"Just about everybody got wrong-footed by 2008, but some people's mistakes were truly spectacular. Here are some of the worst predictions that were made about 2008. Savor them—a crop like this doesn't come along every year.
1. "A very powerful and durable rally is in the works. But it may need another couple of days to lift off. Hold the fort and keep the faith!" —Richard Band, editor, Profitable Investing Letter, Mar. 27, 2008
At the time of the prediction, the Dow Jones industrial average was at 12,300. By late December it was at 8,500.
2. AIG (AIG) "could have huge gains in the second quarter." —Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008
AIG wound up losing $5 billion in that quarter and $25 billion in the next. It was taken over in September by the U.S. government, which will spend or lend $150 billion to keep it afloat.
3. "I think this is a case where Freddie Mac (FRE) and Fannie Mae (FNM) are fundamentally sound. They're not in danger of going under…I think they are in good shape going forward." —Barney Frank (D-Mass.), House Financial Services Committee chairman, July 14, 2008
Two months later, the government forced the mortgage giants into conservatorships and pledged to invest up to $100 billion in each.
4. "The market is in the process of correcting itself." —President George W. Bush, in a Mar. 14, 2008 speech
For the rest of the year, the market kept correcting…and correcting…and correcting.
5. "No! No! No! Bear Stearns is not in trouble." —Jim Cramer, CNBC commentator, Mar. 11, 2008
Five days later, JPMorgan Chase (JPM) took over Bear Stearns with government help, nearly wiping out shareholders.
6. "Existing-Home Sales to Trend Up in 2008" —Headline of a National Association of Realtors press release, Dec. 9, 2007
On Dec. 23, 2008, the group said November sales were running at an annual rate of 4.5 million—down 11% from a year earlier—in the worst housing slump since the Depression.
7. "I think you'll see [oil prices at] $150 a barrel by the end of the year" —T. Boone Pickens, June 20, 2008
Oil was then around $135 a barrel. By late December it was below $40.
8. "I expect there will be some failures. … I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system." —Ben Bernanke, Federal Reserve chairman, Feb. 28, 2008
In September, Washington Mutual became the largest financial institution in U.S. history to fail. Citigroup (C) needed an even bigger rescue in November.
9. "In today's regulatory environment, it's virtually impossible to violate rules." —Bernard Madoff, money manager, Oct. 20, 2007
About a year later, Madoff—who once headed the Nasdaq Stock Market—told investigators he had cost his investors $50 billion in an alleged Ponzi scheme.
10. A Bound Man: Why We Are Excited About Obama and Why He Can't Win, the title of a book by conservative commentator Shelby Steele, published on Dec. 4, 2007.
Mr. Steele, meet President-elect Barack Obama.
A good compilation for Forecasters."
Wednesday, December 31, 2008
India to Become an Important Market for Security Equipment Firms
With terrorism reaching a never before levels in the country and with mass transport systems acting as soft targets for criminal and terrorist activities, India is poised to become an important international spender in the global security market as per the latest report by Frost& Sullivan.
As per the report, the country’s homeland security spending is expected to total around $9.7 bn by 2016, with security of airports contributing to around $3.2 bn at a compound annual growth rate (CAGR) of 5%t. New analysis by the research firm on Indian Homeland Security Market, finds that the market earned revenues of $800 mn in 2007 and estimates this to reach over $1 bn in 2016.
Among other things, the latest Mumbai terror attacks has led to urgent call for formulation of more developed security measures to protect areas where there is a high level of civilian mobility. Mass transport systems are especially being seen as 'soft' targets for both criminal and terrorist activities. Intelligent and durable surveillance systems within 'rolling stock' are among the key revenue generators in this sector. Other technologies that will increase investment included low TCO, self-diagnosing CCTV systems, automatic wireless image downloads and innovative passenger screening technologies.
The increasing importance of air traffic couple with increase in small- to medium-size airports is also expected to enhance the demand for airport security measures. Key technologies include biometric electronic access control, passenger screening portals and explosive detection systems for baggage, as well as cutting-edge passenger processing systems.
However the report also says that foreign security firms that don’t have JV with a local partner in the country could face slow procurement trends, as an emphasis on developing the indigenous security industry and the prevalent dependence on manpower-intensive security measures could hamper security investment.
As per the report, the country’s homeland security spending is expected to total around $9.7 bn by 2016, with security of airports contributing to around $3.2 bn at a compound annual growth rate (CAGR) of 5%t. New analysis by the research firm on Indian Homeland Security Market, finds that the market earned revenues of $800 mn in 2007 and estimates this to reach over $1 bn in 2016.
Among other things, the latest Mumbai terror attacks has led to urgent call for formulation of more developed security measures to protect areas where there is a high level of civilian mobility. Mass transport systems are especially being seen as 'soft' targets for both criminal and terrorist activities. Intelligent and durable surveillance systems within 'rolling stock' are among the key revenue generators in this sector. Other technologies that will increase investment included low TCO, self-diagnosing CCTV systems, automatic wireless image downloads and innovative passenger screening technologies.
The increasing importance of air traffic couple with increase in small- to medium-size airports is also expected to enhance the demand for airport security measures. Key technologies include biometric electronic access control, passenger screening portals and explosive detection systems for baggage, as well as cutting-edge passenger processing systems.
However the report also says that foreign security firms that don’t have JV with a local partner in the country could face slow procurement trends, as an emphasis on developing the indigenous security industry and the prevalent dependence on manpower-intensive security measures could hamper security investment.
Tuesday, December 30, 2008
Reliance Money Plans to Start Stock Exchange with FTIL
Anil Dhirubhai Ambani Group firm Reliance Money has set its eyes on giving competition to the two premier stock exchanges in the country, viz. Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Reliance Money in collaboration with Financial Technologies India Ltd (FTIL) plans to start its own stock exchange.
Reliance Money has the monetary backing of R-ADAG group; it is also a prominent player in commodity market after picking 10% stake in the National Multi Commodity Exchange (NMCE). The company wants to increase its holding to 26% in near future. Reliance Money’s spot exchange for agriculture commodities is also expected to early 2009. The FTIL group has interests in a currency futures exchange, commodity futures, power exchange and spot exchange for agricultural commodities and plans to set up an exchange for SMEs. It has also set up exchanges overseas.
There is tremendous scope for equity stock exchange in the country that has only 5% of its households investing in equities compared to the global average of around 50%. The equity derivative segment has the biggest scope, with the NSE enjoying a virtual monopoly in the segment with an average daily volume of around Rs 40,000 cr. The spot equity market average turnover doesn’t even match up to half of the NSE derivate average, with the BSE having a daily average volume of Rs 4,000 cr and the NSE having daily average volumes at Rs 10,000 crore in the spot segment.
Any aspirant in the stock exchange segment will however need approval from the Reserve Bank of India (RBI). For FTIL, the equity exchange would be an extension of MCX-SX, its currency trading exchange, which was launched under a subsidiary. Reliance Money will have to set up a new company. Another issue could be equity holding, SEBI has recently decided to allow a single shareholder to hold a maximum of 15% in stock exchanges, but has not notified this yet. The aspirant companies’ track record will also be key factor in getting regulatory approval. If approved, this will be the first stock exchange after 1994, when the NSE was set up
Even though both sources have not confirmed the development, both are eyeing the possibility of an exchange for small and medium-sized (SME) enterprises, an area which is beleaguered with several failed attempts. Earlier ventures such as the Indo Next under the BSE trading platform, Over the Counter Exchange of India (OTCEI) and Inter-Connected Stock Exchange of India had failed to take off.
Worldwide SME exchanges are flourishing. LSE's Alternative Investment Market (AIM) was established in 1995 to nourish young entrepreneurial British firms. AIM is home to over 1,500 firms of which close to 250 are listings of firms based outside Britain. Obviously, one of the attractions for overseas firms is the laidback regulatory regime.
Reliance Money has the monetary backing of R-ADAG group; it is also a prominent player in commodity market after picking 10% stake in the National Multi Commodity Exchange (NMCE). The company wants to increase its holding to 26% in near future. Reliance Money’s spot exchange for agriculture commodities is also expected to early 2009. The FTIL group has interests in a currency futures exchange, commodity futures, power exchange and spot exchange for agricultural commodities and plans to set up an exchange for SMEs. It has also set up exchanges overseas.
There is tremendous scope for equity stock exchange in the country that has only 5% of its households investing in equities compared to the global average of around 50%. The equity derivative segment has the biggest scope, with the NSE enjoying a virtual monopoly in the segment with an average daily volume of around Rs 40,000 cr. The spot equity market average turnover doesn’t even match up to half of the NSE derivate average, with the BSE having a daily average volume of Rs 4,000 cr and the NSE having daily average volumes at Rs 10,000 crore in the spot segment.
Any aspirant in the stock exchange segment will however need approval from the Reserve Bank of India (RBI). For FTIL, the equity exchange would be an extension of MCX-SX, its currency trading exchange, which was launched under a subsidiary. Reliance Money will have to set up a new company. Another issue could be equity holding, SEBI has recently decided to allow a single shareholder to hold a maximum of 15% in stock exchanges, but has not notified this yet. The aspirant companies’ track record will also be key factor in getting regulatory approval. If approved, this will be the first stock exchange after 1994, when the NSE was set up
Even though both sources have not confirmed the development, both are eyeing the possibility of an exchange for small and medium-sized (SME) enterprises, an area which is beleaguered with several failed attempts. Earlier ventures such as the Indo Next under the BSE trading platform, Over the Counter Exchange of India (OTCEI) and Inter-Connected Stock Exchange of India had failed to take off.
Worldwide SME exchanges are flourishing. LSE's Alternative Investment Market (AIM) was established in 1995 to nourish young entrepreneurial British firms. AIM is home to over 1,500 firms of which close to 250 are listings of firms based outside Britain. Obviously, one of the attractions for overseas firms is the laidback regulatory regime.
Telecommunications Post Highest Growth in Service Sector: FICCI Survey
The new FICCI Survey on service sector paints resilient picture of service sector in India. Telecommunication sector topped the survey as the three segments with biggest growth were wireless subscribers, internet subscribers and broadband subscribers; they witnessed growth of 50%, 26% and 87% (y-o-y) respectively. Railways, IT/software services and Entertainment & media were other major sectors that witnessed growth between 15% and 25% (y-o-y).
Organised retail and Housing finance are the two biggest surprises in the survey. Both these segments grew at 12% and 15% respectively thwarting the general assumption that these segments were doomed in the current economic scenario. Both these segments suffered heavily in stock markets citing demand constrains. News that players in Organised Retail have started restructuring their businesses also added to this perception.
Organised retail and Housing finance are the two biggest surprises in the survey. Both these segments grew at 12% and 15% respectively thwarting the general assumption that these segments were doomed in the current economic scenario. Both these segments suffered heavily in stock markets citing demand constrains. News that players in Organised Retail have started restructuring their businesses also added to this perception.
Growth in earnings from Foreign Tourists during Apr-Nov period is another surprising revelation of the survey. Earning from foreign tourist grew at 16.5% (y-o-y) despite numerous terrorist attacks that took place in the same period of time, indicating foreign tourists were undeterred by terrorists. The survey covered 31 service sector segments and gauged their performances during Apr-Nov 2008 period over corresponding period of time.
Tuesday, December 23, 2008
US Worrying Indian Auto Components Manufacturers
Indian auto component manufacturing is going through tough times. Domestic demand has fallen and exports have dried up, manufacturers are finding it hard to stay afloat. As per a new estimate by Federation of Indian Micro, Small & Medium Enterprise (FISME), some 4,000 ancillary units are on verge of closure making 200,000 jobs redundant.
With the big three American automotive giants in dock, things are looking bleak for auto component exporters. If two of the big three file for the bankruptcy then many of Indian OEM players would be left in lurch without any payment for their exports. General Motors, biggest export destination for Indian auto components account for USD 500 mn worth of exports. If it goes down, it won’t just hit the small players it will hit big players of the Indian auto components market.
ECGC( Export Credit Guarantee Corp) has already frozen credit risk insurance cover to all auto component manufacturers who supply components to big three in US. This has aggravated the problems of component manufacturers specially the small manufacturers who can’t take risks like large firms and are at inevitable loss of business. According to FISME, almost 25% of SMEs in auto component manufacturing have NPAs and this is expected to increase to 50% in near future. The fact that these SMEs account for almost 50% of India’s total auto components exports speaks about the troubled times ahead for the industry.
With the big three American automotive giants in dock, things are looking bleak for auto component exporters. If two of the big three file for the bankruptcy then many of Indian OEM players would be left in lurch without any payment for their exports. General Motors, biggest export destination for Indian auto components account for USD 500 mn worth of exports. If it goes down, it won’t just hit the small players it will hit big players of the Indian auto components market.
ECGC( Export Credit Guarantee Corp) has already frozen credit risk insurance cover to all auto component manufacturers who supply components to big three in US. This has aggravated the problems of component manufacturers specially the small manufacturers who can’t take risks like large firms and are at inevitable loss of business. According to FISME, almost 25% of SMEs in auto component manufacturing have NPAs and this is expected to increase to 50% in near future. The fact that these SMEs account for almost 50% of India’s total auto components exports speaks about the troubled times ahead for the industry.
Government to Relax ECB Norms
At a time when funding has become increasingly difficult for corporates across the globe for expanding capacity and growing businesses, since global economic slowdown made the lenders apprehensive of funding projects. The government is expected to relax norms, as early as next week, to make it easier for domestic companies to raise money through External Commercial Borrowings (ECBs), in a bid to boost a slowing economy,
Among measures recommended by the committee of secretaries include, permitting realty firms to tap ECBs, relaxing borrowing norms for non-banking finance companies (NBFCs), increasing the ECB limit 50 per cent to $750 mn under the automatic route (without RBI’s approval and raising the price ceiling at which overseas loans can be raised.
At present, real estate firms are not allowed to tap the ECB route and NBFCs are allowed to borrow within guidelines specified by the Reserve Bank of India (RBI). For the real estate sector, norms could be relaxed only for integrated township projects, realty firms were demanding infrastructure status for real estate apart from using ECB proceeds without restriction.
Earlier in the year in October, the government had permitted companies to use the ECB route up to $500 mn per financial year for rupee expenditure under the automatic route (see table). In addition, the India Infrastructure Finance Company Ltd (IIFCL) was allowed to raise Rs 10,000 cr of tax-free bonds and function as a refinancer for the sector.
Project awards by authorities such as the National Highways Authority of India have come to a virtual standstill because of, among other things, concerns over the viability of projects and high interest rates. Meanwhile, the government has decided to revise upwards cost estimates of 60 highway projects worth Rs 70,000 cr by up to 20%, to help road developers borrow more funds and boost road building activity across the country
The government is also expected to relax the pricing allowed for borrowing foreign exchange loans by raising the spread or premium charged over the international interest rate benchmark, the London Interbank offered rate (Libor). At present, a company cannot pay more than 300 bps over Libor on loans for three to five years and not more than 500 bps over Libor for loans above five years.
Among measures recommended by the committee of secretaries include, permitting realty firms to tap ECBs, relaxing borrowing norms for non-banking finance companies (NBFCs), increasing the ECB limit 50 per cent to $750 mn under the automatic route (without RBI’s approval and raising the price ceiling at which overseas loans can be raised.
At present, real estate firms are not allowed to tap the ECB route and NBFCs are allowed to borrow within guidelines specified by the Reserve Bank of India (RBI). For the real estate sector, norms could be relaxed only for integrated township projects, realty firms were demanding infrastructure status for real estate apart from using ECB proceeds without restriction.
Earlier in the year in October, the government had permitted companies to use the ECB route up to $500 mn per financial year for rupee expenditure under the automatic route (see table). In addition, the India Infrastructure Finance Company Ltd (IIFCL) was allowed to raise Rs 10,000 cr of tax-free bonds and function as a refinancer for the sector.
Project awards by authorities such as the National Highways Authority of India have come to a virtual standstill because of, among other things, concerns over the viability of projects and high interest rates. Meanwhile, the government has decided to revise upwards cost estimates of 60 highway projects worth Rs 70,000 cr by up to 20%, to help road developers borrow more funds and boost road building activity across the country
The government is also expected to relax the pricing allowed for borrowing foreign exchange loans by raising the spread or premium charged over the international interest rate benchmark, the London Interbank offered rate (Libor). At present, a company cannot pay more than 300 bps over Libor on loans for three to five years and not more than 500 bps over Libor for loans above five years.
Friday, December 19, 2008
FICCI demands additional stimulus, fiscal package, criticizes US move for duty cuts
The Federation of Indian Chambers of Commerce and Industry (FICCI) asked the central government for more fiscal measures to tackle the current economic downturn, along with demanding more rate cuts from the Reserve Bank of India (RBI) to ease liquidity crisis and reduce cost of borrowing. The fiscal relief asked include, cutting the Cash Reserve Ratio (CRR) further to 4.5%, Repo Rate to 5%, Reverse Repo Rate to 4% and Statutory Liquidity Ratio (SLR) to 22% along with the all important reduction in bank interest rate by 100 bps.
Growth stimulus is now very important according to the industry body, especially with the slow down happening in the domestic economy, and inflation worries subsiding. The industry body has also asked for further rate cuts in home loans, re-imposition of countervailing duty and higher import levies.
For the housing sector the association has sought to raise the upper limit of loans to Rs 50 lakh in the existing Rs 5-20 lakh slab lower rates of interest of 9.25%, besides cutting the rates to 6-7% from 8.5% for home loans below Rs 5 lakh.
For the domestic steel industry, the association has asked for restoration of countervailing duty on imported steel items along with raising import duty to 15 % from the existing 5% to "prevent dumping" of cheaper products in India.
For the textile sector, the chamber asked for deferment of 8th quarterly installments of principal amounts on loans taken by the industry, besides asking for restoration of drawback rates that prevailed before reduction in September 2008.
Earlier this week, FICCI had sharply criticized the US’s move to seek zero duty commitments on sectors such as chemicals from India and other developing countries. The association further said that US-based National Association of Manufacturers (NAM), which has been consistently pressing for sectorals, has recently stated that WTO Ministerial Meeting must await consensus on sectoral agreements.
Sectoral talks relate to complete slashing of import duties in 14 identified industrial sectors. These cuts are additional to the proposed formula-based import duty cuts that every country will have to undertake, if the Doha deal is inked. Indian industry is wary of pressure by the US to make sectoral talks mandatory, as it could mean slashing of import duty on key sectors, including chemicals, industrial machinery as well as electrical and electronic goods. This would mean that cheap goods from abroad could flood the domestic market, causing problem to the Indian industry.
Growth stimulus is now very important according to the industry body, especially with the slow down happening in the domestic economy, and inflation worries subsiding. The industry body has also asked for further rate cuts in home loans, re-imposition of countervailing duty and higher import levies.
For the housing sector the association has sought to raise the upper limit of loans to Rs 50 lakh in the existing Rs 5-20 lakh slab lower rates of interest of 9.25%, besides cutting the rates to 6-7% from 8.5% for home loans below Rs 5 lakh.
For the domestic steel industry, the association has asked for restoration of countervailing duty on imported steel items along with raising import duty to 15 % from the existing 5% to "prevent dumping" of cheaper products in India.
For the textile sector, the chamber asked for deferment of 8th quarterly installments of principal amounts on loans taken by the industry, besides asking for restoration of drawback rates that prevailed before reduction in September 2008.
Earlier this week, FICCI had sharply criticized the US’s move to seek zero duty commitments on sectors such as chemicals from India and other developing countries. The association further said that US-based National Association of Manufacturers (NAM), which has been consistently pressing for sectorals, has recently stated that WTO Ministerial Meeting must await consensus on sectoral agreements.
Sectoral talks relate to complete slashing of import duties in 14 identified industrial sectors. These cuts are additional to the proposed formula-based import duty cuts that every country will have to undertake, if the Doha deal is inked. Indian industry is wary of pressure by the US to make sectoral talks mandatory, as it could mean slashing of import duty on key sectors, including chemicals, industrial machinery as well as electrical and electronic goods. This would mean that cheap goods from abroad could flood the domestic market, causing problem to the Indian industry.
Tuesday, December 16, 2008
PSB hail Home Loan Package, Industry Disagree & Consumers Wait-n-Watch!!
After weeks of speculation and months of wait, a hint of hope has emerged for borrowers. In a coordinated effort, public sector banks (PSBs) put a cap on interest rate charged on fresh home loans of up to Rs.5,00,000 at 8.50% from December 16 and announce a slew of measures to stimulate credit delivery to housing and micro, small and medium enterprises sector. PSBs expect to give loans worth around Rs15,000-20,000 cr under this package. Among major other measures initiated:
· Time Frame - The special home loan package would be applicable for new loans sanctioned up to June 30, 2009
· Switch Facility - Loans up to Rs.5,00,000 will be offered at a fixed rate of 8.50% for five years after which the borrower can switch to a floating rate without paying any charge
· Loan size between Rs 5-20 lakhs - PSBs will also not charge more than 9.25% on home loans of Rs.5 lakh-20 lakh having tenure of up to 20 years
· Processing fee - Banks will not to charge any processing fees and pre-payment charges for loans up to Rs.20 lakh, and would also provide free insurance cover
· Industrial rate cuts - for micro industries, PSBs have reduced loan rates by 100 bps, while for small industries, they have reduced loan rates by 50 bps, and set up cells to redress grievances regarding these loans
The Indian Banks Association (IBA) has justified the threshold of Rs.20 lakh for interest rate relief announced for home loan borrowers, saying that the package will take care of housing requirements of the common man. However industry body Assocham has termed the home loans package by PSBs as highly inadequate, demanding that the government peg the interest rate on housing loans up to Rs.30 lakh at 6% and at 8.5% for loans above this amount. Among other negatives for the measure is that, that existing borrowers from private sector banks will not be able to transfer their loans to PSBs.
After the move from PSBs, all eyes are also on private sector banks, especially the larger ones such as HDFC, Axis and ICICI to follow suit. Until that time, its wait and watch for consumers.
Friday, December 12, 2008
Domestic India automobile sales plummet, Exports provide some relief
India’s automobile sales plummeted in November, seeing one of the biggest falls, even as exports spiked by 62% during the month. According to the latest figures released by the Society of Indian Automobile Manufacturers (SIAM), tighter lending by banks and slowing economy have led to auto sales plunging by 18% in the domestic market in the month of November as against the figures in the same month last year.
Category wise, commercial vehicle sales almost halved (50%) in November to 20,637 units from 40,879 units in the same month last year, while passenger car sales dropped comparatively less (20%) to 83,059 units from 1,03,031 units in the same month last year. Demand for passenger cars in India has fell in four of the past five months.
In the two-wheeler segment, two-wheeler sales fell 15% to 5,67,502 units from 6,65,181 units in the same period last year while motorcycle sales fell 20% to 4,31,171 units as against 5,40,553 units in the corresponding month a year ago.
Exports have however been the saving grace this month, total vehicles exports rising by 62% to 146,337 units in November against 90,398 units in the same month last year, led by passenger vehicles, motorcycles, scooters and three-wheelers. Break up among the export figures show that, passenger car exports rose almost twice at 34,607 units compared with 15,464 units in the year-ago period. Two-wheeler exports jumped 52% in November to 89,245 units compared with 59,041 units in the year-ago period. And motorcycle exports rose a similar 51% to 85,549 units from 56,739 units in the corresponding month 2007.
However experts feel that this is not the right period to gauge the automobile sector’s performance. The picture would be clear only by February- March, as by then some impact of the excise duty cut would have been felt and if financing situation improves, sales could pick up.
The fall in sales in India came as a blow to carmakers who were hoping that emerging markets like India, China, Russia and South America would make up for falling demand in developed markets.
Sales have plunged hugely this year across developed markets like the United States, Japan and Europe, as well as emerging economies like China and Russia, forcing automakers to revisit their plans for developing markets.
Category wise, commercial vehicle sales almost halved (50%) in November to 20,637 units from 40,879 units in the same month last year, while passenger car sales dropped comparatively less (20%) to 83,059 units from 1,03,031 units in the same month last year. Demand for passenger cars in India has fell in four of the past five months.
In the two-wheeler segment, two-wheeler sales fell 15% to 5,67,502 units from 6,65,181 units in the same period last year while motorcycle sales fell 20% to 4,31,171 units as against 5,40,553 units in the corresponding month a year ago.
Exports have however been the saving grace this month, total vehicles exports rising by 62% to 146,337 units in November against 90,398 units in the same month last year, led by passenger vehicles, motorcycles, scooters and three-wheelers. Break up among the export figures show that, passenger car exports rose almost twice at 34,607 units compared with 15,464 units in the year-ago period. Two-wheeler exports jumped 52% in November to 89,245 units compared with 59,041 units in the year-ago period. And motorcycle exports rose a similar 51% to 85,549 units from 56,739 units in the corresponding month 2007.
However experts feel that this is not the right period to gauge the automobile sector’s performance. The picture would be clear only by February- March, as by then some impact of the excise duty cut would have been felt and if financing situation improves, sales could pick up.
The fall in sales in India came as a blow to carmakers who were hoping that emerging markets like India, China, Russia and South America would make up for falling demand in developed markets.
Sales have plunged hugely this year across developed markets like the United States, Japan and Europe, as well as emerging economies like China and Russia, forcing automakers to revisit their plans for developing markets.
Wednesday, December 10, 2008
“Service Sector To Push India’s Economic growth to 7.5-8% this Fiscal”
Chief Economic Advisor (CEA)of India expect the service sector to act as a stabilizer to the country’s economy, helping it grow by 7.5-8% in the current financial year. His views come amidst fear that even the service sector which has till now been relatively immune to drastic slowdown, will get negatively affected in a major way in the remaining months of 2008-09.
The CEA however admitted that even the services sectors like the other sectors has seen slow down in the growth momentum this year. He however believes that the cyclical decline for the services sector would be comparatively much less than the manufacturing sector.
Service sector is a major part of the Indian economy, with it dominating the economic scene especially in recent times. IT and IT enabled services (ITES) have been the cynosure of the country’s development, putting in on the world map. Such positive forecasts would do a world of good for the sector, even as the country tries to defend itself from the pains of global recession. But this has to be seen in perspective with global economic growth especially from US that has gone into recession, and which accounts for around 50% of the IT and ITES portfolio.
The CEA however admitted that even the services sectors like the other sectors has seen slow down in the growth momentum this year. He however believes that the cyclical decline for the services sector would be comparatively much less than the manufacturing sector.
Service sector is a major part of the Indian economy, with it dominating the economic scene especially in recent times. IT and IT enabled services (ITES) have been the cynosure of the country’s development, putting in on the world map. Such positive forecasts would do a world of good for the sector, even as the country tries to defend itself from the pains of global recession. But this has to be seen in perspective with global economic growth especially from US that has gone into recession, and which accounts for around 50% of the IT and ITES portfolio.
Tuesday, December 9, 2008
LIC to bolster Indian Equity Market with its Investment Plan
India’s largest life insurer and also the largest domestic investment institution, Life Insurance Corporation of India (LIC) plans to invest Rs 31,000 cr in equities and corporate bonds in the next four months. Out of the total amount, LIC would invest Rs 11,000 cr in stocks and Rs 20,000 cr in non-convertible debentures. LIC could bolster the equity markets, especially at a time when FIIs are selling off causing huge declines in the market. Even the insurer has been affected by the slump in the equity markets, with it seeing a fall in unit-linked policies, even though traditional policies such as endowment policies appear to be staging a comeback. LIC may invest a total of Rs 40,000 cr in equities during the current fiscal, although it is still awaiting a reply from IRDA on its request to hike the cap on investment in an individual company.
The company plans to use mobilisation from its new scheme, Jeevan Aastha, which guarantees benefits on maturity and death, to invest in debt instruments as returns are guaranteed. Of the Rs 25,000 cr it has targeted from the new scheme, 50% will be invested in government bonds while the balance will be invested in other debt instruments. The company this year has seen a definite increase in the number of corporates approaching it for investment especially in NCDs and rated papers.
Until, November this year, LIC has invested Rs 1,02,476 cr compared with Rs 97,738 cr a year ago. This break-up includes Rs 36,311 cr in government bonds, Rs 23,190 cr in debentures and bonds, Rs 12,372 cr in infrastructure, Rs 1,342 cr as project loans, Rs 164 cr in IPOs ( a relatively small amount reflection the mood of the IPO market in the country) and Rs 29,000 cr in equities (secondary market).
The company plans to use mobilisation from its new scheme, Jeevan Aastha, which guarantees benefits on maturity and death, to invest in debt instruments as returns are guaranteed. Of the Rs 25,000 cr it has targeted from the new scheme, 50% will be invested in government bonds while the balance will be invested in other debt instruments. The company this year has seen a definite increase in the number of corporates approaching it for investment especially in NCDs and rated papers.
Until, November this year, LIC has invested Rs 1,02,476 cr compared with Rs 97,738 cr a year ago. This break-up includes Rs 36,311 cr in government bonds, Rs 23,190 cr in debentures and bonds, Rs 12,372 cr in infrastructure, Rs 1,342 cr as project loans, Rs 164 cr in IPOs ( a relatively small amount reflection the mood of the IPO market in the country) and Rs 29,000 cr in equities (secondary market).
Thursday, December 4, 2008
What’s Wrong with Tata’s Global Footprint Strategy
Tata aggressive stance of acquiring companies globally and developing global presence has gone wrong. Tatas are now painfully recognizing the fact that they in for more trouble for their overleveraged acquisitions of giant steel and niche automotive player. Tata’s Jaguar & LandRover (JLR) unit has already asked for the £1 Bn of loan from the government, there were also news of Tatas picking up money from the market at higher interest rates to keep its JLR unit afloat. Tata Corus is already on cost cutting spree and has asked Dutch government for its staff realization program.
So, what went wrong with Tata’s strategy of developing Global presence and become a world player in almost every spree of its business?
Tata’s core strategy was evading regional and nation business cycles, to implement this strategy Tatas needed to generate revenue from world over and setup manufacturing units to ratonalise the cost. Tatas made assumption that if business cycle in a country/region goes through trough then its companies can survive on demand and revenue from other regions. Tata never thought what would happen if different regions go into recession simultaneously. The thought of global recession never concurred to Tatas as “decoupling theory” was very popular at that point of time.
The other major mistake that Tatas did was it has been unable to accrue production cost benefit from its takeover. It invested in highly niche automotive companies like JLR, which can’t be produced world over thus production cost are difficult to rationalise. The other acquisition, Corus, runs on thin margin and high costs; Corus hasn’t been able to cut costs yet, though it may be able to do it successfully in future but it is taking toll of Tatas.
So, what went wrong with Tata’s strategy of developing Global presence and become a world player in almost every spree of its business?
Tata’s core strategy was evading regional and nation business cycles, to implement this strategy Tatas needed to generate revenue from world over and setup manufacturing units to ratonalise the cost. Tatas made assumption that if business cycle in a country/region goes through trough then its companies can survive on demand and revenue from other regions. Tata never thought what would happen if different regions go into recession simultaneously. The thought of global recession never concurred to Tatas as “decoupling theory” was very popular at that point of time.
The other major mistake that Tatas did was it has been unable to accrue production cost benefit from its takeover. It invested in highly niche automotive companies like JLR, which can’t be produced world over thus production cost are difficult to rationalise. The other acquisition, Corus, runs on thin margin and high costs; Corus hasn’t been able to cut costs yet, though it may be able to do it successfully in future but it is taking toll of Tatas.
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