Archive for the ‘Banking’ Category

Services Sector Slows Down for Second Consecutive Month in August

India’s services sector slowed down for a second consecutive month in August as the pace of expansion comes down from a record high level seen in June, as reflected in the HSBC Services Purchasing Managers’ Index (PMI) based on a survey of 400 firms. However, even the current reading on the PMI is very robust and consistent with a fast expanding economy.

.

The headline seasonally adjusted HSBC Business Activity Index stood at 59.3 in August, falling slightly from 61.7 in July. This was the second successive decrease in the headline figure, even though it continued to signal a very sharp pace of expansion in the country’s service sector.

.

Earlier the manufacturing data too had shown some slowdown in expansion in August, although the absolute figure there too remained strong. Overall, the HSBC India Composite Output Index for the month of August stood at 60.3, down from 61.9 in July. However, the latest reading continues to remain consistent with a very rapid pace of growth in the overall economy.

.

Looking at the sub-indices, the index of incoming new business received by the service sector firms increased markedly during the month, boosted by the ongoing improvement in global economic conditions as well as strong domestic demand. The survey also revealed that the latest growth was faster than that posted in July. All the six sectors monitored under the survey indicated that new business had risen during the month.

.

Further, despite the sharp rise in output recorded during the month, backlogs of work with the service sector companies continued to rise in August. It clearly indicates increasing capacity pressures being faced by the economy. A similar finding was also revealed by the manufacturing PMI, thus indicating that overall economy was under capacity pressures and growth could slow down until the pace of investment picks up.

.

In a related inference, the August data signalled a marked increase in input costs faced by Indian service companies. This is an expected development when capacities come under pressure. The latest rise in input prices was driven by higher purchasing costs and wage inflation. The survey indicated that while the rise in costs in August was marginally lower than the previous month, it was nonetheless strong in the context of the historical data.

.

Overall, the services sector as well composite business activity seems to be doing pretty well for now. The recent slowdown reflects that capacities are getting filled and therefore pressures on cost side are building up. Commenting on the India Services PMI survey, Frederic Neumann, Co-Head of Asian Economics Research at HSBC said, “Service sector activity, which in India accounts for the bulk of economic output, slowed a little last month. But, monetary officials can hardly afford to relax their guard. Growth remains strong, and there are few signs that input and output price pressures are letting up meaningfully. Both employment generation and outstanding business remain consistent with a robust, ongoing expansion.”

.

OUR Websites:  http://www.smcindiaonline.com,http://www.smccapitals.com,
http://www.smctradeonline.comhttp://www.smcwealth.com

.

Share/Bookmark

Advertisements

Standard Chartered IDR : “Opportunity in Crisis”

Standard Chartered IDR : “Opportunity in Crisis”

By Jagannadham Thunuguntla

.

.


The bad market conditions are putting pressure on the ongoing IPO of Standard Chartered IDR. However, if one closely observes, there is some opportunity emerging in the Standard Chartered IDR.

.

What’s the trade?

.

When the price of Indian IDR was fixed, the trading price of the Standard Chartered Plc share on London Stock Exchange was trading in the range of GBP 15.5.

.

However, thanks to the stabilization of the global equity markets in the past 2 to 3 trading sessions, the price of the Standard Chartered Plc on London stock exchange has reached to the tune of GBP 16.82 on Thursday closing. Hence, the Indian rupee translation of the trading price in London stock exchange works out to the equivalent price of Rs 1140. As, there is 10:1 exchange rate, the effective equivalent price of Standard Chartered Indian IDR works out to Rs 114.

.

If one observes, the Standard Chartered IDR issue book is getting built at the lower end of Rs 100.

.

So, the institutional investors and large HNIs can take this opportunity, by simply applying for IDRs in the Indian public issue; and shorting the share in the London stock exchange. Hence, there is a spread of Rs. 14 (that is, between Rs. 114 and Rs. 100), that is 14%.

.

This trade is more fascinating, especially, on the back of the fact that recently the listing days from the closure of the issue have been reduced to 12 days from the erstwhile 22 days. So, 14% is the spread available for a trade of just 12 days.

.

Further, it is appearing that the IPO book will at best get barely subscribed one time. Hence, there is no risk of oversubscription. So, whoever applies is assured of allotment. Hence, as there is no spill-over risk due to oversubscription, this trade can really work well.

.

It seems there is a clear 14% opportunity in just 12 days for institutions and large HNIs.

.

Even if we assume that the final issue price will be in line with the Rs 104 per IDR, as applied by the Anchor investors, still there is Rs 10 spread (that is, between Rs 114 and Rs. 104), that is to the tune of about 10%.

.

The couple of assumptions that need to be highlighted are:

.


(a) The IDR issue will be able to get closed successfully and will not get called off; and

(b) The currency risk is properly hedged

.

Conclusion

.


As this is the first ever IDR issue in India, the learning curve will be steeper for every one associated in the value chain, regarding the concept and nuances of the modus operandi. As always, the “first mover advantage” can prove to be invaluable.

WILLINGNESS TO TAKE RISK IS NOT YOUR RISK APPETITE

Today we have wide investment options to invest our hard earned money to achieve our goals.Depending on our Greed or Fear, we choose products to invest. Some choose mutual funds; some choose direct investment in shares whereas some opt for PPF, Bank FDs or any other debt products. While before investing in any of the financial product, it’s important for an investor to consider his/her risk appetite. Risk appetite is the amount of risk that an investor can bear on its investments.

.

Importance of the Risk Appetite:

.


Suppose Mr. A and Mr. B invested Rs100 in XYZ Share. After some days the value drop to Rs 90, at this point both were calm, and accepted that this happened because of market volatility. After some more days, again price went down below70. At this point, A starts feeling oohh… and ouch… in his stomach. This is the point where his emotional pain increases to a point where he can no longer stay with this investment. That is the risk appetite for A whereas B is not affected that much, still he can take loss of 20 more, only where prices drop below 50, he may feel jitter.

.

But here the question arises in the mind that how can we judge our risk appetite. Risk Appetite is determined from many factors like our expectations, current situation and past experiences of investing. In developing nations like India, we can find many investors who have high risk appetite and can take high risk to achieve high returns. But there is a high probability that while considering the risk appetite; investor may forget to consider the “Ability to take risk”. It’s not important whether he is willing to take risk or not.

.

Willingness to take risk and the ability to take risk both are most important factors that one should consider before deciding the risk appetite.

.

Willingness to Take Risk:

.


This depends on our inherent nature, our attitude towards life, finance domain, Knowledge of financial products etc. Our whole upbringing will contribute towards this because our willingness to take risk will depend on our inherent self, who we are from inside. So you can either be extra cautious by nature and may not be willing to take risks or you can be a big risk taker and bet money on anything.

.

Ability to Take Risk:

.


This is the next important part in Risk taking. Does your situation allow you to take risk or not? It has nothing to do with your willingness to take risk, you can be a risk taker and dying to bet on the next multibagger or invest in that 100% return a year mutual fund, but you have to consider the worst case at the end. You have to visualize the worst case as if it has happened after you take that risky decision.

.

While concluding, I wish to say that before investing in any financial asset one should judge his risk appetite. We should always take calculated risk (as per the willingness & ability to take risk) and being aware of what will be the outcome. Risk taking should be a rational, not an emotional, decision. We should know what can be the impact of taking decision. Hence, we must take risk which is required for meeting our financial goals. Taking Over-risk is same as taking Low-risk.

.

NEWS ROUND UP 29th March – 02nd April

Economy

🙂

·India’s annual food price index stood at 16.22% as on week ended March 13, slower than the 16.30% growth recorded last week. A year ago, food prices were up 7.46%. At the same time, primary articles inflation rose to 13.88% from 4.91% last year, while fuel, power, light & lubricants prices climbed to 12.68%.

.

Power

🙂

·NTPC, the state owned power generator, has evinced interest to set up solar and wind projects in Orissa with aggregate generation capacity of 500 Mw.

.

The company has sent a draft MoU for approval of the Orissa government in this regard.

.

·GMR Energy will soon raise over Rs 1,600 crore from a group of private equity players led by Singapore-based Temasek Holdings and banks to fund its expansion. The company is a subsidiary of the G M Rao-led GMR Infrastructure that has interests in highways, airports, agri-business and urban infrastructure.

.

Oil & Gas

🙂

.

·ONGC has approved investing Rs 3,240 crore ($712 million) for the first phase development of three marginal fields located in Mumbai offshore on the western coast.

.

Capital Goods

🙂

·L&T has been awarded a contract by the Ministry of Defense for the design and construction of 36 high speed interceptor boats for the Indian Coast Guard. The contract is valued at Rs 977 crore. The design is being carried out in house by the Company and its ship design center, that is a part of the Company’s Heavy Engineering division. The boats are planned to be constructed at the Company’s existing shipyard at Hazira and at its new shipyard coming up at Katupalli near Ennore.

.

·L&T bagged six orders worth Rs 1,181 crore for construction of power transmission line and sub-station works. Three of these six orders worth Rs 741 crore have been secured from the Gulf markets and the other orders worth Rs 440 crore are for domestic projects. These orders will be executed by electrical and gulf projects operating company, a part of L&T’s construction division.

.

Automobile

🙂

.

·Tata Motors, India’s largest vehicle manufacturer by revenue, is selling a third of its stake in the construction equipment-making subsidiary, Telcon, to its joint venture partner, Hitachi, for Rs 1,000 crore.

.

·Tata Motors had signed an agreement with the Myanmarese government for setting up a heavy truck plant in the South-East Asian nation, with an installed capacity of up to 5,000 units annually.

.

·TVS Motor Company has announced the launch of its new model TVS Jive, India’s first auto-clutch motorcycle, in Chandigarh. With this launch, the company expects that it sales in Punjab will grow significantly from 2,000 motorcycles to 3,600 motorcycles per month.

.

Realty/ Construction

🙂

.

·Patel Engineering has been awarded the contract to develop the largest waterfront project in the southern hemisphere. The project, an integrated township in Port Louis, the capital of Mauritius, is valued at $1 billion.

Spread over more than 24 hectares, the project involves residential, commercial, entertainment and real estate.

.

·Punj Lloyd plans to sell its 19.4 per cent stake in Pipavav Shipyard to co-promoter Skil Infrastructure through an inter se promoter transfer. The stake is valued at Rs 825 crore at the company’s current market
capitalisation of Rs 4,251 crore. The Nikhil Gandhi-promoted Skil Infrastructure has an 18.27 per cent stake in Pipavav Shipyard.

.

Telecommunication

🙂

.

·Kuwait-based Zain Telecom’s board cleared Bharti Airtel’s proposal to buy its African assets for $10.7 billion (around Rs 48,600 crore), marking the Indian company’s first successful attempt to acquire operations in Africa after two failures.

.

Cement

🙂

.

·Shree Cement has got the Central Electricity Regulatory Commission’s (CERC) approval to start inter-state trading business in power it produces at its merchant plant. The company has 260 MW installed captive power generation capacity and is in the process of putting up additional 300 MW merchant capacity, which is set to go on stream in a few days.

NEWS ROUND UP 22nd – 26th March

Hello Friends here we come up with the News Round Up from various categories.

Economy

🙂


·The Reserve Bank of India (RBI) unexpectedly raised interest rates from record-low levels for the first time since it began cutting in 2008, citing intensifying inflationary pressures and a steady economic recovery. The central bank raised the repo rate, the rate at which it lends to banks to 5.00 percent from 4.75 percent and reverse repo rate, the rate which it absorbs funds from the system to 3.50 percent from 3.25 percent with immediate effect.

.

·India’s Wholesale price inflation accelerated to 9.89 percent in February from a year ago, above the Reserve Bank of India’s end March projection of 8.5 percent and higher than the 8.56 percent level recorded in January this year.

.

·India’s food price index rose 16.30 percent in the 12 months to March 6, while the fuel index was up 12.68 percent. The rise in the food price index was lower than an annual rise of 17.81 percent in the previous week.

.

Pharmaceutical

.


·Elder Pharmaceuticals had increased its stake in Bulgarian subsidiary Elder Biomeda AD to 61 per cent from the present 51 per cent, as part of its strategy to strengthen its presence in the European market. The Rs 600- crore turnover Elder Pharma did not disclose the deal size. In April 2008, Elder had formed Biomeda AD in Bulgaria, to acquire three Bulgarian healthcare companies belonging to the local Biomeda group.

.

Metal

.


·Welspun Gujarat Stahl Rohren unit will acquire a 75 per cent stake in MSK Projects, marking its foray into infrastructure. Welspun will invest a total of Rs 400 crore, of which Rs 200 crore will be infused directly into MSK.

.

Realty/ Construction.

.


·Punj Lloyd has bagged a project worth $40 million (nearly Rs 181 crore) from Abu Dhabi Gas Industries (GASCO) for infrastructure related works.

.

The company has secured a letter of award for engineering, procurement and construction works in UAE from GASCO.

.

·Subhash Projects & Marketing has bagged two orders worth Rs 475.34 crore for infrastructure related works. The company, along with Kirloskar Brothers Ltd, has bagged a contract worth Rs 439.35 crore from Bangalore Water supply Sewerage Board for civil and electromechanical works.

.

·· Hindustan Construction Company (HCC) acquired a controlling stake in Swiss real estate firm Karl Steiner AG in an all-cash deal for around Rs 150 crore (Swiss Francs 35 million), a move that will pave way for the company to enter the European and Gulf markets.

.

·PT Madhucon Indonesia, a subsidiary of the Hyderabad-based infrastructure company Madhucon Projects Ltd, has been granted a new coal mining business permit for exploration of 30,970 hectares at Mauraduwa in south Sumatra, Indonesia.

.

Oil & Gas

.


·GAIL India plans to transit 21 per cent more natural gas through its pipelines at 114.8 million cubic meters per day in 2010-11 fiscal. The company in a press statement that it has set a target of transmitting 114.8 mmscmd of natural gas from domestic fields and imported LNG in 2010-11 fiscal as opposed to moving 94.8 mmscmd during current fiscal.

.

Capital Goods

.


·McNally Bharat Engineering Company has bagged an order worth Rs 173.2 crore for works at Mahanadi Coalfields in Sambalpur, Orissa. This is the third order that the company has bagged within a week, the first two being from NPCC and SAIL.

.

·Larsen & Toubro (L&T) has bagged a project worth Rs 2,035 crore from ONGC Mangalore Petrochemicals Ltd to set up an aromatics complex at Mangalore special economic zone.

.

Automobile.

.

·Mahindra & Mahindra has joined the long list of corporate houses looking to obtain a banking licence after the finance minister’s budget speech revealed that banking regulator RBI was planning to allow more players in the sector. A top executive of the $6.3-billion group that it was planning to seek a banking licence for its non-banking finance company Mahindra & Mahindra Financial Services (MMFSL).

Take Control Of Your Golden Years Financial Planning Final Part:)

Continuing the final part 🙂

Sumit’s colleague, Ankit, who is 30 years old, commences his retirement planning at the same time. Given that he also aims to retire at the age of 60 years, he has an investment horizon of 30 years. Assuming, like Sumit, he invests Rs 50,000 every month @ 10% per annum, he will accumulate Rs 11.30 crore at retirement. On the same lines, Piyush, Sumit’s other colleague, commences investing at the age of 35 with an investment horizon of 25 years to accumulate Rs 6.63 crore at the age of 60 years (at Rs 50,000 per month @ 10% per annum).

.

.

Given that all three of them have the same monthly investment (Rs 50,000), which is invested at the same rate (10% per annum), the difference can be attributed completely to Sumit’s early start vis-à-vis his colleagues. Ankit who has an investment tenure that is lower than Sumit’s by only 5 years accumulates a corpus that is nearly 40% lower than Sumit’s. Piyush, whose investment tenure is lower than Sumit’s by 10 years, accumulates approx 65% lower than him on retirement. A 5-Yr delay in retirement planning sounds like a small difference, but the power of compounding magnifies it to gigantic proportions.

.

CHALK OUT YOUR CORPUS 🙂

.

You’ll have to keep a realistic goal that you can realise in the time you have. Don’t expect that the zeroes will multiply automatically in your savings. See how much you can afford to save every month. Of course, if you start at a late age you will have to increase your savings substantially, so cut down on any superfluous expenses.

.

Prepare a budget which lists what you spend on necessities so that you know how much your monthly/annual expenditure will be in the future. Account for inflation too. Keep a rough estimate of 7-8% inflation every year. Also, consider expenses that are bound to increase, such as medical and transport expenses. Then again, calculate the expenses that may cease to exist, such as your children’s education.

.

.

DON’T TOUCH THOSE SAVINGS

.

More often than not, people have combined savings, that is, they save money for all their financial goals together— retirement, children’s education, their marriage, buying a home, etc. Invariably, you spend more on your initial financial goal and end up depleting your savings. By the time you retire, you have barely any money left. Overcome this obstacle.

.

Build your retirement corpus separately, and do not touch it. It’s always better to earmark the time period for your goals and make separate portfolios for each of these goals. For instance, your children’s education may be a short-term goal (compared with retirement, that is). Since retirement is a long-term goal, if you are starting early you can afford to take risks and invest primarily in equities. But if retirement is a short-term goal, that is, only 5 years away, you won’t be able to take any risks. You’ll be more concerned about security. In that case, invest primarily in debt instruments.

MAKE A PLAN

Before you embark on saving for retirement, you must have a plan in place. While a plan may sound fancy and even intimidating, rest assured it is not all that complicated. Your retirement plan is simply your wish list of how you wish to spend your twilight years. Among other expenses, when you plan for retirement, you must make it a point to set aside money for medical expenses and contingencies, as any retirement plan without them is incomplete.

While you have to decide how you wish to lead your life in retirement, your financial planner will help  you translate that dream in numbers. He will put a number to everything i.e. your dream house, vehicle, post-retirement income, medical expenses and contingencies among other inputs. He will tell you how much you need to save and where to invest your savings so as to achieve your retirement corpus. In other words, he will outline a roadmap and more importantly, will implement the same for you.

.

TRACK AND REVIEW YOUR PLAN

.

Once the plan is outlined and implemented you have to still ensure that you are on track at all times to meet your targeted return at the desired level of risk. This calls for a periodic review of your investment plan. Over time as you approach retirement; reduce allocation to risky assets like stocks and/or equity funds in favour of more conservative avenues like fixed deposits.

The future is closer than you think. Pick targets early and give them the right kind of support to take control of those golden years.

.

For any financial planning queries, email us at financialplanning@smcwealth.com

NEWS ROUND UP

Economy

.


·IIP for the month of January grew 16.7% on year. The mining sector grew 14.6% in the month while the manufacturing sector grew 17.9%. The electricity sector witnessed a growth of 5.6% in the month.

.

India’s annual food price index increased 17.81% as on week ended February 27, slower than the 17.87% growth recorded last week. A year ago, food prices were up 7.54%.

.

Healthcare

.

·Fortis Healthcare announced the largest overseas acquisition by an Indian company in the healthcare space, buying the entire 23.9 per cent stake held by TPG Capital in Singapore’s Parkway Holding Ltd for $686 million (Rs 3,119 crore).

.

Capital Goods

.

·ABB Ltd. has bagged orders worth $22 million (nearly Rs 100 crore) from Haryana Vidyut Prasaran Nigam for the supply of four sub-stations. The company would deliver four sub-stations equipped with automation, protection and control systems to HVPNL.

.

·Areva T&D India has bagged a contract worth Rs 400 crore from Uttar Pradesh(UP) Power Transmission Corporation for building a substation. The company’s transmission and distribution division will build a 765 KV extra high voltage substation at Anpara thermal plant in UP.

.

·Thermax announced a JV with US-based Babcock & Wilcox Power Generation Group to manufacture super-critical boilers in the country. The total investment in the JV is estimated at Rs 700 crore.

.

·McNally Bharat Engineering Company has bagged an order worth Rs 245.42 crore from Steel Authority of India Ltd for infrastructure related works at Rourkela steel plant. The contract is for inter-plant transportation facilities at Rourkela steel plant.

.

Mining & Minerals

.

·State-owned miner NMDC is planning to invest around Rs 2,400 crore to lay a pipeline between its Chhattisgarh plant and Visakhapatnam in Andhra Pradesh.

.

Realty & Construction

.

·Gammon India has bagged an order worth Rs Rs 631.81 crore from Delhi Tourism and Transportation Development Corporation for construction of bridge. The company has received the project for construction of bridge and its approaches over river Yamuna, Delhi.

.

·Hindustan Construction Company (HCC) has plans to invest around Rs 50,000 crore in its township project in Lavasa, near here, over the next 10-12 years ·Hindustan Construction Company (HCC) along with its joint venture partner has bagged a contract worth Rs 197 crore from North Frontier Railway for
development of a tunnel in Imphal.The company has bagged the project along with its JV partner Coastal Projects Ltd for developing a railway tunnel between Jiribam and Tupur in Imphal.

.

·Nagarjuna Construction Company secured new contracts aggregating to Rs 1,221 crore. The first order is of two contracts valued at Rs 647 crore from Hyderabad Growth Corridor. In addition, it has secured three contracts worth Rs 358 crore from Maharashtra State Electricity Distribution.

·Construction firm Ahluwalia Contracts India is in acquisition talks for specialised construction firms, with a war-chest of up to Rs 100 crore, and hopes to sew up the deal by June. The New Delhi-based firm sees a 25-30 per cent organic growth for next five years and acquisitions of up to Rs 100 crore could be funded from its internal resources.

.


Banking & Finance

.

·Rural Electrification Corporation Ltd (REC) signed a memorandum of understanding (MoU) with NTPC Tamil Nadu Energy Company Ltd (NTECL), a joint venture company set up by NTPC and the Tamil Nadu Electricity Board (TNEB), to fund a power project in North Chennai. Of the total project cost, 30 per cent is being met by equity and balance through debt.

.

Distilleries

.

·The country’s largest liquor maker United Spirits is undertaking an aggressive promotion campaign for its recently launched energy drink ‘Romanov Red’.

.

The company will invest over Rs 5 crore in the next one year on promotions, as it aims to garner a 15 per cent share in the domestic energy drink market that stands at around 1.5 million cases (of 24 cans) per annum.

.

Stay Tuned for More updates 🙂