28February2009

GDP growth of Indian at 5.3%

GDP growth of India (12 largest GDP of the world) is estimated at 5.3% for the October –December 2008 quarter, which is a 6 year low. This is mainly caused by 2.2% decline in agricultur and 0.2% decline in manufacturing sector.

First 9 months of this Fiscal GDP growth now is 6.9% (Q1: 7.9%, Q2: 7.6%, Q3: 5.3%). Projected growth for this year was 7.1%. Now to get this projected growth last quarter should have 7.7% growth. Considering recession, growth of last quarter is expected to be around 5% and so we"ll miss the projected growth by quite a margin.

How GDP is calculated?

The method of Calculating India GDP is the expenditure method, which is,

GDP = consumption + investment + (government spending) + (exports-imports)

i.e. GDP = C + I + G + (X-M)

The other two methods of calculating GDP are Product wise (Calculating the total production) and Income wise (Calculating the total incomes received by factors of production - labour & capital)

Meanwhile, US economy shrunk by 6.2% for the same period of October-December 2008. This is its worst hit since 1982.

INR at 51.12 against Dollar

INR reached its all time low of 51.12 per dollar. This is mainly due to heavy demand for dollars. Dollar gained against Euro and Pounds yesterday. So, this gave opportunity to investors to buy dollars from India and sell it outside. Widening of Fiscal deficit from 2.5% to 6% already led Re to fall below 50 mark. Taking measures for growth RBI may further cut rates. This will further bring Re down. Another impact would be on inflation which has already reached to a low of 3.2%. We might see further fall in inflation in view of rate cuts and annualisation factor.

List of CEOs of major Indian Companies

Many a times we want to know CEO/Chairman of some major Indian company. I have compiled a list that would be lot helpful. Let me know if there is any correction or if I missed anything.

Company	CEO/Chairman
ADAE	Anil Ambani
Air Deccan	GR Gopinath
Apollo Tyres	Neeraj Kanwar
Ashok Leyland	R Seshasayee
Asian Paints	Ashwin Dani
AV Birla Group	Kumar Mangalam Birla
AZB Partners	Zia Mody
Bajaj Auto	Rahul Bajaj
Bank of Baroda	MD Mallya
Bharat Forge	BN Kalyani
Bharat Petroleum	Ashok Sinha
Bharti Enterprises	Sunil Mittal
Biocon	Kiran Mazumdar Shaw
Birla Corp	RS Lodha
Bombay Dyeing	Jeh & Ness Wadia
Britannia	Vinita Bali
BSNL	AK Sinha
Cadbury India	Bharat Puri
Cipla	YK Hamied
Cromptom Greaves	Gautam Thapar
Dabur	VC Burman
Dr. Reddy's Labs	K Anji Reddy (Chairman)
Dr. Reddy's Labs	GV Prasad (CEO)
EID Parry	SM Datta
Essar Group	Shashi Ruia
GAIL	UD Choubey
Godrej Group	Adi Godrej
Gujarat Ambuja Cement	NS Sekhsaria, Suresh Neotia
HCL Technologies	Shiv Nadar (Chairman), Vineet Nayar (CEO)
HDFC	Deepak Parekh
Hero Group	Brij Mohal Lall Munjal
Hinduja Group	SP Hinduja
Hindustan Petroleum	Arun Balakrishnan
HSBC India	Naina Lal Kidwai
Hyundai India	BVR Subbu
ICICI Bank	Chanda Kochar
ICICI Prudential	Shikha Sharma
ICICI Ventures	Renuka Ramnath
Infosys Technologies	Nandan Nilekani * Narayan Murthy (co founder and chairman), Kris GopalKrishnan (CEO)
IOC	Sarthak Behuria
Ispat Industries	VK Mittal
ITC	Yogesh C Deveshwar
Jet Airways	Naresh Goyal
Kotak Mahindra Bank	Uday Kotak
Larsen & Toubro	AM Naik
Mahindra & Mahindra	Keshub Mahindra, Anand Mahindra
Maruti Udyog	RC Bhargava
Microsoft India	Ravi Venkatesan
Motorola India	FV Vandrewala
Nicholas Piramal	Ajay Piramal
Nirma	Karsanbhai Patel
ONGC	R.S. Sharma
Pantaloon Retail	Kishore Biyani
Pepsi Co.	Rajeev Bakshi
Ranbaxy	Malvinder Singh Mohan
Raymond	Gautam Singhania
Reliance Industries	Mukesh Ambani
Reserve Bank of India	Subbarao
RPG Group	Harsh Goenka
SAIL	SK Roongta
Satyam Computers	Kiran Karnik(Chairman), A.S. Murthy (CEO)
SEBI	Bhave
Shoppers' Stop	BS Nagesh
Standard Chartered	Jaspal Bindra
Star TV India	Peter Mukerjea
State Bank of India	OP Bhatt
Tata Group	Ratan Tata
Tata Steel	B Muthuraman
TCS	S Ramadorai
UB Group	Vijay Mallya
Videocon Industries	Venugopal Dhoot
Wipro	Azim Premji (Chairman), Girish Paranjpe & Suresh Vaswani (joint CEOs)
Yes Bank	Rana Kapoor
Zee Telefilms	Subhash Chandra
Hindalco Industries	Kumar Mangalam Birla
NTPC	R.S. Sharma
Oracle Financial Services Software (i-flex)	Rajesh Hukku
Spicejet	Sanjay Aggarwal

25February2009

Duty cut of 2%

Using every privilege it has to lure voters just before code of conduct for the next general elections is applicable, Finance Minister Mr. Pranab Mukherjee announced 2% cut in excise duty. This will be in addition to the 4% excise duty cut made in December and will continue in the next Fiscal. Note here that the duty cut is only for the items with current excise duty at 10%. There are other slabs with duty more than 10% and other at 4%, though these are not affected. But the items with 10% duty (which now will be at 8%) are 96% of all. So more or less this cut is across the commodities. There is 2% cut in the service tax as well, bringing it down from 12% to 10%. So we see cut in bills if the benefit is transferred to consumer. 

S&P Lower India Rating

Standard & Poor’s (S&P) lowered the outlook for India’s credit rating from stable to negative (BBB-) indicating higher possibility of a downgrade. The revision has increased expectations of a rate cut aimed at boosting sentiment. S&P’s revised outlook has came less than three weeks after it said India will be the second-fastest growing economy after China. But economy prospects and fiscal position are separate issues. India fiscal deficit was as high as 6% as against 2.5% expected budget deficit. Also with the current duty cuts (mentioned above) there will be higher fiscal deficit. Note here that on the same ratings (Long term debt, Local currency) some other countries stands as:

Pakistan: CCC+

Sri Lanka: B+

Kazakhstan: BBB

Israel: AA-

Jordan: BBB

Russia: BBB+

US: A+

Australia, New Zealand: AAA

China: A+

Hong Kong: AA+

Singapore: AAA

Argentina: B-

Brazil: BBB+

Venezuela: BB-

France, Germany, Ireland, Portugal, Netherland, Switzerland, UK, Sweden, Norway: AAA

Iceland: BBB+

SEBI clearance for Satyam sale

SEBI has laid the way for Satyam to issue preferential shares at a price which can be lower than what rules allowed till now. At present, the pricing of a preferential issue is based on the average price of the stock for two weeks or six months, whichever is higher, from the relevant date (which is 30 days prior to shareholders’ approval). This is now relaxed to two weeks average price.

National Rural Employment Guarantee Act

Introduction

• Government of India under Prime Minister Manmohan Singh launched NREGA on 25th August 2005. 
  
• NREGA aimed to provide work to people living below poverty line in rural India.
  
• The NREGA provides a legal guarantee for one hundred days of employment in every financial year to adult members of any rural household willing to do public work related unskilled manual work at the statutory minimum wages. 
  
• Central Government shall meet the cost towards the payment of wage, 3/4 of material cost and certain percentage of administrative cost. 
• State Government shall meet the cost towards unemployed allowance, 1/4 of material cost and administrative cost of State council.
  
• Adult members of rural households submit their name, age and address with photo to the Gram Panchayat. The Gram panchayat registers households after making enquiry and issues a job card. 
  
• The employment will be provided within a radius of 5 km: if it is above 5 km extra wage will be paid.
  
• TATA Consultancy Services, India's largest IT/ITES sector company has designed the software solution for the state of Andhra Pradesh. NIC, a government of India undertaking, developed solution has been implemented in other areas.
  
• Wages paid would be through a saving bank account in local bank or post office. Government is trying hard to ban wages payment through cash.

Facts

Under NREGA, rural labourers have a legal entitlement not only to work on demand but also to minimum wages. To prevent corruption, a wide range of transparency safeguards has been built into the Act. For example, muster rolls are supposed to be kept at the worksite, displayed at the Panchayat Bhawan, and read out in public at the time of wage payments. Employment and wage details also have to be entered in the labourers’ 'Job Cards', to enable them to verify the records for themselves. Contractors are totally banned.

At the gram panchayat level, the main responsibility for implementing NREGA works lies with the Panchayat Executive Officer (PEO). Another key actor is the Village Labour Leader (VLL), who is supposed to be selected by the gram sabha for the purpose of 'supervising' a specific worksite.

VLLs were there with Sampoorna Grameen Rozgar Yojana (SGRY), a predecessor of NREGA. At that time, the VLL was a de facto contractor. He or she received the work orders, spent the funds, arranged the works, and filled the muster rolls. Under NREGA, funds are routed through the panchayat and the VLL is supposed to be a mere worksite supervisor, who earns wages at the same rate as other labourers.

Current Status of NREGA

• Barely 3.2 per cent of the registered households could avail of 100 days of employment in one year '06-'07.
  
• Average employment provided under the scheme was just 18 days in the same year block.
  
• Rural population, even Government not aware of the scheme.
• Discrepancy in muster roll prepared by the team leader.

14January2009

After a long gap, I am again back to update this blog. Long list of events happened since my last update:

1) Satyam Fiasco: A lot said and known already in all daily newspapers, channels. 

What happened actually? 

How and how much the Satyam books were cooked? 

Why the Books were cooked?

Why the fraud was accepted now? 

Who was benefitted? 

What was the role of PWC? 

What next?

2) Wipro banned by World Bank.

What happened? 

Whats industry practice?

Azim Premji's clearance.

3) Infosys Q3 results much better than expected. 

4) Inflation continue to roll down. Now less than 6%. 

I will proceed from here tomorrow onwards! 

19December2008

Inflation in India at 9 months low
Inflation dropped to 6.84% for the week ending on 6th December. This is mainly because of the fall of crude oil which was reflected in other commodities. This downturn of inflation would continue as the base effect (comparing to last year) would help it to be low. Other reason for the reduction in inflation is the excise rate cut and good crop this season.
Reducing inflation figures caused the bond yield down in hopes of interest rate cuts. (Bond's yield is inversely proportion to interest rates)

Quick Update
Sensex crossed 10,000 mark.
Rupee getting stronger. INR was at 50.35 on 1Dec, 49.57 on 8Dec, 48.05 on 15Dec and 46.89 on 18Dec.
Crude goes further down to $36.22 a barrel falling 9.59% yesterday and 8.12% day before.

18December2008

Fed cuts rates again
The US Federal Reserve cut its target for overnight interest rates to a range of 0-0.25%. This now closes option for any further rate cut. The Fed also said it would expand its policy of buying mortgage-backed securities to support the housing market and that it was now considering the benefits of purchasing long-term treasury bills – a move first used by President Franklin Roosevelt in the Great Depression to push down long-term interest rates.
A treasury bill is taditionally a short term zero coupon bond i.e. they do not pay interest. They are instead issued at a discount to their face value. Like any Government bonds there is very little risk attached to investing in treasury bills. Default risk on a government's borrowings in its own currency is low enough to be regarded as zero.

Gloom at Wall Street
Morgan Stanley posted a $US2.2 billion fourth-quarter loss, wider than the most pessimistic analyst's estimate, as it unexpectedly wrote down the value of fixed-income businesses and lost money in all three of its main divisions.

Goldman Sachs, the 139-year-old investment bank reported its first quarterly loss since becoming a public company 10 years ago. For the period ended November, Goldman reported a fourth-quarter net loss of $2.12 billion, or $4.97 a share, compared with net income of $3.22 billion, or $7.01 a share, a year earlier.

OPEC cuts oil production
Organisation of the Petroleum Exporting Countries (OPEC) yesterday decided to pull an extra 2.2 million barrels per day (bpd) out of production from 1 January. This aimed to put a floor on crude price at $43 a barrel. It seems the news is not taken positively as crude is now trading at $39.8 a barrel.

TATA on Ferrari
Tata will be riding on Ferrari in coming season of Formula -1. Soon we"ll see Tata logo on F-1 cars of Felipe Massa and Kimi Raikkonen. This comes as a 'historic' news as claimed by Ferrari management. Tata on the other hand believes it as one of the cheapest way to get promotion globally.

Satyam (contd. from yesterday)
Satyam share in India fell by 30% yesterday at close. ADRs soar up 50% after Satyam called off the deal. Maytas Infrastructure fell by 20% yesterday and its further down 20% today. One costly mistake has caused Satyam promoters 600 crores.

17December2008

Bernard Lawrence Madoff FraudulenT
In what could be the biggest Ponzi scam of all time, Bernard L. Madoff got arrested on 11thDecember2008. He was amongst the most active in NASDAQ and served as its chairman of the board of directors, and on its board of governors. A Ponzi scheme is a fraudulent investment that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from the profit from any real business.
Madoff's fraud may involve up to $50 billion in cash and affect many financial institutions, charities, funds, funds of funds of the world.
Madoff had a remarkable track record of success year after year. A hedge fund run by Madoff described its strategy as focused on shares in the S&P index, averaged a 10.5 percent annual return over the past 17 years. In November 2008, amid a general market collapse, the fund reported that it was up 5.6 percent that month, while the S&P 500-stock index fell 38 percent.
Hedge funds typically hold their portfolio at a securities firm (typically a major bank or brokerage) whereas Madoff's firm was its own broker-dealer and supposedly processed all its trades. Although Madoff was a pioneer of electronic trading, he refused to provide his clients online access to their accounts. He sent out accounting statements by mail, whereas most hedge funds statements and allowed them to be downloaded via computer for easier analysis by investors.

Satyam Maytas
Satyam board pushed a deal to buy Maytas Infrastructure and Maytas Properties, spending $1.6 bn from cash rich Satyam systems. Satyam founder and Chairman B Ramalinga Raju and other insiders hold 36 percent in Maytas Infra and 35 percent in Maytas Properties. Analysts questioned the motives of Satyam's top executives, saying there was a potential conflict of interest because they hold stakes in both companies. This was severely criticised causing Satyam ADR to fell by 55% (ADR: Stock of Indian Company listed in American Exchange). Finally the board bowed to investor pressure and canceled plans to spend $1.6 billion to buy two builders.
The acquisitions made little sense at a time when technology outsourcing companies are preserving cash to help weather the global economic slowdown. Considering there are no synergies that could boost buying of realty sector industries by IT company. It would be interesting to see if at all Satyam may win back the confidence of investors.

16December2008

Cheaper Home Loan
Buying a Home has become cheaper for Low/Middle income group and in smaller towns. All of 28 Public sector Banks in India have decided to lower the interest rates on home loans and loans for small and medium enterprise, however with some conditions.

Under the scheme launched, interest rate on home loans up to Rs 5 lakh, for a maximum period of 20 years, will not exceed 8.5 per cent for the first five years. However, if interest rates changes further then lower of two will be applicable. The margin for this been reduced to 10 per cent, from the current 20-25 per cent. This means that now a buyer can get 90% of home amount as loan.
Similarly interest rate on loans up to Rs 20 lakh for a maximum period of 20 years has been fixed at 9.25 per cent and the margin has been reduced to 15 per cent. Also there will be a free insurance cover for this loan. Pvt. Banks viz. ICICI and HDFC haven't responded to this yet.
More so, this can't be a big relief to realty sector. Hardly anyone takes 5-20 Lakh loans in metros, or even tier B cities. This makes sense for Public Sector Banks whose majority of customers are those asking for 15-20 Lakh Loans, with average of 7-8 Lakh.
Existing customers are not entitled for this scheme. This is because this measures are taken to boost demand for home and help struggling realty sector.

Banks also said they are reducing the interest rate on loans to micro enterprises by 0.5% and small and medium enterprises by 1%. Both existing and new customers will benefit from the move, which comes into immediate effect.

Inflation

Everyday we talk about inflation, few months back this was the biggest hurdle for Finance minister. Inflation was rocketing high. Now we read that as inflation is easing Government can take measures to improve growth etc. But how exactly does it all work?

Let us start with defining inflation. Inflation is an increase in the prices of goods and services in an economy over a period of time. As everyone understands inflation increases means increase in the price and vice versa. Actually the concept is little deeper. We’ll understand this well when we’ll see how it is calculated.

There are two ways to calculate Price Indices:

1) Wholesale Price Index, WPI: WPI is the index that is used to measure the change in the average price level of ‘goods traded in wholesale market’. India has taken WPI as an indicator of the rate of inflation in the economy.

2) Consumer Price Index, CPI: CPI is a weighted average of prices of a specified set of goods and services ‘purchased by consumers’. It is a price index that tracks the prices of a specified set of consumer goods and services, providing a measure of inflation. CPI is the official measure of inflation in many countries such as the United States, the United Kingdom, Japan, France, Canada, Singapore and China.

India is the only major country that uses a wholesale index to measure inflation. The WPI has an All Commodities Index, which consists of three major groups – 

1) Primary Articles; 2) Fuel, Power, Light & Lubricants; and 3) Manufactured Products.

These are again broken up into smaller sub-groups. For instance, the primary articles group would have food articles, non-food articles and minerals. Each of these sub-groups would have several individual commodities in them.

This WPI tracks prices of 435 commodities, of which 98 are primary articles, 19 in the fuel, power, light & lubricants group and 318 are in the manufactured products group.

The current index, which uses 1993-94 as its base year, has weights of 22.025 for primary articles, 14.226 for fuel etc and 63.749 for manufactured products.

Calculation of Inflation

Inflation is calculated point to point compared to last year. WPI figure is released every week. Base year us taken as 1993-94 where WPI is taken as 100. Current WPI is compared with WPI exactly 52 weeks back. These are the values of WPI of last year and this year:

Week No.	Date	WPI		Date	WPI
1	5/1/2008	217.6		6/1/2007	208.7
2	12/1/2008	217.8		13/01/2007	208.7
3	19/01/2008	218.2		20/01/2007	208.9
4	26/01/2008	219		27/01/2007	209
5	2/2/2008	218.8		3/2/2007	208.9
6	9/2/2008	219.4		10/2/2007	209
7	16/02/2008	220.4		17/02/2007	208.6
8	23/02/2008	220.9		24/02/2007	209
9	1/3/2008	222.3		3/3/2007	209.3
10	8/3/2008	225.7		10/3/2007	209.4
11	15/03/2008	226.4		17/03/2007	209.6
12	22/03/2008	226.6		24/03/2007	210.1
13	29/03/2008	226.7		31/03/2007	210.4
14	5/4/2008	227.8		7/4/2007	211.5
15	12/4/2008	228.2		14/04/2007	211.4
16	19/04/2008	228.9		21/04/2007	211.5
17	26/04/2008	229.1		28/04/2007	211.6
18	3/5/2008	230.5		5/5/2007	212
19	10/5/2008	230.6		12/5/2007	212.4
20	17/05/2008	230.8		19/05/2007	212.4
21	24/05/2008	231.2		26/05/2007	212.3
22	31/05/2008	232.3		39119	212.5
23	7/6/2008	236.5		9/6/2007	211.8
24	14/06/2008	236.9		16/06/2007	211.9
25	21/06/2008	237.7		23/06/2007	212.4
26	28/06/2008	238.4		30/06/2007	212.8
27	5/7/2008	239.3		7/7/2007	213.3
28	12/7/2008	239.5		14/07/2007	213.6
29	19/07/2008	240.5		21/07/2007	213.7
30	26/07/2008	240.7		28/07/2007	213.9
31	2/8/2008	241.4		4/8/2007	213.8
32	9/8/2008	241.1		11/8/2007	213.7
33	16/08/2008	241.1		18/08/2007	213.7
34	23/08/2008	241.2		25/08/2007	213.9
35	30/08/2008	241.4		39091	214.8
36	6/9/2008	241.7		8/9/2007	215
37	13/09/2008	241.7		15/09/2007	215
38	20/09/2008	241.3		22/09/2007	215.2
39	27/09/2008	241.3		29/09/2007	215.3
40	4/10/2008	239.6		6/10/2007	215
41	11/10/2008	238.8		13/10/2007	215
42	18/10/2008	238.3		20/10/2007	215.3
43	25/10/2008	238.5		27/10/2007	215.4
44	1/11/2008	235.5		3/11/2007	216.1
45	8/11/2008	235		10/11/2007	215.8
46	15/11/2008	235.1		17/11/2007	216
47	22/11/2008	233.7		24/11/2007	215.6
48	29/11/2008			39094	216.3
49	6/12/2008			8/12/2007	216.3
50	13/12/2008			15/12/2007	216.4
51	20/12/2008			22/12/2007	216.4
52	27/12/2008			29/12/2007	216.7

How inflation is calculated? For example we will get inflation for this week i.e. week number 47. Inflation_47 = (WPI_47_2008-WPI_47_2007)/WPI_47_2007 = (233.7-215.6)/215.6~8.4%. Important thing to note is inflation is always calculated compared so same week exactly a year back.

This is how inflation for the year looks:

Note that in May it showed a steep rise. This is mainly attributed to increasing crude price in that period. Fuel price were increased in period of June-July. This led to increase in transport cost leading to increasing in vegetable prices and other commodities.

Normally, high inflation is linked to higher money supply in the market. Think it this way, when there is high money supply this means purchasing power of people increases which leads to increase in prices. As we see, inflation is easing since September 2008. This gives Finance Ministry + RBI an opportunity to take steps for growth. Hence, they are more comfortable in decreasing interest and rates cut recently hence increasing the money supply in the system.