Vaswani Industries
Issue Terms :
Issue price / Floor Price (Rs) 45-49
Application per share (Rs) 45.00
Minimum investment amount (Rs) 5,400.00
Minimum bid (no of shares) 120 shares and in multiples of 120 thereafter
Maximum Shares for Retail 4440-4080
Issue Date and Size :
Issue opens 29-Apr-11
Issue closes 03-May-11
Listing on BSE, NSE
Issue size (Rs cr) 45-49
Mkt cap at issue price (Rs cr) 105.71-115.10
Shares on Offer Lakhs :
Total shares offered 100.00
Of above, offered to public 100.00
Post-issue shares 234.91
Post-issue promoters' holding(%)57.43
Company Financials (Rs cr) 2009-12-31
No of months 7
Turnover 68.78
Net profit / (loss) 2.69
Borrowings 70.45
Lead Managers & Registrar :
Lead Manager(1) Ashika Capital Limited
E-mail vil.ipo@ashikagroup.com
Lead Manager(2) N.A.
E-mail N.A.
Registrar : Link Intime India Pvt Ltd
E-mail: vil.ipo@linkintime.co.in
Saturday, April 30, 2011
TOP STORIES
Osian's new promise: Will pay back by 29th May
Neville Tuli's latest promise to pay back money raised for Osian's Art Fund comes after the threat of collective action by some aggrieved investors...
*Equity funds may have suffered large-scale erosion in April
*How Kalmadi reached Delhi, and slipped
*Suresh Kalmadi's tryst with Pune and politics
*Market on a downtrend: Weekly Market Report
*Military men fighting extended battle over uniform pension
*Distress call: Use multiple channels to free seafarers held hostage by pirates
*The economic war on our coasts, and how India can snatch victory for once
Neville Tuli's latest promise to pay back money raised for Osian's Art Fund comes after the threat of collective action by some aggrieved investors...
*Equity funds may have suffered large-scale erosion in April
*How Kalmadi reached Delhi, and slipped
*Suresh Kalmadi's tryst with Pune and politics
*Market on a downtrend: Weekly Market Report
*Military men fighting extended battle over uniform pension
*Distress call: Use multiple channels to free seafarers held hostage by pirates
*The economic war on our coasts, and how India can snatch victory for once
NEWS HEADLINES
GENERAL
1)In a bid to promote two-way engagement and build better
understanding with the overseas Indian community, a uni-
que institution - Pravasi Bhartiya Kendra - will come up in
New Delhi by next year.
CORPORATE / INDUSTRY
2)Biocon Ltd, India's biggest biotechnology company, agreed
to sell a majority stake in its German unit AxiCorp GmbH
for e40 million (Rs 263.2 crore) because it didn't need the
company's services to sell Biocon's insulin products in the
European nation after an alliance with the world's biggest
drug maker Pfizer Inc.
3)Auto component maker Motherson Sumi Systems Ltd(MSSL)
on Thursday said it will merge three group firms with itself
as it looks to consolidate its business. The company, which
has set a target of becoming a $5-billion entity by 2015,
said its board of directors has approved the merger of Sumi
Motherson Innovative Engineering (SMIEL), MSSL Global
Wiring and India Nails Manufacturing with itself.
MONEY & BANKING
4)Paring all of its initial gains, the rupee closed flat on
Thursday at 44.43/44 against the US currency due to late
dollar demand from importers, in tandem with local equities
amid increased capital outflows.
5)The interest rate on saving bank deposits, the last bastion
of administered rate of interest, is set to be deregulated,
with the Reserve Bank of India(RBI) kicking off a discussion
for a market driven rate. The rate has remained at 3.5
per cent since March, 2003.
6)India's largest private lender ICICI Bank Ltd on Thursday
announced a 44% rise in its net profit in the fourth quarter
(Q4) ended 31 March, bolstered by growth in fee income
and lower provisions for bad loans, even as it saw a loss in
treasury revenue and a rise in operating expenses. Net
profit for the quarter stood at Rs 1,452 crore, up from
Rs 1,006 crore in the year earlier. Provisions during the
period declined 61% to Rs 384 crore from Rs 990 crore.
7)Strong growth in advances, coupled with a robust jump in
net interest income, buoyed Bank of Baroda's net profit
in the fourth quarter ended March 31, 2011. Net profit
for the quarter increased 43 per cent to Rs 1,294 crore,
against Rs 906 crore in the corresponding quarter last
year.
INSURANCE
8)Insurance sector regulator IRDA has decided to appoint research
organisations to analyse the pattern of claims to help the re-
gulator put a lid on the insurance fraud in the healthcare sec-
tor.
9)Mukesh Ambani-controlled Reliance group is in talks to
buy out Bharti in the life insurance firm Bharti Axa Life.
Reliance, which has spelt out its aspirations to build a
financial services empire, is understood to be in advanced
stage of negotiations with the Mittals-led Bharti which has
been looking for an exit for the past one year.
MARKETS
10)Indian shares dropped for the fourth day, shedding 0.8% in
a choppy session on Thursday as monthly derivatives contracts
expired and high inflation strengthened expectations of a tight
monetary stance by the central bank. Reliance Industries ex-
tended losses a day after an oil ministry source said the
energy giant could face a penalty for falling short of the
targeted gas production at its D6 block off the east coast.
The stock, which weighs the most on key indexes, slipped
1.4%, taking losses for the year to date to 8.2%. The 30-
share BSE index fell 0.81%, or 156.67 points, to 19,292.02
points, with 25 components closing in the red. It had
started higher.
MUTUAL FUNDS
11)The popularity of exchange-traded funds, or ETFs, worldwide
in the past two years is now rubbing off an Indian investors,
too. In the year ending March 31, 2011, when assets under
management (or AUM) of most product categories of local
mutual funds either shrank or remained unchanged, money man-
aged and investor folios under ETFs, including gold-backed
schemes, more than doubled.
12)Having run out of new equity themes, mutual fund (MF)
houses are trying to jump on to the commodity wagon. Fund
houses are either latching on to gold, the only commodity
they are permitted to launch funds on, or launching funds
underlaid by global commodity stocks.
CORPORATE SCORE
13)BANGALORE-HEADQUARTERED biopharmaceutical company,
Biocon Ltd has registered a 25 per cent rise in its net profit
to Rs 101 crore in the fourth quarter of financial year 2010-
11 as compared with Rs 81 crore in the corresponding period
last year.
COMMODITIES
14)Gold advanced to a record after the US Federal Reserve
pledged to keep interest rates near zero to bolster the re-
covery, weakening the dollar and boosting demand for precious
metals as an alternative investment. Immediate-delivery gold
gained as much as 0.4 per cent to $1,534.05 an ounce, and
traded at $1,532.53 at 10:05 a.m. in London.
15)Food inflation went up to 8.76% for the week ended April 16,
raising fears of another hike in the key policy rates by the
Reserve Bank in its annual policy to be announced next week.
16)Despite soaring gold prices, jewellers are gearing up to meet
the demand from consumers on Akshaya Tritiya, which falls on
May 6. Though prices of 22 carat gold used in making jewellery
have gone up by 30% year on year, jewellers, in expectation of
good sales, have introduced new offers and schemes to attract
consumers. Some are offering advance booking to neutralise
the impact of rising prices. Gold coin sales, which have
picked up in the recent months, also earn good revenue for
jewellers.
17)GOLD set a new record at Rs 22,470 per 10 gms today on
brisk buying by stockists and jewellers for the upcoming
'Akshaya Tritiya' and marriage season, driven by a record
rally in global markets. Silver also surged Rs 3,400 to
Rs 72,000 a kg. The white metal had hit a record level
of Rs 74,300 on April 25.
REAL ESTATE
18)Mumbai home sales dropped to a two-year low in the first
quarter as record prices and interest rates at the highest
since 2008 crimped demand, increasing the number of unsold
units to a record, according to Liases Foras Real Estate
Rating & Research.
COMMUNICATIONS
19)Telecom tariffs may fall again as sector regulator Trai begins
the review of interconnect charges, or the amount one mobile
operator pays another for using the latter's network to orig-
inate, terminate or transit a call. These charges constitute
about 75% of the total call cost.
INFORMATION TECHNOLOGY
20)Polaris Software Lab Ltd has reported a 26 per cent increase
in net profit to Rs 58 crore for the fourth quarter ended
March 31,2011 as against Rs 46 crore for the corresponding
quarter, last year. Revenue increased by 25 per cent to
Rs 438 crore (Rs 351 crore).
21)Hexaware Technologies has reported an almost five-fold in-
crease in net profit for the first quarter ended March 31,
2010 as it increased billing rates for services rendered
and gained from currency volatility. Net profit for the mid-
size IT services company stood at Rs 53.8 crore against
Rs 11.6 crore in the same quarter a year ago.
INTERNATIONAL
22)The Bank of Japan (BoJ) kept monetary policy unchanged on
Thursday even as it lowered growth forecasts and estimated
the economy tipped into recession early this year, disappoint-
ing analysts who felt the grim readings after last month's
earthquake called for more policy easing.
23)TOP Asian car makers Honda Motor and Hyundai Motor painted
vastly different portraits on Thursday, with Hyundai turning in
a stellar quarterly performance while Honda struggled to over-
come supply woes after Japan's earthquake.
1)In a bid to promote two-way engagement and build better
understanding with the overseas Indian community, a uni-
que institution - Pravasi Bhartiya Kendra - will come up in
New Delhi by next year.
CORPORATE / INDUSTRY
2)Biocon Ltd, India's biggest biotechnology company, agreed
to sell a majority stake in its German unit AxiCorp GmbH
for e40 million (Rs 263.2 crore) because it didn't need the
company's services to sell Biocon's insulin products in the
European nation after an alliance with the world's biggest
drug maker Pfizer Inc.
3)Auto component maker Motherson Sumi Systems Ltd(MSSL)
on Thursday said it will merge three group firms with itself
as it looks to consolidate its business. The company, which
has set a target of becoming a $5-billion entity by 2015,
said its board of directors has approved the merger of Sumi
Motherson Innovative Engineering (SMIEL), MSSL Global
Wiring and India Nails Manufacturing with itself.
MONEY & BANKING
4)Paring all of its initial gains, the rupee closed flat on
Thursday at 44.43/44 against the US currency due to late
dollar demand from importers, in tandem with local equities
amid increased capital outflows.
5)The interest rate on saving bank deposits, the last bastion
of administered rate of interest, is set to be deregulated,
with the Reserve Bank of India(RBI) kicking off a discussion
for a market driven rate. The rate has remained at 3.5
per cent since March, 2003.
6)India's largest private lender ICICI Bank Ltd on Thursday
announced a 44% rise in its net profit in the fourth quarter
(Q4) ended 31 March, bolstered by growth in fee income
and lower provisions for bad loans, even as it saw a loss in
treasury revenue and a rise in operating expenses. Net
profit for the quarter stood at Rs 1,452 crore, up from
Rs 1,006 crore in the year earlier. Provisions during the
period declined 61% to Rs 384 crore from Rs 990 crore.
7)Strong growth in advances, coupled with a robust jump in
net interest income, buoyed Bank of Baroda's net profit
in the fourth quarter ended March 31, 2011. Net profit
for the quarter increased 43 per cent to Rs 1,294 crore,
against Rs 906 crore in the corresponding quarter last
year.
INSURANCE
8)Insurance sector regulator IRDA has decided to appoint research
organisations to analyse the pattern of claims to help the re-
gulator put a lid on the insurance fraud in the healthcare sec-
tor.
9)Mukesh Ambani-controlled Reliance group is in talks to
buy out Bharti in the life insurance firm Bharti Axa Life.
Reliance, which has spelt out its aspirations to build a
financial services empire, is understood to be in advanced
stage of negotiations with the Mittals-led Bharti which has
been looking for an exit for the past one year.
MARKETS
10)Indian shares dropped for the fourth day, shedding 0.8% in
a choppy session on Thursday as monthly derivatives contracts
expired and high inflation strengthened expectations of a tight
monetary stance by the central bank. Reliance Industries ex-
tended losses a day after an oil ministry source said the
energy giant could face a penalty for falling short of the
targeted gas production at its D6 block off the east coast.
The stock, which weighs the most on key indexes, slipped
1.4%, taking losses for the year to date to 8.2%. The 30-
share BSE index fell 0.81%, or 156.67 points, to 19,292.02
points, with 25 components closing in the red. It had
started higher.
MUTUAL FUNDS
11)The popularity of exchange-traded funds, or ETFs, worldwide
in the past two years is now rubbing off an Indian investors,
too. In the year ending March 31, 2011, when assets under
management (or AUM) of most product categories of local
mutual funds either shrank or remained unchanged, money man-
aged and investor folios under ETFs, including gold-backed
schemes, more than doubled.
12)Having run out of new equity themes, mutual fund (MF)
houses are trying to jump on to the commodity wagon. Fund
houses are either latching on to gold, the only commodity
they are permitted to launch funds on, or launching funds
underlaid by global commodity stocks.
CORPORATE SCORE
13)BANGALORE-HEADQUARTERED biopharmaceutical company,
Biocon Ltd has registered a 25 per cent rise in its net profit
to Rs 101 crore in the fourth quarter of financial year 2010-
11 as compared with Rs 81 crore in the corresponding period
last year.
COMMODITIES
14)Gold advanced to a record after the US Federal Reserve
pledged to keep interest rates near zero to bolster the re-
covery, weakening the dollar and boosting demand for precious
metals as an alternative investment. Immediate-delivery gold
gained as much as 0.4 per cent to $1,534.05 an ounce, and
traded at $1,532.53 at 10:05 a.m. in London.
15)Food inflation went up to 8.76% for the week ended April 16,
raising fears of another hike in the key policy rates by the
Reserve Bank in its annual policy to be announced next week.
16)Despite soaring gold prices, jewellers are gearing up to meet
the demand from consumers on Akshaya Tritiya, which falls on
May 6. Though prices of 22 carat gold used in making jewellery
have gone up by 30% year on year, jewellers, in expectation of
good sales, have introduced new offers and schemes to attract
consumers. Some are offering advance booking to neutralise
the impact of rising prices. Gold coin sales, which have
picked up in the recent months, also earn good revenue for
jewellers.
17)GOLD set a new record at Rs 22,470 per 10 gms today on
brisk buying by stockists and jewellers for the upcoming
'Akshaya Tritiya' and marriage season, driven by a record
rally in global markets. Silver also surged Rs 3,400 to
Rs 72,000 a kg. The white metal had hit a record level
of Rs 74,300 on April 25.
REAL ESTATE
18)Mumbai home sales dropped to a two-year low in the first
quarter as record prices and interest rates at the highest
since 2008 crimped demand, increasing the number of unsold
units to a record, according to Liases Foras Real Estate
Rating & Research.
COMMUNICATIONS
19)Telecom tariffs may fall again as sector regulator Trai begins
the review of interconnect charges, or the amount one mobile
operator pays another for using the latter's network to orig-
inate, terminate or transit a call. These charges constitute
about 75% of the total call cost.
INFORMATION TECHNOLOGY
20)Polaris Software Lab Ltd has reported a 26 per cent increase
in net profit to Rs 58 crore for the fourth quarter ended
March 31,2011 as against Rs 46 crore for the corresponding
quarter, last year. Revenue increased by 25 per cent to
Rs 438 crore (Rs 351 crore).
21)Hexaware Technologies has reported an almost five-fold in-
crease in net profit for the first quarter ended March 31,
2010 as it increased billing rates for services rendered
and gained from currency volatility. Net profit for the mid-
size IT services company stood at Rs 53.8 crore against
Rs 11.6 crore in the same quarter a year ago.
INTERNATIONAL
22)The Bank of Japan (BoJ) kept monetary policy unchanged on
Thursday even as it lowered growth forecasts and estimated
the economy tipped into recession early this year, disappoint-
ing analysts who felt the grim readings after last month's
earthquake called for more policy easing.
23)TOP Asian car makers Honda Motor and Hyundai Motor painted
vastly different portraits on Thursday, with Hyundai turning in
a stellar quarterly performance while Honda struggled to over-
come supply woes after Japan's earthquake.
Friday, April 29, 2011
Market For You
GLOBAL INDICES
• At 9.00 am in the morning, Asian markets were trading mixed, with Hang Seng
trading 0.2% lower.
• Nikkei ended higher on Thursday, boosted by strong earnings from Advantest and
other technology companies.
• Hang Seng index fell on Thursday, reversing earlier gains, on renewed concerns
about further monetary tightening policy from Beijing.
• FTSE index ended almost flat on Thursday as gains in miners were cut short by
disappointing results from AstraZeneca PLC, Unilever PLC and Whitbread PLC.
• Dow Jones ended higher on Thursday despite modest US economic growth in the
first quarter.
INDIAN EQUITY MARKET
• At 9.00 am in the morning, the SGX Nifty was trading 0.1% higher.
• Indian stock indices slumped on Thursday on account of selling on the last day of
the April futures contract expiry and on fear of higher-than-expected interest rate
hike by the RBI in its annual policy statement.
• All indices ended in red with BSE Realty and BSE Metal leading the fall.
• Among realty stocks, Unitech fell nearly 8% and DB Realty fell more than 4%.
• Fertiliser shares like National Fertilizers rose 1.3% and Coromandel International
added 2.3% after the Cabinet approved revision in the nutrient-based subsidy rates
of phosphatic and potassic fertilisers for 2011-12 (Apr-Mar).
• ICICI Bank ended up 1% as the bank's Jan-Mar net profit was in line with market
expectations, while Vijaya Bank and Bank of Baroda ended nearly 6% and 5%
down respectively.
• Shares of Southern Petrochemical Industrial Corp gained 18% and Orient Paper
and Industries were up 3.7% on better than expected earning results.
• Cox & Kings India ended up nearly 4% after the board approved a two-for-one
stock split while Pipavav Shipyard closed over 1% higher after it signed a MoU
with UK's Babcock group to build aircraft carriers for the Indian Navy.
DOMESTIC NEWS
• India's primary articles inflation rate rose to 12.08% for the week ended April 16
from 11.96% a week ago; food articles inflation rate also increased slightly to
8.76% from 8.74% a week ago.
• Economic Affairs Secretary says that the threat of runaway inflation toppling
India's growth remains real, and while the government has done all it could on the
fiscal side, more measures to combat price rise are likely from the RBI.
• Economic Affairs Secretary informs that government will begin divestments in
FY12 with PFC's FPO in May; will also launch cooking gas, kerosene smart cards
in FY12.
• RBI, in a discussion paper says deregulation of savings bank deposit rate will
improve transmission of monetary policy, but warns that it could lead to unhealthy
competition among banks and hurt their profitability.
• EPFO to pay 9.5% interest rate on claims till new rate is decided for FY12.
• World Gold Council says that at the end of March, gold exchange-traded funds
held 2,110.3 tn gold worth $97.6 bn, compared with a high of 2,167.4 tn at
December end, indicating a net outflow during Jan-Mar.
• Pipavav Shipyard enters into a preliminary agreement with UK's Babcock Group to
jointly work on the possibility of building aircraft carriers for the Indian Navy.
• HCL Tech signs a new agreement with NASDAQ-listed JDA Software Group for
supply chain management.
• Bank of Baroda plans to increase the number of overseas branches to 100 in FY12
from 85 now.
• Japan International Co-operation Agency to extend a soft loan of Rs.14100 cr for
the third phase expansion of Delhi Metro Rail Corp.
• Monnet Ispat plans to raise around Rs.1300cr by selling up to 20% stake in its
power arm by June next year.
• Future Ventures’ issue gets subscribed 1.52 times with HNIs, bidding 7.8 times the
offer reserved for them.
• Welspun Infra Projects acquires a 35% stake for Rs.470cr in Leighton Contractors.
• Jyothy Labs says that it is still awaiting the outcome of its bid to acquire 50.97%
stake in Henkel India from its parent firm Henkel AG.
• Biocon to divest its entire 78% stake in German unit AxiCorp for $58.2 mn.
DERIVATIVES MARKET
• Nifty April futures (near future) expired slightly down against the spot index; it also
witnessed 3.05 mn decrease in open interest (OI).
• Put Call Ratio (OI) fell from 1.24 on April 27 to 1.09 on April 28.
• Nifty 6000 April Call strike continued to witness the highest OI.
• Nifty 5700 April Put strike continued to witness the highest OI.
• India VIX (volatility index based on the Nifty 50 Index Option prices) fell from
21.35% on April 27 to 20.92% on April 28.
INDIAN DEBT MARKET
• Call rates ended at 6.85-6.95% on Thursday against 6.85-6.90% on Wednesday on
strong demand from banks to meet cash reserve needs for the fortnight ending May 6
and also as view that RBI may raise key policy rates persisted.
• Banks borrowed Rs.30385 cr from RBI's repo tenders vs Rs.37035 cr on Wed.
• Gilt prices fell on Thursday as some selling took place on expectation that RBI will
hike key rates in its Monetary Policy Statement for 2011-12 on May 3.
• The 10-year 7.80%, 2021 paper ended at Rs.97.93, or 8.1057% yield compared with
Rs.98.04, or 8.0895% yield on Wednesday.
• Sentiment took a hit after Economic Affairs Secretary highlighted the problems
faced due to inflationary pressures and said that RBI is expected to take further steps
to contain inflation.
• Weekly primary articles inflation data did not affect gilt prices much.
• Intraday, large positions were avoided ahead of RBI’s policy statement, keeping
prices in a tight range.
• Meanwhile, RBI announced the auction of 77-day cash management bills worth
Rs.6000 cr on April 29.
Currency Overview
• The Indian rupee erased intraday gains and ended flat on Thursday due to persistent
dollar purchases by oil companies to meet their month-end requirements.
Commodity Overview
• Crude oil prices rose 10 cents to settle at $112.86 a barrel, a 31 month high, on the
NYMEX.
• Gold prices rose on signs of continuing accommodative monetary policy from the
US Federal Reserve.
INTERNATIONAL NEWS
• US economic growth slowed sharply in the first quarter to a rate of 1.8% after
growing at a 3.1% pace in the fourth quarter of 2010.
• IMF says that many Asian economies have been slow to raise interest rates and
clamp down on credit and they need to act promptly to avoid overheating; also says
that the Asian economy would grow 7% in 2011-12 even as it grapples with risks
including inflation, turmoil in the Middle East and the effects of Japan's tsunami.
• Bank of Japan expects the economy to expand 0.6% in the current business year
ending March 31, 2012, down from the rate of 1.6% the bank had forecast in
January; keeps its overnight call rate range at 0 to 0.1% by unanimous vote.
• World Bank projects China's real GDP growth at 9.3% this year, revising its
previous projection of 8.7%.
• At 9.00 am in the morning, Asian markets were trading mixed, with Hang Seng
trading 0.2% lower.
• Nikkei ended higher on Thursday, boosted by strong earnings from Advantest and
other technology companies.
• Hang Seng index fell on Thursday, reversing earlier gains, on renewed concerns
about further monetary tightening policy from Beijing.
• FTSE index ended almost flat on Thursday as gains in miners were cut short by
disappointing results from AstraZeneca PLC, Unilever PLC and Whitbread PLC.
• Dow Jones ended higher on Thursday despite modest US economic growth in the
first quarter.
INDIAN EQUITY MARKET
• At 9.00 am in the morning, the SGX Nifty was trading 0.1% higher.
• Indian stock indices slumped on Thursday on account of selling on the last day of
the April futures contract expiry and on fear of higher-than-expected interest rate
hike by the RBI in its annual policy statement.
• All indices ended in red with BSE Realty and BSE Metal leading the fall.
• Among realty stocks, Unitech fell nearly 8% and DB Realty fell more than 4%.
• Fertiliser shares like National Fertilizers rose 1.3% and Coromandel International
added 2.3% after the Cabinet approved revision in the nutrient-based subsidy rates
of phosphatic and potassic fertilisers for 2011-12 (Apr-Mar).
• ICICI Bank ended up 1% as the bank's Jan-Mar net profit was in line with market
expectations, while Vijaya Bank and Bank of Baroda ended nearly 6% and 5%
down respectively.
• Shares of Southern Petrochemical Industrial Corp gained 18% and Orient Paper
and Industries were up 3.7% on better than expected earning results.
• Cox & Kings India ended up nearly 4% after the board approved a two-for-one
stock split while Pipavav Shipyard closed over 1% higher after it signed a MoU
with UK's Babcock group to build aircraft carriers for the Indian Navy.
DOMESTIC NEWS
• India's primary articles inflation rate rose to 12.08% for the week ended April 16
from 11.96% a week ago; food articles inflation rate also increased slightly to
8.76% from 8.74% a week ago.
• Economic Affairs Secretary says that the threat of runaway inflation toppling
India's growth remains real, and while the government has done all it could on the
fiscal side, more measures to combat price rise are likely from the RBI.
• Economic Affairs Secretary informs that government will begin divestments in
FY12 with PFC's FPO in May; will also launch cooking gas, kerosene smart cards
in FY12.
• RBI, in a discussion paper says deregulation of savings bank deposit rate will
improve transmission of monetary policy, but warns that it could lead to unhealthy
competition among banks and hurt their profitability.
• EPFO to pay 9.5% interest rate on claims till new rate is decided for FY12.
• World Gold Council says that at the end of March, gold exchange-traded funds
held 2,110.3 tn gold worth $97.6 bn, compared with a high of 2,167.4 tn at
December end, indicating a net outflow during Jan-Mar.
• Pipavav Shipyard enters into a preliminary agreement with UK's Babcock Group to
jointly work on the possibility of building aircraft carriers for the Indian Navy.
• HCL Tech signs a new agreement with NASDAQ-listed JDA Software Group for
supply chain management.
• Bank of Baroda plans to increase the number of overseas branches to 100 in FY12
from 85 now.
• Japan International Co-operation Agency to extend a soft loan of Rs.14100 cr for
the third phase expansion of Delhi Metro Rail Corp.
• Monnet Ispat plans to raise around Rs.1300cr by selling up to 20% stake in its
power arm by June next year.
• Future Ventures’ issue gets subscribed 1.52 times with HNIs, bidding 7.8 times the
offer reserved for them.
• Welspun Infra Projects acquires a 35% stake for Rs.470cr in Leighton Contractors.
• Jyothy Labs says that it is still awaiting the outcome of its bid to acquire 50.97%
stake in Henkel India from its parent firm Henkel AG.
• Biocon to divest its entire 78% stake in German unit AxiCorp for $58.2 mn.
DERIVATIVES MARKET
• Nifty April futures (near future) expired slightly down against the spot index; it also
witnessed 3.05 mn decrease in open interest (OI).
• Put Call Ratio (OI) fell from 1.24 on April 27 to 1.09 on April 28.
• Nifty 6000 April Call strike continued to witness the highest OI.
• Nifty 5700 April Put strike continued to witness the highest OI.
• India VIX (volatility index based on the Nifty 50 Index Option prices) fell from
21.35% on April 27 to 20.92% on April 28.
INDIAN DEBT MARKET
• Call rates ended at 6.85-6.95% on Thursday against 6.85-6.90% on Wednesday on
strong demand from banks to meet cash reserve needs for the fortnight ending May 6
and also as view that RBI may raise key policy rates persisted.
• Banks borrowed Rs.30385 cr from RBI's repo tenders vs Rs.37035 cr on Wed.
• Gilt prices fell on Thursday as some selling took place on expectation that RBI will
hike key rates in its Monetary Policy Statement for 2011-12 on May 3.
• The 10-year 7.80%, 2021 paper ended at Rs.97.93, or 8.1057% yield compared with
Rs.98.04, or 8.0895% yield on Wednesday.
• Sentiment took a hit after Economic Affairs Secretary highlighted the problems
faced due to inflationary pressures and said that RBI is expected to take further steps
to contain inflation.
• Weekly primary articles inflation data did not affect gilt prices much.
• Intraday, large positions were avoided ahead of RBI’s policy statement, keeping
prices in a tight range.
• Meanwhile, RBI announced the auction of 77-day cash management bills worth
Rs.6000 cr on April 29.
Currency Overview
• The Indian rupee erased intraday gains and ended flat on Thursday due to persistent
dollar purchases by oil companies to meet their month-end requirements.
Commodity Overview
• Crude oil prices rose 10 cents to settle at $112.86 a barrel, a 31 month high, on the
NYMEX.
• Gold prices rose on signs of continuing accommodative monetary policy from the
US Federal Reserve.
INTERNATIONAL NEWS
• US economic growth slowed sharply in the first quarter to a rate of 1.8% after
growing at a 3.1% pace in the fourth quarter of 2010.
• IMF says that many Asian economies have been slow to raise interest rates and
clamp down on credit and they need to act promptly to avoid overheating; also says
that the Asian economy would grow 7% in 2011-12 even as it grapples with risks
including inflation, turmoil in the Middle East and the effects of Japan's tsunami.
• Bank of Japan expects the economy to expand 0.6% in the current business year
ending March 31, 2012, down from the rate of 1.6% the bank had forecast in
January; keeps its overnight call rate range at 0 to 0.1% by unanimous vote.
• World Bank projects China's real GDP growth at 9.3% this year, revising its
previous projection of 8.7%.
Wednesday, April 27, 2011
Economic Insights
U.S. Sovereign Risk: Never Say Never?
Sovereign risk has been almost a daily fi xture in the headlines for over a year, although until this past week most of it was focused on Europe. Europe’s headline dominance has been due both to the severity of its debt crisis and the diffi culty in fi nding a satisfactory resolution from the perspective of the capital markets. Despite numerous resolution efforts and initiatives by the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Union (EU), the situation remains far from resolved. Spreads on Greece, Ireland, Portugal, and Spain bonds all reached record levels last week amidst widespread market expectations that bondholders will not get made whole, especially on Greek bonds. And Portugal has joined Greece and Ireland in needing to tap into the European bailout fund. Globally, there have 26 downgrade rating actions for sovereigns but only fi ve upgrades thus far in 2011.
But that is the rest of the world. This week it was the United States’ turn to grab the
sovereign risk headlines as Standard & Poors (S&P) reaffi rmed its AAA ratings on $9
trillion of publicly held U.S. government debt, but more importantly changed its outlook
to negative.
S&P’s accompanying report noted that “...our rating on the U.S. sovereign signals that we believe there is a likelihood of at least one-in-three of a downward rating adjustment within two years.” An obviously unhappy Obama administration and Treasury probably took little comfort in the added note from S&P that “if we do lower the rating, it would be by no more than one notch to AA+.” Ironically, S&P’s warning that it might downgrade the U.S. to a level below AAA for the fi rst time since government ratings began in 1941 came on the heels of efforts by both Republicans (led by Congressman Paul Ryan) and the Democrats (led by the Obama administration) to put proposals on the table to reduce government debt and defi cits. But those proposals are widely divided, especially on the issue of using tax hikes to help resolve the fi scal challenges facing the federal government.
Sovereign risk has been almost a daily fi xture in the headlines for over a year, although until this past week most of it was focused on Europe. Europe’s headline dominance has been due both to the severity of its debt crisis and the diffi culty in fi nding a satisfactory resolution from the perspective of the capital markets. Despite numerous resolution efforts and initiatives by the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Union (EU), the situation remains far from resolved. Spreads on Greece, Ireland, Portugal, and Spain bonds all reached record levels last week amidst widespread market expectations that bondholders will not get made whole, especially on Greek bonds. And Portugal has joined Greece and Ireland in needing to tap into the European bailout fund. Globally, there have 26 downgrade rating actions for sovereigns but only fi ve upgrades thus far in 2011.
But that is the rest of the world. This week it was the United States’ turn to grab the
sovereign risk headlines as Standard & Poors (S&P) reaffi rmed its AAA ratings on $9
trillion of publicly held U.S. government debt, but more importantly changed its outlook
to negative.
S&P’s accompanying report noted that “...our rating on the U.S. sovereign signals that we believe there is a likelihood of at least one-in-three of a downward rating adjustment within two years.” An obviously unhappy Obama administration and Treasury probably took little comfort in the added note from S&P that “if we do lower the rating, it would be by no more than one notch to AA+.” Ironically, S&P’s warning that it might downgrade the U.S. to a level below AAA for the fi rst time since government ratings began in 1941 came on the heels of efforts by both Republicans (led by Congressman Paul Ryan) and the Democrats (led by the Obama administration) to put proposals on the table to reduce government debt and defi cits. But those proposals are widely divided, especially on the issue of using tax hikes to help resolve the fi scal challenges facing the federal government.
Sunday, April 24, 2011
5 great investing lessons from Warren Buffett
In no chairman's annual statement to his shareholders will you find attached a letter from the chairman's grandfather to his uncles. This is what makes Warren Buffett's letter so unique.
Every value investor eagerly waits for this annual letter from Buffett, the chairman of Berkshire Hathaway, a group with a market cap of $208 billion. It holds companies in industries as diverse as insurance, airlines and candies.
We picked up Buffett's most recent letter to his shareholders and highlight just five lessons from this letter, though every line of it has something to teach.
The market value and intrinsic value will converge, though it could take years. Stick to the rule of picking stocks below their intrinsic value.
Margin of safety: The doomsayers have suggested that in a 'new normal world,' future stock returns would not replicate past averages. But Buffett emphasises: "Market price and intrinsic value often follow very different paths -- sometimes for extended periods -- but eventually they meet."
Many academic research papers say the same thing, but coming from a practitioner who himself has made billions of dollars from stocks, it should instil your faith in equities
However, note that deciding factor of stock returns is 'intrinsic value.' Buffett's philosophy in picking stocks is he buys 'a dollar bill at 40 cents'.
Here, 'a dollar' is the intrinsic value, and if you buy a stock worth a dollar at 40 cents, you can hope to make profits. The huge discount at which you are buying the stock is called 'margin of safety.'
But how do you find the intrinsic value of a stock? Buffett measures the performance of his company's stock using 'book value' (we guess he must be using similar tools to measure the performance of many of his other investments too).
Combine the two things and it suggests that you could make profits if you are able to pick a stock trading below its book value.
However, you should use book value selectively. In some cases, book value is not a good proxy to the company's value, for instance, in IT companies whose main resources are humans.
Derivatives are not all that bad. But they can be 'weapons of mass destruction', if not understood properly.
"Derivatives are weapons of mass destruction." Buffett has been quoted saying so in the aftermath of the credit-led financial crisis of 2008. Some of his critics believe this is misleading, as Buffett's company Berkshire Hathaway itself has forged many derivative contracts.
The latest financial statement of the company reports 203 of them. But there is something very unique to them.
His company has 39 'equity puts' on global indices such as S&P 500 and FTSE 100. This means he has sold insurance to investors who fear against the fall in these indices.
Obviously, looking at the present uncertainties, the odds of these indices falling is significant. But the duration of these contracts is as long as 10-15 years, highlighting Buffett's belief that equity delivers in the long term.
Assume a slack period for equities through this new decade and that the S&P 500 and FTSE 100, after 10 years, remain at the level where they are today.
Buffett would lose absolutely nothing. In fact, Berkshire would make a huge profit. The company raked in a premium of $4.2 billion from selling these puts.
If the indices remain at the same level, Berkshire would lose $3.8 billion, which is the settlement value of the contract. The net gain is, therefore, $400 million!
Berkshire also designed the contracts to its advantage, in such a way that it does not have to pay any collateral for these contracts.
Can you do the same? First, let's admit that very few of us properly understand the risk when we enter into derivatives contracts. It's true for companies too.
Hexaware Technologies and Ranbaxy Laboratories suffered huge losses due to these complex instruments.
Also, you can't take such a long view in India. Contracts are of shorter duration, and you can only roll it over, further complicating the matter. Also, in derivative contracts, you pay margin, which can ruin your wealth if the value of underlying asset moves in an unexpected direction.
Management matters. It decides how the company will use retained earnings. If a company's stock can't deliver return higher than the index, you are better off holding the index.
Management is important
Buffett benchmarks the performance of his company to S&P 500. If stocks of Berkshire are not able to deliver a return higher than S&P 500 consistently over the long term, the shareholders would be better off investing in an index fund.
Buffett says managements "should establish performance goals at the onset of their stewardship. Lacking such standards, managements are tempted to shoot the arrow of performance and then paint the bull's-eye around wherever it lands."
You carefully go through press releases of Indian companies and transcripts of analyst conferences after every quarterly result, and quite often you would observe this phenomenon.
But firms with good management, like Infosys Technologies, give some guidance on their future performance, even though it's for the short term.
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