In 1991, India adopted the new economic policy (NEP) of liberalisation aiming at improving the economy’s competitiveness in the global market. A telecommunications service of world-class quality inter alia was considered essential for the success of the NEP.

Deregulation

The new policy opened up basic telecom services to competition. To begin with, India introduced private competition in value-added services in 1992. Accordingly, the initial framework for the deregulation of India’s telecom sector was contained in the National Telecom Policy (NTP) 1994. The primary reason for deregulation was the poor performance of state-owned telecom companies – huge unmet demand, poor quality of service, higher tariff and inefficient operations. The reforms began with NTP 1994 and were later followed by the constitution of a regulatory authority in the form Telecom Regulatory Authority of India (TRAI) and NTP 1999.

Phenomenal Growth in Cellular Subscribers

India’s telecom sector has undergone a major transformation through significant policy reforms and has made rapid progress since the announcement of the NTP-1999. Since 2000, the telecom sector has been a key contributor to the Indian economy’s impressive performance registering sustained high growth rates. The robust growth in mobile phones was the principal driver for telecom growth in the country as it has been in other parts of the world. The reform measures coupled with the proactive policies of the Department of Telecommunications (DoT) have resulted in an unprecedented growth of the mobile segment.

During the last few years, the mobile sector has witnessed high growth rates. Since 2004 the number of cell phones has grown remarkably in the range of 50% – 74%. As indicated in Table 1, between March 2005 and March 2009, the country has added around 335 million new wireless subscribers to reach a total of 391.76 million; however, the fixed line subscriptions have declined by 3.46 million, down to 37.96 million over the same period, partly reflecting the substitution effect.

India’s teledensity (the number of telephone subscribers per 100 people) grew initially slowly from 7.2 in March 2004 to 12.8 in March 2006, but thereafter galloped to a level of 37 in March 2009 (Chart A), predominantly due to the mobile additions.

India Enjoys the World’s Second Largest Mobile Subscriber Base

In fact, telecommunications is one of the few sectors in India, which has witnessed unprecedented expansion as well as the most striking structural and institutional reforms since 1991. Today, the Indian telecommunications network with over 429.72 million mobile subscribers [(GSM, CDMA & WLL (F)]* is the second largest in the world, next only to China and continues to be one of the fastest growing telecommunication markets in the world, as the country continues to add about 8-10 million new mobile connections each month. A progressive regulatory regime, network expansion by operators, reduction in tariffs and cost of handsets, which essentially make the service affordable for the common users, all acted as demand booster to the growth of the telecom sector. As a result, the common man today has access to this most needed facility.

MNP System

There are some signs that the quality of mobile services needs to be further improved. For instance, many dissatisfied mobile subscribers despite the poor service do not switch to another network, as they do not have the facility to continue with the same number. However the Mobile Number Portability (MNP) system can act as a solution for cellular users to overcome the problem of changing service provider by retaining their mobile number.

The implementation of the MNP system facilitates cellular subscribers to change their service provider while retaining their existing mobile number by shifting from one mobile network operator to another. The unique benefit of the system is that the subscriber can migrate to a new mobile service provider without inconvenience or disruption to friends, family or business contacts. For businesses, this is a special feature, eliminating the expense of updating stationery, business cards that contain a mobile phone number.

One of the major advantages of the MNP system is that on its implementation the service providers (big or small) are ought to improve their quality of cellular services and customer services, in order to retain the existing customer. Besides, the other benefits of MNP system to cellular subscribers are:

(i)        Competition among telecom service providers leads to introduction of new products and services in order to remain competitive; and 

(ii)               More value added services are made available to customers, either at lower costs or free.

MNP in other Countries

World over there are 50–60 countries which have adopted the MNP system. Countries like Hong Kong, UK, Australia, US, Germany, France and Netherlands provide number portability. These countries introduced it between 1999 and 2003. Netherlands also implemented number portability when its mobile penetration had been only 10%. In the year 2008, around eight countries has launched the MNP system (Table 2).

China is the world’s largest mobile market in terms of subscriber base. Recently, China’s Ministry of Information Industry (MII) has implemented the MNP system on a trial basis in Tianjin and Shenzhen. If the trials are successful in these cities, MNP is expected to become a nationwide policy in 2009. Peru has planned to launch MNP from January 2010.

Need for MNP in India

Taking into consideration the stupendous growth of the cellular subscribers it was felt that the MNP system be implemented in order to provide better services by creating competition in the market. Accordingly, TRAI has initiated the process of MNP in 2005 by issuing a consultation paper on MNP on July 22, 2005.

On the basis of inputs received from the stakeholders and its own analysis, TRAI submitted its recommendations to DoT on March 8, 2006 recommending the implementation of MNP in the whole country from April 2007 in a phased manner, starting from metropolitan cities and Circle A service areas followed by Circle B and Circle C service areas.

Delay in Implementation of MNP

In nearly all countries that have attempted MNP system, there has been a long time gap between notification and actual implementation. India is not an exception, though TRAI has recommended MNP system to be made available to all mobile subscribers from April 1, 2007, the implementation process was delayed as the telecom companies opposed the MNP owing to the fear that they stand to lose subscribers. In addition, the COAI has expressed apprehension on cost escalation, saying it would be detrimental to lowering tariffs and may adversely affect the rising subscriber base and has suggested the appointment of an independent consultant to conduct a comprehensive cost-benefit analysis. 

Launching of MNP in India

Keeping in view the growth of telecom services in India, TRAI felt that it is now an appropriate time to initiate the process of implementing this facility for further enhancing the quality of service and customer satisfaction. As a result of TRAI’s concerted efforts, finally, the DoT has issued a notification in this regard declaring that MNP is to be implemented in a phased manner, commencing September 2009 and to be completed by March 2010. The MNP system will be initially implemented in all metros and Category ‘A’ service areas within six months of award of MNP license by September 20, 2009. Subsequently the operation of MNP will be expanded to the rest of the service areas by March 20, 2010. Thus, in September 2009, cellular subscribers in Delhi, Mumbai, Kolkata, Chennai, Maharashtra, Gujarat, Tamil Nadu, Andhra Pradesh and Karnataka will have the facility to switch operators even while retaining their existing number.

TRAI has suggested the creation of an independent MNP Clearing House Administrator which will be entrusted with the task of controlling and managing mobile number portability in the country. Syniverse Technologies (Zone-1) and MNP Interconnection (Zone-2) are the two companies who have been licensed by the DoT to carry out the MNP exercise. Telcordia is a US-based telecom solutions provider and is the 74% stakeholder in MNP Interconnection.    

The DoT further clarified that TRAI will decide on all kinds of tariffs related to MNP like the transaction fee to be charged from the customer for seeking change of number. MNP charges are likely to be below Rs 300 and it will take maximum of two days to change the service provider. TRAI will insist on keeping the costs at reasonable level so as not to discourage subscribers willing to change their service provider and at the same time make it a viable business model for the service providers.

International Experience

By May 2009, MNP was available in around 60 countries. The European Union (EU) has mandated the introduction of MNP as a result almost all countries in Europe have implemented MNP. As per the report of Telecommunications Management Group (TMG), around 154 million mobile subscribers around the world have availed the MNP facility while changing service provider.

The telecom operators world over has mixed experience as far as MNP is concerned as a result, the rate of number portings differs significantly between the countries. For instance, in EU, Finland reported the highest porting rate, whereas Sweden, Norway and Denmark witnessed lower porting rate. As per Frost & Sullivan report on MNP in Asia, MNP worked well in South Korea and Hong Kong, while it has proved ineffective in Taiwan, Japan and Singapore. In Asia, Hong Kong has the highest MNP implementation, where statistically, every mobile subscriber has ported their mobile telephone number at least once.

In some countries the implementation of MNP system has been unfavourable to companies with strong telecom network while it has benefitted weak operators who have advantages in fees and plan charges. While in developing countries, big operators have lost their customers to small operators on account of poor customer service. For instance, one of South Korea’s largest telecom operator, SK Telecom suffered a loss of market share after the implementation of MNP, from over 70% to about 50%.

In 2005-06, ACNielsen research team has conducted a survey of mobile subscribers in Singapore to find out the reason of changing the service provider using the MNP system. The findings of the survey revealed that pricing is the main factor for switching service provider followed by network coverage (Table 4).

Market Expectations

India is the 8^th nation in Asia to launch MNP system. India’s telecom sector is one of the most competitive in the world with 12 players offering services to over 400 million subscribers. However, the top 5 operators have captured significant market share of 83%, while the other 7 companies account for just 17% (Table 5).

Market analysts anticipate that the price competition in India’s telecom sector may intensify in the post MNP period. Some of the major implications expected in the telecom sector are as follows:

(i)           The move is expected to increase the overall churning rate in the telecom sector. At present, the average churning rate is 3-4% with portability it could go up to 8-10%.

(ii)      In the metropolitan cities as there is limited growth potential for new subscriber additions the small and new players will both compete with bigger companies by offering cheap pricing strategies to retain and attract subscribers.

(iii)              In other circles, existing operators will target both, new subscribers as well as existing subscribers of other operators.

(iv)    Telecom analysts project that the market share of top three companies, Bharti Airtel, Reliance and Vodafone will differ slightly as these companies may lose some customers due to poor customer service while on the other hand they may also add new customers from other companies with weak network connectivity.

(v)      Public sector companies BSNL and MTNL may lose some customers as these companies do not adopt aggressive marketing strategies like private sector companies for adding new customers nor they offer attractive packages to retain the existing customers.

(vi)     As per the latest study by Angel Broking, the Average Revenues Per User (ARPUs) of the mobile companies would be affected by around 5% as a result, the telecom companies’ margins would also plunge by 100-150 basis points. In India, the pre-paid subscribers’ base is almost 90% of the total subscriber base and has low ARPU.

To conclude, in a competitive market like India, the real beneficiaries of MNP would be the subscribers, who will get better service offerings at competitive prices. Analyzing the experience of other Asian markets with MNP system, telecom analysts forecast moderate porting rate in the Indian telecom market. However, pricing and quality of service will play a major role in customer retention.

* This note is prepared by Bipin K Deokar and assisted by Anita Naik.

References 

TRAI (2009): ‘Draft Regulations on Mobile Number Portability’, June 30.  

TRAI (2009): ‘Background Note on Mobile Number Portability’.  

Keynote Capitals Research Review of Mobile Number Portability in India.

(http://www.stockmarketsreview.com/news/mobile_number_portability_in_india_20090626/)

Wheat procurement by different procurement agencies in the current wheat-marketing season April 2009- March 2010 has touched 250.61 lakh tonnes as on 7th July registering an increase of 23 lakh tonnes over the procurement made in the full marketing season 2008-09, i.e. 226.89 lakh tonnes.

According to figures released by the Tea Board, Indian exports during the first five months of 2009 have slumped by almost 13 million kg. The unit realization per kg of tea has increased by 31 % due to global shortage of the commodity to touch Rs 129.1 for the five months. The total production during January-May 2009 stands at 215.8 million kg as against 240.2 million kg during January-May 2008. Drought like conditions in the Dooars and major portion of Terai has seen production in North India fall significantly in the early part of the year. In South India, frost during the month of December and January and then the continuous drought in the following months led to drop in production.

The central government has assured farmers of adequate supply of fertilizers this season but admitted that the availability of some complex fertilizers is tight due to low production at domestic level. The supply of complex fertilizers in the month of June was 7.45-lakh tonnes as against the requirement of 8.12 lakh tonnes.

 Oilmeal exports slumped by 33% to 1,97,593 tonnes in June as against 2,95,204 tonnes a year ago, while the exports in April-June were 6,14,528 tonnes down by 57% on year. This dropping is recorded for the sixth consecutive month, due to lower demand and prices in traditional Asian markets although sales to China soared. Sales to traditional Asian markets like Vietnam, South Korea, Japan, Indonesia and Thailand dropped sharply. Exports in April-June to Vietnam fell by 51.5% to 2,00,677 tonnes, South Korea dropped 67.2% to 70,644 tonnes; Japan by 56.1% to 83,436 tonnes; Indonesia fell by 47.9% to 47,821 tonnes and Thailand by 52.5% to 72,118 tonnes. Oilmeal exports to China jumped by 71.4% for the three months to 93,289 tonnes, mainly due to higher shipment of rapeseed meal.

Total arrivals of cotton during the 2008-09 season across the country amounted to 284.20 lakh bales, of which 127.07 lakh bales i.e. 45% have been mopped by Cotton Corporation of India (CCI) and Nafed as MSP of cotton were ruling higher than prices prevailing in the open market. CCI alone purchased 89.35 lakh bales, which included 19.97 lakh bales in Maharashtra, 32.77 lakh bales in Andhra Pradesh, 12.36 lakh bales in Gujarat, 10.43 lakh bales in Punjab, 2.58 lakh bales in Haryana, 1.55 lakh bales in Rajasthan, 7.36 lakh bales in Madhya Pradesh, 1.62 lakh bales in Karnataka and 0.71 lakh bales in Orissa. Nafed’s total purchases of 37.72 lakh bales were concentrated in Maharashtra (35.21), Andhra Pradesh (1.34) and Gujarat (1.17), respectively.

 Kochi-based Directorate of Cashew and Cocoa Development (DACCD) reported that production of cashew during 2008-09 is estimated to increase nominally by around 3-4% to 6.9 lakh tonnes as against 6.6 lakh tonnes produced last year.  Cashew production is expected to increase only in Maharashtra while that in other states like Andhra Pradesh, Orissa, Kerala, Karnataka, and Tamil Nadu the production would remain more or less stagnant. Production of cashew in Maharashtra during 2008-09 would be around 1.7 lakh tonnes.

Exports of Marine products earned a record Rs 8,607.94 crore during 2008-09 fiscal with 6.02 lakh tonnes of seafoods being shipped out. In dollar terms, it was US $1,908.63 million. It has been reiterated that right policies and interventions by the Union Government and MPEDA and the proactive role played by the industry helped in achieving the positive growth in exports for the fifth consecutive year in the most trying circumstances. Frozen shrimp continued to be the major export item accounting for 44 % of the total export earnings, though its share in the exports during the period dropped 8 % in quantity, 4 % in rupee value and 15 % in dollar terms. While Tuna exports increased from Rs 69.31 crore to Rs 231.38 crore, registering a growth of 287 per cent due to implementation of a scheme of converting existing trawlers in to tuna long liners. The European Union remained the largest market for Indian seafood accounting for 1.51 lakh tonnes (25 per cent) in quantity and earning Rs 2,800 crore (32.5 per cent) or $623 million (33 per cent). Exports to the US fell further to US $227.29 million (-10.18 per cent), making it fourth-largest buyer of Indian seafood.

The government is considering a proposal to launch a special venture capital fund for the poultry sector. Under which there would be promotion of value addition in poultry products. This fund would help small farmers in the sector who have been reeling under the impact

Industry

The Index of Industrial Production (IIP) stands at 281.9, which is 2.7% higher as compared to the level in the month of May 2008.

The annual growth in the Indices of Mining, Manufacturing and Electricity sectors for the month of May 2009 has been 3.7%, 2.5% and 3.3% as compared to 5.5%,4.5%, and 2.0% in May 2008.

In terms of industries, as many as 9 out of the 17 industry groups (as per 2-digit NIC-1987) have shown positive growth during the month of May 2009 as compared to the corresponding month of the previous year. The industry group ‘Other manufacturing industries’ (27.3%), Rubber,plastic, petroleum and coal products’ (16.4%) and ‘ wood and wood products (15.3%) have registered double digit growth during May 2009. On the other hand, the industry group ‘Food Products’ (-14.7%), Jute Textile ((-20%),have shown double digit  negative growth.

As per Use-based classification, the Sect oral growth rates in May 2009 over  2008 are  3.8% in Basic goods, (-)3.6% in Capital goods and 6.1%  in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 12.4%  and (-) 2.3% respectively, with the overall growth in Consumer goods being  1.2%.

Infrastructure

The Index of Six core industries having a combined weight of 26.7 per cent in the Index of Industrial Production (IIP) with base 1993-94 stood at 250.1 (provisional) in May 2009 and registered a growth of 2.8% (provisional) compared to a growth of 3.1% in May 2008.  During April-May 2009-10, six core industries registered a growth of 3.9% (provisional) as against 2.7% during the corresponding period of the previous year.

Crude Oil production (weight of 4.17% in the IIP) registered a growth of (–)4.3% (provisional) in May 2009 compared to a growth rate of 3.2% in May 2008. The Crude Oil production registered a growth of (-)3.7 (provisional) during April-May 2009-10 compared to 2.1% during the same period of 2008-09.

Petroleum refinery production (weight of 2.00% in the IIP) registered a growth of (-)4.3% (provisional) in May 2009 compared to growth of 0.1% in May 2008. The Petroleum refinery production registered a growth of (-)4.4% (provisional) during April-May 2009-10 compared to 2.1% during the same period of 2008-09.

Coal production (weight of 3.2% in the IIP) registered a growth of 10.2% (provisional) in May 2009 compared to growth rate of 8.8% in May 2008. Coal production grew by 11.8% (provisional) during April-May 2009-10 compared to an increase of 9.5% during the same period of 2008-09.

Electricity generation (weight of 10.17% in the IIP) registered a growth of 3.3% (provisional) in May 2009 compared to a growth rate of 2.0% in May 2008. Electricity generation grew by 5.1% (provisional) during April-May 2009-10 compared to 1.7% during the same period of 2008-09.

Cement production (weight of 1.99% in the IIP) registered a growth of 11.6% (provisional) in May 2009 compared to 3.8% in May 2008. Cement Production grew by 11.7% (provisional) during April-May 2009-10 compared to an increase of 5.4% during the same period of 2008-09.

Finished (carbon) Steel production (weight of 5.13% in the IIP) registered a growth of 1.4% (provisional) in May 2009 compared to 3.3% (estimated) in May 2008. Finished (carbon) Steel production grew by 2.1% (provisional) during April-May 2009-10 compared to an increase of 1.4% during the same period of 2008-09.

Inflation

The official Wholesale Price Index for  'All Commodities' (Base: 1993-94 = 100) for the week ended 27 June 2009 rose by 0.04%. The annual rate of inflation, calculated on point to point basis, declined by -1.55%  for the week ended 27 June 2009 as compared to a substantial increase of  12.0% during the corresponding  week   of the previous year.

Primary articles witnesses a rise of 0.3 per cent mainly due to higher prices of arhar, fruits and vegetables, urad and moong.

 The  price of the major group fuel, power, light and lubricants remained stationary.

An increase of 0.1% has been witnessed in the prices of manufactured products mainly due to high price of butter, imported edible oil etc. Final WPI for the week ended 25 April 2009 was revised upward to 233.1 from 230.7 as a result the corresponding inflation rate stood at 1.8% instead of 0.7%.

Financial Market Developments

Capital Markets

Primary Market

State-owned hydropower major NHPC Ltd is set to hit the market with its initial public offering (IPOs) in August. NHPC plans to offer 167 crore shares with a face value of Rs 10 each, with the premium to be decided through the book-building process. Similarly, state-owned Oil India Ltd and National Hydroelectric Power Corporation (NHPC) will tap the capital market with their IPOs in August/September this fiscal.

Secondary Market

Markets saw the biggest fall in the last eight months in the budget week. Key benchmarks corrected sharply on concerns of a ballooning fiscal deficit. Investors were also disappointed as the Finance Minister did not announce major liberalization measures in his new budget. A cautionary statement on India's sovereign rating by Standard & Poor's (S&P), the credit rating agency, further weighed on the bourses. The BSE Sensex lost 1,408.83 points or 9.45% to 13,504.22 for the week. The BSE Small-Cap index fell 590.45 points or 10.14% to 5,234.50 in the week. The BSE Mid-Cap index fell 468.63 points or 9.03% to 4,718.59 in the week. The NSE Nifty lost 420.35 points or 9.50% to 4003.90 in the week.

In the Union Budget 2009-10, Finance Minister Pranab Mukerjee has reduced paperwork for sub-brokers by excluding them from the purview of service tax has cleared the confusion caused by a recent observation made by the Comptroller and Auditor General of India (CAG).

Following the Securities and Exchange Board of India’s (SEBI’s) decision to ban entry load from August 1 prompted a number of fund houses to hike their exit loads in their equity and debt schemes. Around seven fund houses, including Reliance, ICICI Prudential, UTI, Bharti AXA, Birla SunLife, IDFC and HDFC have hiked exit loads by 0.5-2%.

Derivatives

The Nifty future finally succumbed under selling pressure, registering a fall of 9.75% during the week. It ended Friday at 3,993.2 points, way lower than 4,424.65 points, against the previous week. The fall also pushed the Nifty future into a sharp discount against the spot. Open interest (OI) improved marginally to 2.25 crore shares for Nifty July futures; it was pegged at 2.20 crore shares last Friday. Nifty near month contract added 8.45 lakh shares in OI on 10th July owing to which the OI for the full week added nearly 5 lakh shares.

Volatility index ended the week on a dull note. Similar to how it went up when the Nifty had surged from March lows, it is now turning weak along with Nifty’s fall. The volatility index slipped to 35.83 against last week’s 45.86. The fall can be partly explained by the high squaring up of Nifty put options.

The cumulative FII positions as a percentage of the total gross market position on the derivative segment as on July 9 slipped to 33.69% (35.45%). They indulged in alternate bouts of buying and selling. They reduced their index futures holding to Rs 7,405.02 crore (Rs 8,435.74 crore) and stock futures to Rs 16,867.64 crore (Rs 18,529.59 crore). However, FII holdings in index options increased to Rs 21,903.08 crore (Rs 20,785.2 crore).

Government Securities Market

Primary Market

Government re-issued securities of 6.49% 2015, 7.35% 2024 and 7.50% 2034 for the notified amount of Rs 5,000 crore, Rs 2,000 crore and Rs 2,000 crore ,respectively on 10 July 2009. Yield to maturity (YTM) set by the government on the 6 years maturity, 15 years maturity and 25 years maturity were 6.55%, 7.45%, and 7.98%, respectively.

Open market operation purchase of auction was held on 9 July 2009 with aggregate notified amount of Rs 7,500 crore. Government securities such as 6.05% 2019, 6.30% 2023 and 7.95% 2032 were purchased with cut of yield 6.92% for 10 year maturity and 7.80% for 23 years maturity respectively. Cut of yield on 6.30% 2023 is not available.

182-day Treasury Bills (TBs) were auctioned on 8 July 2009 with YTM of 3.43% and notified amount of Rs 1,500 crore. In the auction 52 bids were received out of 5 bids were accepted.

In an auction of 91-day TBs on 8 July 2009, 82 bids were received from which 37 have accepted with notified amount of Rs 8,000 crore and YTM of 3.23%.

State Development Loans maturing in 2019, were auctioned by three state governments namely Andhra Pradesh, Uttar Pradesh and West Bengal with notified amount of Rs 1,000 crore , Rs 1,000 crore and Rs 2,000 respectively. 10-year loans of Andhra Pradesh Uttar Pradesh and West Bengal follows cut of yield of 7.94%, 7.97% and 7.96%, respectively.

Secondary Market

Call rate moved in a narrow range throughout the week and ended on 10 July 2009 at 3.20%-3.30% as against 3.20%-3.25% ended on 3 July 2009. This marginal rise in the call rate was due to comfortable liquidity in banking industry and lower demand form banks during the whole week.

On the backdrop of increase in Government borrowing plans in the remaining financial year, bond yields during last week have increased. High liquidity in the system has been resulted in the banks parking Rs 1,47,590 crore in reverse repo window on 10 July 2009.

Trade volumes dipped as disappointed banks sold and insurance companies abstained from making purchases. Trade volumes during the week dropped to Rs 12,700 crore per day, a Rs 5,500- crore drop over the previous week.

Bond Market

During the week under review, one bank and two central undertakings tapped the bond market to mobilize an aggregate amount of Rs 975 crore through issuance of perpetual and bonds respectively.

Foreign Exchange Market

The rupee closed at Rs.48.69 per dollar on 10 July 2009 as compared with Rs 47.99 per dollar as on 03 July 2009 due to importers hedge over forward exposures. The Rupee moved between Rs 48.22 and Rs 48.92, with a standard deviation of 30 paise during the week. Forward premia for one, three, six and 12 months remained stable to firm at 2.26% (2.21% previous week), 2.53% (2.69%), 2.55% (2.57%), 2.43% (2.57%) and 2.28% (2.27%) respectively.

Commodities Futures derivatives

The Forward Markets Commission (FMC), the regulatory authority of the commodity futures market, has come up with an idea of introducing futures trade in organic agricultural products. This could be launched only if there is a sufficient volume in organic agricultural products.

National Commodities & Derivatives Exchange Limited (NCDEX), one of the leading commodity future exchange l trading in Groundnut (in Shell) – Bikaner Futures contract on 10 July 2009. These contracts would be available in addition to the existing groundnut (in shell) Junagadh base contract.

As per the report by SMC Capitals the removal of Commodities Transaction Tax (CTT) and continuing Securities Transaction Tax (STT) in the Budget 2009-10 is likely to have a huge impact with traders and arbitrageurs shifting their focus from equity to commodity markets. Taking a comparative view of trading volumes in commodities and stock markets, the volume of trading in commodities is on rise even otherwise over the last couple of years with a corresponding fall in volumes in equities.

Wheat futures registered smart gains on NCDEX during the weekend. Aggressive intraday short covering at lower levels coupled with increase in demand has boosted the trading activities. Sentiments are bullish for wheat which has gained over 3% over the weak. The July contract for Wheat ended higher Rs 5.80 at Rs 1,116.00 a quintal. The volume in the contract stood at 3,280 tons.

Chana futures hit 3% upper circuit in the second half on NCDEX on 10 July. Bullish advices from the spot market and dismal availability of chana in cash in the midst of encouraging demand fuelled chana futures. The availability of chana has reduced significantly in the cash market as farmers and stockists have halted their produce from bringing in the market in anticipation of further rise in the prices. The benchmark July chana surged 3.57% or Rs 59.00 and ended the day at Rs 2,326 per quintal. Chana for August delivery settled up by 3.49% or Rs 61.00 at Rs 2,409 per quintal.

Insurance

Reliance Life Insurance has seemingly not float an initial public offer now since Irda has pointed towards the 6AA provision of the Insurance Act, which specifies that any Indian promoter having more than 26% equity in an insurance venture can reduce its stake only after ten years or within such period the central government may decide.

Banking

The country’s largest insurer, LIC has earmarked around Rs 25,000 crore for investing in mutual funds and project loans for 2009-10.

In a move to churn its asset portfolio and earn fee-based income, IDBI Bank has securitized the retail loans of Tata Motors Finance worth over Rs 200 crore.

National Housing Bank (NHB) plans to set up a mortgage guarantee company by March. The new entity would have an initial capital of Rs 120 crore, against the minimum requirement of Rs 100 crore set by the RBI.

Corporate

French power equipment maker Areva is all set to dispose of its transmission & distribution (T&D) business, including its Indian arm Areva T&D. The company’s supervisory board has asked its executive board to put the group’s T&D division up for sale to part finance the group’s long-term development plan. In order to reinforce its position as a leader on the nuclear market and to make further inroads into the renewable energies market, it needs to invest and recruit, while maintaining a healthy balance sheet.

Larsen & Toubro has bagged two orders worth Rs 651 crore. The company has bagged on order worth Rs 440 crore from HPCL Mittal Energy and another Rs 211 crore from MRPL.

Reliance Power Ltd (R-Power), part of the Reliance’s Anil Dhirubhai Ambani (ADA) group, is in talks with five leading global power companies to sell its 15% equity stake in the company. Preliminary talks have started with three Chinese power companies, which include China Light and Power Holdings (CLP), and French and Canadian companies.

Tata Steel will be increasing its capacity of Jamshedpur plant from 6.8 million tonnes to 10.5 million tonnes steel annually. Around Rs 12,000 crore is estimated for the expansion of the capacity which will be completed by 2010. Meanwhile company has proposed to set up mega plants in Jharkhand, Orissa and Chattisgarh.

HSBC Global Investment Funds (Mauritius) has hiked its stake in Unitech up to 5.17% by acquiring shares through the private placement route.

Hindustan Construction Company Ltd (HCC) has bagged an order worth Rs 387 crore for Dagacchu Hydro Power project in Bhutan.

Lupin Ltd and Matrix Laboratories and Niche Generics, the UK subsidiary of Unichem Laboratories, may face anti-trust investigations by the European Union for delaying the entry into the market of generic versions of a hypertension drug. The European Union’s antitrust regulator, the European Commission, said that the three Indian companies, along with France’s Les Laboratories Servier, Israel-based Teva Laboratories and Krka Group had entered into agreements to delay the entry of generic versions of Perindopril, on which Laboratories Servier had the patent.   

External Sector

Exports during May, 2009 were valued at US $ 11010 million (Rs. 53435 crore) which was 29.2 per cent lower in dollar terms (18.4 per cent in Rupee terms) than the level of US$ 15550 million (Rs.65506 crore) during May,2008. Cumulative value of exports for the period April- May, 2009  was US$ 21753 million (Rs. 107214 crore) as against US $ 31626 million (Rs. 129846 crore) registering a  negative growth of 31.2  per cent in Dollar terms and 17.4  per cent in Rupee terms over the same period last year.

Imports during May, 2009 were valued at US $ 16212 million (Rs.78682 crore) representing a decrease of 39.2 per cent in dollar terms (30.0 per cent in Rupee terms)  over the level of imports valued at US $ 26684 million ( Rs. 112405 crore) in May,2008. Cumulative value of imports for the period April- May 2009 was US$ 31959 million (Rs. 157514 crore) as against US$ 51507 million (Rs. 211752 crore) registering a negative growth of 38.0 per cent in Dollar terms and 25.6 per cent in Rupee terms over the same period last year.

Oil imports during May, 2009 were valued at US $ 4135 million which was 60.6 per cent lower than oil imports valued at US $ 10495 million in the corresponding period last year.   Oil imports during April- May, 2009 were valued at US$ 7768 million which was 59.6 per cent lower than the oil imports of US $ 19244 million in the corresponding period last year.

Non-oil imports during May, 2009 were estimated at US $ 12078 million which was 25.4 per cent lower than non-oil imports of US $ 16189 million in May, 2008. Non-oil imports during April- May, 2009 were valued at US$ 24191 million which was 25.0 per cent lower than the level of such imports valued at US$ 32262 million in April- May, 2008.

The trade deficit for April- May,2009 was estimated at US $ 10206 million which was lower than the deficit of US $ 19880 million during April-May, 2008.

Information Technology

Aegis Ltd, a BPO firm of Essar Group, has acquired CCN Group PTY Ltd, a South Africa based BPO firm, for around $30 million with revenues of over $19 million for the financial year 2008-09.

Optical storage manufacturer, Moser Baer India has reported a net loss of Rs 151 crore for the year ended March 31, 2009 against a loss of Rs 79 crore in the corresponding period ended March 2008. However, the net sales of the company has surged to Rs 2,289 crore in 2008-09 from Rs 1,964 crore in the previous fiscal year.

Global pharma major GlaxoSmithKline (GSK) has signed a new five-year support contract with Mahindra Satyam, the new brand identity of Satyam Computer Services, for SAP and other critical systems support to its businesses across the world. Satyam has been working with GSK since 2002, providing IT application development and support services.

The board of fraud-hit Satyam Computer Services (now Mahindra Satyam) has approved the proposal of Venturebay, a unit of its new owner Tech Mahindra, to hike its stake in Satyam through a second round of preferential share allotment to 42.7%.

Telecom 

Aditya Birla Group company, Idea Cellular has received approval from its shareholders and secured & unsecured creditors to ‘de-merge’ its passive infrastructure, namely its towers and base stations to its wholly-owned subsidiary Idea Cellular Towers Infrastructure Ltd. Recently, Vodafone Essar too received clearance from the foreign investment promotion board (FIPB), to hive off its towers and related infrastructure business into a separate arm called Ortus Infratel.

The proposed alliance between Bharti Airtel, India’s largest telecom company, and South African telecom giant MTN crossed the first hurdle after SEBI exempted MTN from making the mandatory open offer to Bharti Airtel shareholders under the overtake code.