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Sunday, December 14, 2008

FY10 may be more difficult year: RBI

The RBI governor, Duvvuri Subbarao, said country`s growth projections for the current financial year ending in March 2009 may be revised downwards. The Reserve Bank of India (RBI) governor, Duvvuri Subbarao, said the country's growth projections for the current financial year ending in March 2009 may be revised downwards. Speaking to the media after meeting the chief minister of West Bengal, he said FY10 may be a more difficult year.

Inflation drops to lowest in seven months

Inflation dropped to 8% for week ended Nov 29 against 8.4% in the previous week. India's inflation, based on the wholesale price index (WPI), further cooled off and was inline with the expectations in the week through November 29. Inflation declined due to a drop in food products and primary articles, the Government announced on Thursday.

The index for fuel, power, lubricants, lights and manufactured products remained unchanged. The annual point-to-point inflation was 8.00% in the week ended Nov. 29 versus 8.4% in the previous week, the Commerce & Industry Ministry said. Inflation had touched a 16-year peak of 12.91% in August.

Inflation was expected to come in at 7.97% - 8%. Meanwhile, the Government revised the inflation rate for the week ended Oct. 4 to 11.49% from a preliminary estimate of 11.44%

Weekly Stock Ideas - Dec 14 2008

Buy L&T

Buy Punj Lloyd


Buy IVRCL Infra

Buy Ansal Infra

Ten commandments on Banks

So diversify your investments across banks and don`t park all your cash in one place.

1. Thou shalt not use one bank account
Bank deposits are not 100% safe. Deposits of only up to Rs 1 lakh are insured by the government. If your bank fails, this is the maximum amount you will be entitled to. In the past, when there has been a rush of investors to withdraw deposits, some banks have been forced to stagger payment or limit withdrawals. So diversify your investments across banks and don't park all your cash in one place.

2. Thou shalt not live on credit
Even in normal circumstances, cash is king. In times of a meltdown, as is the case now, this is doubly true. As defaults rise, stock brokers ask the clients for upfront payments before placing a buy order for securities. In such situations, only cash will allow you to tap the opportunities that a volatile stock market throws up.

3. Thou shalt not rely on debt
While equity markets are going through one of the roughest phases in recent years, fixed deposits and other debt options are offering very attractive returns. But don't be tempted to go on a debt binge just because the interest being offered is very high. Though debt gives some stability to your portfolio, keep in mind that every investment carries an element of risk, including the so-called 'safe' investments. Some non-banking finance companies, in which debt funds and fixed maturity plans had invested, are defaulting in repayment commitments.

4. Thou shalt not be passive
You need to update your portfolio regularly and a bust offers an opportunity to do this. Keep an eye on market movements to weed out dead investments or take advantage of new avenues. For instance, did you know that some banks are allowing free upgrades to higher interest rate deposits without having to pay a penalty?

5. Thou shalt think globally
Global factors affect you; foreign names matter. When Lehman Brothers went bust, Unitech's shares were hammered. So from now on, you need to look at how foreign companies, hedge funds, PE funds or FIIs are performing, since they invest in the companies that you invest in.

6. Thou shalt have a fixed time frame
If you don't have a specific time frame for your investments or decide to ignore the one you had initially set, you could end up losing. Those who invested in real estate found this out to their disadvantage; they went into a panic mode and tried to offload their property even when prices were abysmal and there were few buyers.

7. Thou shalt ignore listing day gains
No longer can you rely on IPOs for assured profits. There was a time when investors could book spectacular profits of 100-150% and get out of an IPO the day it was listed. This is not true anymore.

8. Thou shalt not ignore equities
Don't give up investing in the stock market just because the Sensex has fallen to below 10,000. Even if the uncertainty has forced you to scale down your investments, don't stop putting in the money altogether. Regular investments help you bring down average costs.

9. Thou shalt not ignore bargains
A slowdown is a great time for the consumer. When everyone starts cutting down on investments and sales targets are consistently missed, it opens up the market for good deals. Houses, cars, gadgets, consumer durables... you're likely to get great deals on all these if you keep your eyes and ears open.

10. Thou shalt not be afraid to quit
While recent job cuts in the high-profile aviation and financial services sectors might have scared you, not every industry is faced with the same uncertainty. All you need to do before you decide to change jobs is homework. Find out which sectors are suited to your skillsets and experience. For example, the professional requirements of aviation and hospitality sectors easily overlap.

via Indiainfoline

Weekly Newsletter - Dec 14 2008

Last weekend saw some stimulation for the economy. The measures by the government and the RBI resulted in the major indices gaining around 8% each for the week. Much needed support from global markets pepped up sentiment further.

The coming week will again dance to the global market music. On the domestic front there will be leaks of advance tax numbers. More focus would be on a Fed meet likely next week and industrial production data in the US which is expected to be negative.

Markets have the tendency to surprise and bulls will hope for some positive surprises like this week. Remain cautious. Avoid putting much fresh money as yet .

India’s Oct IIP drops to negative 0.4% from year ago

India’s industrial production fell for the first time in 15 years. Output at factories, utilities and mines dropped 0.4% in October from a year earlier after a revised 5.45% gain in September, according to the Central Statistical Organization. Market was expecting an increase of 2.1%. IIP last declined in output in April 1993.

Waning exports and weaker domestic demand are forcing companies such as Mahindra & Mahindra Ltd. and Ashok Leyland Ltd. to cut production, weakening growth in an economy expected by the central bank to expand at the slowest pace in more than four years.

India’s exports fell for the first time in seven years in October.

Earlier, on Dec. 6, RBI lowered its repurchase rate to 6.5% from 7.5%, the third cut since October. The next day the government announced a US$4bn stimulus package.

Manufacturing, which accounts for about 80% of total output, dropped 1.2% in October. Electricity output rose 4.4% and consumer-goods production fell 2.3%.

Passenger-car sales declined 19% last month, the most in more than five years, as tighter lending by banks and a slowing economy hurt demand. Sales fell to 83,059 from 103,031 a year earlier, according to the Society of Indian Automobile Manufacturers.

Concern over companies cutting production and losing profits has seen Sensex decline 52% this year. FIIs have sold US$13bn of domestic equities this year, compared with US$17.2bn of share purchases in 2007.

Weaker production and exports may hurt India’s economic expansion. India's economy may grow 7.5% in the year to March 31 from 9% or more annually in the previous three years, according to the RBI data.

Rate cuts and stimulus to pep up economy

Last weekend was an eventful one. The Government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem. The first priority was to re-assure the people of the stability of the financial system in general and of the safety of bank deposits in particular. To this end, steps were taken to infuse liquidity into the banking system and also to address problems being faced by various non-bank financing companies. These steps have ensured that the financial system is functioning effectively without suffering the kind of loss of confidence experienced in the industrialised world.

Having assured stability of the system, the Government has focused its attention on countering the impact of the global recession on India's economic growth. On the monetary side, the RBI has sought to pump sufficient liquidity into the banking system to enable bank credit to meet the expanded requirements of the economy keeping in mind the contraction in credit from non-bank sources. Banks have been provided adequate liquidity through a series of reductions in the CRR and additional flexibility in meeting the SLR requirement. Interest rate reductions have also been signalled by reductions in the repo and reverse repo rates, the most recent of which was announced on Saturday when both the repo rate and the reverse repo rate were cut by 100 basis points. Access to external commercial borrowings has also been liberalised so that borrowers capable of accessing funds from abroad are allowed to do so. The banks are being encouraged to counter what might otherwise become self-fulfilling negative expectations by enhanced lending to support economic activity.

These measures in the area of money and credit are being supplemented by fiscal measures designed to stimulate the economy. In recognition of the need for a fiscal stimulus, the Government had consciously allowed the fiscal deficit to expand beyond the originally targeted level because of the loan waivers, issue of oil and fertilizer bonds and higher levels of food subsidy.