $34.80, $12.66, $22.67, $10.28, $93.31 and $13.74, respectively. Patni Computers, however, gained 1% at $10.74.
Sunday, March 9, 2008
Bear market confirmed by southern breakout
After several weeks of range-trading, a clear trend was finally established post-Budget. Unfortunately, it was down. The Nifty dropped to 4,771.6 points, a week-on-week loss of 8.65 per cent. The Sensex was down 9.12 per cent at 15,974.52 points. The Defty lost 10.04 per cent as the rupee weakened as a consequence of dollar outflows caused by foreign institutional investor (FII) selling. Domestic funds were also sellers.
Background and breadth indicators were also poor. Volumes remained low, and declines far outnumbered advances. Smaller stocks lost more ground. The Nifty Junior was down 14.45 per cent and the Nifty Midcaps was down 11.31 per cent. The BSE 50 lost 10.59 per cent. The BankNifty lost an extraordinary 16.35 per cent while the CNXIT was down 5.59 per cent – relatively little damage due to the weaker rupee.
Outlook: Several key supports were busted as the market moved decisively outside the trading zone of 5,000-5,600. There is support at current levels and good support at 4,600. While there could be a short-term recovery, the upside will be restricted by resistance between 4,900-5,000. A major bear market is confirmed.
Rationale: The breakout has pulled the indices decisively below respective 200 Day Moving Averages (DMA) and those will be resistances on a pullback. In the short-term, momentum indicators are oversold and this could trigger a short-term recovery. In the long-term, sequential closes below the 200 DMA confirms a major bear market.
Counter-view: Liquidity will be a key factor in any recovery. But volumes are down through the past 6 weeks and that is a bad sign. It would be a positive signal if the market climbed back to 5,000-plus and closed above the 200 DMA. But that looks unlikely since it would require substantial volume increase.
Bulls and Bears: A few sectors have defensive strength. Pharma and auto shares look to have the best insulation along with FMCGs. Ranbaxy is looking like a counter-cyclical, as is Aurobindo. Metals look more risky but Hindalco, Sterlite, Sesa Goa and perhaps, Tata Steel are reasonable bets for aggressive long traders. Dabur India and HUL are defensive counters. In the auto sector, Hero Honda and Bharat Forge seem decent defensive bets.
On the flip side, bank stocks were butchered with panic across the board. There could be a smart pullback here eventually due to short-covering. The stocks to watch are SBI, Bank of Baroda, Kotak and of course, ICICI itself. Reliance Capital could also respond to the buyback offer, and LIC Housing is also likely to do beat other financial stocks
Background and breadth indicators were also poor. Volumes remained low, and declines far outnumbered advances. Smaller stocks lost more ground. The Nifty Junior was down 14.45 per cent and the Nifty Midcaps was down 11.31 per cent. The BSE 50 lost 10.59 per cent. The BankNifty lost an extraordinary 16.35 per cent while the CNXIT was down 5.59 per cent – relatively little damage due to the weaker rupee.
Outlook: Several key supports were busted as the market moved decisively outside the trading zone of 5,000-5,600. There is support at current levels and good support at 4,600. While there could be a short-term recovery, the upside will be restricted by resistance between 4,900-5,000. A major bear market is confirmed.
Rationale: The breakout has pulled the indices decisively below respective 200 Day Moving Averages (DMA) and those will be resistances on a pullback. In the short-term, momentum indicators are oversold and this could trigger a short-term recovery. In the long-term, sequential closes below the 200 DMA confirms a major bear market.
Counter-view: Liquidity will be a key factor in any recovery. But volumes are down through the past 6 weeks and that is a bad sign. It would be a positive signal if the market climbed back to 5,000-plus and closed above the 200 DMA. But that looks unlikely since it would require substantial volume increase.
Bulls and Bears: A few sectors have defensive strength. Pharma and auto shares look to have the best insulation along with FMCGs. Ranbaxy is looking like a counter-cyclical, as is Aurobindo. Metals look more risky but Hindalco, Sterlite, Sesa Goa and perhaps, Tata Steel are reasonable bets for aggressive long traders. Dabur India and HUL are defensive counters. In the auto sector, Hero Honda and Bharat Forge seem decent defensive bets.
On the flip side, bank stocks were butchered with panic across the board. There could be a smart pullback here eventually due to short-covering. The stocks to watch are SBI, Bank of Baroda, Kotak and of course, ICICI itself. Reliance Capital could also respond to the buyback offer, and LIC Housing is also likely to do beat other financial stocks
Analysts bullish on steel sector
Analysts across broking houses are upgrading their stance on Indian steel companies, especially considering the beating that steel stocks seem to have taken of late. Credit Suisse was the latest house to join the band wagon which raised its target prices for most steel stocks. It is bullish on JSW, Tata Steel and SAIL but Tata Steel is its top pick. Analysts say that iron ore shortages are hurting supply. Under normal circumstances, the $150-plus price increases/ tonne seen since the July 2007 trough would have led to a strong supply response globally. “Production growth, instead, has come down — a first in 15 years. This is not merely due to cost increases, as cost pressures and pricing power have almost no correlation,” the broking house Credit Suisse remarked in a note to clients. The broking house also feels that decline in Chinese production growth has been hurt by raw material shortages. “We find year-on-year growth has picked up in all geographies except the EU and China (together 53% of global production). It seems raw material shortages have kept Chinese production growth under check,” said Credit Suisse’s Neelkanth Mishra in his recent report on the steel sector. He attributes a sharp slowdown in domestic ore production (still about two-thirds of ore supplies for China) as an important reason. He expects it to remain low, keeping steel supply in check. Another main issue seems to be coking coal intensifying shortages. Floods in Queensland have resulted in 16-24 million tonne of coking coal shortage, translating into 20-30 million tonne of steel. India gets 80% of its supplies from Queensland, and will be the most impacted in the near term. Credit Suisse also said that the demand may fall less than supply leading to steep price increases. “We expect 20 million tonne of demand growth ex-China in 2008. Together with an expected 20 million tonne decline in Chinese net exports and the coking coal impact, a 60 million tonne supply increase is needed outside China — a difficult task, in our view,” the report said. Although the report warns that steel stocks have been rerated sharply over the past three years (as the market has gained confidence in the steel super-cycle). So much so that the valuation discount that was applied to Indian steel companies versus the global leaders has now disappeared, and in the case of SAIL, has even turned into a premium, it feels. Hence it infers that steel stocks will continue to be quoted at a price multiple at which they are quoting now.Its top pick is Tata Steel as it believes the company has strong volume growth in India, as well as high self sufficiency in iron ore and coking coal which helps margins. It also estimates that Corus stands to benefit significantly from leverage measures to improve Corus self-sufficiency —Ivory Coast iron ore and Mozambique coal will improve longer term profitability
CMC: Buy
Investments with a one-year horizon may be considered in the CMC stock, considering its availability at reasonable valuations and bright business prospects. At Rs 808, the share trades at 13 times its current earnings and 10 times its estimated FY09 earnings. An increasing focus on high margin services, rising international revenues, presence in key IT spending segments in India – visibility for which has increased after the Railway and Union Budgets and improvements in operational parameters – make for robust business prospects for CMC.
CMC’s customer services and system integration businesses handle IT solutions and manage turnkey projects by providing services across the entire gamut of IT infrastructure components. These activities are the largest contributor to revenue. CMC also has an ITES division, which handles back-office processes, call-centre services and an education and training division, which provides IT education services to college graduates and corporate professionals. System integration and educational training, which are growing at a higher rate, are the company’s relatively high margin offerings.
The company has been expanding client relationships in areas such as defense, e-governance, ports and transportation, all key drivers of domestic IT spend. The proposals in the railway budget ranging from increased mobile ticketing, augmenting IT infrastructure, fleet tracking and having a complete call-centre infrastructure by 2008-09, may all mean additional order flow for CMC, given its execution capabilities and existing relationship with the Railways. The Union Budget proposals to increase the number of IT-enabled citizen service centres to deliver Government services and increase in defense spend also hold promise for the company. But the caveat here is that where the deals are hardware intensive, the margins may be lower.
CMC’s international revenues have increased 35 per cent in the nine months ended December 2007. The growth here is driven by system integration deals, infrastructure management deals, synergies with TCS and focus on ITES services. International deals are usually more margin accretive than domestic ones and the company hopes to achieve a 50-50 balance between the two over the next 12-15 months. Though the extending receivables cycle was a concern earlier, this has been reduced sharply in the latest quarter. Margin pressures could arise as a result of competition from players such as HCL Infosystems, Wipro Infotech, Bartronics and Datacraft, for the above deals
CMC’s customer services and system integration businesses handle IT solutions and manage turnkey projects by providing services across the entire gamut of IT infrastructure components. These activities are the largest contributor to revenue. CMC also has an ITES division, which handles back-office processes, call-centre services and an education and training division, which provides IT education services to college graduates and corporate professionals. System integration and educational training, which are growing at a higher rate, are the company’s relatively high margin offerings.
The company has been expanding client relationships in areas such as defense, e-governance, ports and transportation, all key drivers of domestic IT spend. The proposals in the railway budget ranging from increased mobile ticketing, augmenting IT infrastructure, fleet tracking and having a complete call-centre infrastructure by 2008-09, may all mean additional order flow for CMC, given its execution capabilities and existing relationship with the Railways. The Union Budget proposals to increase the number of IT-enabled citizen service centres to deliver Government services and increase in defense spend also hold promise for the company. But the caveat here is that where the deals are hardware intensive, the margins may be lower.
CMC’s international revenues have increased 35 per cent in the nine months ended December 2007. The growth here is driven by system integration deals, infrastructure management deals, synergies with TCS and focus on ITES services. International deals are usually more margin accretive than domestic ones and the company hopes to achieve a 50-50 balance between the two over the next 12-15 months. Though the extending receivables cycle was a concern earlier, this has been reduced sharply in the latest quarter. Margin pressures could arise as a result of competition from players such as HCL Infosystems, Wipro Infotech, Bartronics and Datacraft, for the above deals
Saturday, March 8, 2008
Dangerous Cracks Appearing in Job Market
Dangerous Cracks Hit Job Market As Employers Cut Positions, Thousands Drop Out of Labor Force
WASHINGTON (AP) -- Dangerous cracks in the nation's job market are deepening. Employers slashed jobs by the largest amount in five years and hundreds of thousands of people dropped out of the labor force -- ominous signs that the country is falling toward a recession or has already toppled into one.
For the second straight month, nervous employers got rid of jobs nationwide. In February, they sliced payrolls by 63,000, even deeper than the 22,000 cut in January, the Labor Department reported Friday.
The grim snapshot of the country's employment climate underscored the heavy toll the housing and credit debacles are taking on companies, jobseekers and the economy as a whole.
"It sounds like the recession bell is ringing for the U.S. economy, although it is still faint," said Stuart Hoffman, chief economist at PNC Financial Services Group.
On Wall Street, stocks tumbled. The Dow Jones lost 146.70 points, a little more than 1 percent to close at 11,893.69. The Dow was down 370 for the last two days of the week.
The worsening situation will prompt the Federal Reserve to cut a key interest rate deeply -- perhaps by as much as three-quarters of a percentage point -- at its next meeting March 18, or possibly sooner, to help brace the teetering economy, analysts predicted.
The shower of pink slips was widespread. Factories, construction companies, mortgage brokers, real-estate firms, retailers, temporary-help firms, child day-care providers, hotels, educational services, accounting firms and computer designers were among those shedding jobs. All those cuts swamped job gains at hospitals and other health care sites, bars and restaurants, legal services and the government.
"Losing a job is painful, and I know Americans are concerned about our economy; so am I," said President Bush. "It's clear our economy has slowed."
The big question: Just how much? The weak employment report pushed an increasing number of private economists into believing the economy is probably shrinking now. Under one rough rule, the economy would have to contract for six months for the country to be considered in a recession.
The unemployment rate actually dipped slightly from 4.9 percent to 4.8 percent, as 450,000 people left the labor force for any number of reasons. Economists thought many people probably gave up looking for work.
"It stands to reason that a large share of the people left because they didn't feel like anything was there for them -- that the market was too weak to be searching for a job at this point," said Mark Zandi, chief economist at Moody's Economy.com.
To relieve persistent credit problems, the Federal Reserve announced Friday that it will increase the amount of loans it plans to make available to banks this month to $100 billion. The Fed already has provided a total of $160 billion in short-term loans to cash-strapped banks since December. The Fed, in another step, said it will make $100 billion available to a broad range of financial players through a series of separate transactions.
Crumbling employment conditions are feeding fears the economy will fall victim to all the stresses. Until recently, the positive forces of job and wage growth have helped to offset the negative forces hitting people from the housing and credit crises. Now people and businesses alike are more cautious, spelling more trouble for the economy.
"The debate should no longer be about whether there is or is not a recession, only about how deep it will be," said Nigel Gault, chief economist at Global Insight.
The elimination of 63,000 jobs in February was the most since March 2003 and marked the second month in a row of job losses. The last time the economy suffered two consecutive months of job losses was in May and June 2003, when the labor market was still struggling to recover from the blows of the 2001 recession.
"Businesses got cold feet, and when that happens the easiest thing to do is to put hiring on hold and wait until the dust clears," said Ken Mayland, economist at ClearView Economics.
Economic growth slowed to a near standstill of just a 0.6 percent pace in the final quarter of last year. Before Friday's employment report, many thought growth would weaken further -- around a 0.4 percent pace. Now, however, a growing number think the economy is contracting.
Bush's top economic adviser, Edward Lazear, acknowledged Friday that the economy may dip into negative territory in the current quarter. Lazear's comment was the most pessimistic assessment heard out of the White House. He would not discuss whether the White House believes the economy will actually fall into a recession.
The Bush administration was hoping the government's speedily enacted economic stimulus package -- including tax rebates for people and tax breaks for businesses -- will help bolster the economy in the second half of this year.
"I know this is a difficult time for our economy, but we recognized the problem early and provided the economy with a booster shot," Bush said. "We will begin to see the impact over the coming months," the president predicted.
Democrats, however, said more relief is needed now.
House Speaker Nancy Pelosi, D-Calif., spoke of charting a "new direction for our economy." Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee, called for action to stem record-high home foreclosures.
The Democratic presidential contenders, Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, blamed the job losses on what they believe are failed Bush policies. "The news should put to rest any doubts that our economy is in deep trouble," Clinton said. Obama said the employment news meant "more heartache and struggle" for Americans.
On the employment front, workers with jobs saw modest wage gains.
Average hourly earnings for jobholders rose to $17.80 in February, a 0.3 percent increase from the previous month. Over the last 12 months, wages were up 3.7 percent. With lofty energy and food prices, though, workers may feel like their paychecks are shrinking.
Spreading fallout from the housing and credit troubles are the main factors behind the economic slowdown. People and businesses alike are feeling the strains and have turned cautious. Adding to the stresses on pocketbooks, budgets and the economy: skyrocketing energy prices. Oil prices, which have set a string of record highs in recent days, now top $105 a barrel. Gasoline prices have marched higher, too.
All those problems are putting consumers in a gloomy state of mind.
Consumer confidence sank to a new low of 33.1 in early March, according to the RBC Cash Index. That was the worst since the index began in 2002.
To help shore up the economy, Federal Reserve Chairman Ben Bernanke signaled last week that the central bank is prepared to lower interest rates again. Economists are now predicting a deep rate reduction by the Fed on or before its regularly scheduled meeting March 18. The Fed, which has been slicing the rate since September, recently turned more forceful. It slashed the rate by 1.25 percentage points during just eight days in January -- the biggest one-month reduction in a quarter-century.
WASHINGTON (AP) -- Dangerous cracks in the nation's job market are deepening. Employers slashed jobs by the largest amount in five years and hundreds of thousands of people dropped out of the labor force -- ominous signs that the country is falling toward a recession or has already toppled into one.
For the second straight month, nervous employers got rid of jobs nationwide. In February, they sliced payrolls by 63,000, even deeper than the 22,000 cut in January, the Labor Department reported Friday.
The grim snapshot of the country's employment climate underscored the heavy toll the housing and credit debacles are taking on companies, jobseekers and the economy as a whole.
"It sounds like the recession bell is ringing for the U.S. economy, although it is still faint," said Stuart Hoffman, chief economist at PNC Financial Services Group.
On Wall Street, stocks tumbled. The Dow Jones lost 146.70 points, a little more than 1 percent to close at 11,893.69. The Dow was down 370 for the last two days of the week.
The worsening situation will prompt the Federal Reserve to cut a key interest rate deeply -- perhaps by as much as three-quarters of a percentage point -- at its next meeting March 18, or possibly sooner, to help brace the teetering economy, analysts predicted.
The shower of pink slips was widespread. Factories, construction companies, mortgage brokers, real-estate firms, retailers, temporary-help firms, child day-care providers, hotels, educational services, accounting firms and computer designers were among those shedding jobs. All those cuts swamped job gains at hospitals and other health care sites, bars and restaurants, legal services and the government.
"Losing a job is painful, and I know Americans are concerned about our economy; so am I," said President Bush. "It's clear our economy has slowed."
The big question: Just how much? The weak employment report pushed an increasing number of private economists into believing the economy is probably shrinking now. Under one rough rule, the economy would have to contract for six months for the country to be considered in a recession.
The unemployment rate actually dipped slightly from 4.9 percent to 4.8 percent, as 450,000 people left the labor force for any number of reasons. Economists thought many people probably gave up looking for work.
"It stands to reason that a large share of the people left because they didn't feel like anything was there for them -- that the market was too weak to be searching for a job at this point," said Mark Zandi, chief economist at Moody's Economy.com.
To relieve persistent credit problems, the Federal Reserve announced Friday that it will increase the amount of loans it plans to make available to banks this month to $100 billion. The Fed already has provided a total of $160 billion in short-term loans to cash-strapped banks since December. The Fed, in another step, said it will make $100 billion available to a broad range of financial players through a series of separate transactions.
Crumbling employment conditions are feeding fears the economy will fall victim to all the stresses. Until recently, the positive forces of job and wage growth have helped to offset the negative forces hitting people from the housing and credit crises. Now people and businesses alike are more cautious, spelling more trouble for the economy.
"The debate should no longer be about whether there is or is not a recession, only about how deep it will be," said Nigel Gault, chief economist at Global Insight.
The elimination of 63,000 jobs in February was the most since March 2003 and marked the second month in a row of job losses. The last time the economy suffered two consecutive months of job losses was in May and June 2003, when the labor market was still struggling to recover from the blows of the 2001 recession.
"Businesses got cold feet, and when that happens the easiest thing to do is to put hiring on hold and wait until the dust clears," said Ken Mayland, economist at ClearView Economics.
Economic growth slowed to a near standstill of just a 0.6 percent pace in the final quarter of last year. Before Friday's employment report, many thought growth would weaken further -- around a 0.4 percent pace. Now, however, a growing number think the economy is contracting.
Bush's top economic adviser, Edward Lazear, acknowledged Friday that the economy may dip into negative territory in the current quarter. Lazear's comment was the most pessimistic assessment heard out of the White House. He would not discuss whether the White House believes the economy will actually fall into a recession.
The Bush administration was hoping the government's speedily enacted economic stimulus package -- including tax rebates for people and tax breaks for businesses -- will help bolster the economy in the second half of this year.
"I know this is a difficult time for our economy, but we recognized the problem early and provided the economy with a booster shot," Bush said. "We will begin to see the impact over the coming months," the president predicted.
Democrats, however, said more relief is needed now.
House Speaker Nancy Pelosi, D-Calif., spoke of charting a "new direction for our economy." Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee, called for action to stem record-high home foreclosures.
The Democratic presidential contenders, Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, blamed the job losses on what they believe are failed Bush policies. "The news should put to rest any doubts that our economy is in deep trouble," Clinton said. Obama said the employment news meant "more heartache and struggle" for Americans.
On the employment front, workers with jobs saw modest wage gains.
Average hourly earnings for jobholders rose to $17.80 in February, a 0.3 percent increase from the previous month. Over the last 12 months, wages were up 3.7 percent. With lofty energy and food prices, though, workers may feel like their paychecks are shrinking.
Spreading fallout from the housing and credit troubles are the main factors behind the economic slowdown. People and businesses alike are feeling the strains and have turned cautious. Adding to the stresses on pocketbooks, budgets and the economy: skyrocketing energy prices. Oil prices, which have set a string of record highs in recent days, now top $105 a barrel. Gasoline prices have marched higher, too.
All those problems are putting consumers in a gloomy state of mind.
Consumer confidence sank to a new low of 33.1 in early March, according to the RBC Cash Index. That was the worst since the index began in 2002.
To help shore up the economy, Federal Reserve Chairman Ben Bernanke signaled last week that the central bank is prepared to lower interest rates again. Economists are now predicting a deep rate reduction by the Fed on or before its regularly scheduled meeting March 18. The Fed, which has been slicing the rate since September, recently turned more forceful. It slashed the rate by 1.25 percentage points during just eight days in January -- the biggest one-month reduction in a quarter-century.
Reliance Ind eying petrochem project in Qatar
Reliance Industries is keen to set up a petrochem complex in Qatar especially for polymer production.
The company is "definitely interested in establishing a world-scale petrochemical complex here with Qatar Petroleum,'' R P Sharma, president (LNG business) of Reliance Industries who was in Qatar to attend the Middle East Gas Summit, said.
Mr Sharma said India had a huge market for polymers. "India consumes a lot of polymer and is a huge market,'' he was quoted as saying by Gulf Times daily.
Earlier, making a presentation on "Emerging trends in India and China'' transnational pipelines and LNG at the summit, Mr Sharma said domestic gas production in the two countries was expected to increase rapidly over the next 15 years.
Consumption was expected to be growing even faster, making gas imports necessary for both India and China. India also plans to import some 22.5m tonnes to meet its demand in 2011 and 2012.
The development of gas transmission and distribution networks in China and India is opening greater export opportunities for Russian and Middle Eastern gas, he said.
"Over a period of time, China and India may move from the role of a price-taker to price-maker in the Asia-Pacific region,'' Mr Sharma said.
The company is "definitely interested in establishing a world-scale petrochemical complex here with Qatar Petroleum,'' R P Sharma, president (LNG business) of Reliance Industries who was in Qatar to attend the Middle East Gas Summit, said.
Mr Sharma said India had a huge market for polymers. "India consumes a lot of polymer and is a huge market,'' he was quoted as saying by Gulf Times daily.
Earlier, making a presentation on "Emerging trends in India and China'' transnational pipelines and LNG at the summit, Mr Sharma said domestic gas production in the two countries was expected to increase rapidly over the next 15 years.
Consumption was expected to be growing even faster, making gas imports necessary for both India and China. India also plans to import some 22.5m tonnes to meet its demand in 2011 and 2012.
The development of gas transmission and distribution networks in China and India is opening greater export opportunities for Russian and Middle Eastern gas, he said.
"Over a period of time, China and India may move from the role of a price-taker to price-maker in the Asia-Pacific region,'' Mr Sharma said.
Thursday, March 6, 2008
Campus recruitment to fall by 38%
The campus recruitment by the IT and ITeS companies is likely to fall by about 38 per cent this year.
“The problem will be seen in the next six months,” said Mr K. Pandia Rajan, Managing Director of Ma Foi Management Consultants, a player in the human resource space. “We have seen companies staggering the joining dates by 2 to 3 months, batch sizes have come down ,” he said at the release of Ma Foi Employment Survey 2008.
Also, as the demand and supply gap increases with the supply on the rise and a fall in demand, campus hiring could be less than 38 per cent, he said.
Elaborating the reason for the trend, Mr Rajan said a depreciating dollar and a possible slowdown in the US economy are the key reasons for measured hiring by the companies.
The sector is also seeing some “downsizing” as “at least two large IT companies have downsized their staff strength,” he said, without naming the companies.
However, he added that with a slowdown in hiring, the attrition rates are also expected to come down by five to six per cent.
The Ma Foi 2008 survey expects an addition of about 74,693 jobs, a rise of 7.31 per cent over last year in the IT sector while ITeS sector will add 56,221 jobs, a rise of 7.2 per cent.
The survey was conducted across 22 key sectors like manufacturing, real estate and construction, hospitality, transport, communications and others.
In terms of percentage of growth in recruitments, the health sector shows the highest growth at 8.9 per cent, followed by IT at 7.3 per cent, ITeS at 7.2 per cent and hospitality at 6.9 per cent.
According to the survey, while the hospitality sector would generate the maximum number of employment in 2008 over last year with over 4.26 lakh jobs, education sector will have highest number of jobs in 2008 (1.42 crore).
Demand for fresh recruits is above 30 per cent in hospitality followed by sectors such as energy generation and supply sector, ITeS, and mining and extraction.
“The problem will be seen in the next six months,” said Mr K. Pandia Rajan, Managing Director of Ma Foi Management Consultants, a player in the human resource space. “We have seen companies staggering the joining dates by 2 to 3 months, batch sizes have come down ,” he said at the release of Ma Foi Employment Survey 2008.
Also, as the demand and supply gap increases with the supply on the rise and a fall in demand, campus hiring could be less than 38 per cent, he said.
Elaborating the reason for the trend, Mr Rajan said a depreciating dollar and a possible slowdown in the US economy are the key reasons for measured hiring by the companies.
The sector is also seeing some “downsizing” as “at least two large IT companies have downsized their staff strength,” he said, without naming the companies.
However, he added that with a slowdown in hiring, the attrition rates are also expected to come down by five to six per cent.
The Ma Foi 2008 survey expects an addition of about 74,693 jobs, a rise of 7.31 per cent over last year in the IT sector while ITeS sector will add 56,221 jobs, a rise of 7.2 per cent.
The survey was conducted across 22 key sectors like manufacturing, real estate and construction, hospitality, transport, communications and others.
In terms of percentage of growth in recruitments, the health sector shows the highest growth at 8.9 per cent, followed by IT at 7.3 per cent, ITeS at 7.2 per cent and hospitality at 6.9 per cent.
According to the survey, while the hospitality sector would generate the maximum number of employment in 2008 over last year with over 4.26 lakh jobs, education sector will have highest number of jobs in 2008 (1.42 crore).
Demand for fresh recruits is above 30 per cent in hospitality followed by sectors such as energy generation and supply sector, ITeS, and mining and extraction.
Now, FM looks at home loan rates
Appeals for lower interest rates for loans up to Rs 20 lakh.
Finance Minister P Chidambaram has indicated that interest rates on housing loans of up to Rs 20 lakh may be lowered as risk rates on such loans are at the bare minimum.
"I shall certainly bear in mind that there is public demand that interest rates for those who borrow housing loans up to Rs 20 lakh must be lowered," the finance minister said during his post-Budget interaction with the Associated Chamber of Commerce and Industry (Assocham).
Chidambaram said 80 per cent of the home loans raised are well within the range of Rs 20 lakh and defaults among such borrowers are extremely low.
The finance minister’s statement is significant given that major public sector banks – State Bank of India, Punjab National Bank and Canara Bank – cut their benchmark prime lending rates 50 basis points last month at his request.
Chidambaram had appealed for lower interest rates to boost consumption expenditure.
All banks wanted to wait till the first quarter of 2008-09 to take a call on reducing interest rates.
The finance minister, however, said it was for the banks and Reserve Bank of India (RBI) to take a call on lowering home loan rates, since lower rates could put pressure on inflationary targets.
“The RBI governor can never please everyone. It is his judgement call what the interest rates should be in order to contain inflation and promote growth," Chidambaram said.
Banks, however, had already started pricing loans up to Rs 20 lakh at 25 to 50 basis points less than loans above Rs 20 lakh. The differential pricing followed the RBI designating loans up to Rs 20 lakh priority sector lending and reducing the risk weight for capital allocation to 50 basis points from 75 basis points.
Banks had raised their overall lending rates by up to 400 basis points in over a year up to May 2007 following increases in reserve requirements by the central bank, which led to a sharp fall in loan growth for home, car, two-wheeler and commercial vehicle purchases.
The year-on-year growth in home loans towards the end of November 2007 had dropped to 15 per cent from 33 per cent a year ago. For commercial vehicles, loan growth dropped to 36 per cent from 81 per cent a year earlier.
Significantly, private sector banks, including ICICI Bank, the country's second largest bank, have not responded to the rate cuts by their public sector competitors.
Finance Minister P Chidambaram has indicated that interest rates on housing loans of up to Rs 20 lakh may be lowered as risk rates on such loans are at the bare minimum.
"I shall certainly bear in mind that there is public demand that interest rates for those who borrow housing loans up to Rs 20 lakh must be lowered," the finance minister said during his post-Budget interaction with the Associated Chamber of Commerce and Industry (Assocham).
Chidambaram said 80 per cent of the home loans raised are well within the range of Rs 20 lakh and defaults among such borrowers are extremely low.
The finance minister’s statement is significant given that major public sector banks – State Bank of India, Punjab National Bank and Canara Bank – cut their benchmark prime lending rates 50 basis points last month at his request.
Chidambaram had appealed for lower interest rates to boost consumption expenditure.
All banks wanted to wait till the first quarter of 2008-09 to take a call on reducing interest rates.
The finance minister, however, said it was for the banks and Reserve Bank of India (RBI) to take a call on lowering home loan rates, since lower rates could put pressure on inflationary targets.
“The RBI governor can never please everyone. It is his judgement call what the interest rates should be in order to contain inflation and promote growth," Chidambaram said.
Banks, however, had already started pricing loans up to Rs 20 lakh at 25 to 50 basis points less than loans above Rs 20 lakh. The differential pricing followed the RBI designating loans up to Rs 20 lakh priority sector lending and reducing the risk weight for capital allocation to 50 basis points from 75 basis points.
Banks had raised their overall lending rates by up to 400 basis points in over a year up to May 2007 following increases in reserve requirements by the central bank, which led to a sharp fall in loan growth for home, car, two-wheeler and commercial vehicle purchases.
The year-on-year growth in home loans towards the end of November 2007 had dropped to 15 per cent from 33 per cent a year ago. For commercial vehicles, loan growth dropped to 36 per cent from 81 per cent a year earlier.
Significantly, private sector banks, including ICICI Bank, the country's second largest bank, have not responded to the rate cuts by their public sector competitors.
Monday, March 3, 2008
Sensex plunges 900 points; banking, realty stocks worst hit
The BSE benchmark Sensex plunged by 900 points on Monday due to heavy selling by funds triggered by weak global trend. Banking, capital goods, realty and energy stocks dragged the markets today.
The 30-share index tumbled 5.12 per cent or 900.84 points to 16,677.88. The number of scrips that declined was higher at 26, and the advancing ones were only 4.
The Sensex fell after the Budget proposes to increase the short-term capital gains tax to 15 per cent.
Among sectoral indices, worst performers were Bankex, Realty, Capital Goods and Power indices. Bankex index has lost 6.72 per cent or 679.29 points to 9,434.44, Power index was down 6.35 per cent or 233.19 to 3,437.75, Realty index was down 5.71 per cent at 7,999.93 and Capital goods declined 5.80 per cent or 936.89 points to 15,182.63.
Similarly, the S&P CNX Nifty on the NSE lost 270.50 points to 4,953.00 as most of the index related heavyweight stocks lost notable grounds.
The advance-decline ratio on the Nifty was 1:9 depicting the current weakness.
Weak global trend mainly pulled down the share prices in early trading. Hong Kong share prices opened down 3.5 per cent today over worries of inflation and slowing down of domestic growth as well as concerns about the recession in the US economy.
The 30-share index tumbled 5.12 per cent or 900.84 points to 16,677.88. The number of scrips that declined was higher at 26, and the advancing ones were only 4.
The Sensex fell after the Budget proposes to increase the short-term capital gains tax to 15 per cent.
Among sectoral indices, worst performers were Bankex, Realty, Capital Goods and Power indices. Bankex index has lost 6.72 per cent or 679.29 points to 9,434.44, Power index was down 6.35 per cent or 233.19 to 3,437.75, Realty index was down 5.71 per cent at 7,999.93 and Capital goods declined 5.80 per cent or 936.89 points to 15,182.63.
Similarly, the S&P CNX Nifty on the NSE lost 270.50 points to 4,953.00 as most of the index related heavyweight stocks lost notable grounds.
The advance-decline ratio on the Nifty was 1:9 depicting the current weakness.
Weak global trend mainly pulled down the share prices in early trading. Hong Kong share prices opened down 3.5 per cent today over worries of inflation and slowing down of domestic growth as well as concerns about the recession in the US economy.
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