Current Economic Statistics and Review For the
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Theme
of the week:
Growth of India’s Telecom Sector: Landline Versus Mobile * Telecom
services the world over have begun to play all-embracing roles in the
socio-economic development for a nation. Telecommunication is one of the
prime support services essential for rapid growth and modernisation of
various sectors of the economy. In Liberalisation
In
1991 Deregulation To
begin with, NTP
– 1994 The
initial framework for the deregulation of Further
Reforms The
reforms began with NTP 1994 and were later followed by the constitution of a
regulatory authority in the form TRAI and NTP 1999. In 1997, Parliament
enacted the Telecom Regulatory Authority of India (TRAI) Act to “regulate
telecommunications services.” As
originally constituted, TRAI was responsible for making recommendations to
the government on telecommunications, supervising service providers, and
more importantly, settling disputes between service providers and consumers,
as also amongst service providers. It has been set up with a view to
discharging regulatory functions, thereby providing a level playing field in
the telecom sector. TRAI began functioning as a regulatory authority in the
telecom sector from February 20, 1997. New
Telecom Policy Certain
important objectives of the NTP 1994 had remained unfulfilled, like
availability of telephone on demand, provision of world class services at
reasonable prices and universal availability of basic telecom services to
all villages. The government recognised that the country ought to have a new
comprehensive and forward-looking telecommunications policy which creates an
enabling framework for development of a world-class telecom infrastructure
and also to facilitate Phenomenal
Growth in Gross Subscribers As
stated above, As
per the latest report of TRAI at the end of March 2008 the gross
subscribers’ base consisting of fixed and mobile users has risen to 300.51
million as against less than one-tenth at 22.81 million subscribers at the
end of March 1999. The telecom subscriber base has reached a new milestone
as more than 278 million telephony subscribers have been added during the
last decade, registering a compound annual growth rate (CAGR) of 32.6 per
cent. The crossing of 300 million base is another significant landmark after
the country achieved the target of 250 million telephone subscribers in
December 2007. Today, our teledensity stands at about 26.2 subscribers per
100 people, predominantly due to the mobile additions. The fixed line
numbers, in contrast, are falling, while mobile has emerged as the preferred
access medium. Growth
of Cellular Subscribers Since
2000, the Indian telecom sector has been a key contributor to the
economy’s impressive performance registering sustained high growth rates.
Mobile phones have been the principal engine for telecom growth in the
country, as it has been in other parts of the world though not to the same
extent as in
During
the last few years, the mobile sector has witnessed high growth rates. Since
2004 the number of cell phone has grown at a rate of 60 per cent plus, with
the exception of 2008. Today, the Indian telecommunications network with
over 261 million mobile connections is the third largest in the world and
the second largest among the emerging economies of Asia, next only to Structural
Composition – Fixed vs.
The
structure and composition of telecom growth has undergone a substantial
change in terms of fixed vs. mobile phones. Land-line services grew strongly
for a while but have been experiencing of late zero growth. As indicated in
Table 2, the growth in telephone subscribers in the initial 5 years, between
March 1999 and March 2003 was primarily driven by fixed-line telephones,
while in the last 5 years, between March 2004 and March 2008 it has been
predominantly driven by the cellular phones on account of rapid expansion.
During this period the rate of decline of land lines accelerated sharply. As
a result, the fixed-line segment has grown from around 21.61 million
subscribers in March 1999 to around 41.33 million in March 2003.
During
the period March 1999 to March 2003, around 19.72 million new landline
subscribers were added as compared and 12.1 million new mobile subscribers.
However, the year 2004 was a watershed year for the fixed-line services in Today,
the mobile subscribers are not only much more than the land-line subscribers
in the country, but also increasing at a much faster pace. This was along
expected lines as, for the past few years, mobile phone subscriptions has
seen growth at many times faster rate than fixed phone subscriptions with
almost all leading operators focusing more on wireless. Consequently,
between March 2004 and March 2008, the country has added around 247 million
new wireless subscribers to reach a total of 261 million; however, our fixed
line subscriptions declined by 1.91 million, down to 39.42 million over the
same period. Sustained
Growth of Fixed-line Telephones in Notwithstanding
such remarkable achievement, it is necessary to note that
Table
3 indicates that in Key
Factors for Growth of Mobile Telephones During
the period 2003-2008, mobile tariffs continued to show a downward trend and
declined by around 80 per cent on account of rising competition as there
were two cellular operators in each of the 21 telecom circles and in some
circles it had doubled to four. As well, there has been an on-going
competition in tariff rates in metros; for instance currently in Mumbai
there are 6 cellular operators offering competitive rates to customers. On
account of fierce competition among telecom operators in (i)
Competition-induced
sharp decline in tariffs, which have made wireless highly affordable; (ii)
Sharp
reduction in handset prices on account of deduction in taxes and fierce
competition among manufacturers to increase their market-share; (iii)
Aggressive
promotion of prepaid offerings and (iv)
Increased
competition from the third and fourth cellular operators. In
addition, owing to falling prices of equipment, deployment of wireless
infrastructure has become more economical than provisioning of fixed lines.
Besides, deployment of advanced cellular technologies has eased the coverage
of difficult terrains and thus, has accelerated the telecom network rollout. A
Few Other Aspects Recently,
member of the Rajya Sabha, Ms Anusuiya Uikey has raised a question in
Parliament regarding the details of number of subscribers who have withdrawn
landline connections and the reasons for the withdrawals. The Minister of
Communication and Information Technology replied that around 45.2 lakh have
discontinued the landline services during the last five years (Table 4).
As
indicated in Table 4, during the period March 2004 to March 2008, the rate
of decline of land lines accelerated sharply. Despite the best efforts of
Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL),
there seems to be no let-up in the surrender of landline connections, with
close to 45 lakh landline subscribers having discontinued their connections
in the last five years. The Minister in his reply has stated the reasons for
withdrawal of landline connections as follows: (i)
Preference
of customers for mobile telephone over landline telephone; (ii)
Surrendering
of 2nd and above telephone taken for internet etc. due to
availability of broadband; (iii)
Shifting
of landline customer to BSNL Mobile; (iv)
Shifting
of customer to private operator; (v)
Surrender
of excess landline telephone connections and (vi)
Shifting
of office/company/residence. In
order to retain the number of landline subscribers the telecom analysts in
the country have suggested some measures. Some of the major suggestions are
as follows: (i)
The
fixed line service providers need to provide value over and above voice
connectivity; (ii)
Telecom
companies should provide a host of value-added services such as SMS,
MMS and caller tunes, which are rather uncommon on fixed-lines; (iii)
If
fixed lines providers want to fight back, they will have to change their
current tariff plans by providing bundled packages with attractive schemes;
and (iv)
The
most important is to provide pre-paid fixed-line connections as the
customers prefer pre-paid as compared to post-paid on account of operational
convenience. Conclusion Despite
many attractive schemes being offered by BSNL and MTNL to retain landline
customers, it has had a limited effect so far. Recently, the government has
decided to exempt companies offering fixed-line fee, which is paid on the
adjusted gross revenue (AGR), to boost competition in the fixed-line
segment. However,
the telecom players comprehend that there is a need
for the government to take a proactive approach on this issue as the
huge infrastructure set up by the public owned companies BSNL and MTNL is
not being used optimally. However,
the telecom analysts opine that the fixed line telephony segment is
definitely poised for growth in the coming years as the telephone operators
are increasingly focusing on enhancing broadband penetration levels in the
country and looking at introducing new value-added services to enhance the
experience of customers. BSNL is planning to use new technologies such as
internet protocol television (IPTV) for tapping the fixed-line market.
Managing Director of BSNL said that, “I think the trend should reverse.
Broadband and IPTV should give a boost to landline numbers in
References
TRAI
(2004): ‘Consultation Paper on Spectrum related issues: Efficient
Utilisation, Spectrum Allocation, and Spectrum Pricing’, May
31. GOI
(2007): Annual Report 2006-07, Department of Telecommunications (DoT),
Ministry of Communications & Information Technology. GOI
(2002): ‘Report of the Steering Committee on communication and for the
Tenth Five Year Plan (2002-2007) Planning Commission, May. Jain
R, ‘Framework for Review of Indian Spectrum Management Policies’ IIM
Ahmedabad. Sisodiya
A S & Pothal S P (2008): ‘Spectrum Scuffle – War for the (Air)
Waves’, The Analyst, February. Business
Line (2006): ‘CDMA camp divided over spectrum allocation’, May 28. Business
Line (2005): ‘TRAI proposes cut in spectrum charges’, May 13. *
This note is prepared by Bipin K Deokar.
*
GSM – Global System for Mobile Communication, CDMA – Code Division
Multiple Access and WLL(F) – Wireless Local
Highlights of Current Economic Scene AGRICULTURE
The
central government would not be able to achieve the rice procurement target
of 27.6 million tonnes this year, even though it started purchasing
foodgrain from the last week of June 2008, at an increased minimum support
price (MSP) to Rs 850 per quintal fixed for 2008-09 marketing season. Rice
procurement has touched 27 million tonnes so far and is expected to end up
with 27.3 - 27.4 million tonnes during the current marketing season ending
this month. The government, however, has been able to procure only 792,000
tonnes during July-August as against 700,000 tonnes in the same period last
year despite paying the enhanced MSP. The industry sources have blamed rice
millers for undertaking slow procurement in Andhra Pradesh. Besides, it has
been reported that states like Orissa, Chhattisgarh have not transferred the
total quantity of rice procured by them to the central pool. As
per the notification on September 3, 2008 by Directorate General of Foreign
Trade, exports of Pusa-1121 non-basmati rice variety would be allowed for
shipment with an immediate effect instead of scheduled date of October 15,
2008 at a minimum export price of US $1,200 (or Rs 48, 000) per tonne. This
move is expected to tranquil supply concerns in the global market. Shipments
of rice would be permitted only through ports at Kandla, According
to Cotton Association of India, the central government has increased the
minimum support prices (MSP) of cotton by 48 per cent to match an increase
in market rates. State-owned
co-operative major National Agricultural Cooperative Marketing Federation (Nafed)
has kept the minimum export price (MEP) of onion for September unchanged at
the average of US $250-255 per tonne amid domestic prices showing signs of
stability. At present, retail prices of onion in the national capital are
ruling at Rs 15-20 per tonne. Sugar
mills in Uttar Pradesh have to pay an additional Rs 1,480 crore to the
farmers following the Supreme Court's refusal to stay the Allahabad High
Court's judgment that upheld the state-advised price (SAP) of cane at Rs
125-130 per quintal. The additional sugarcane payment of Rs 1,480 crore to
the farmers is expected to be made by September 7 2008, after the apex
court's refusal to extend the time. According
to Uttar Pradesh Sugar mills Association, the overall sugar production in
Uttar Pradesh would surpass International
Sugar Organisation (ISO) has estimated that global sugar production would
fall by 7.4 million tonnes to 161.6 million tonnes in 2008-09, owing to
steep fall in sugar output in
According to the Coffee Board statistics, realisation from Indian coffee exports (permit issued), in rupee terms, has increased by 33.04 per cent to Rs 1,789.73 crore in the first eight months of the calendar year 2008 as against to Rs 1,345.20 crore worth coffee exported during the same period last year. In dollar terms, it has risen by 29.93 per cent at US $ 412.70 million from last year. As for the unit value realisation, it is up by 25.81 per cent to Rs 1,07,513 per tonne. Coffee exports (permit issued) for the first eight months have risen by 5.74 per cent to 166,465 tonnes. The prices of Arabica parchment in the month of August fluctuated in the range of Rs 5,300 to Rs 5,600 per 50 kg bag, in tune with the international coffee prices. As for the global coffee exports, the International Coffee Organisation has stated that in the first 10 months of coffee year 2007-08 (October to July) exports have fallen by 4.2 per cent to 79.3 million bags. Exports of Arabica in the same period was just under 62 million bags compared to 64.3 million bags last year; whereas Robusta exports amounted to 32.3 million bags against 34.7 million bags. According
to Rubber Board, production of natural rubber has shot up by over 18 per
cent to 72,000 tonnes during August 2008 as against 60,850 tonnes in the
year-ago period due to favourable climatic conditions. The consumption level
of natural rubber was up by 4 per cent at 78,000 tonnes in August, compared
to 75,105 tonnes for the same period last year. Exports in the period under
review this year showed a whopping rise of 65 per cent at 2,341 tonnes as
against 1,416 tonnes in the same period last year. Imports dipped by 150 per
cent to 2,726 tonnes, compared with 6,839 tonnes in the same period last
year. It is projected that natural rubber yield for the 2008-09 fiscal year
would be at 8.75 lakh tonnes and consumption at 8.99 lakh tonnes. The
exports and imports are estimated at 50,000 tonnes and 80,000 tonnes,
respectively. In 2007-08 fiscal, the production of natural rubber slipped by
3 per cent to 8.25 lakh tonnes from 8.52 lakh tonnes in 2006-07. But the
consumption increased by 5 per cent to nearly 8.6 lakh tonnes during
2007-08. The country exported 51,381 tonnes of natural rubber in the same
fiscal against 56,545 tonnes in the previous fiscal. A
senior official of Tea Board has reiterated that e-auctioning of tea would
go online by November 2008 and the software and system testing for the
project would be carried out by the month of September. The Information
Technology (IT) arm of the National Stock Exchange (NSE) has developed the
customised software application for e-auction of tea. It is expected that
the IT solution for auctioning of tea in the country would expedite the
process of futures trading in tea across the country. The new auctioning
mechanism would provide optimal market timings, standard contract
descriptor, uniform price increments, price discovery, uniform lot size,
automatic matching and audit trail. This system would bring all auction
participants on one platform, where they can carry out online transactions.
Currently, auctioning centres are functioning at Guwahati, Kerala
accounts for nearly 20 per cent of the country’s total annual seafood
exports of Rs 7,000 crore and almost 50 per cent of Kerala’s share is
usually attained in the August-October period. But this year, the export
sector has been affected badly due to the non-availability of ice, delay in
processing due to electricity cuts, the 25 per cent power cut at
high-tension freezing plants and the additional costs charged (Rs 12.50 per
unit instead of the average tariff of Rs 5.52) for power in the plants and
high fuel prices. This has led to a sharp dip in the prices of almost all
varieties of seafood by the last week of August. The price of squid, a
popular item in the global market, has dropped to Rs 40-60 per kg from Rs
140-160 a few weeks ago. There is poor demand for erstwhile popular items
such as Indian sardine and mackerel. Infrastructure The
Index of Six core-infrastructure industries having a combined weight of 26.7
per cent in the Index of Industrial Production (IIP) with base 1993-94 stood
at 240.1 in July 2008 and registered a growth of 4.3 per cent compared to a
growth of 7.2 per cent in July 2007. During April-July 2008-09, six
core-infrastructure industries registered a growth of 3.7 per cent as
against 6.6 per cent during the corresponding period of the previous year.
Crude
Oil production (weight of 4.17 per cent in the IIP) registered a negative
growth of 3.0 per cent in July 2008 compared to a growth rate of 0.9 per
cent in July 2007. The Crude Oil production registered a growth of (-) 0.9
per cent during April-July 2008-09 compared to (–) 0.3 per cent during the
same period of 2007-08. Petroleum
refinery production (weight of 2.00 per cent in the IIP) registered a growth
of 11.8 per cent in July 2008 compared to growth of 4.7 per cent in July
2007. The Petroleum refinery production registered a growth of 5.4 per cent
during April-July 2008-09 compared to 11.0 per cent during the same period
of 2007-08. Coal
production (weight of 3.2 per cent in the IIP) registered a growth of 5.5
per cent in July 2008 compared to growth rate of 1.1 per cent in July 2007.
Coal production grew by 7.7 per cent during April-July 2008-09 compared to
an increase of 0.8 per cent during the same period of 2007-08. Electricity
generation (weight of 10.17 per cent in the IIP) registered a growth of 4.5
per cent in July 2008 compared to a growth rate of 7.5 per cent in July
2007. Electricity generation grew by 2.6 per cent during April-July 2008-09
compared to 8.1 per cent during the same period of 2007-08. Cement
production (weight of 1.99 per cent in the IIP) registered a growth of 8.8
per cent in July 2008 compared to 9.4 per cent in July 2007. Cement
Production grew by 6.5 per cent during April-July 2008-09 compared to an
increase of 7.7 per cent during the same period of 2007-08. Finished
(carbon) Steel production (weight of 5.13 per cent in the IIP) registered a
growth of 1.9 per cent in July 2008 compared to 10.8 per cent (estimated) in
July 2007. Finished (carbon) Steel production grew by 3.8 per cent during
April-July 2008-09 compared to an increase of 6.8 per cent during the same
period of 2007-08. Inflation The official Wholesale Price Index (WPI) for 'All Commodities' (Base: 1993-94 = 100) for the week ended 30th August 2008 rose by 0.2 per cent to 240.8 from 240.3 for the previous week. The annual rate of inflation, calculated on point to point basis, stood at 12.10 per cent for the week ended 30/08/2008 (over 01/09/2007) as compared to 12.34 per cent for the previous week. The annual rate of inflation stood at 3.72 per cent as on 01/09/2007 i.e. a year ago. The index for Primary Articles group rose by 0.3 per cent to 249.2 from 248.5 for the previous week. The annual rate of inflation, calculated on point to point basis, for ‘Primary Articles’ stood at 10.07 per cent for the week ended 30/08/2008. It was 8.07 per cent as on 01/09/2007 i.e. a year ago. The index for 'Food Articles' group rose by 0.2 per cent to 237.3 from 236.9 for the previous week due to higher prices of bajra (3 per cent), urad and arhar (2 per cent each) and jowar and fruits & vegetables (1 per cent each). However, the prices of maize and condiments & spices (1 per cent each) declined. The annual rate of inflation for ‘Food Articles’ stood at 4.58 per cent for the week ended 30/08/2008. It was 7.08 per cent as on 01/09/2007 i.e. a year ago. The index for 'Non-Food Articles' group rose by 0.3 per cent to 247.1 from 246.3 for the previous week due to higher prices of cotton seed and raw rubber (2 per cent each) and raw cotton (1 per cent). The
index for 'Minerals' group rose by 1.4 per cent to 656.0 from 646.7 for the
previous week due to higher prices of iron ore (2 per cent). The index for Fuel, Power, Light and Lubricants group remained unchanged at its previous week's level of 376.2 . The index for the major group, Manufactured Products, rose by 0.3 per cent to 207.7 from 207.1 for the previous week. The groups and items for which the index showed variations during the week are as follows:- The index for 'Food Products' group rose by 1.3 per cent to 215.7 from 213.0 for the previous week due to higher prices of salt (5 per cent), khandsari, sugar and oilcakes (3 per cent each) and groundnut oil (1 per cent). However, the prices of imported edible oil (4 per cent) and gingelly oil (1 per cent) declined. The index for 'Textiles' group rose by 0.1 per cent to 144.3 from 144.2 for the previous week due to higher prices of tyre cord fabric (14 per cent), mixed fabrics and cotton grey cloth & canvas (7 per cent each) and hessian & sacking bags (2 per cent). However, the prices of synthetic yarn (1 per cent) declined. The index for 'Chemicals & Chemical Products' group rose marginally to 223.3 from 223.2 for the previous week due to higher prices of acid (all kinds) (1 per cent). However, the prices of powder/granules other than vitamins (6 per cent) and bopp film (3 per cent) declined. The index for 'Non-Metallic Mineral Products' group rose by 0.4 per cent to 216.9 from 216.1 for the previous week due to higher prices of cement (1 per cent). For
the week ended 05/07/2008, the final wholesale price index for 'All
Commodities’ (Base: 1993-94=100) stood at 239.3 as compared to 238.7 and
annual rate of inflation based on final index, calculated on point to point
basis, stood at 12.19 per cent as compared to 11.91 per cent reported
earlier vide press note dated 18/07/2008. Banking The
Payment and Settlement Systems Act, 2007 and the Payment and Settlement
Systems Regulations, 2008 have been notified and have come into effect from
August 12, 2008. The Payment and Settlement Systems Act stipulates that no
person other than the Reserve Bank of India (RBI) shall commence or operate
a payment system except under and in accordance with an authorisation issued
by the RBI under the provision of the Act. Punjab
National Bank, the country’s second largest public sector bank has paid a
dividend of Rs 236.91 crore to the government for the financial year
2007-08. The bank has declared 130 per cent dividend for the year 2007-08. Commerzbank
AG is buying Allianz SE’s Dresdner Bank for €9.8 billion ($14.4 billion)
in the biggest financial-services takeover in South
Indian Co-operative Bank has merged with Saraswat Co-op Bank after receiving
an approval from the RBI and Commission of Co-operation and Registrar of
Co-operative Societies, Pune. With the merger, the number of branches of
Saraswat Bank will increase to 170 from the present 156. Kolkata-based
UCO Bank is likely to go for a follow-on public offer (FPO) of shares by the
December-end to raise about Rs 500–600 crore. The bank is waiting for the
government’s approval for restructuring its equity capital before going
ahead with the FPO. Insurance Life
Insurance Corporation (LIC) has decided to allow 10,000 agents to collect
renewal premium from the policy holders. Agents who have qualified for
LIC’s chairman club membership are eligible. The corporation has also
decided to allow senior agents to recruit and train new agents. Financial
Market 1.
Capital Markets Primary
Market Eleven
banks participated in the mock test carried out by the Bombay Stock Exchange
(BSE) for the new initial public offering (IPO) payment facility recently
permitted by Securities and Exchange Board of India (SEBI). The first IPO in
which the facility called the Application Supported by Blocked Amounts (ASBA)
will be used is 20 Microns Limited, which would open on September 08, 2008.
This facility allows banks to block IPO application money in the
applicant’s bank account till the time of allotment of shares. Only that
amount proportionate to the share allotment will be transferred from the
account. Resurgere
Mines and Minerals India Ltd closed at 97.6 per cent above its issue price
of Rs 270 on its listing day on September 1, 2008 on the National Stock
Exchange (NSE). It opened at Rs 285 and touched an intra-day high of Rs
568.9 and a low of Rs 278.2 before closing at Rs 533.55. On the BSE, it
closed 94.2 per cent above its issue price. It closed at Rs 524.35 and
touched an intra-day high of Rs 562.8 and a low of Rs 272.05. Secondary
Market A
sharp fall in international crude oil price turned the market bullish and
triggered a rally on the bourses initially in the week ended Friday, 5
September 2008. However subsequently, the gains were wiped out due to a
setback in global equities and domestic political concerns. The market
declined in three out of four trading sessions in a holiday-truncated week.
The slide in international crude oil prices calmed inflation concerns. The
domestic inflation rate rose 12.34 per cent in the year through 23 August
2008, lower than previous week’s 12.40 per cent. The global crude oil
prices declined sharply in response to less than expected damage from
Hurricane Gustav. The 30-share Bombay Stock Exchange’s Sensitive index (BSE
Sensex) lost 80.70 points or 0.55 per cent to 14,483.83 over the week.
Small-cap and mid-cap indices nudged slightly higher. The BSE Small-Cap
index rose 13.58 points or 0.2 per cent at 6,905.22. The BSE Mid-Cap index
advanced 11.43 points or 0.2 per cent to 5,753.72. NSE’s S&P CNX Nifty
lost 7.7 points or 0.2 per cent to 4352. The rupee lost ground steadily and
the Deftly lost over 2 per cent as a result. Among
the sectoral indices of BSE, banking stocks and public sector undertakings (PSU)
outperformed on the back of inflation, which retraced to 12.34 per cent.
Over the week, bankex and PSU gained 2.33 per cent and 2.12 per cent,
respectively. Metal index lost 4.55 per cent, the highest loser during the
week, as steel makers slashed the metal prices in line with correction in
metal prices globally. The
SEBI has floated a discussion paper on the possibility of allowing stock
exchanges, depositories, clearing corporations, banks and insurance
companies to hold up to 15 per cent against the current individual
shareholding limit of 5 per cent. These investors may be allowed to hold the
higher stake directly or indirectly in stock exchanges. The
average assets under management (AAUMs) of the mutual fund industry saw a
spurt in August as money trickled in through fixed maturity plans, after
witnessing an erosion in the average assets for two consecutive months on
the back of a series of liquidity tightening measures by the Reserve Bank of
India (RBI). AAUMs rose by 2.77 per cent, or Rs 14, 686 crore, to Rs
5,44,317 crore from July, indicates data released by the Association of
Mutual Funds of India (AMFI). Reliance Mutual Fund continued to retain the
top spot, while HDFC Mutual Fund grabbed the second spot by managing to
notch a higher AAUM than ICICI Prudential Mutual Fund. UTI Mutual Fund and
Birla Sunlife Mutual Fund have bagged the fourth and fifth positions,
respectively. In
terms of assets under management, HDFC Mutual Fund propelled to the number
two position among fund houses due to huge inflows into its fixed income
schemes. HDFC Mutual has overtaken ICICI Prudential, which had retained the
runners-up spot for a long time. As late as March this year, HDFC has been
behind UTI by around Rs 5,000 crore and lagging ICICI Prudential by almost
Rs 10,000 crore. Derivatives During
the week under review, the derivative market swung sharply up in one session
through a 200-point range, and plunged through the rest of the week and
ended at the low end. Volumes improved slightly. Volatility and implied
volatility remained low. After witnessing wild swings intra-week, the Nifty
September future finished marginally lower at 4352.2 points against the
previous week’s close of 4370.55, shedding little over 0.4 per cent.
However, the premium of Nifty September future over the spot widened to 7
points against its previous week’s 4 points. There has been reasonable
open interest (OI) expansion across the index futures and index option
spaces. The Bank Nifty and the CNXIT both showed positive returns although
they were weak on September 05. Both these sector indices have decent OI and
the Bank Nifty holds almost 5 lakh. The futures are trading at some premium
to the spot. The Junior is also trading at a large premium to spot but it
has unsatisfactory liquidity. The volatility has been low and the VIX is
trading on relatively lower at 32. The cumulative foreign institutional
investors (FII) positions as a per centage of total gross market position on
the derivative segment, as on September 4 has been 37.98 per cent. FIIs
resorted to heavy selling on Friday, though they were net buyers during most
part of the week. They now hold index futures worth Rs 12,637 crore (Rs
12,906 crore) and stock futures worth Rs 19,077 crore (Rs 16,056 crore).
However, their holding on index options stood higher at Rs 22,093 crore (Rs
18,270 crore). 2.
Government Securities Market Primary
Market On
September 02, 2008, RBI auctioned 91-day and 182-day Treasury bills
(T-bills) for the notified amounts of Rs.5,000 crore (out of which Rs.3,000
crore under MSS) and Rs.2,500 crore (out of which Rs.2,000 crore under MSS),
respectively. The cut-off yields for 91-day and 182-day T-bills were 9.02
per cent and 9.08 per cent, respectively. Secondary
Market Inter
bank call rates averaged at 8.87- 9.06 per cent during the week. Bonds
rallied for the second week in succession on the back of frenetic purchases
by banks for meeting Statutory Liquidity Ratio (SLR) requirements. The
government bond yields have dipped sharply due to improved liquidity. The
government securities market is seeing huge cash flows due to redemption of
bonds in two maturities. This, coupled with the softening of oil, have
caused bond yields to drop sharply. The rally came despite the large mop-up
of liquidity through the week through T-bills. Liquidity remained tight,
which has been evident from the week-end liquidity adjustment facility
auction. The recourse to the repurchase window at the auction was to the
tune of Rs 18,550 crore even as another Rs 4,500 crore of bonds were due to
be redeemed. The liquidity tightness was also evident from the issuance of a
series of short tenor certificates of deposit (CD) by some of the large
public and private sector banks. SBI associate banks raised three-month CDs
at 11.05 per cent. But private sector banks such as Axis Bank raised CD
resources at rates as high as 11.42 per cent. The chase for SLR securities
pushed up the trade volumes in the market. The
daily trade volume during the week averaged Rs 10,800 crore. In fact, on
many days, trade volumes in the debt markets exceeded that of the equity
markets. This has been the first time debt volumes were overtaken by equity
markets since 2003. 3.
Bond Market With
low appetite for debt and volatility in equities, banks are targeting to buy
municipal bonds. ICICI Bank and State Bank of India (SBI), which have
municipal bonds in their portfolio, are planning to make more such
investments considered safe and high return. According to Akash Deep Jyoti,
head of corporate & government ratings at Crisil, the municipal bond
market in Corporate
bond market is seeing a lot of action after a gap of few months, due to a
huge appetite for such debt offerings. With the ongoing issues of Power
Finance Corp (PFC) and Indian Oil (IOL) witnessing good investor interest,
more companies are planning to tap the market in the first week of
September. Divergent trends prevailing in the corporate and government bond
markets are propelling corporate bond spreads to historically high levels.
In the corporate bond market, a five-year corporate bond is offering
investors a spread of close to 200 basis points over and above what a
government security of a similar tenure is offering. Across the curve,
corporate bonds are offering spreads in the 180-200-bps range over
government securities. During
the week under review, 3-development financial institution, two non-banking
companies tapped the market by issuance of bonds and non-convertible
debentures.
4.
Foreign Exchange Market Rupee
depreciated for the fourth consecutive week on speculation that economic
slowdown in the Currency
Futures Trade
in currency futures on the NSE averaged 39,800 contracts a day during the
week, against 70,000 contracts recorded on August 29, i.e., the first day of
introduction of this instrument. On September 5, the NSE reported trade of
over 37,000 currency futures contracts. According
to SEBI Chairman C B Bhave, SEBI is mulling the introduction of rupee-euro
and rupee-yen contracts in currency futures soon as it is in the process of
studying the market for both the contracts and would be launched after
considering the outcome of the study. He also said the market regulator
would be launching interest rate futures within the next five months. The
committee, which had looked into currency futures, would be studying the
possibility of interest rate futures and would set the norms and guidelines
Currently, only rupee-dollar contracts are allowed for trading in currency
futures. On
September 02, 2008, SEBI said that it would allow trading in exchange traded
interest rate futures by December-January, a move that will help banks and
FIIs manage interest rate risks. Initially, these futures contracts would be
based on 10-year government bond yield, which should be settled by physical
delivery. 5.
Commodities Futures Derivatives Mr.
Anupam Mishra, Director, Forward Markets Commission (FMC), said that futures
trading in rubber, chana, soya oil and potato would remain suspended till
November 30, 2008. In fact, NCDEX had applied to the regulator for
re-listing these commodities for trade once the deadline expires on
September 07. According to FMC, the four commodities accounted about Rs
15,000 crore a month (Rs 500 crore daily) of the total volume. After
rising steadily for last one year, the prices of critical commodities like
edible, crude oils and steel have sharply declined on September 01, 2008,
due to rising inflation. While international prices of crude oil at the New
York Mercantile Exchange has been traded at $116.57 a barrel, down from all
time high of $147.27 a barrel in mid-July, the prices of Palmolein and
Soyabean oils in the international market have softens. Both the decline in
crude and edible oils is significant to the government’s fight against
double digit inflation as domestic prices are impacted by volatility in the
international market. Total
aggregate futures trading turnover of the Multi-Commodity Exchange (MCX) and
the National Commodity & Derivatives Exchange (NCDEX) has come down by
20 per cent to Rs 4.24 lakh crore during the month of August 2008 from Rs
5.32 lakh crore registered in the previous month. This is mainly due to
meltdown in the most globally traded commodities like crude oil and gold
during the month. According
to sources, MCX is planning to re-launch futures in aviation turbine fuel (ATF)
with a few modifications in the contract specification. The exchange, which
launched ATF futures in July, has approached FMC for its approval to the
changes it sought in the contract, as it is mandatory for the exchanges to
seek FMC approval before making any changes in the running contract. ATF or
jet fuel is a specialised type of petroleum-based fuel used to power
aircraft. It is generally of a higher quality than fuels used in less
critical applications such as heating or road transport. There has been a
steady rise in fuel demand and refiners need an assured supply to cater to
the growing demand. Airlines are also looking at hedging on long-term
contracts with refineries. MCX
has signed a memorandum of understanding with Telecom Equipment
Manufacturers Association (TEMA) to use the platform for metal price
discovery. The objective of the alliance is to share knowledge about metal
commodities with the members of TEMA and to increase their participation on
the exchange platform. NSE
& NCDEX promoted power exchange—Power Exchange India (PEX)— is
proposed to launch its operations from the first week of October from
Mumbai, will offer Internet-based power trading, minimum power trading of 1
mw hour (mwh) and above all power seller will not be entitled for payment of
margin. Indian
Energy Exchange (IEX), which completed two months of operations, has
recorded a total volume of 251 million units with a trading of 58 MW on day
one touching the highest transaction of over 18,000 MW on August 8. The
hourly prices were in the range of Rs 6.50 a KW to Rs 8.50 a KW with an
average price of Rs 7.50 a KW. The exchange trades day-ahead contracts and
has 52 members, including Reliance Energy Trading, Tata Power Trading
Company, Tata Power Company, PTC India, JSW Power Trading and state
electricity boards of West Bengal, Kerala, Karnataka, Andhra Pradesh, Insurance The
Life Insurance Corporation, the public sector giant is going for change in
strategy this year. LIC is repositioning some of its plan like Jeevan Anand,
Jeevan Tarang and Jeevan Saral. While SBI Life Insurance is planning a
massive expansion in tier four towns and is lining up a slew of health
insurance plans and micro insurance products. Kotak Life Insurance is aiming
for a 100 per cent growth and has decided to focus on its group business and
capital guarantee products. At the same time Prudential ICICI is planning to
scale up business, while not compromising on service. Corporate
Sector Azim
Premji, promoter of Wipro, has bought a 10 per cent stake in food and
grocery retailer Subhiksa for about Rs 230 crore. This transaction was done
by Premji’s personal investment entity Zash Investment Ltd. The stake was
bought from ICICI Ventures, a private equity arm of ICICI Bank. After this
transaction, Subhiksa’s promoter will have 59 per cent stake in
Chennai-based retailer, followed by ICICI Venture’s 23 per cent. Suzlon
Energy, the world’s fifth largest wind turbine manufacturer, will acquire
a 22.5 per cent stake from Portugal-based Martifer SGPS SA in its subsidiary
RE Power Systems AG of Kingfisher
Airlines, the merged airline operations of Kingfisher Airlines and Deccan
Aviation, is planning to raise $400 million through equity, possibly by
March 2009. Retail
chain Big Bazaar, plans to open 15 more stores by end-November at an
investment of Rs 1,500 – 1,600 crore. With this, Big Bazaar will have 112
stores in pan-India. The stores would be set up in places such as Information
Technology Nazara
Technologies has launched a game that can be played on the new generation
iPhone as well as 3G services phone. The company has announced the launch of
its first 2D game based on Mahabharata’s Eklavya, which will be available
on J2ME and Brew platforms across all operators’ decks. Telecom As
per the latest report from international media research firm Media Partners
Asia, the direct-to-home (DTH) operators are set to capture 72 per cent of
the 25 million new subscribers in the next three years through intense
competition between the cable and DTH firms. According to the report, of the
25 million new subscribers added till December 2010, there will be about 18
million DTH subscribers, up nearly three times from 6.3 million subscribers
in the current month, while a total of 7.2 million digital cable subscribers
will be added by the cable firms, a six fold increase from the existing 1.2
million. GTL
Infrastructure, a subsidiary of telecom network major GTL, has raised around
Rs 3,500 crore for rolling out an additional 17,000 telecom towers in the
country. The Rs 3,500 crore debt was raised from international lenders
including Europe’s largest financial development group DEG (a part of KFW
Bankengruppe, a company owned by the German government) and Asian
Development Bank, Telecom
subscribers of BSNL can now pay their telephone bills through ATMs of Punjab
National Bank. Post-paid mobile subscribers of BSNL can pay their bills in
any of the 1,700 ATMs of PNB throughout the country where as for fixed line
customers this facility is available in 19 major cities at present. BSNL
has set an ambitious target of bringing almost one fourth of the total cable
TV subscribers’ base (82 million cable homes) in the country with the
launch of its internet protocol television (IPTV) service in the country.
Recently, BSNL has launched its IPTV services in Rajasthan and is planning
to bring around 100 cities under this service by the end of the current
financial year 2008-09. The
International Chamber of Commerce (ICC), the global arbitration tribunal has
asked Tata Communications to pay over $19 million plus interest from May
2006 as damages against the $385 million sum claimed by Reliance Globalcom,
a subsidiary of Anil Ambani-led Reliance Communication Ltd (Rcomm), as the
‘loss profit damages claim for sale of capacity’.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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