Highlights of  Current Economic Scene

AGRICULTURE  

Food ministry sources have reiterated that within the first five days of procurement season 2008-09 (October 1-5), Food Corporation of India (FCI) has purchased 7 lakh tonnes of rice from the various states for adding to the country’s buffer stock and servicing PDS and other welfare schemes. Six state agencies and mills in Punjab have purchased 76,923 tonnes of paddy. While Pungrain procured 22,614 tonnes by October 5, almost 34 per cent of the total buys on the first day, Markfed bought 16,269 tonnes accounting for 24.3 per cent of the total buys. Total allocation of rice under the targeted PDS for 2008-09 would be around 235 lakh tonnes and for other welfare programmes it would be 37 lakh tonnes, bringing the total requirement to 272 lakh tonnes. Several states have demanded to increase allocation of rice for above poverty line (APL) consumers.

Exports of basmati rice is estimated to rise by 13 per cent despite a cess of Rs 8000 per tonne while shipment of non basmati varieties have fallen by 31 per cent in the crop year ending September 2008 due to ban on shipments form April. As per certificate issued by Agricultural Development Authority (APEDA), exports of non-basmati rice are estimated to have decline to 3.2 million tonnes form 4.67 million tonnes during the period under review.

Food Corporation of India (FCI) expects to lift 85-lakh metric tonnes of rice from the state during this kharif marketing season as against 76.9 lakh metric tonnes accumulated last year. It has cautioned to Punjab-based rice millers not to procure paddy with more than 17 per cent moisture content. Further, it has cleared that it would procure rice with only 3 per cent damage content and stressed that millers should dry up the moist paddy before selling.  Most of the rice millers procure paddy with higher moisture content and then store the moist paddy for milling as a result of it, damage content has been found high in rice during milling process.

Faced with low level of offtake by states, the central government has decided to sell 840,000 tonnes of wheat to bulk consumers such as flour millers and small-scale wheat processing units having maximum monthly consumption of 30 tonnes, aiming to check prices during the festive season. This quantity would be sold by Food Corporation of India (FCI) to traders through tender under the open market sale scheme (OMSS) in October- November 2008. Maximum quantity of wheat for which bids can be submitted is 1,000 tonnes.

Senior official from Punjab agriculture department has stated that wheat harvest is targeted to be around 24.85 million tonnes in the upcoming rabi season in Punjab and Haryana, although the area under cultivation of the crop is set to decline. But some experts are of the view that coverage under wheat would surpass their target, if weather conditions remained favourable throughout the season and Minimum Support Price  (MSP) is increased. The rabi sowings of wheat, which normally starts from November is likely to commence early this year from third week of October in some states such as Punjab, Uttar Pradesh, Haryana on account of conducive temperatures. 

Prices of pulses in the domestic market are likely to rise by about 5 per cent because of higher demand during festival season amid estimates of lower production in the kharif season during this year. Currently, prices of almost all plusses have increased sharply, arhar dal is being sold at Rs 52 per kg, moong at Rs 60 per kg and chana at Rs 48 per kg as compared to Rs 46 per kg, Rs 52 per kg and Rs 40 per kg, respectively, about a month ago.

The Indian Institute of Pulses Research (IIPR) has developed a new variety of red lentil (masoor dal) WBL 77, which is expected to increase the yield by about 20 per cent. The size of this seed is reported to be smaller than present available varieties. The normal productivity of masoor is 15-16 kg per hectare but with this seed the yield is expected to be around 81 quintal.

Indore-based Soyabean Processor Association of India (Sopa) reiterated that bumper crop and higher overseas demand of soymeal has resulted in rise in exports of soyameal by 38 per cent to 4.8 million tonnes during the oil-year 2007-08 from 3.5 million tonnes achieved last year. Out of 45 major export destinations, demand from countries like Malaysia , Japan , China , Vietnam and Thailand has increased significantly. Shipments in the same period to Malaysia has risen by two-fold at 1.22 lakh tonnes, Japan by 72 per cent at 8.57 lakh tonnes, China by 54 per cent at 2 lakh tonnes and Vietnam by 39 per cent at 12.43 lakh tonnes.  Exports of soyameal during April - September 2008, have registered a growth of 118 per cent to 1.6 million tonnes as compared to 0.76 million tonnes during the same period last year. While in the month of September exports of soyameal declined sharply by 69 per cent to 68,442 tonnes from 2.23 lakh tonnes in the previous year. However, due to high soymeal exports, there has been rise in the price of poultry feed in the country, as soymeal is a key ingredient of the feed. It is expected that favourable weather conditions along with wider applications of technology and weed management techniques, country’s soybean production would cross 10-million tonne mark during 2008.

Cotton Corporation of India (CCI) stated that cotton procurement this year is likely to hit a record to 5 – 10 million bales (1bale =170 kg) as against last year purchase of 2.75 million bales due to a sharp hike in minimum support price (MSP). Procurement of cotton would be starting from second week of October in the states of Punjab , Haryana and Rajasthan. Procurement from the centre zone (Maharashtra, Madhya Pradesh and Gujarat ) is likely to commence form the third week of October, while from southern zone (Andhara Pradesh, Karnataka) it is expected to begin from the first week of November. Cotton output is expected to rise to 32 million bales in 2008-09 from 31.5 million bales last year.

Cotton Corporation of India (CCI) has projected that purchase of cotton from Gujarat would hit a record at 6-7 lakh bales in 2008-09 as against 1.25 lakh bales bought a year ago. It is expected that cotton exports would decline this year since the duty drawback of 1 per cent was withdrawn by the government.

As per the trade officials, after exporting sugar in the international market since last two year, India would turn into sugar importer this year due to sharp fall in sugar output because of erratic weather conditions in the main growing regions of southern and western parts of India . Southern Indian mills have already signed a deal to import about 350,000 tonnes of Brazilian sugar and costal states are in talks with Thailand and Brazil to import another 7700,000-800,000 tonnes of sugar. Industrial officials have estimated that sugar production in the crop year ending September 2009 would drop to 20 million tonnes from about 27 million tonnes in the previous year. Southern Indian states together account for more than 20 per cent of the country’s total sugar production.

Gur and Khandasari units in Uttar Pradesh have begun crushing of sugarcane at Rs 120-125 per quintal even though state government is yet announce the state advised price (SAP).  Prices of gur in Muzzafarnagar district were ruling at Rs 1,850-1,950 per quintal more than double of last year price of Rs 900 per quintal. Most of the gur producers are being paid more than Rs 60-70 than they received last season. Acreage under sugarcane in the state would be down by 20 per cent owing to which there would be war between sugar mills and gur producers for the sugarcane. Experts are of the view that gur prices are high owing to which substantial diversion of sugarcane would be going to gur units. 

Rubber Board official has reiterated that natural rubber production so far during this fiscal year has risen by 27 per cent to 3.93 lakh tones as compared to 3.09 lakh tonnes in the corresponding period last year, aided by a favourable climate. Output of natural rubber in the month of September increased by 21 per cent to 79,000 tonnes as against 65,275 tonnes in the same month last year. Consumption is also reported to rise due to increase in production and exports of tyres. Overall consumption increased to 4.44 lakh tonnes during April - September 2008-09 from 4.22 lakh tonnes the same period a year earlier, while in September alone, consumption rose marginally to 76,000 tonnes from 74,590 tonnes in the same period last year. Overall rubber production so far has been 3.93 lakh tonnes compared to 3.09 lakh tonnes in the corresponding period last year. Import of natural rubber during the period between April to September 2008-09 declined to 36,386 tonnes from 44,247 tonnes a year ago, while export rose to 29,667 tonnes from 17,398 tonnes previous year. However, imports in September have shot up by 9 per cent to 9,878 tonnes from 9,093 tonnes due to a fall in prices in the global market, while export rose marginally to 1,250 tonnes from 1,166 tonnes a year ago. It is expected that output of natural rubber in 2008-09 would touch 8.75 lakh tonnes and consumption to 8.99 lakh tonnes, while exports and imports are estimated to be at 50,000 tonnes and 80,000 tonnes, respectively.

Chhattisgarh is expected to face a major shortage of chemical fertilisers during the current rabi season. Most of the village cooperative societies supplying fertilisers to the farmers have no stock of fertilisers, while the state government can meet just 17 per cent of the total fertiliser demand for the rabi season. Demand of fertiliser in the state for the entire rabi season is estimated to be around 225,000 tonnes, while state agencies are reported to have 37,996 tonnes of fertilisers to meet the demand. Nearly 1.78 million hectares of land is available for the cultivation in the rabi season.

As per the latest report by Food and Agriculture Organisation of the United Nations (FAO), global food import expenditure, in value terms, is estimared to reach US $1,035 billion in 2008, 26 per cent higher than the previous peak in 2007. This figure is still provisional, because FAO’s food import bill forecasts are conditional on developments in international prices and freight rates, which remain highly uncertain for the remainder of the year. The bulk of the anticipated growth in world food import bill is projected to come from higher expenditure on rice (77 per cent), wheat (60 per cent) and vegetable oils (60 per cent). Import bills for livestock products are expected to register smaller increases, owing to moderate rises in global prices together with subdued trade. Only China and the European Union (EU) account for more than 10 per cent of global imports each.

Industrial Production

The General Index stands at 273.0, which is 1.3% higher as compared to the level in the month of Aug 2007. The cumulative growth for the period April-Aug 2008-09 stands at 4.9% over the corresponding period of the pervious year.

Mining, Manufacturing and Electricity sectors for the month of Aug 2008 stand at 162.2, 282.4, and 221.6 respectively, with the corresponding growth rates of 4.0%, 1.1% and 0.8 % as compared to Aug 2007. The cumulative growth during April-Aug, 2008-09 over the corresponding period of 2007-08 in the three sectors have been 4.1%, 5.2% and 2.3% respectively, which moved the overall growth in the General Index to 4.9%.

Seven out of the seventeen industry groups (as per 2-digit NIC-1987) have shown positive growth during the month of Aug 2008 as compared to the corresponding month of the previous year. The industry group ‘Transport and Equipments and Parts’ have shown the highest growth of 11.2%, followed by 8.9% in ‘food products’ and 8.0% in ‘Basic Metals and Alloys’.  On the other hand, the industry group ‘Wool, Silk and Man-made Fibre Textiles’ have shown a negative growth of 14.9% followed by12.3% in ‘Metal Products and Parts’.

Sect oral growth rates in Aug 2008 over Aug 2007 are 3.9% in Basic goods, 2.3% in Capital goods and (-)6.2% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 5.1% and 5.0% respectively, with the overall growth in Consumer goods being 5.1%.

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 for 'All Commodities' (Base: 1993-94 = 100) for the week ended 27th September 2008 declined marginally to 240.7 from 241.0 (Provisional) for the previous week.  

The annual rate of inflation, on point to point basis, stood at 11.80 percent for the week ended 27/09/2008 as compared to 3.36 percent during the corresponding period a year ago.  

Index of Primary Articles, major group, declined by 0.2 percent due to lower prices of bajra, maize, gram, masur, fruits and vegetables, raw wool, and raw cotton.

The annual rate of inflation, calculated on point-to-point basis, for ‘Primary Articles’ stood at 11.17 percent as compared to 6.16 percent a year ago.  

The index for fuel power, light and lubricants remained unchanged at its previous week's level of 375.3.

The index for manufactured products dipped by 0.1 percent due to of fall in food products prices by 0.05 per cent.

 For the week ended 2/08/2008, the final wholesale price index for 'All Commodities’ (Base: 1993-94=100) stood at 241.4 as compared to 240.4 (Provisional) and annual rate of inflation based on final index, calculated on point to point basis, stood at 12.91 percent as compared to 12.44 percent.

Financial Markets

Capital Market

Primary Market

According to a report of Nexgen Capitals, the merchant-banking arm of brokerage firm SMC Global Securities, the domestic primary market has virtually dried up as the total value of initial public offerings (IPOs) of 2007 has witnessed an erosion of about $3.43 billion so far this year, with the media space being the worst hit. The bullish trend in the capital market has been seen in the IPO volume of 2007, with a record volume of $8.18 billion was raised. However, rough market conditions have resulted in a negative return of 42 per cent or a value erosion of $3.43 billion in absolute terms till October 10, 2008.

Expecting a market turnaround in coming months, six companies have re-filed IPO prospectuses with the Securities and Exchange Board of India (SEBI) since June. According to Prime Database, Gini & Jony, Globus Spirits, Mahindra Holidays & Resorts, MBL Infrastructure and MCX are other companies that have re-filed draft red herring prospectuses with the regulator.

State-run hydropower producer NHPC, which was planning to come out with an IPO to raise an estimated Rs 1,670 crore, is withholding the offer for the time being. The company had earlier scheduled the launch of the offer between October 13 and 17. This is the second time that NHPC is delaying the launch of the IPO.

The first company to use the Applications Supported by Blocked Amount (ASBA), 20 Microns, on its listing day on October 6, closed 38.38 per cent below its issue price of Rs 55 on the NSE. It closed at Rs 33.65. On the BSE, too, it closed below its issue price at Rs 33.30.

Secondary Market

During the week, the stock market saw global carnage with all the major markets down by double-digits. A global sell-off triggered the biggest weekly fall for Indian indices in the last 18 years. Fears the deepening credit crisis will push the global economy into recession, rattled stock markets across the globe. The BSE Sensex corrected by 50 per cent from its peak of 21,207 in January 2008. SEBI's relaxed norms on foreign institutional investors (FII) investment, CRR rate cut of 150-basis points (during the week) by RBI, a lower inflation number at 11.80 per cent and sharp correction in crude oil prices to $80 levels failed to lift the sentiment. Lower IIP numbers in August at 1.3 per cent versus 10.9 per cent year-on-year made things worse, with the BSE Sensex coming very close to the 10 per cent lower circuit on October 10 but pulling back to recover. The BSE Sensex crashed by 1,998 points (or 15.95 per cent) to 10,528 during the week. The NSE Nifty lost over 14 per cent at 3,280 points and it hit a low of 3,199 on October 10. The NSE Defty down 16.65 per cent as the rupee tested support at Rs 49 before settling at Rs 48.72. The FIIs have sold close to Rs 5,000 crore of equity in October and Indian institutions have sold about Rs 900 crore. Smaller stocks were worst hit with the Nifty Junior and the Midcaps 50 down 19.9 per cent and 21 per cent, respectively. The BSE 500 was off 17.5 per cent.

Among the sectoral indices of BSE, all the indices lost drastically during the week. All the stocks lost more than 10 per cent with Consumer Durables, Reality, Metal and Capital goods have been the worst performers who lost more than 20 per cent over the week. Metal stocks tumbled on fear of a decline in demand for industrial metals in the event of a global recession. Sluggish growth in the capital goods segment in August (2.3 per cent) took a toll on stocks in this sector.

In a move to boost liquidity, the government and the Reserve Bank of India (RBI) are considering a special window to enable banks with farm loan relief scheme arrears, a major factor influencing liquidity, to raise funds. The move will help inject liquidity into the system till Parliament approves the Rs 25,000-crore reimbursement. Banks may also be asked to extend credit of Rs 7,000-8,000 crore to mutual funds that face heavy redemptions. As per media sources, the government and regulators feared that two or three asset management companies might face such pressures. Details of how the funds will be made available could not be ascertained and these moves are being discussed along with the use of other monetary policy instruments like the Statutory Liquidity Ratio (SLR), cash reserve ratio (CRR).

On October 6, 2008, SEBI lifted the October 2007 restrictions on issue of participatory notes (PNs) by FIIs with immediate effect in a move to bring in more funds to the sagging capital markets. It has also removed the P-Note limit of 40 per cent of an FII's total assets under custody. Foreign investors withdrawing a net $9.5 billion from the domestic stock markets this year has made the SEBI to remove the restrictions on the issue of PNs by FIIs, against securities, including derivatives as underlying. The SEBI relaxation follows the recent finance ministry decision to relax the rules for external commercial borrowings.

Derivatives

The selling in the cash market has seen an exaggerated reflection in derivatives. Although volumes have not risen, prices have swung sharply and the composition of index instruments to stock underlyings shows extreme caution. Most of the selling was led by the FIIs but local institutions have been net sellers and heavy ones. A low put-call ratio (PCR) is bearish most of the time. Overall PCRs (of index plus stock options) tend to be low because very few stocks have any put volumes at all (even stock call volume is low). However, the overall PCR has historically been in the range of 0.7 or higher. The bulk of option volume is in the Nifty itself. The Nifty PCR is very low – hovering at around 0.7 for all outstandings and at 0.6 for October itself. Volatility has risen as well – the VIX closed at around 40 on Friday after hitting much higher levels intra-day. The Nifty was settled at premium to the spot close.

The Nifty October future tumbled 14.43 per cent to 3,295 points against its previous week’s close of 3,851. The premium of Nifty October future, which had widened to 32.7 points during the week, has  fallen to about 15 points, driven primarily by the fresh shorts positions created over the week.

The cumulative FII positions as percentage of total gross market position on the derivative segment as on October 8 was 35.79 per cent. FIIs have been selling out quite heavily, particularly so in index futures through out the week. According to NSE data, the FIIs hold index futures worth Rs 9991.95 crore (Rs 9,968.52 crore) and stock futures worth Rs 13,675.43 crore (Rs 14,692.25 crore). Their holding on index options stood higher at Rs 19,262.5 crore (Rs 18,639.66 crore).

Government Securities Market

Primary Market  

Three State Governments auctioned 10-year paper maturing in 2018 through an yield based auction using multiple price auction method on October 7, 2008 for an aggregate amount of Rs. 2,011.80 crore. The cut-off yields for the securities of Jammu & Kashmir, Kerala and Uttar Pradesh have been set at 8.55 percent, 8.50 per cent and 8.89 per cent, respectively.

On October 8, 2008, RBI auctioned 91-day and 364-day T-bills for the notified amounts of Rs.5,000 crore and Rs.2,000 crore, respectively. The cut-off yields for 91-day and 364-day T-bills were 8.48 per cent and 8.45 per cent, respectively. 

Secondary Market

Inter bank call rates moved in a range of 8.90-18.76 per cent during the week. Overnight rates jumped to 23 per cent, the highest in more than 19 months, before easing to around 20 per cent, the highest since April 2007, as banks scrambled to meet reserve requirements for the fortnight amid tight cash conditions in the domestic money. Bonds continued their rally as risk averse investors turned to bank deposits and foreign funds liquidated their domestic assets. According to traders, the rally was largely driven by domestic institutional investors chasing Government securities. Towards the weekend, the booster for the bond market rally came from the RBI’s intervention through a record cut in the CRR on September 29. But, despite a reporting Friday, markets were strapped for liquidity. The liquidity crunch became apparent from the high recourse to the RBI’s repurchase window at the weekend Liquidity Adjustment Facility (LAF) auction. At the LAF auction, 95 banks and primary dealers borrowed a total of Rs 91,500 crore through the repo window. The liquidity crunch has been largely driven by panic from FIIs and hedge funds rapidly unwinding from the domestic markets to shore up the capital of their beleaguered parents.

Average daily trade volume was in excess of Rs 9,000 crore. In fact, trade volumes were very close to equity market volumes. Average CBLO volumes during the week increased by around 4 per cent as compared to the previous week. The weighted average rates moved lower during the week, at 9.29 per cent, as against 11.15 per cent, during the previous week.

The panic in the markets also prompted the RBI to defer auctions of securities worth Rs 10,000 crore, through issue of 6-year securities and reissue of the 7.95 per cent 2032 paper. The reason for the deferral was largely because few banks were prepared to lend in call markets, instead, most preferred to park funds in Government securities.

Bond Market

The urban development ministry is working on a fresh blueprint for municipal bonds’ structure and investment pattern and has begun holding discussions with the RBI and SEBI on the issue. The move will allow more cities to tap the debt market to access funds for vital urban renewal projects. The focus of the new guidelines will be enabling municipal corporations to issue taxable bonds. The existing guidelines for the issue of tax-free bonds will be given a fresh look as well. While a few cities have already issued municipal bonds in recent years, fresh consultations with industry and financial institutions have indicated that there is a greater appetite for taxable bonds than tax-free bonds.

Foreign Exchange Market

Rupee tumbled to a record, leading declines in Asian currencies during the week, as investors pulled money from stock markets amid concerns that a deepening credit- market crisis will push the global economy into a recession. The rupee took a battering on October 10, as panic-stricken buying by banks forced the local currency to slump to a record low of 49.30 against the dollar. However, heavy intervention by the central bank brought the local unit back to the 48.60 levels. The rupee dropped by the most against the greenback in more than 15 years as the RBI cut the CRR for the second time in week amid a surge in lending costs between banks. The rupee closed at Rs.48.72 per dollar on October 10, 2008 as compared with Rs.46.88 per dollar as on October 03, 2008.

The forward premia across all maturities remained low during the week as some exporters hedged to take advantage of the current situation. Forward premia for 30, 90, 180 and 360 days were 0.74 per cent (0.26 per cent), 0.16 per cent (0.6 per cent), 0.08 per cent (0.73 per cent) and 0.14 per cent (0.64 per cent).

According to data released by the central bank on October 10, the country’s forex reserves have dipped by $7.8 billion for the week ended October 3, 2008.

 Currency Futures

There was hectic dollar hedging on the stock exchanges during the week when the rupee-dollar exchange rate fluctuation was high. On October 10, when the rupee weakened to more than 49 to the dollar, the number of currency futures contracts traded on the NSE too soared to nearly two lakh contracts. NSE clocked a total turnover of Rs 936 crore, the highest so far, and a big jump from the number of contracts averaged in the early weeks of currency futures trading. The average contracts traded on NSE was significantly up from number of contracts traded in the last week of September (58905 contracts). MCX-SX clocked a turnover of Rs 181.6 crore (37,339 contracts) on October 10 against Rs 287.49 crore (59,952 contracts) on October 7, the day MCX-SX’s trading platform became operational. On BSE too, the volumes had gone down after the large number of trades witnessed on the launch date of October 1. BSE clocked a turnover of Rs 11 crore only (2288 contracts) against a turnover of Rs 307 crore (65,686 contracts) on October 1.

 Commodities Futures derivatives

Acting tough on the single commodity exchanges, the Forward Markets Commission (FMC) has tightened the process for granting permission to restore futures trading in de-licensed commodities. The commodity markets regulator has sought details of steps taken by commodity exchanges to make contracts liquid, in at least two cases. It has also asked for clarifications about the failure of these contracts in the past. In a significant move, the Bombay Commodity Exchange (BCEL), an age-old oil and oilseed futures trading platform, has sought permission to restore trading in all vegetable oils and oilseeds (including palm oil, sunflower oil and seed, groundnut oil and seed and sesame seed and oil barring soybean), for which the regulator has asked for clarifications. The exchange excused itself from trading in Gujarat-centric edible oilseed and oils, as Indore is the largest hub of soybean in the country.

Crude prices dropped on October 10, in futures trading to hit lower circuit set by the commodity exchanges on heavy selling by traders in line with a similar weak global trend. Selling pressure picked up as the crude oil tumbled more than four dollar a barrel and headed for its biggest weekly decline since December 2004, pacing a slump in commodities on concern the deepening financial crisis will push the global economy into a recession, market experts said. Crude for December delivery dropped by 4.63 per cent at Rs 4,100 per barrel in trading volume of seven lots on the Multi Commodity Exchange. For October contract it fell by 4.17 per cent at Rs 4,048 per barrel in trading of 9,843 lots. November contract lost 3.75 per cent at Rs 4,078 per barrel in a trading volume of 2,022 lots. Trading sentiment remained bearish rising 4.52 dollar, or 5.2 percent, to 82.07 dollar a barrel on the New York Mercantile Exchange. Crude futures fell by more than 12 per cent over the week, and have dropped 44 per cent from a record 147.27 dollar a barrel reached on July 11.

Similarly, base metals futures hammered to hit lower circuit falling by six per cent on the Multi Commodity Exchange (MCX) on concerns over a global recession following spreading financial crisis. Copper for February and November contracts crashed by six per cent each to hit lower circuit at Rs 247.65 and Rs 246 per kg, respectively, at MCX counter. The contracts recorded business turnover of 275 and 1,188 lots. At London Metal Exchange, copper for three-month delivery fell as much as nine per cent at 4,830 dollar a tone. Strengthening of the US dollar against major currencies and softening crude oil in the global markets also continued to put base metal prices under pressure. Copper remained hard-hit as hedge funds, which had been providing liquidity to the commodity, were unwinding their positions in the commodity space on global demand concerns.

Mild steel October contracts fell sharply to Rs 27,020 per tone on October 7 from a recent high of Rs 37,610 per tonne quoted in mid-July mainly on reports of slowdown in construction industry. The most heavily exchange traded steel product, mild steel ingots, was seen moving as low as Rs 27,330 per tonne from its previous month's level of Rs 29,450 per tonne. International prices slid sharply in September due to weak demand from US, Europe and China . The concern of economic slowdown coupled with declining construction spending in major economies resulted in drastic fall in prices.

Banking

To reverse the tight liquidity situation in the domestic markets brought by the global financial turmoil, the RBI reduced the cash reserve ratio (CRR) – the amount of reserves banks keep with RBI – by 50 basis points, the first time in five years. The new CRR of 8.5 per cent in place of 9 per cent will come into effect from October 11, 2008.

Insurance

The shake-up in the core operations of AIG, after its $85 billion bailout by the US government, will have its ripple effect in the financial conglomerate’s business in India . Barring its two insurance joint ventures with the Tatas – Tata AIG Life Insurance and Tata AIG General Insurance – where it holds 26 per cent each, AIG plans to put all its business units in India , including the nascent asset management business. AIG had earlier decided that it would retain its commercial property/casualty and foreign general insurance businesses, while selling off some life insurance business. It was also seeking alternatives for its securities

In a major come-back plan, the $18-billion Cigna Corp, one of the largest health insurers in the world, has asked consultancy firm Ernst & Young the mandate to assess the Indian health insurance market and advice it on a re-entry into the country. The US major had exited the country in 2001, disappointed with the slow pace of insurance reforms here.

Corporate

Tata Motors has relocated its Rs 1 lakh car project to Gujarat , at an investment of Rs 2,000 crore. Together with Tata Motors, about 60 vendors would also move to the new location. To begin with, Tata Motors would produce 2.5-3 lakh cars annually and the capacity is expandable up to five lakh cars.

The government has allowed companies operating in the refining, exploration and mining sectors to bring into India up to $500 million of external commercial borrowings (ECBs), a ten-fold expansion from the earlier cap of $50 million. This would significantly benefit companies such as Reliance Industries, Cairn India, ONGC, Essar Oil, Mittal Energy Investments, Indian Oil Corporation, Reliance Energy and Tata Steel that have lined up huge investments in these sectors.

Thermax has bagged an order worth Rs 450 crore from an integrated steel unit for setting up a 60 MW captive power plant in Andhra Pradesh.

After providing software for its reservations and inventory, technology provider Bird Group has announced a strategic partnership with Paramount Airways for its frequent flier programme. Madurai-based Paramount Airways is the first airline in the country to fly an all-business class service to all its destinations with a fleet of Embraer aircraft.  

Indiabulls Real Estate has announced a consolidated net profit of Rs 7.99 crore for the second quarter ended September 30, a 76.6 per cent decline over the corresponding period a year ago.

L&T Infotech has signed an agreement with service management software provider Astea International to provide its IT expertise for the latter’s operations.

Malladi Drugs and Pharmaceuticals will be investing up to $300 million, over the next 3-5 years to set up its global ‘one-stop-shop’ in Malaysia .

Asianet Television Network has launched its Telgu entertainment channel ‘Sitara’ in Andhra Pradesh. The media group will also launch a 24-hour new channel in the state by November-end.

 Information Technology

The board of directors at SAP consulting major Axon Plc of the UK has recommended the £441 million counter offer for the company by HCL Technologies, dropping an earlier preference for the £407 million bid by Infosys Technologies.

Infosys Technologies has announced that it would not increase the price of its original acquisition bid of 600 pence a share for the UK-based consulting firm Axon.

L&T Infotech has signed a partnership agreement with Astea International Inc, which is in services life cycle management and mobility solutions.

Direct to Home (DTH) operator Dist TV is raising about Rs 1,139 crore through allotment of shares on right basis to the existing shareholders.

Dynamic Technologies has acquired a UK-based aeronautic firm for $16 million (about Rs 76.34 crore). However, the company has not disclosed the identity of the acquired firm.

TCS is acquiring Citigroup Inc’s interest in Citigroup Global Services Ltd the captive business processing outsourcing (BPO) arm of Citigroup in India , for $505 million, in an all-cash deal.

Telecom

In the history of television content distribution business, the year 2008 will definitely go down as the year of “Direct-To-Home”. The year so far has seen three DTH launches already and one more is awaited. The country’s largest telecom operator in terms of number of subscribers’ base, the Sunil Mittal led Bharti Airtel has announced the roll out of its DTH services from October 9, 2008, in 62 cities through 21,000 retail points, taking the number of DTH players in the country to five. The group eventually intends to step up its presence to 252 cities, using the 9-lakh potential retail points for launching its DTH services.

State-owned BSNL has opposed the merging of ailing ITI with itself amidst stiff opposition from the employee unions. The accumulated losses of equipment manufacturer ITI stand at about Rs 2,500 crore and its merger with BSNL may put an additional burden of Rs 1,000 crore.

*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.