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Saturday, October 11, 2008

Quarterly Preview - Capital Goods, Engineering

Quarterly Preview - Capital Goods, Engineering

Infosys Technologies Results

Infosys Technologies Results

Weekly Global Events

The US government lent insurance major AIG an additional US $37.8bn. The insurer was seized last month and lent US $85bn. The company’s executives, meanwhile, got a rough ride in Congress for spending US $440,000 at a fancy resort the week after AIG was bailed out.

Bank of America reached a settlement with those states, including California and Illinois, that had brought lawsuits against the lending practices of Countrywide Financial, a beleaguered lender bought by the bank this year. The settlement rejigs the mortgages of around 400,000 homeowners and could cost up to US $8.6bn. Separately, Bank of America raised US $10bn in a share sale and said it would halve its dividend.

SAP, the world’s largest maker of software for business, said it had experienced a very sudden and unexpected drop in demand. And figures showed that the rate of growth in revenue from online advertising in the US in the first half of 2008 was considerably lower than in the same periods in 2007 and 2006. IBM, however, reported a 22% increase in quarterly profit.

GM, Ford shares fall on grim auto outlook

General Motors (GM) shares plunged 31% on Thursday and Ford Motor tumbled 21% on reports that auto sales will hit recession levels this year and get worse in 2009. Global auto market may experience an absolute collapse in 2009 amid growing concerns around availability of credit and general economic stress, said JD Power. The outlook represents the most dire warning yet on the auto industry in the wake of the financial turmoil that has rocked consumer confidence and virtually shut the door for many consumers to finance vehicle purchases. In response, S&P put GM and Ford's debt ratings on CreditWatch with a negative outlook. However, shares of the two US auto majors rebounded on the last day of the week. GM said it was not considering bankruptcy. Separately, GM also decided to stop production for a short time at several European plants, as part of its effort to reduce capacity. Other carmakers are also cutting back in Europe as they adapt to a sharp drop in demand.

Bankers to rescue Hindalco rights issue

The Rs50.47bn rights issue of Hindalco Industries is set to devolve on the underwriters. Although the quantum of the devolvement will be clear on Friday after the closure of the issue, reports said the figure is expected to be in the range of at least 15-20%. The five merchant banks are ABN Amro, Citigroup, Deutsche Bank, DSP Merrill Lynch and State Bank of India. The offer managed to attract subscription of only 45% (including a large chunk subscribed by the promoters) till Wednesday. This included GDR holders’ application to buy their entire entitlement of nearly 11%. The Aditya Birla group, the promoters, has promised to subscribe to 50% of the issue, against its entitlement of 31.4%. Domestic financial institutions have a combined 15% stake in the aluminium giant.

US withdraws motion against Ranbaxy

The US Department of Justice (DoJ) withdrew its motion in a local court against Ranbaxy after the Indian drug maker handed over the documents sought by the authorities. Ranbaxy said that the DoJ has been provided with a comprehensive set of audit documents based on instructions by the company, which will help resolve the questions raised by the U S government about the company's business practices and standards. Ranbaxy said that it remains confident that its pharmaceutical products are sale and effective and remains committed to cooperatively working with all regulatory and legislative authorities. Ranbaxy shares bucked the gloomy mood in the market, rising by 16% on the week.

Q1 wireless subscriber base up 10% QoQ

The total subscriber base of the wireline and wireless services reached 325.79mn for the quarter ended June as against 300.49mn for the quarter ending March, thus registering an increase of 8.4% during the quarter. The tele-density for the quarter ended June reached 28.33 compared to 26.22 for the quarter ending March. The subscriber base for wireless services increased from 261.07mn for the quarter ended March to 286.87mn for quarter ended June. Subscriber base of wireline service decreased from 39.42mn for the quarter ended March to 38.92mn for the quarter ended June. For GSM segment, all India blended ARPU per month decreased by 9.3% from Rs264 in March to Rs239 in June. For CDMA segment, all India blended ARPU for the quarter ended June was Rs139 compared to Rs159 for the quarter ended March.

Infosys Q2 net up 10% QoQ; cuts guidance

Infosys Technologies Ltd. announced financial results for the fiscal second quarter ended September 30, 2008. The Bangalore-based IT major has posted a consolidated net profit of Rs14.32bn versus Rs13.02bn in the previous quarter. This translates into a sequential growth of nearly 10%. Consolidated revenue for the reporting quarter is at Rs54.18bn, up 11.6% over the April-June quarter. Income was expected to be in the range of Rs52.29bn and Rs52.72bn. Earnings per share (EPS) for the second quarter has increased to Rs 25.02 from Rs22.75 in the first quarter. The EPS was expected to be in the range of Rs 23.52 and Rs 23.95.

Inflation coming down slightly

India's inflation, based on the wholesale price index (WPI), slowed to a 15-week low towards the end of September, as prices either declined or remained stable, the Government said. The annual point-to-point inflation stood at 11.8% in the week ended September 27 as against 11.99% in the previous week, the Commerce & Industry said in a statement. The rate was below a median forecast of 11.98%. The annual inflation rate was 3.36% during the corresponding week of the previous year. The WPI for 'all commodities' declined by 0.1% to 240.7 from 241.0 in the previous week. Inflation for the week ended Aug. 2 was revised up to 12.91% from a provisional estimate of 12.44% while the WPI for the same period was increased to 241.4 from the preliminary forecast of 240.4.

The index for Primary Articles group declined by 0.2% to 250.9 from 251.3 in the preceding week, while the annual point-to-point inflation declined to 11.17% from 11.29% reported in the previous week. The index for Fuel & Power group remained unchanged at its previous week's level of 375.3. The rate of inflation remained unchanged at 16.52% for this commodity group. The index for Manufactured Products declined by 0.1% to 207.2 from 207.5 in the previous week. The rate of inflation declined to 10.33% from 10.55% in the previous week. Inflation for 30 essential commodities increased marginally to 7.74% in the week ending September 27 from 7.7% in the previous week.

Industrial output plummets in August

The turmoil in the global financial markets now seems to have started affecting the Indian economy in a really bad way. India's industrial production plunged to its worst level in more than a decade in August, the Government said. The index of industrial production (IIP) fell sharply to 263.6 in August from 273.8 in July, with the corresponding growth rate sliding to a paltry 1.3% from a healthy 7.4% in July. Economists had expected IIP growth at 6% in August. The mining sector grew by 4% in August versus 3% in July, while manufacturing grew by 1.1% in August as against 8% in July, and electricity rose by 0.8% in August compared to 4.5% year ago. The Government also said that it has revised the July industrial production growth to 7.4% from a provisional figure of 7.1%. For the first five months of the current fiscal year, industrial output growth stood at 4.9% versus 10% in the corresponding period of the last fiscal year.

Expect global slowdown - IMF

The world economy is decelerating quickly—buffeted by an extraordinary financial shock and by still-high energy and commodity prices—and many advanced economies are close to or moving into recession, the IMF says in its latest World Economic Outlook (WEO).

The October 2008 report which was released two days prior to the IMF-World Bank Annual Meetings in Washington, said that growth in emerging economies is also weakening after years of strong growth, though it will still drive global growth.

Speaking at the WEO press conference, IMF Chief Economist Olivier Blanchard emphasized the importance of implementing joint financial and macroeconomic policies at this point "to stem the negative momentum on multiple fronts." On the financial side, "this implies the design of comprehensive programs to deal with systemic problems," while on the macroeconomic side, "this implies the use of monetary and fiscal policies to support growth and break negative feedback loops between the financial and real sectors," he said.

"With the right macro and financial policies—and these policies are available—we ca

Weekly Newsletter - Oct 11 2008

Headwinds seems to be a gentle word for the markets world over as indices continue to witness ruthless selling. We believe the market is yet to find a firm bottom and 3000 levels for the Nifty remain our next hope. Despite relatively attractive valuations, index heavyweights could succumb to the selling pressure of FIIs and domestic funds. The last ones standing could face more carnage as desperate investors look to cash out at any price. Redemption pressures are being talked about from various quarters and this could intensify if things don’t improve. Given the sharp fall this week, there is always hope that things turn around. We may see some positive ticks beginning Tuesday. However, that should not tempt you to take heavy positions. Remain light till there is more clarity.

Considering the unprecedented carnage in the global financial markets and uncertainty over the fate of the US and other major economies, we would like to refrain from giving any investment ideas. We continue to advise caution at this stage. Investors should stay on the sidelines till the global selloff abates and markets stabilise. One should not get carried away if there is any kind of a relief rally, as further selling is expected. Any advance in Indian stocks can only be sustained if global markets recover.

Indian markets too remain under stress

The global mess kept pounding Indian markets, which twice avoided trading freeze this week. The Sensex tumbled 16% and the Nifty lost 14% after sinking to 17-year lows of 10,239 and 3198, respectively. The Government, SEBI and RBI announced measures to ease the pain in the markets, but the same met with limited success, as the massacre continued unabated. The Government expanded the scope of infrastructure to allow companies in mining, exploration and refinery sectors to raise overseas loans through the ECB route. Capital market regulator SEBI removed restrictions on offshore derivative instruments (ODIs) in both, the cash as well as futures & options segments of the market. SEBI chief C.B. Bhave said the 40% cap on ODIs, including participatory notes (PNs), out of the total assets under custody in the cash market will also be done away with.

But, the biggest step was taken by the RBI, which slashed CRR by 150 basis points to 7.5% to boost liquidity. The reduction in the CRR comes into effect on Saturday and will pump Rs600bn into the banking system. Also, the Government canceled bond auctions worth US$2bn. The central bank sprung into action after call rates in the inter-bank overnight market soared to a 19-month high of 23%, and the rupee hit an all-time low of 49.30 bringing this year's losses to 20% before it regained some ground.

Finance Minister P. Chidambaram and other top government officials reiterated the strength of the Indian economy and promised to take further steps to provide more funds to the banking sector. "We will take steps to infuse liquidity because we recognise that the flow of credit smoothly and efficiently through the system is vital to the stability of the financial system," Chidambaram said.

Finance Secretary Arun Ramanathan said that the RBI has assured the government it was keeping a close watch on the market and would take appropriate steps. The Government set up a panel, which includes representatives from the RBI, to assess the liquidity problem and report back within a week, he said. The RBI blamed the money market squeeze squarely on international conditions and assured investors that the Indian economy was in good health.

Global markets continue to singe...

The mayhem in global markets continued this week, as the financial contagion deepened in Europe, and even spread to Japan later in the week. Equity markets across the globe plunged badly amid mounting fears that the worst financial crisis since the Great Depression would result in a prolonged and painful global recession. The incessant carnage prompted governments and regulators to take more emergency steps to try and stop the bloodshed.

But, all the efforts yielded little results, as the MSCI World Index suffered its worst week in more than three decades. The Nikkei in Japan lost a fourth of its value while the Hang Seng dropped 16%. The FTSE 100 in London fell below 4,000 for the first time in more than five years. The Dow Jones Industrial Average sank under 9,000 for the first time since 2003. The Nasdaq fell below 1,700 and the S&P 500 plunged into triple digits.

Russian stock exchanges delayed the opening of trading and Indonesia extended a two-day halt. Iceland suspended equity trading until Oct. 13 after the government seized Kaupthing hf, the country's biggest bank. Russia's government said it will start buying stocks of domestic companies next week to help support prices. Consob, Italy's securities-market regulator, banned all short sales on the country's stocks.

The cost of borrowing in dollars in London for three months rose as cash injections and interest-rate cuts by 10 major central banks failed to unlock the frozen money markets. The cost to protect corporate bonds from default soared to records around the world on investor concerns that the deepening credit crisis will trigger more failures as companies struggle to finance their businesses.

Market Outlook - Look beyond pain

Market Outlook - Look beyond pain

India Economy, IndiaBulls Real Estate, Hindalco, TCS, Tata Power

India Economy, IndiaBulls Real Estate, Hindalco, TCS, Tata Power

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Weekly Market Outlook - Oct 11 2008

Weekly Market Outlook - Oct 11 2008

What if .. ICICI goes bust ?

Frequently Asked Questions

What will happen to my account ?

Will I get my money back ?

Is my money INSURED ?

Will RBI give the money I have in ICICI ?

READ more ...

The deposit insurance system in India is subject to the Provisions of Deposit Insurance Act (enacted in 1961). Deposit Insurance and Credit Guarantee Corporation (DICGC) is the body that operates the deposit insurance system.

Q1 Which banks are insured by the DICGC?

Commercial Banks: All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC.

Cooperative Banks: All State, Central and Primary cooperative banks, also called urban cooperative banks, functioning in States / Union Territories which have amended the local Cooperative Societies Act empowering the Reserve Bank of India (RBI) to order the Registrar of Cooperative Societies of the State / Union Territory to wind up a cooperative bank or to supersede its committee of management and requiring the Registrar not to take any action regarding winding up, amalgamation or reconstruction of a co-operative bank without prior sanction in writing from the Reserve Bank are covered under the Deposit Insurance Scheme. At present all co-operative banks other than those from the States of Meghalaya, Mizoram, Nagaland, and the Union Territories of Chandigarh, Lakshadweep and Dadra & Nagar Haveli are covered under the deposit insurance scheme of DICGC.

Primary cooperative societies are not insured by the DICGC.

Q2 What does the DICGC insure?

In the event of a bank failure, DICGC protects bank deposits that are payable in India. The DICGC insures all deposits such as savings, fixed, current, recurring, etc. except the following types of deposits (i) Deposits of foreign Governments; (ii) Deposits of Central/State Governments; (iii) Inter-bank deposits; (iv) Deposits of the State Land Development Banks with the State co-operative bank; (v) Any amount due on account of deposit received outside India; (vi) Any amount, which has been specifically exempted by the Corporation with the previous approval of Reserve Bank of India.

Q3 What is the maximum deposit amount insured by the DICGC?

Presently, deposits of each depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh) for both principal and interest amount held by him "in the same right and same capacity" as on the date of liquidation/cancellation of bank’s licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.

Q4 How will I know whether my bank is insured by the DICGC or not?

The DICGC while registering the banks as insured banks furnishes them with printed leaflets for display giving information relating to the protection afforded by the Corporation to the depositors of the insured banks. In case of doubt, depositor should make specific enquiry from the bank’s officials in this regard or visit DICGC website on the web address

What is the ceiling on amount of Insured deposits kept by one person in

Q5 different branches of a bank?

The deposits kept by one person in different branches of a bank are aggregated for the purpose of insurance cover and presently a maximum amount upto Rupees one lakh is paid.

Q6 Does the DICGC insure just the principal deposit amount or both principal and
accrued interest?

The DICGC insures principal and interest upto a maximum amount of Rs. One lakh. For example, if an individual had deposit(s) with principal amount of Rs.95,000 plus accrued interest of Rs.4,000, the total amount insured by the DICGC would be Rs.99,000. If, however, the principal amount were Rs. One lakh, the accrued interest would not be insured, not because it was interest but because the amount was over the insurance limit.

Q7 Can deposit insurance be increased by depositing funds into several different
accounts all at the same bank?

No. All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks they would then be separately insured.

Q8 What is a single ownership account?

A single (or individual) ownership account is an account owned by one person. Such accounts include those in the owner’s name; those established for the benefit of the owner by agents, nominees, guardians, custodians, or conservators; and those established by a business that is a sole proprietorship.

Q9 Are deposits in different banks separately insured?

Yes. If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.

Q10 If I have deposits at two different banks, and those two banks are closed on
the same day, are my funds added together, or insured separately?

Your funds from each bank would be insured separately, regardless of the date of closure.

Q11 What is the meaning of deposits held in the same right and capacity and
different right and capacity?

If a person opens in his name more than one account in a bank, for example Mr. K.A.Pandit opens one savings account and one or more fixed deposit accounts, all the accounts are considered in the same right and same capacity and insurance coverage is limited to a maximum of Rupees one lakh. But if Mr. K.A.Pandit opens a joint account, the joint account is considered in a different right and different capacity and insurance coverage is provided separately. Each joint account is insured separately from any deposits individually owned by the joint depositors. Each joint account owned by a combination of different persons is insured upto Rupees one lakh. All joint accounts owned by the combination of same persons are added together and the combined total is insured upto Rupees one lakh.


Deposits held in different capacities











Shri S. K. Pandit







Shri S. K. Pandit





(Partner of ABC & Co.)

Shri S. K. Pandit





(Guardian for Master Ajit)

Shri S. K. Pandit





(Director, J.K. Udyog Ltd.)

Deposits held in joint accounts

Account (i)

First a/c holder- "Shri A. K. Sharma"

Maximum insured amount upto

Second a/c holder - "Smt. B. Sharma"

Rs.1 lakh

Account (ii)

First a/c holder - " Shri A. K. Sharma"

Maximum insured amount upto

Second a/c holder - "Shri P. Sharma"

Rs.1 lakh

Account (iii)

First a/c holder - "Smt. B. Sharma"

The a/c will be clubbed with the

Second a/c holder-"Shri A. K. Sharma"

a/c at (i)

Account (iv)

First a/c holder - "Shri A. K. Sharma"

Maximum insured amount upto

Second a/c holder - "Smt. B. Sharma"

Rs.1 lakh

Third a/c holder - "Shri P. Sharma"

Account (v)

First a/c holder - "Smt. B. Sharma"

The a/c will be clubbed with the

Second a/c holder - "Shri P. Sharma"

a/c at (iv)

Third a/c holder - "Shri A. K. Sharma"

Q12 Can the bank deduct the amount of dues payable to it by the depositor?

Yes. Banks have the right to set off their dues from the amount of deposits. The deposit insurance is available after netting of such dues.

Q13 Who pays the cost of deposit insurance?

Deposit insurance premium is borne entirely by the insured bank.

Q14 When is the DICGC liable to pay?

If a bank goes into liquidation: The DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit upto Rupees one lakh within two months from the date of receipt of claim list from the liquidator.

If a bank is reconstructed or amalgamated / merged with another bank: Where in respect of an insured bank a scheme of compromise or arrangement or of reconstruction or amalgamation has been sanctioned by any competent authority and the said scheme provides for each depositor being paid or credited with, on the date on which the scheme comes into force, an amount which is less than the original amount and also the specified amount, the Corporation shall be liable to pay to every such depositor in accordance with the provisions of section 18 of DICGC Act an amount equivalent to the difference between the amount so paid or credited and the original amount, or the difference between the amount so paid or credited and the specified amount, whichever is less:

Provided that where any such scheme also provides that any payment made to a depositor before the coming into force of the scheme shall be reckoned towards the payment due to him under that scheme, then the scheme shall be deemed to have provided for that payment being made on the date of its coming into force.

Q15 Does the DICGC directly deal with the depositors of failed banks?

No. In the event of a bank’s liquidation, the liquidator prepares depositor wise claim list and sends it to the DICGC. After scrutiny the DICGC pays the money to the liquidator who is liable to pay to the depositors. In the case of amalgamation / merger of banks, the amount due to each depositor is paid to the transferee bank.

Q16 Can any insured bank withdraw from the DICGC coverage?

No. The deposit insurance scheme is compulsory and no bank can withdraw from it.

Q17 Can the DICGC withdraw deposit insurance cover from any bank?

The Corporation may cancel the registration of an insured bank if it fails to pay the premium for three consecutive half year periods. In the event of the DICGC withdrawing its cover from any bank for default in the payment of premium the public will be notified through newspapers.

Registration of an insured bank stands cancelled if the bank is prohibited from accepting fresh deposits; or its licence is cancelled or a licence is refused to it by the Reserve Bank; or it is wound up either voluntarily or compulsorily; or it ceases to be a banking company or a co-operative bank within the meaning of Section 36A(2) of the Banking Regulation Act, 1949; or it has transferred all its deposit liabilities to any other institution; or it is amalgamated with any other bank or a scheme of compromise or arrangement or of reconstruction has been sanctioned by a competent authority and the said scheme does not permit acceptance of fresh deposits. In the event of the cancellation of registration of a bank, deposits of the bank remain covered by the insurance till the date of the cancellation.

Q18 What will be the Corporation’s liability on de-registration of banks ?

The Corporation has deposit insurance liability on liquidation etc. of "insured banks" i.e. banks which have been de-registered (a) on account of prohibition on acceptance of fresh deposits or (b) on cancellation of license or where it is found that license can not be granted. The liability of the Corporation in these cases is limited to the extent of deposits as on the date of cancellation of registration of bank as an insured bank subject to the monetary ceilings applicable.

On liquidation etc. of other de-registered banks i.e. banks which have been de-registered on other grounds such as non payment of premium or their ceasing to be eligible cooperative banks under section 2(gg) of the DICGC Act, 1961, the Corporation has no liability.