Economy Headlines

Chidambaram turning it on for markets and economy

Rajesh Singla

  Finance minister P Chidambaram has sent out signals that could bring cheer to investors and the stock market. He ...

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Should you sell your Petrol car and buy a diesel one?

Rajesh Singla

India is one of the biggest markets for diesel cars. Most of the people prefer diesel engines over petrol ones ...

SBI slashes processing fee for the Home loans

Rajesh Singla

Country's largest lender State Bank of India has halved the home loan processing fee, a move which could be followed by other public sector lenders in the coming days. The new fee structure is applicable starting January 11.

Will UPA leave people in 'Kolaveri D'

Rajesh Singla

Government had another set back today in Winter session when its purposed Insurance Bill & NIAI bill got rejected by the parliamentary panel. Government has now set back on FDI on Insurance, Retail. With 8 sessions pending, Janlokpal Bill, FDI in Aviation, Companies Bill & 5 other major bills are pending in the cabinet.

What FDI in Retail mean to us?

Rajesh Singla

The government announced that it would allow 51 percent foreign direct investment (FDI) in the multi-brand retail segment and raise the cap on foreign investment in single-brand retailing to 100 percent from 51 percent.Think how India progressed from 1991 when India opened themselves for FDI for industry. In the hindsight, can you foresee where will be after 20 years in Retail Industry?

Will govt. deliver what it promised in this Winter Parliament Session?

Rajesh Singla

Winter Parliament session is going to start on 22nd November, 2011, which is scheduled to have 21 working days. Key Policy making decisions needs to be implemented in this winter session. Till now government has failed to keep Common man as well as Industrialist happy. Common man woes due to High Inflation, High interest rates on EMI’s & Lokpal Bill standing still. Lot of people have set their eyes on this one critical event which will decide how Stock market will behave in coming 3 months.

Does Aviation problems limit to Kingfisher,Air India only?

Rajesh Singla

If you think only Kingfisher & Air India is having problems in hand with losses building in thousands of crore, then you need to think again! Most of the companies are facing the heat with losses mounting up each quarter. Domestic Air traffic has increased by 19% & topline (sales) of each airline has increased then, Why Whole aviation sector is in doom & day of glory seems distant?

Is only Eurozone facing the heat of Debt?

Rajesh Singla

If you thought recent debt scenario from Eurozone & US was bad, look over to the other side of the Atlantic and you will be shocked to know that India stands first in Asia as most indebted countries in percentage to its GDP.

How easy it is to start business in India?

Rajesh Singla

Thinking of starting a business in India by becoming an entrepreneur. Think again. The World Bank yesterday released its much awaited, ‘Doing Business’ report and it should give the Govt, especially the Govt of Maharashtra some food for thought. This report, ranks countries based on their ease of doing business, from 1 – 183. A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm. This index averages the country's percentile rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic. The rankings for all economies are benchmarked to June 2011. The 10 criteria considered are – ease of starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvencies. Can you even imagine India getting anywhere in the top when these are the criteria? The best country, as per World Bank, to do business in is Singapore. This is followed by Hong Kong, New Zealand, with USA coming at fourth place. Denmark and Norway come in fifth and sixth place respectively, followed by UK at seventh place. This is followed by South Korea, Iceland, Ireland at 10th place. Saudi Arabia at 12th place is ahead of even Australia, Germany, Japan. And where does India figure? Scroll down the list, keep on going down and just when you think the page will come to an end, India comes at the 132nd place. We are just a notch above Nigeria and place lower to West Bank and Gaza. Ethiopia, Nepal, Egypt, Kazakhstan, Pakistan, Mongolia, Serbia are all much, much ahead of India. And to think that we keep on comparing ourselves with China, which is at 91st place. The only solace is that India’s ranking has gone up 7 notches, from 139 to 132.. How does India figure in the 10 points of criterion? YoY, there is no change in the rankings of ease of starting a business; dealing with construction permits, enforcing contracts. In terms of betterment in rankings, India has fared better in terms of getting electricity, paying taxes and resolving insolvencies. But the rest, ranking has fallen – registering property, getting credit, protecting investors and trading across borders. The Report is telling in terms of the time taken. For eg: it takes 227 days for getting the construction permits , 67 days to get electricity, 44 days to register a property, 254 days to oay taxes but the worst is time taken to enforce contracts, which takes 1420 days! Top city to do business in India is Ludhiana, Hyderabad comes at number two, Bhubaneshwar at number 3, Gurgaon at number 4 and Ahmedabad is at number 5. Bengaluru is at 13th place, Chennai at 15th place, Mumbai at 10, New Delhi at 6, and the lowest on the ranking scale is Kolkatta.

Power Cuts

Rajesh Singla

It seems to be business as usual on the stock market front. Back to tracking stocks and the global cues. But what about the domestic scenario? Most of the country is grappling under severe power cuts. This is not summer, yet there is ‘load shedding’ or should we say forced power cuts. In Maharashtra, the power cut ranges from 2 hours to a staggering 16 hours. The Govt of the most developed state is broke, which is why it has no money to pay and buy surplus power from neighbouring states. The Metro’s across the country are largely unaffected but across India, there is a power crisis, spurred on by the acute shortage of coal. www.stockssavvy.comA report in Economic Times states that coal supply to power projects in southern states including Andhra Pradesh and Tamil Nadu was affected due to the Telangana agitation. Fuel supply to the eastern and northern states was disrupted due to floods in Orissa and the adjoining coal mines. Multitude of reasons – strikes, heavy rains have hurt mining, loading and transportation at mines of Northern Coalfields, Central Coalfields, Eastern Coalfields, Mahanadi Coalfields and Singareni Collieries Company. Therefore, projects that supply power to states such as Tamil Nadu, Andhra Pradesh, Chhattisgarh, Uttar Pradesh, Maharasthra, West Bengal and Madhya Pradesh are vulnerable. These problems have only got compounded because we as such suffer from poor domestic coal production. And this is a problem which has been unleashed by the Govt due to its complete inaction, which does not come as any new news. Private sector companies are not allowed to mine and sell coal in the open market. That is the prerogative and monopoly of Coal India. Supply is not able to keep pace with the demand. And imported coal is two to three times more expensive. Coal India too sells at regulated prices, much below the international prices. This is done to keep the electricity costs down. If Coal India was allowed free pricing, our electricity prices will shoot through the roof. Coal is the prime fuel used to generate power and currently as per Central Electricity Authority (CEA), more than half of the country’s 86 thermal power stations are currently running at “critical” stocks of less than five days, while more than a third of the plants have become “super critical”. The immediate short term measure was that the Coal Ministry announced earmarking a part of the 4 MT coal sold through e-auction to meet shortages. But this is just a temporary relief. Demand for coal is rising at the rate of 8.4% over past five years while supply has grown by a dismal 5.4%. For FY12, Coal India has committed 331 MT of coal supply to the power sector as against the demand for 426 MT. The Govt of India has put out a report stating that when the 12th Plan Period ends in March 2012, India could face a coal shortage of 15%. Currently, India’s coal demand is estimated at 696 MT, of which only 554 MT is likely to be available thus 142 MT will need to be imported. So what options do the power companies now have? There are only three options – they import coal or buy through the e-auction or acquire coal mines. The first option is probably the only feasible one. E-auction is meant only for small power companies and that is definitely not the category into which these power companies fall. Acquiring is no longer easier and where do they get the green bucks when they are already leveraged to the hilt? Also it has been seen that of the 100 coal mines allotted to private sector companies, only 5 to 6 have started production. Importing is thus the only option. The relief will come, that’s for sure. But it will once again be a temporary relief. What we need is a permanent solution. Allowing entry of private sector companies to mine and sell has to be an option which the Govt needs to consider. Yes, it could mean hike in our electricity bills but come to think of it, that too is necessary for inculcating responsible usage of electricity. Unfortunately, for all the lapses of the Govt, we will have to bear the brunt, pay a price. Inflation is already a concern and if power tariffs rise further, well, do not know what RBI will do to control the prices. This festival season will be one of its kind – hot, sweaty and terribly expensive! When UPA came in power, they promised people that India will be free from Power problems in 2014 & India will be self sufficient till 2040. This was a big booster for the markets, Nifty rallied from 3500 to 4200.We have gone backwards rather than going forward in tacking our power problems. It would be interesting to see what Govt will have to say in their upcoming elections? Tell us how bad the power cuts in your area?

Rakesh Jhunjhunwala: Again One Step ahead of markets

Rajesh Singla

Even as the markets are weighed down by global and domestic concerns, Rakesh Jhunjhunwala has been relatively busy churning his portfolio. He has bought stake in three companies, increased and shed holding in some others, while sitting tight on the rest. Among the most successful investors in India, he recently bought stocks of Pipavav Shipyard, Sterling Holidays and Subex. While exploring the reasons that led the much-reported investor to buy these companies, we also look at the past to gauge his strategy. Sterling Holiday Resorts Sterling Holiday, a vacation ownership company (like Mahindra Holidays), has 15 resorts at key tourist destinations, including Darjeeling, Goa, Manali, Mussoorie and Ooty (total inventory of 1,258 rooms). Though Sterling had a first-mover advantage to capitalise on India's growing consumption demand and changing consumer habits, it also got saddled with problems. However, its suffering on account of debt has eased, with new investors and private equity investing in the company. Additionally, a new and experienced management has been put in place to drive future plans. After falling in 2009-10, revenues are increasing at a fast pace (58 per cent in June quarter), with a turnaround expected by 2012-13. Subex Subex, which provides operations and business support systems to telecom companies across the globe, saw its stock fall almost 95 per cent from its peak of Rs 730 in January 2007. This can be attributed to worry over the telecom space and its excessive debt (almost 2.6 times equity in FY11). The restructuring of its FCCBs, improvement in the internal cash flow and fund raising has, to some extent, alleviated the debt concerns. Analysts expect its debt-equity to fall to 0.87 times by 2012-13. It recently also sold a non-core business (which should improve profitability) and won a few orders. Pipavav Defence & Offshore Engg Pipavav Defence is among the most recent buys of Jhunjhunwala, who has bought convertible warrants (conversion at Rs 78 per share). With its world-class shipbuilding capacity, the company is well positioned to gain from the huge opportunities in the Indian defence space. It recently entered into an agreement with Mazagon Dock to help the latter hasten implementation of its big order book of Rs 100,000 crore (Rs 1,000 billion). While the deal opens a window of opportunity to partner with the largest defence shipbuilding company, it will also help diversify revenue stream and improve utilisation of facilities.

Petrol is most expensive in India than all the other countries in the world

Rajesh Singla

For all those already reeling under a series of hikes in petrol prices on the back of zooming inflation, here is some news that will enrage you further. Data of retail prices in countries across the world shows that Indian prices are amongst the highest in the world at current exchange rates. And, if you even out the differences in purchasing power of different currencies then Indian petrol and diesel prices become the highest barring some tiny, remote countries. Even a simple comparison of retail prices in different countries by converting them to Indian rupee reveals that petrol in India is more expensive than 98 other countries. Among 157 countries for which data is available, those belonging to the Organization of Petroleum Exporting Countries have the lowest price. The Organisation of Petroleum Exporting Countries (OPEC) are the ones that have huge oil reserves and are its main producers. So, petrol is cheapest in Venezuela at just Rs 1.14 per litre. In Iran it sells for Rs 4.8 per litre. The second group comprises of countries like the US, Iraq, Indonesia, etc, where minimal tax is levied on petroleum products. They also have lower prices than India. A litre of petrol costs Rs 42.82 in the US. India tops the group of countries which have moderate to high tax regimes. Others in the group are the EU countries and others like Singapore, New Zealand, Thailand and Brazil. At Rs 69.90 -the average price of petrol in 24 Indian cities -Indian prices are now comparable to price of petrol in EU. Romania has EU's cheapest petrol at Rs 72.33 per litre. However, price comparisons done like this - by converting into one currency using the exchange rate - are deceptive. Petrol prices equivalent to Rs 96.39 in the UK might not pinch the English in the same way as Rs 69.90 will clobber Indians. Using PPP prices, petrol is by far much more costlier in India than most countries. PPP price of petrol in India is $3.95, lower than just three small countries - Timor-Leste, Malawi and Eritrea. Petrol costs less than a dollar in the OPEC and USA while in most of Europe, Russia, Japan, China and the Americas it is priced between one to two international dollars by PPP calculations. Despite huge subsidies, diesel is more expensive in India than 136 other countries. Costing $2.46 at PPP, India is 23rd most expensive in diesel prices. Can anybody explain why Indians have to bear this unbearable burden?

Are you hedged against recent hikes in Petrol, Home Loan EMI's?

Rajesh Singla

Hike in Home, Car Loan rates The Reserve Bank of India (RBI) raised repo rates by 25 bps on Friday to 8.25% and reverse repo rates by 25 bps to 7.25%, to arrest rising inflation in Asia's third largest economy. CRR was unchanged at 6%. The RBI raised key lending rates for the 12th consecutive time in 18 months to 8.25 per cent. Post the hike, most analysts expect the RBI to pause the rate hike cycle. Annual inflation surged 9.78 per cent for the month of August, its highest in over a year, driven by rising prices of food and manufactured products. The move will trigger the banks to increase the home & car loan EMI’s. Hike in Petrol State oil companies will raise petrol prices by 3.14 a litre from Friday, delivering another blow to households that are already reeling under near double-digit inflation and provoking strong condemnation from the opposition parties. The price of ATF was also hiked by 2.5%. Oil companies have raised petrol rates for the 12th time since the fuel was decontrolled in June last year. They explained the latest rise saying international prices had risen and the rupee had depreciated. Oil companies are facing criticism for this argument as they had not cut petrol prices when rupee soared to a 34-month high in July or when Brent crude, currently at $115 a barrel, had dropped from $127 a barrel in April to about $98 last month. Petrol price have hiked from 50 to 70 Rs. in last 2 years which is whooping 40% hike. Also, this move will fuel up the inflation. Hike in LPG cylinders A Group of Ministers (GoM) meet this morning was to debate whether households should be entitled to between four to six subsidized LPG cylinders, and pay market rates for refills after that. Subsidized cooking gas cylinders currently cost Rs. 395.35 each; if the new proposal is passed, households would pay over Rs. 650 per cylinder after exhausting their quota. The last minute update is that the meeting has been postponed but it is matter of time that hike will be passed. Commodities Prices are uncontrollable specially for basic commodities such as onion, potato which are sky rocketing. There is couple of inference to be taken from these hikes: For the Government: Government needs to analyze the reason for the high inflation. Is it supply side problem? Most of the food grains are getting wasted. Recently anomaly is Nasik onion market where onion is getting foil because of the lack of proper distribution system. FDI inflows in retail sector will vastly improve the distribution channel but it is going to take time especially if one check out the speed of the India government to pass policies. For Common man: Recent hikes for the common man emphasize how much it is important for him to hedge himself against Inflation. No matter what the hikes are going to continue & he needs to live with this fact. Today, he is finding it difficult to make both ends meet. How will he survive tomorrow when the prices of the things are going to sky rocket? The best hedge is to start systematically with small savings & get a financial plan to plan ahead of inflation.

Impact of weak Indian currency

Rajesh Singla

The rupee's depreciation against the dollar is seen to be beneficial to the Indian economy in some ways, and detrimental in other ways. The rupee fell to 48 against the dollar, its weakest in nearly 2 years, early on Wednesday as worries Europe could be heading for another banking crisis rattled global markets. Let us quickly analyze the impact of Weak Indian currency on different institutions. Weaker rupee complicates government’s battle against runaway inflation. Imports become more expensive. The dramatic dip in rupee’s value has a very bad impact on the economy. While many currencies have been weakening against the dollar, India has been the worst performer in Asia. With the increase in dollar rate, the rupee remains weak & Indian imports of Crude Oil, edible oil, pulses & Capital goods becomes more expensive. The rise in dollar rate adversely impacts government’s efforts to curb inflation.

What is your Country Credit rating?

Rajesh Singla

America rating downgrade has suddenly spurted up the interest in rating of their own country. There are three major credit rating agencies: Standard & Poor's, Fitch and Moody's. India is graded as BBB- Stable by S&P & Fitch rating agency whereas Moody has given a rating of baa3. America downgrade will certainly benefit other countires as investors will look to invest in countries which has stable ratings. Here is the list of ratings of the countries according to all the 3 rating agencies.

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