Rupee falls to 45.59 as rush for dollar continues
Foreign funds hold key to recovery
SingTel to pump Rs 1800 cr into Bharti group
Sabras to merge with Tata Chemicals
New SAIL upgrade plan for Bhilai
Foreign Exchange, Bullion, Stock Indices

Mumbai, Aug 7 
A battered rupee today conceded more ground to the dollar, hitting an intra-day low of 45.57/59 and later closing at 45.55/56 after a burst of corporate demand and a wave of speculative trading by banks in the inter-bank forex market.

Though there was moderate amount of dollar sales by exporters early in the day, it was not enough to halt the currency’s freefall. To cap it all, a large section of the dealers in the market believes the rupee has not hit its lowest point in the trough. The fears were stoked by the rush for dollars among companies.

“The worst is probably not over for the rupee. There is evidence that the pressure on the currency will pile as companies are still buying greenbacks to hedge their positions,” a dealer said.

However, there are others in the market who feel the rupee will hover in the range of 45.50-45.60 in the immediate term given that the forex market is witnessing a two-way trading — there are both buyers and sellers. “Exporters came forward to sell dollars in good volumes today. Therefore, it is likely that the rupee will move within the 45.50-60 range,” an analyst with HDFC Bank said.

The rupee opened steady at 45.40/43, as against its previous finish of 45.40/42 but the currency dipped below the 45.50-mark to touch 45.50/52 due to inter-bank speculation, dealers said.

Thereafter, buying of dollars by importers sent the rupee tumbling to its new historic low of 45.57/59.

However, at these levels, dollar supplies in the market improved as players, particularly exporters, unwound their positions to pocket the gains. The rupee hit its intra-day high of 45.53. However, it closed lower at 45.55/56, thus showing a sharp decline of around 15 paise over its previous close.

Dealers said another reason which helped the rupee close a little above its intra-day low was the Reserve Bank’s move to suck out Rs 8,000 crore through repo auctions conducted at a higher cut-off price. “The auction showed that the RBI is bent on raising short-term rates to defend the rupee,” an analyst said.

Forex circles say that if the dollar-buying spree continues, the value of the rupee could dip to 45.75 levels.

“It is at this stage that the RBI could come out with stronger measures, which may include a direct intervention,” an analyst with a foreign bank said.

Meanwhile, the government today privately placed bonds worth Rs 6000 crore with the Reserve Bank of India. The 11.43 per cent 2015 bonds will be issued at par, at a price of Rs 100.    

New Delhi, Aug 7 
Foreign institutional investors (FIIs), who triggered the rupee depreciation, are expected to cause a reverse flow in two to three weeks.

The rupee will begin to appreciate once the reverse flow begins, and the exchange rate of rupee will depend on the level at which the Reserve Bank of India decides to defend the currency. In the past, it had done so at the lowest level. This time, it may allow the rupee to appreciate so that Indian exporters and Indian banks who are holding on to the dollars abroad are hurt.

According to forex market circles, a few Indian banks had purchased dollars more than their clients required. The reverse flow will be so rapid that Indian banks and exporters will be able to bring in their dollars only after the FIIs return. The rupee would have begun to appreciate by then, depriving Indian banks and exporters of substantial gains.

FIIs have made capital gains on both fronts. They pulled out after earning a minimum of 15-20 per cent return when the rupee was relatively high.

There can be no dispute that the FIIs are taking the Indian financial system for a ride. They cannot be faulted however. This is what they have been doing all these years. There is absolutely nothing wrong in profit booking. They would behave the moment Indian players sharpen reflexes to beat them at their game.

The whole thing is a game, which has been played out in the country at least on four occasions in the last seven years, said an official source. “:Look at the behaviour of rupee in the past few years. It remained constant for a relatively long time, then fell sharply, appreciated after some time and finally stabilised.

The RBI has not given any idea about the exchange level at which it would like the rupee to stabilise. It is not prudent on its part to do so. The currency could go down, but it is difficult to predict how far. It would definitely appreciate after that.

But here, the RBI would intervene if the upward pressure is more than what it considers reasonable.

FIIs are concerned about the exchange rate and share prices, both of which are weak. Those who re-enter the market first stand to gain the maximum. There are strong indications that the FIIs are preparing for re-entry.

What could be the ideal exchange rate once the rupee begins to stabilise? Certainly not Rs 46 a dollar. Forex market circles put it around Rs 45.3 a dollar if the RBI permits the rupee to appreciate.    

New Delhi, Aug 7 
Singapore Telecom (SingTel) today said it would invest Rs 1,800 crore in the Bharti group as part of a wider joint venture arrangement under which the overseas firm will pick up 20 per cent in Bharti Telecom and 15 per cent in Bharti Televentures—the holding arms of the group’s telecommunications service companies.

SingTel’s investment is the largest ever by a Singapore-based company in India, and third-largest made outside Singapore, after Belgium and Thailand.. This is also the single largest investment made in the Indian telecom sector.

“We have not decided how much we will invest in the two companies. The amount will depend on the devolution of shares, which will be decided in the next 10 days,” Sunil Bharti Mittal, chairman and group managing director, Bharti Enterprises, said.

“The investment would be channelled by both companies, primarily for developing domestic, international long distance, cellular, fixed line and submarine cabling services. We have also signed an agreement to explore the possibilities of laying a submarine cable system linking Singapore and Chennai,” he added.

SingTel has already applied to the Foreign Investment Promotion Board (FIPB) for clearance. Bharti Enterprises holds 96 per cent in Bharti Telecom’s Rs 30-crore paidup capital. In Bharti Televentures’ paid-up capital of Rs 86 crore, Telecom Italia of Italy and E M Warburg Pincus of the US hold 20 per cent and 19 per cent respectively.

Under the memorandum of understanding signed today, the two companies have agreed to double investments to explore new opportunities. However, both companies will be free to rope in more partners and retain their own brand names for services.

“It is not an exclusive arrangement. British Telecom remains our primary partner. We will also have more allies for our submarine cable venture as we expand. The brand name of our cellular service, Air Tel, will be retained, even though SingTel will pick up a stake in the company,” Mittal said.

Speaking after signing the agreement, the president and CEO of SingTel, Lee Hsien Yang, said: “SingTel chose Bharti because we were impressed with the predominant role played by the group in developing telecommunications in India. We support Bharti’s vision to sharpen its competitive edge and to expand into new areas like domestic long distance and submarine cable systems. In doing so, we hope to make telecom services even more accessible to Indian businesses and consumers. This will, in turn, have multiplier effects on India and its economy.”

“SingTel will play a key role as a partner of Bharti in our mobile network and in all areas of fixed-mobile convergence. We will also be focusing on broadband networks through acquisitions or installation of larger pipes, both domestic and offshore, through submarine cables,” Mittal said.    

Mumbai, Aug 7 
Tata Chemicals proposes to amalgamate its cash rich wholly-owned subsidiary, Sabras Investment and Trading Co with itself. The subsidiary, with sizeable investments, made whopping profits last year and the dividend had vaulted from Rs 20 to Rs 200 for each share having a face value of Rs 100.

Sabras earned a net profit of Rs 142.24 crore for the year ended March 31, 2000 as against the previous year’s net profit of Rs 2.47 crore. The main contributor to its profit was the sale of Associated Cement Co’s (ACC) shares during the year.

Compared with this, Tata Chemicals made a lower net profit of Rs 117.29 crore in the same period including the Sabras’ dividend of Rs 17.60 crore.

The company earned a significantly higher income during the year in view of the strategic sale of a part of the company’s holding in the shares of ACC Ltd. The market value of the quoted investments was Rs 310.80 crore as on March 31, 2000 as against Rs 299.87 crore in the previous year.

The company said its decision to amalgamate was a “prudent move”.

Tata Chemicals has called for an extra-ordinary general meeting to obtain the approval of its shareholders on August 30.

The amalgamation plan is an effort by the company to “remove the corporate barriers” which would help “unhindered flow of financial and managerial resources”.

Tata Chemicals expects the move to pave the way for growth in the present liberalised environment.    

Bhilai, Aug 7 
The Steel Authority of India Ltd (SAIL) is working out a new Rs 1,500 crore modernisation plan for the Bhilai Steel Plant, which will enable its only consistently profit-making steel plant to retain its competitive edge.

As the Rs 5,182 crore turnover Bhilai Steel Plant turns 41, SAIL is looking at ways to ward off the increasing threat to the unit’s profit margins from rivals.

BSP’s operating profit has been sliding over the years. While it was Rs 1,141 crore in 1997-98, in 1999-2000 it stood at just Rs 698 crore.

Speaking to The Telegraph, BSP managing director V. Gujral said, “The last update was in 1982 so we need to push through this plan as a dose of modernisation is the only way to cut costs and relieve pressure on profits.”

The modernisation plan which is to be spread over 2-3 years, calls for linking a new continuous casting facility with Bhilai’s 2.5 mt twin hearth furnace. “Earlier this was not considered to be feasible, but a few Czech plants have found to be adopting this route,” Gujral explained.

This is expected to cost between Rs 800-1000 crore and enhance the steel making capacity from 2.5 mt to 2.8 mt. Once the new continuous casting mill is set up, BSP will, however, have to cut down its existing blooming and billets mills.

Another Rs 300-400 crore would be earmarked for modernisation in the Steel Melting Shop II’s casting shop which too would help cut down waste and hike profitability. SMS-II includes a continuous casting facility to produce about 1.5 mt of steel.

Further, Rs 200-250 crore will be spent on upgrading facilities at Bhilai’s plate mill to enable it increase its mix of high value-added products.

An earlier ambitious Rs 4,500 crore update plan for BSP was shelved when parent SAIL went into the red a couple of years back. But Gujral is optimistic of the new plan being implemented, as “BSP’s health depends on it.”

Since SAIL is a ‘navratna’ company, the plan would merely require clearance from the steel behemoth’s board and it does not require formal approval from the Union government.

BSP is of primary importance in SAIL’s battle to get out of the red. Last year SAIL posted a loss of Rs 1,720 crore despite an over Rs 5,000 crore write-off on past loans and interest dues, on a turnover of Rs 16,722 crore.

The sense of urgency in upgrading the Bhilai unit stems from the fact that the Madhya Pradesh-based steel-maker contributes about 35 per cent of its output and nearly a third of its turnover besides being the sole profit-making unit. Any further pressures on its profit will see SAIL sinking deeper into the red.    


Foreign Exchange

US $1	Rs.45.56	HK $1	Rs. 5.75*
UK £1	Rs.68.70	SW Fr 1	Rs. 26.35*
Euro	Rs. 41.46	Sing $1	Rs. 26.05*
Yen 100	Rs. 41.89	Aus $1	Rs. 26.30*
*SBI TC buying rates; others are forex market closing rates


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