Markets look for clues, rescue angels
Job over at Haldia Petro, says Mitra
Real estate firms on shaky ground
Attacks cloud signs of industrial revival

 
 
MARKETS LOOK FOR CLUES, RESCUE ANGELS 
 
 
FROM OUR CORRESPONDENT & AGENCIES
 
Mumbai, Sept. 23: 
Stalked by fears and threats of war, the country’s foreign exchange and debt markets are looking up to a saviour — the Reserve Bank of India (RBI). They hope it will use all weapons in its monetary arsenal to keep the economy from being thrown off course.

Experts are veering round to the view that an attack on Afghanistan would not have as bad an effect on the money and debt markets as was originally thought. The optimism stems, in large part, from the way in which the central bank soothed frazzled sentiment in the past few days, either through indirect intervention to defend a battered rupee, or injecting liquidity in the money markets to keep interest rates stable.

“Despite the uncertainty, the RBI has calmed markets by holding the rupee and providing liquidity,” said a senior official from a private sector bank.

That, however, is no guarantee that the firmness in rupee or the prices of government securities will persist; the apprehension is that it could change dramatically the moment US goes ahead with its strikes.

“We could see the rupee dipping by another 20-25 paise from its current level of around 48 to a dollar, though the fall will not be steep,” said N Subramanian, analyst at e-Mecklai. The central bank, he added, has indicated that it would like to see it hover around the 48-mark.

“The rupee is seen between 47.90 and 48.08, unless the tension intensifies. If things worsen, it could even decline to 48.30 per dollar,” said another dealer. There is a consensus in the market that a sharp fall is possible only if oil prices flare up to more than $ 30 a barrel.

In the debt markets, rattled earlier this week following the hijack attacks in the US, government security prices have rebounded due to the central bank’s actions. For instance, the benchmark ten-year 2011 11.50 per cent bond has seen yields touching around 9.48 per cent against 9.77 per cent last week. The higher the price of a gilt, the lower the yield and vice versa.

A major liquidity boost came when the RBI bought securities thorough the open market operations, lending the market much-needed stability. “The yields have declined and this shows the control of RBI keep interest rates stable,” said N Subramanian, general manager of ICICI.

Estimates put the amount injected into the system through open market operations last week at Rs 3,800 crore. Even as call rates shot up to over 14 per cent due to a rise in demand for funds caused by advance tax outflows of Rs 7,000 crore, the central bank mellowed the rates by pumping in Rs 1,400 crore through a reverse repo auction.

The liquidity-management moves have come at a time when there is pressure on the central bank to bring down interest rates. Most companies want a bank rate cut, but some analysts say the RBI is justified in not reducing rates as the rupee is under pressure.

The rate-cut chorus has been building up against the backdrop of unmitigated misery for equity investors. Almost a fortnight since the World Trade Center demolition sent global stocks into an endless tailspin, there are few signs that the worst is over for bourses at home.

Brokers and analysts say the big losses on Wall Street and Asia on Friday have hardly given investors reasons to stay on board and not look for safe-haven options. The sellloff is, therefore, expected to continue this week.

There are many predicting a 100-200 point plunge in key indices like the sensex as US attacks unnerve the market.

The pessimism is deepened by the flight of foreign institutional investors (FIIs), who are believed to have been net sellers in equities and debt at Rs 159.9 crore and Rs 237.9 crore respectively for the week ended September 21.

Global gloom

Global markets seem set for another round of heavy losses in the week ahead, analysts predicted on Sunday. The sheer degree of last week’s selling has left many asking how it could go further. US shares shed 14 per cent by Friday’s close, ending their worst week since the Great Depression. European stocks fell to October 1998 levels.

Bank of England Governor Edward George added to the gloom on Sunday saying economic recession in Britain could not be ruled out in the short term.

   

 
 
JOB OVER AT HALDIA PETRO, SAYS MITRA 
 
 
BY A STAFF REPORTER
 
Calcutta, Sept. 23: 
Tapan Mitra, reacting to reports about his resignation as the chairman of Haldia Petrochemicals (HPL), today said he had been brought in to ensure that the project went on stream smoothly, and since that objective had been accomplished, there was no point in continuing in his post.

Sources said Mitra sent in his resignation to the government and the HPL board last week, seeking immediate release. “I was brought into HPL to oversee the project is commissioned smoothly. I have tried my best to deliver. Now with the commercial production in place, there’s no point to stick to the post,” Mitra said.

The former managing director of Indian Aluminium Company (Indal) was brought into the troubled HPL by the state government in 1998. He worked largely to pacify the three promoters of the project — The Chatterjee Group, West Bengal Industrial Development Corporation and the Tata — in crisis. His sudden resignation, sources said, will certainly make the situation a little more complicated, at least in the short term.

“The government has requested him to withdraw the resignation but he has refused. He has also informed the HPL board that he will not seek shareholders’ approval for re-appointment at the forthcoming annual general meeting although he is eligible for it,” they said. A notice on the resolution seeking his reappointment has already been sent to shareholders.

Sources close to the HPL promoters see Mitra’s resignation is a precursor to the state government’s pullout from the company.

“In all likelihood, the state government will sell its stake to TCG and the proceeds will be spent to promote HPL downstream projects as well as for the overall growth of the port town of Haldia,” they said.

   

 
 
REAL ESTATE FIRMS ON SHAKY GROUND 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, Sept. 23: 
Demand-whacked realtors in India are spooked by the vision of the death-and-glory boys of America playing their Rambo-style war games in the sub-continent to avenge the mayhem at Manhattan.

There’s a frisson of fear in the real estate business. “If America sends its troops into Pakistan and Afghanistan to flush out Osama bin Laden, the real estate business here will feel the heat because of India’s proximity to the world’s new war theatre,” said Manish Kashyap, head of corporate services in India for C.B. Richard Ellis.

The realtors are spooked by the thought that if the west’s commandos move into the region, multinational companies will hold off plans to invest in India, which is already struggling to attract foreign direct investment that has been estimated at a piffling $ 2.3 billion in Unctad’s latest report.

“Being an American company, we handle most of the overseas clients. None of them have yet had the time to react or call off commitments to India, but most definitely plans will be rescheduled. In another two weeks, we will be able to gauge how much of the business we stand to lose because of these attacks,” says Anurag Munshi, senior manager, research in Jones Lang LaSalle said.

Says Munshi, “It’s (postponing real estate plans) not a big deal in our business; it happens all the time. But if India gets involved in the war even indirectly, the MNCs will call off their plans completely.”

Real estate consultancy firms say no one has backed off on his commitments but questions of security are being asked. Munshi feels: “The firms will not actually hold back investment in long term but demands for safety may increase. There will be demand for more stand-alone spaces away from the central business district (CBD) areas.”

The security demand from the attacks may even translate into increasing business in terms of disaster recovery centres and data recovery centres.

Sanjay Verma, director of Cushman & Wakefield, agrees with the general feeling that though the immediate tendency is to restrain investment (including real estate), it won’t have a long-term impact unless there is political unrest.

“In case there is a long term impact, the prices of CBD areas will either soften or stagnate. Conversely, we might see a surge in prices in specific locations because of security concerns.”

Both Verma and Munshi feel that it will take at least six months before a proper assessment on investment flows and consumer interest in real estate can be made.

   

 
 
ATTACKS CLOUD SIGNS OF INDUSTRIAL REVIVAL 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept. 23: 
The slump in manufacturing and troubles in other sectors continued in the second quarter of this fiscal though there were some areas which showed signs of revival, says the Ascon study compiled by CII.

The study, which tracks trends in April-September 2001, has been compiled before the September 11 hijack attacks in the US roiled global markets and prompted a scaling down of growth forecasts. To that extent, the findings present a brighter picture.

The study treats growth rates above 20 per cent as excellent, between 10-20 per cent as good, 0-10 per cent as moderate and those below that as negative growth rates. Of the 119 sectors surveyed, 10, including motorcycles, personal computers and cellular services, logged excellent growth, 22 high growth, 51 registered moderate growth and 36 suffered negative growth rates.

Passenger car production grew 12 per cent in April-September as against minus 6 per cent last year.

Production of air-conditioners and water coolers grew 12 per cent (22 per cent) and 5 per cent (12 per cent) but washing machines were down 5 per cent.

   
 

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