Wednesday, November 26, 2008

26November2008

Sensex Performance
Sensex opened firm up at 9160.5 gaining 2.89% over previous close of 8903.12 in reports of federal bailout of citi group. Market were steady intra day reaching high of 9182.8. But as happening for quite some time markets open up, then FIIs who are seeking opportunity to bank on every rally, began selling and the market dips towards the end. Finally Sensex closed at 8695.53, down 2.33% from yesterday's close before reaching intra day low of 8649.4. Biggest index movers were Reliance Industries and State Bank of India which contributed 111.6 points drop of the 207.6 points drop of sensex.

Fuel price cut in India
There is some good news for Indians burdened by the inflation. Government has announced Fuel prices cut, but cant execute it before elections in states get over. Opposition, namely BJP and Left are crying it foul as it can please the voters and breach the election code of conduct. This would come as a big relief as announcement is for Rs. 5 per liter petrol, Rs. 2 per liter diesel and Rs. 50 per cylinder of LPG. This was highly predicted as crude is already at $50 per barrel and government has raised fuel prices on 4th June when it was at $120-$130 per barrel and Indian oil companies were struggling hard for survival. Since then crude raised to its high of $145.29 a barrel on 3rd July but since then declined steadily and broke $100 barrier on 15th September (The date which divided world in two parts, pre 15th Sep and post 15th Sep) Crude broke the barrier of $50 on 20th November and hence it was getting very much hopeful by the government to cut prices.

Citigroup
This has been a very happening week for Citigroup. Citi, which never sleeps (by the virtue of its presence in vast geography) was on the brink of death. Few days after citi announced laying off 50000 odd employees, the boss, CEO Vikram Pandit himself was finding it tough to hold ground.
Citi shares lost ~58% in a week from 17th-21st November and pressure was constantly building on it. On 24 November U.S. government announced a huge bailout of Citigroup to rescue the company from bankruptcy. Treasury will provide $20 billion in troubled asset relief fund in addition to $25 billion given in October. Government also guarenteed $300 billion in assets. In return the bank will give to government $27 billion of preferred shares and warrants to acquire stock. Preferred share will pay 8% annual return. The government will obtain wide powers over banking operations. Executive salaries, dividends will be capped. Citi gained 57.82%, on 24th November as single day movement.

Friday, November 21, 2008

21November2008

US mkt down by more than 6.7%

Crude fall below $50


Rupee Fall further to 50.175 per $

Thursday, November 20, 2008

20November2008

Rupee closed below 50 per Dollar first time
For the first time in history, Rupee broke the psychological barrier of 50 per Dollar. It has breached this barrier on 27th October intraday but closed at 49.945. There are couple of reason for this fall of Re. against $. Firstly, FII (Foreign Institutional Investors) are buying $ heavily. This must be because the FII are exiting indian stock market and investments from oil companies. The high demand for $ makes Re. weak against $. Another reason for this downfall is arbitrage opportunity developed in $-Re in offshore and domestic market (arbitrage is the state when there is different in pricing of an instrument in different market. In this situation one can make risk free profit. Arbitrage is rarely observed in evolved markets). There are Non-deliverable Forward (NDF) trading on INR in Dubai and Singapore (NDF can be explained as a forward contract where you agree to buy or sell INR on future date at current price. But at the end of the period you don't need to physically deliver INR, just need to pay the difference). $-Re. rate in this market is around 50.85-50.90, this prompted buying of Dollars from domestic market and selling in these market providing a clear arbitrage.
As was always known exporters and IT companies gain the most when Re weakens as their is in $. But this is not the case now. Major or all IT companies are hedged to their Fx exposure now a days. So they wont be able to make a gain out of this.
It is important to note that Re fell by 26.9% since beginning of 2008 and down by 27.36% from its year high of 39.265 on 15-Jan-08. RBI is trying its best by selling $ and lowering demand, as is clear in steep fall of $ reserve RBI. But it seems that this is not enough as Re is inching 51 per $ today!

Wednesday, November 19, 2008

19November2008

FM asks India Inc to lower prices
Finance minister of India, Mr. P. Chidambaram has urged urged India Inc. CEO to lower prices. This is in view to increase the sale and hence safeguard the jobs which is quite possible in large scale. CEOs of automobile industry, builders etc. expressed inability to lower price. Auto sector companies already are running on very low margin of 4-5%, so lowering prices wont be possible to meet the requirement. Builders are already finding it difficult to raise capital are struggling to complete the projects. DLF, Unitech have expressed inability to lower rates. Unitech has put its construction of chain of luxury hotels on hold to fund its other projects.

Yahoo! CEO Jerry Yang resigns
Severely criticized for his handling of deal with Microsoft, advertisement deal with Google, Yahoo Inc. co-founder and CEO could not handle the pressure from shareholders and stepped down. Note: In May Microsoft bid for Yahoo! giving $33 for each share when Yahoo! was trading at $25-27. Jerry, rejected the offer and Microsoft in its try to get Yahoo! and fight against ever growing Google, walked away. Google also did not proceed with commercial search advertising arrangements with Yahoo! as regulators dint allowed because of the affect on competition in the market.
By November beginning Yahoo! share was pricing at $10-10.5. A steep fall after the deals canceled. On 18th November 2008, shares rose by more than 8.5% in hopes of new CEO restarting talks with Microsoft.

This is another case of a Chief Executive being complacent for his company. Similar was the case with Dick Fuld, CEO of Lehman Brothers who was too bold to claim Lehman being under priced before Lehman filed for bankruptcy on 15September2008.

Grant Road to be made junction
Grant Road will be made junction to increase number of locals of western line from South Bombay to Virar. Churchgate station is already functioning at its max. There is a local leaving Churchgate station every 2 minutes in peak hours. Making Grant Road a junction would come as a relief to millions of commuters on western line of Mumbai.

Tuesday, November 18, 2008

18November2008

Citi to reduce headcount by 50000
Citi that never sleeps, has announced to cut jobs by 50,000 by January of 2009. This will be over job cut of 23,000 from January to September 2008. This will make it largest job cut by Financial company in the current crisis. These job cuts will be across all region and mainly in Investment Banking division. Citi faced losses of $20bn in last quarter. And this move tends to reduce the losses in next quarter, though not enough to get Citi profit!

Job cut in Diamond industry
Latest industry to hit by global recession is Diamond industry. And India is badly hit by it. Indian Diamond industry purchases raw diamonds from African countries and process it to beautiful jeweleries and export it. With exports coming down Indian companies are asking for less raw diamond. This reduces the demand for our skilled workers. Though, these companies have already given leaves to contract workers earlier. Considering the huge size of Indian Diamond industry mainly concentrated in Surat, this will definitely affect Indian Economy which is still much safe than other major economies of the world.

Japan in recession

World's second largest economy (source: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)) Japan is the latest country to enter recession. The economy has contracted by 0.4%. Note here that a country is said to be in recession if its growth is negative for two consecutive quarters. A technical recession is if a country suffers negative growth including inflation for two consecutive quarters. Japan is suffering because the use of the Japanese products reduced immensely across the globe. France is next to follow Japan with UK on the brink. Economy of China is also slowing down. Is the world heading for a bigger crisis than 1929-1930?