Power Grid Limited
Saturday, November 08, 2008
Job cuts galore...
Nokia plans to reorganize its sales and marketing activities and its research center. The company said that 450 jobs will be affected in the markets unit and 130 in the research center. In addition, Nokia plans to close its Turku site in Finland, where 220 employees work, and relocate those activities predominantly to Salo.
Tata Motors-owned Jaguar Land Rover (JLR) reportedly plans to cut 400 more jobs to overcome the global economic gloom. The plans have been announced to the company’s 16,000-strong workforce that is currently facing short-time working and prolonged plant shutdowns. The 400 redundancies are on top of the 198 job losses JLR recently announced as part of its annual efficiency drive.
Another Tata owned company, Europe's second-largest steelmaker Corus said it planned to cut 400 jobs in its distribution business because of the economic downturn. The company, owned by Tata Steel, said it would start an immediate consultation with workers and would try to achieve the job losses through voluntary redundancy. The distribution side of the business employs 2,400 at 36 sites in the UK and Ireland. The proposed reductions will be spread throughout the business, Corus said.
Fidelity Investments will cut nearly 1,300 jobs, or 2.9% of its staff, this month and plans more layoffs in the first three months of next year, the world's biggest mutual fund company said. Fidelity's biggest job cuts in six years follow a slump in assets as investors pull record amounts of money from mutual funds during the financial crisis. Details of the second round of job cuts will be finalized in coming weeks, Fidelity said.
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IMF sees recession in advanced economies
Leading developed economies will witness their first annual contraction next year since the World War II, ravaged by the crippling global financial crisis, the International Monetary Fund (IMF) said. The IMF now expects rich world economies to contract by 0.3% as against its earlier projection of a 0.5% growth. It expects 2009 global economic growth of 2.2%, down by 0.8% from the forecast it announced in October. Because trend output growth in the rich world has slowed over recent decades, the projected downturn is not unprecedented, the IMF said. In terms of undershooting potential, it is comparable to the recessions in 1975 and 1982, it added. "Market conditions are starting to respond to policy actions, but even with their rapid implementation, financial stress is likely to be deeper and more protracted than envisaged in October," the IMF said in a statement. While government efforts to cushion the blow were helping to some extent, more steps were needed, the IMF said. "There is a clear need for additional macroeconomic policy stimulus relative to what has been announced thus far," the IMF added. "Room to ease monetary policy should be exploited," it added.
Suzlon to reschedule stake purchase in REpower
Shares of Suzlon rallied after the company announced that it was in talks with Martifer to set a new payment schedule for buying its 22.4% stake in Germany's REpower Systems. "Suzlon and Martifer are currently in discussions to arrive at a mutually acceptable payment schedule," Ahmedabad-based Suzlon and Martifer said in a joint statement. Suzlon had agreed to complete the purchase of Martifer's stake in REpower for €270mn (US$344mn) by Dec. 15. The Indian company has provided Martifer with a bank guarantee valid until May 2009. Suzlon plans to use its own cash for the purchase and may raise some debt to buy the stake, Chairman Tulsi Tanti said last week. Suzlon last month suspended a rights offer to raise Rs18bn to buy the additional stake in REpower after a slump in stock markets. It owns 66% of REpower and 89% of the voting rights in the German company, including those of Martifer. Meanwhile, a financial newspaper said that Suzlon might face legal action from lenders if it goes ahead with the acquisition of balance stake of Martifer in REpower.
Kingfisher Airlines faces rough weather
Vijay Mallya’s Kingfisher Airlines reportedly defaulted on payment of lease rentals to GE Commercial Aviation Services (GECAS) for four A320s. GECAS, one of the biggest aircraft lessors in the world, asked the Directorate General for Civil Aviation (DGCA) for permission to repossess the aircraft and demanded that the aircraft be de-registered from the airline, a business daily said. However, Kingfisher denied any default and secured ad-interim relief from the Karnataka High Court to prevent the repossession of four A320 aircraft by GECAS. "Since the matter is now sub-judice, the DGCA cannot take action on de-registering the aircraft," a Civil Aviation Ministry spokeswoman said. The court has heard our application and thought it fit to pass ad-interim orders for our protection," A Kingfisher spokesman said.
RIL shares tumble on plant closure reports
Shares of Reliance Industries slipped after newspaper reports stated that the company had shut five of its seven polyester and petrochemicals units at Patalganga near Mumbai. The move was aimed at improving profit margin amid falling demand for polyester products worldwide. As per an agreement reached with the employees' union, the company had given exit offer to almost 800 non-supervisory employees at Patalganga, reports said. But, Reliance Industries clarified that the news of it shutting down five Polyester units in Patalganga was factually incorrect. There are no plans currently to shift any plants from Patalganga to Nagothane, the company said. The PTA and LAB facilities are currently operating at full capacity in Patalganga, RIL said in a statement. Some of the polyester plants are shut for routine maintenance and enhancing product capabilities, it added. The company expects to restart from this month, RIL said.
Weekly Stock Recommendations - Nov 8 2008
Buy BHEL
Buy L&T
Buy Indiabulls Real Estate
Buy JP Associates
Buy ONGC
Export growth slumps in September
India’s merchandise exports rose at the slowest pace in 18 months in September, as demand for the country's goods was hit by the worldwide economic slowdown in the wake of the worst financial crisis since the Great Depression. Exports during September were up by only 10.4% at US$13.75bn while imports surged by 43.3% to US$24.38bn, as a steep fall in the Indian rupee negated the benefit from sharply lower crude oil prices. This translated into a trade gap of US$10.63bn as against US$4.56bn in the corresponding month a year earlier. In rupee terms, exports touched Rs626.41bn, which was 24.7% higher than September 2007 while imports jumped by 61.9% to Rs1.11 trillion. In rupee terms, the trade deficit in September 2008 works out to Rs484.44bn compared to Rs183.73bn in the same month last year. Oil imports during September 2008 climbed 57.1% to US$9.09bn while non-oil imports during the same period was up 36.2% at US$15.28bn.
Core sector growth rebounds
In what could put some smile back on the faces of policymakers at the Centre, India Inc. and the financial markets, growth in the country's six crucial infrastructure industries has improved in September from August. The rebound in the performance of the six core sectors in September over the preceding month came on the back of better output growth logged by Coal, Cement and Electricity, data released by the Government showed. The Index of six core-infrastructure industries, having a combined weight of 26.7% in the Index of Industrial Production (IIP), stood at 237.9 in September and registered a growth of 5.1% compared to a growth of 5.8 % in September 2007. This was much better than August's disappointing growth of just 2.7%. During April-September 2008-09, the six core-infrastructure industries registered a growth of 3.9% as against 6.9% during the corresponding period of the previous year, the Commerce & Industry Ministry said today.
Fitch sees steep decline in GDPs of advanced economies
The world economy is entering a severe recession. Output is falling in the US, Japan, Germany, France and the UK, and this contraction in economic activity to intensify over the next 12 months. For the major advanced economies (MAEs, comprising the US, Eurozone, UK and Japan) in aggregate, Fitch Ratings is forecasting the steepest decline in GDP since the Second World War at -0.8%, in part reflecting the unusually synchronised downturn expected next year.
World GDP will grow by just 1% next year, the lowest rate since the early 1990s and compared to an average of 3.5% over the last five years. The combination of recession in developed economies, lower commodity prices and reduced international capital flows will result in a sharp slowdown in growth in emerging markets (EMs) though most will avoid outright recession.
The rapid intensification of the global credit crisis in the last two months and clearer evidence of household retrenchment, declining corporate investment intentions and falling world trade growth explain the sharp deterioration in the outlook since the summer. These factors far outweigh the benefits to income growth in the advanced economies from the decline in commodity prices.
Recession driven by a contraction in the supply of credit is uncharted territory for the world economy and there are few historical parallels on which to gauge its possible depth or length. However, the aggressive expansion of central bank liquidity provision since early September, in combination with major fiscal injections into the US and European banking systems, will head off the worst case scenario of widespread deflation.
Weekly Newsletter - Nov 8 2008
The market may continue to witness high level of volatility next week, as it struggles for direction after rebounding last week from the recent lows. As usual, the Indian indices will continue to be at the mercy of global cues, as the result season is over and there are hardly any local factors to drive the market. A cut in fuel prices might just be able to cheer up the market, as it will bring down inflation. The market would also welcome a cut in lending rates from private banks. PSU banks cut their rates this week at the behest of the Government. Apart from these, the IIP data for September is another factor that could have some bearing on the sentiment, especially if it turns out to be better than August.
Otherwise, the newsflow remains grim, with several companies announcing cut in production and capex to tide over the economic downturn. While valuations are looking attracting, investors are still wary of the future prospects as a global recession looks imminent. One should avoid aggressive purchases, as the indices may test their previous lows. The upside too appears to be capped, as every rally will be followed by profit booking. The market is going through a major crisis of confidence, and one should stay out until that is restored on a sustained basis.
Govt pressures state-run banks to cut rates
With the economy on a downswing, and India Inc. complaining of credit crunch, the Government asked all nationalised banks to cut rates after the RBI's aggressive monetary easing measures last week. Most public sector banks, including the State Bank of India (SBI) obliged the Government by slashing their prime lending rates by up to 75 basis points, but private banks were still reluctant to do so, though they promised to take up issue shortly.
Finance Minister P. Chidambaram said that Indian banks will be able to meet credit demand for crucial sectors such as housing and SMEs, and were on track to achieve the annual target for agriculture loans. Speaking to reporters after a meeting with the head honchos of nationalised banks in New Delhi, Chidambaram said that Indian banks will be able to ensure adequate flow of credit at appropriate price.
The Finance Minister held the meeting to review the liquidity situation and quarterly performance of the state-run banks. He held wide-ranging consultations with the PSU bank executives relating to the impact of the global financial meltdown on the Indian banking sector. The meeting came a day after the captains of Indian industry met Prime Minister Dr Manmohan Singh, and demanded steps for enhancing liquidity, besides further steps to create an environment conducive for lowering of interest rates.
The Reserve Bank of India (RBI) will keep a close watch on liquidity and public sector banks will report credit delivery every two weeks, Chidambaram said, adding that he expected encouraging decisions on credit pricing and delivery. Public sector banks are facing higher credit demand and they have been asked to assess capital requirements for the next three years. Five nationalised banks have Capital Adequacy Ratio (CAR) of under 12%, he added.
The Finance Minister also said that the National Housing Bank and SIDBI have sought a credit line of Rs100bn from the Government. The RBI will consider the demand for credit line from the NHB and SIDBI, he said. Chidambaram also announced that the credit guarantee on loans will be extended to Rs10mn.
Separately, Finance Secretary Arun Ramanathan said that private sector banks were expected to consider reducing lending rates in the next few days and will support credit lines to non-banking finance companie
Obama trounces McCain...promises change for America
It was a fairytale ending, a dream come true, a triumph of determination against racial barriers and an inspiration to many aspiring politicians across the globe. In a major breakthrough that would have seemed unthinkable just two years ago, Barack Hussein Obama, a first-time senator from Illinois, became the first ever African-American president-elect in the history of America. It was hailed as a momentous occasion, not just for Obama and the hundreds of thousands of African-Americans, but also for a nation that is going through one of its worst periods of economic crisis. Obama was elected the 44th US president, with relative ease, as Americans chose change from George W. Bush's unpopular foreign and economic policies.
Obama, 47, who is a Democrat, defeated Republican Senator John McCain of Arizona, 72, a former prisoner of war who was making his second bid for the presidency. Obama proved that, with the right message, a politician with no money or muscle can overcome the odds and emerge victorious. "If there is anyone out there who still doubts that America is a place where all things are possible, who still wonders if the dream of our founders is alive in our time, who still questions the power of our democracy, tonight is your answer," said Obama in his victory speech in Grant Park in Chicago. "It’s been a long time coming, but tonight, because of what we did on this date in this election at this defining moment, change has come to America," the president-elect added.
In his concession speech, delivered in Arizona Biltmore, Phoenix, McCain offered his congratulations to Obama and saluted the historical significance of the moment. "This is a historic election, and I recognize the significance it has for African-Americans and for the special pride that must be theirs tonight," McCain said, adding, We both realize that we have come a long way from the injustices that once stained our nation’s reputation." Bush called Obama to congratulate him on his victory. He promised to make this a smooth transition. "You are about to go on one of the great journeys of life. Congratulations, and go enjoy yourself," Bush told Obama. For Republicans, who have dominated the party for nearly three decades, the defeat represented a bitter setback and left them contemplating where they now stand in American politics.
Not only did Obama capture the presidency, but he led his party to sharp gains in Congress. This puts Democrats in control of the House, the Senate and the White House for the first time since 1995, when Bill Clinton was in office. Still, the Democratic haul in the Senate falls four short of the 60 needed to pass controversial legislations without Republican support.
Obama and his expanded Democratic majority on Capitol Hill now face the arduous task of seeing the US through an impending recession, and several challenges on the foreign policy front. "The road ahead will be long, our climb will be steep," said Obama. "We may not get there in one year or even one term, but America, I have never been more hopeful than I am tonight that we will get there. I promise you, we as a people will get there," he added. He faces the monumental task of prosecuting two wars abroad, protect the US from terrorist threats and putting the sluggish economy back on track.
Obama has huge promises to keep as well. He has pledged tax cuts to 95% of families. He has proposed near-universal health care. He proposes more spending on infrastructure, both physical and human. He has also promised to get the US out of Iraq in a fast and orderly fashion. In a recognition of the difficult transition he faces, Obama is expected to start filling White House jobs as early as this week. Obama’s advisers said he would not be passive and would move quickly to demonstrate leadership without waiting for the transfer of authority on January 20.
With such a great victory come unreasonably great expectations. And, Obama will inherit a nation weary of the past and wary of the future, gloomy about its place in the world and cynical about its government. Nearly nine of every 10 Americans think the country is on the wrong track, the deepest expression of national pessimism in the polling history. Obama will not take office until January 20, but he can start acting now itself. First, by announcing that he will offer jobs to a few Republicans. Secondly, he can ask his new treasury secretary to start working closely with Henry Paulson immediately, in resurrecting the US economy.
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