Border heat roasts markets
FIIs lose taste for debt
Ministers mix business with Pak bashing
Variable deposit rates flop
Car sales run out of steam, skid in April
Alliance Capital warms up for equity fund launch
New Usha Beltron plant in Jamshedpur
Uri unit battles bullets for power
NIIT gets a new look
Foreign Exchange, Bullion, Stock Indices

 
 
BORDER HEAT ROASTS MARKETS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 23: 
The clock turned back six months for bourses today as they squirmed on fears that the government was sharpening its claws for a border bout.

Dalal Street was in the grip of a war hysteria with investors scampering into safe-haven assets out of shares. The Bombay Stock Exchange (BSE) sensex shed 61.44 points at 3,114.05 — the lowest level in six months. The rumble of troops also drove down the rupee to a new low of 49.05 in the inter-bank forex market.

The 30-share index lost 328.44 points, or a whopping 10.55 per cent, in the space of a week when it closed today after eight straight days of losses. An eye-popping Rs 5,000 crore was shaved off the sensex’s market capitalisation, which plunged to Rs 2,47,565 crore. Also, all stocks listed on the exchange were worth Rs 7,000 crore less today, at a value of Rs 5,94,595 crore.

Brokers said the entire attention of the market was focused on developments in Jammu and Kashmir, where Prime Minister has been touring, and the developments on the border. “Everybody was nervous and most didn’t want to even hold on to stocks, forget buying them at valuations which seem attractive. Bargain hunters are few and far between,” a dealer said.

Reliance group companies continued to bear the brunt of investor panic, finishing around 2 per cent lower. Other counters that finished weak included Hindustan Lever and ITC.

However, some shares bucked the selloff. These included Trent, Glaxo and Polaris, which topped the turnover chart.

Rupee at 49.05

In the forex market, fears that India and Pakistan would cross swords sent the rupee plunging to a new closing low of 49.05 against the dollar. Importers scooped up greenbacks as nationalised banks stayed away.

At 49.04/05 per dollar, the rupee was down more than six paise over Wednesday’s finish of 48.97/98. The previous record closing low was 49.02/03, plumbed on May 15.

   

 
 
FIIS LOSE TASTE FOR DEBT 
 
 
BY ANIEK PAUL
 
Calcutta, May 23: 
With war clouds hovering on the horizon and the rupee rapidly losing ground against the dollar, foreign institutional investors are making a beeline out of the debt market.

The foreign institutions, which invested close to Rs 650 crore in January and February in debt instruments, sold securities worth Rs 595 crore in about two-and-a-half months since March.

Most of the selling came in the last three weeks. Since the beginning of May, the foreign institutions have dumped securities worth Rs 407.40 crore. Debt market operators say the heavy selling was primarily due to the fall of the rupee against the dollar.

Investments made by the foreign institutions in India depreciate with a weakening rupee. In the last three weeks, the rupee fell by over 10 paise against the dollar. Over the last seven years, the rupee depreciated by about 6.2 per cent annually.

The six-month forward dollar is trading at an annualised premium of 6.74 per cent, which implies that the market expects the rupee to slide by that margin over the next half year despite the fact that the country has a reserve of $ 56 billion.

The rampant selling by the foreign institutions triggered a sharp fall in bond prices. The price of the benchmark 10-year paper has fallen by over Rs 5 since the beginning of May.

The price of securities of longer maturity — say, the 10.25 per cent 2021 paper — has fallen by close to Rs 10. Experts say the party in the gilt market is over.

The bond market started falling after the credit policy. The market had expected a sharp rate cut from Reserve Bank governor Bimal Jalan, but it did not happen.

“The withdrawal started — though in a small way — after the budget itself. That was due to the unrest in Gujarat. The selling gained momentum after the credit policy, but once the border heated up, the market was gripped by panic,” brokers said. In April, the foreign institutions offloaded debt instruments worth Rs 124.60 crore, and in March, they sold securities worth about half that amount.

Withdrawal by the foreign institutions was accompanied by a fall in the turnover of the National Stock Exchange’s wholesale debt market. From a high of Rs 4,404.93 crore in February, the turnover of the market fell to Rs 2,434.25 crore in March. Volumes recovered a bit in April and the market posted a turnover of Rs 3,222.24 crore during the month.

   

 
 
MINISTERS MIX BUSINESS WITH PAK BASHING 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, May 23: 
As war clouds loom on the sub-continent, the government’s economic ministers are fanning out, ostensibly on business trips, across the globe to convince the world of India’s position on Pakistan.

Civil aviation minister Shahnawaz Hussain, sent to the Gulf to tie up bilateral air links, has been holding meetings with the top leadership in the Emirates to explain why India is on a collision course with Pakistan.

Hussain has been picked for the job as he has a rapport with Gulf leaders, said top sources in the government. India has strong economic links with Gulf nations like United Arab Emirates, a country where several millions of Indians are now eking out a living.

His colleague in the textiles ministry, Kanshi Ram Rana, is headed for Spain tonight, ostensibly to inaugurate an international conference on wool. However, he admitted he would be informally explaining India’s stand-off with Pakistan. Spain currently holds the rotating presidency of the EU, which is India’s largest trade partner.

Rana, who will stop in Austria and the UK on his way, is taking with him a curious exhibit — a prayer mat woven in Kashmir — to underline just how well the Himalayan state bonds with India. At the same time, Speaker Manohar Joshi is believed to be leaving for Poland on a similar mission.

The articulate information and broadcasting minister, Sushma Swaraj, in France to attend the Cannes film festival, has also been asked to explain India’s stand to French leaders, and sound the right quarters. Swaraj is quite adept at this kind of information dissemination. Recently, she chaired a hush-hush meeting of ministers and top officials, who were trying to contain adverse reports on the Gujarat riots.

Of course, the government does not depend on its diplomatic corps alone to sell its line in nations that really matter — the US and Russia. These are places where the foreign minister himself is shuttling around.

   

 
 
VARIABLE DEPOSIT RATES FLOP 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 23: 
Variable deposits, or those having a flexible interest rate system, a concept propagated by the Reserve Bank of India (RBI), is finding no takers among the banking community on fears of a negative response from retail depositors.

Sources said that the idea, proposed by RBI governor Bimal Jalan in the recent monetary and credit policy, is yet to take off in view of depositor difficulties, even as many maintain that the move would impart flexibility to the interest rate structure.

Domestic banks have long been witnessing a situation of lowering spreads in a falling interest rate regime, where going ahead with reduction in deposit rates is being seen a more difficult proposition than bringing down the lending rates.

Sources here added that the situation has compounded further given the poor industrial conditions with blue chips now demanding cheaper interest rates.

Nationalised banks like Corporation Bank, for instance, are now looking at sub-PLR lending on the asset front to lure blue-chips. While the bank has already disbursed close to Rs 2,000 crore in the form of such advances, officials said a principal disadvantage with this practice was that it gave way to lower yields.

“Therefore, such advances are not the mainstay of the bank. In such a scenario, offering a flexible interest rate system for deposits looks desirable. However, its introduction seems difficult as depositors are comfortable with stable interest rates,” said a senior official from a leading state-run bank.

He added that given this mind-set among depositors, it would take at least six months for the concept to find a place in the country’s banking system.

“Banks should work out a formula which would make the scheme more attractive to retail depositors. It also calls for a concerted education to be imparted among depositors, citing its benefits,” a banker pointed out, citing the case of one of the leading private sector banks which had already introduced a flexible interest rate for deposits, only to find a lukewarm response.

Presenting the monetary policy late last month, Jalan had suggested the creation of a variable interest rate system for all new deposits at six-month intervals, while at the same time offering the fixed rate option to depositors.

Jalan said that banks may offer longer term deposits with six-monthly reset conditions and at the same time offer a fixed rate for similar maturity, the interest rate on which may be higher or lower depending on the period of deposit and the bank’s perception regarding inflation, as also its interest rate outlook over the longer period. He said commercial banks should also consider waiving penalty for premature withdrawal if the deposit is renewed at the variable rate.

   

 
 
CAR SALES RUN OUT OF STEAM, SKID IN APRIL 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 23: 
After six months of gains, passenger car sales slipped 18.4 per cent in April at 3.71 lakh against 4.55 lakh in the same month last year. The figures include passenger and multi-purpose vehicles.

In contrast sales growth in January had been 3.1 per cent, while February was the best month with a record figure of 16.5 per cent. That tempo was lost in March, when sales growth slowed to a modest 0.48 per cent.

“If the January-April is taken as a four-month period, the growth has been better in 2002 compared with the trends in the same period of 2001. February had been an exceptionally good month, so this fall in sales is perceived as an averaging-out phenomenon for the industry. Moreover there has been some restructuring going on in Telco and Maruti, which saw their plants closed for a week. This stopped deliveries for some time, driving down the growth figure further,” SIAM said in its report on sales released today.

A better explanation for the slide is that since February saw a pre-budget spike in sales — potential customers rushed into purchases fearing higher taxes — it is only natural that the pace stabilises at normal levels.

In the new classification, cars up to 3400 mm have been slotted as minis.

Only Maruti Udyog fits into this category with its offering of Maruti 800 and Alto. The largest car maker sold 71,80 cars in this segment in April.

In the compact segment (3401-4000mm), which includes Fiat (Palio), Hyundai (Santro), MUL (Zen) and Telco (Indica), sales went up to 19,077 in April 2002. Maruti lead the category by selling 7,626 cars, followed closely by Hyundai with 5,517 cars and Fiat with 4,103 cars.

In the mid-size segment (4001-4500 mm), total sales stood at 6569 units, the bulk of it coming from Hindustan Motors, which sold 1,484 Mitsubishi Lancer units.

Trailing it were Hyundai Accent with 1,425 units and Ford Ikon with 1,303 units. MUL took a beating in the segment with only 743 units of Esteem sold.

In the executive section (4501-4700mm), the two players, Daimler Chrysler and HM, could only sell 37 cars.

However in the premium segment (4701-5000mm) or the D-segment, 390 cars were sold. Hyundai’s Sonata led the race with sales of 209 units. In the luxury segment, classified as cars above 5001 mm, the single offering from Daimler Chrysler— S Class — sold only three units.

For multi-utility vehicles, classified as those with a seating capacity of eight and more, sales in April were pegged at 4,340 units compared with 7,842 vehicles in the same month of 2001 — a 44 per cent decline. Mahindra was the leader with 2,338 vehicles, followed by Telco’s 1,382 units.

Sales of commercial vehicles, heavy and light vehicles taken together, rose by 38 per cent to 10,989 units from 7,925 units in the year-ago month.

In the two-wheeler category, motorcycles grew by 48.52 per cent with 28.63 lakh units sold in April 2002 compared with 19.27 lakh units sold in April 2001.

However, scooter sales fell by 7.88 per cent as the number of scooters sold in April 2002 was 69,728 units against a sale of 75,694 units in April 2001.

   

 
 
ALLIANCE CAPITAL WARMS UP FOR EQUITY FUND LAUNCH 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 23: 
As investor preference shifts towards equity funds from debt funds in its quest for attractive returns, Alliance Capital Mutual Fund (Alliance), the private sector mutual fund, is planning a new equity fund after a gap of three years.

The new equity scheme that Alliance proposes to unveil later this year is not likely to be a plain vanilla scheme, says Nikhil Johri, chief executive officer of Alliance. It will include certain innovative aspects that are new to this mutual fund industry, he said. The documents are yet to be filed with the Securities and Exchange Board of India (Sebi), and therefore he was a little cagey about revealing the salient features of the scheme.

Alliance, with an investible corpus of over Rs 3000 crore, had last floated an equity scheme in 1999. Called the Alliance Sector Select Series, the sector-specific fund, had offered three schemes—Alliance New Millennium Fund, Alliance Buy India Fund and Alliance Basic Industries fund.

The funds, which were launched at the height of the bull run, saw their net asset values (NAVs) plunging after last year’s stock scam and September 11 attack in the US.

For instance, the New Millennium Fund saw its NAV touching a dismal Rs 2.30 per unit. However, a restructuring exercise saw its NAV again regaining part of its lost ground and is currently quoting around Rs 5.

In April, Alliance’s investor purchases stood at Rs 80 crore which is the highest in the industry. According to Johri, around Rs 25 crore were internal switches from debt funds to equity funds.

Perhaps, this trend must have encouraged Alliance to look at equity funds as very few new schemes are in the marketplace now, say mutual fund experts.

According to Samir Arora, head, Asian emerging markets in Alliance, “the indian market continues to disappoint and we continue to remain bullish”.

Alliance is known to be an aggressive investor in the markets. The fund has, through its schemes, taken more than five per cent stake in Trent Ltd, Pantaloon Fashions and Balaji Telefilms.

According to Johri, a fund to be profitable has to have an investible corpus of a minimum Rs 2000 crore.

A recent report on Indian mutual funds India has highlighted the huge scope that remains untapped.

However, it is early days yet for mutual funds to make forays and establish offices in semi-urban towns as mentioned in global rating agency Moody’s report on Indian mutual funds.

   

 
 
NEW USHA BELTRON PLANT IN JAMSHEDPUR 
 
 
BY A STAFF REPORTER
 
Calcutta, May 23: 
Usha Beltron (UBL), the Rs 1,500-crore flagship of the Jhawar group, plans to set up a sponge iron plant at its Jamshedpur unit at an investment of Rs 75 crore.

The new plant will have a capacity of one lakh tonnes of sponge iron per annum.

UBL joint managing director P. Bhattacharya said the financial closure of the project is likely to be completed shortly. “The project of this magnitude will take around 18 months to complete,” he added.

Explaining the reason behind this fresh capital investment, Bhattacharya said the company currently outsources about 35 per cent of its need for sponge and pig iron for its steel making facility in Jamshedpur.

“Outsourcing is not always a very comfortable proposition as the market for these products always fluctuates widely. Hence, our plan is to increase our own capacity so that we don’t have to depend much on outside procurement,” he said.

The company’s average outgo on procurement of such raw material is around Rs 65 crore.

Bhattacharya said the company would be able to reduce its overall cost of production substantially once this new facility comes up.

Meanwhile, UBL promoters are considering a plan to restructure the company’s equity in order to reverse the adverse debt-equity ratio. The company’s debt stands at Rs 890 crore.

“We are actively considering an equity restructuring plan which will hopefully be finalised very soon,” Prashant Jhawar, vice president, said.

Jhawar, while hinting at the possible rise in the promoters’ stake in the company from the current level of 25 per cent, said, “Any equity infusion is certainly going to have an impact on the current holding pattern.” Jhawar has also indicated that the company may try to rope in financial partners, such as venture capital funds, for acquiring an equity stake.

UBL suffered a massive erosion in its profitability for the year ended March 31. Net profit stood at Rs 6.03 crore on a turnover of Rs 922.28 crore, as against a net profit of Rs 48.81 crore posted on a turnover of Rs 1,095.72 crore in the previous 15-month period. It has declared a dividend of 10 per cent.

Bhattacharya explained that the previous results were not only for a 15-month period but also included earnings from extra-ordinary items worth Rs 25.38 crore. The company’s export earnings last year stood at Rs 170 crore.

   

 
 
URI UNIT BATTLES BULLETS FOR POWER 
 
 
FROM M. RAJENDRAN
 
New Delhi, May 23: 
Barely 25 kilometres from a line of control that simmers at most times and explodes occasionally are 300 gritty professionals who run the gauntlet to ensure that Delhi is not starved of electricity. Many say National Hydroelectric Power Corporation’s (NHPC) Uri project on the Jhelum river in Jammu and Kashmir’s Baramulla district generates more courage than power. Seventy kilometres from Srinagar on the National Highway 1A, the plant is within spitting distance —7 to 8 kms — of Pakistani fighter jets that could be looking for sitting-duck on this side.

But the 480 MW Uri unit is no easy prey. Its powerhouses hum deep inside the tunnel of a 3000-ft hill, the project has been weathering the hail of 100-150 shells that are lobbed from across the international border. In recent weeks, the shelling has intensified. “A lady officer was injured last week when shells pierced her body. Now, she is recovering, but there have been no deaths.”

NHPC spends Rs 6 crore on its security annually, much of it going into underground bunkers for men and machines.

“We have launched our action plan in anticipation of a prolonged shelling or war. This is to ensure that we generate power round-the-clock and through seasons. The project area is prone to incessant rains and heavy snowfall for three to four months in a year, so the working season is eight-nine months,” sources said.

Once on a war footing, the projects stocks up on a month’s provisions and beds inside underground four-unit powerhouse that generate 120 MW each. Around 200 employees work in shifts, while families above can scamper into the 11 specially built bunkers in case of heavy firing or shelling. If the situation escalates into a war, the families are moved to a safe place in Ghantamula, which is another 30 kilometres from the project. While all this happens, generation never stops.

“Even during the Kargil war, we witnessed heavy shelling from both sides, with splinters scarring our office walls. However, the generation continued,” sources said.

The Uri project has helped light up the economy of northern region. Its power is wheeled through the Northern Grid to J&K, Himachal Pradesh, Punjab, Haryana, Rajasthan, Uttar Pradesh, Uttaranchal and the two union territories of Delhi and Chandigarh. “The capital, where the current peak-hour demand is 3000 MW, gets 53 MW daily from the plant,” NHPC sources said. Delhi even saves money, purchasing the power at Rs 1.50 per unit against the Rs 1.57 that it has to pay NTPC.

The Rs 3,300-crore Uri plant can generate 2,663 million units (MU) every year. Built on a turnkey basis over six years by a Swedish consortium, it has battled the wave of militancy since it went on stream in 1997.

   

 
 
NIIT GETS A NEW LOOK 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 23: 
NIIT education centres are going colour. Flaming orange, sunflower yellow, parrot green and jet black—are some of the colours that will replace the old drab white-an d-blue walls. Add to it electronically controlled doors and lights that automatically switch off when all the students leave the room, and you have a new-look NIIT.

NIIT, a pioneer in IT training in India since 1981, had transformed to an IT solutions company during the software boom. But, with various courses witnessing a drop in enrolment, NIIT seems to be adopting all the tricks available to woo students.

The latest initiative will add colour to depict the vibrancy that will be the hallmark of the place. “This is to give an experience of computer education that has an aesthetically refreshing look,” said Pradeep Narayanan, head of NIIT’s education business.

The company recently ventured into teaching the art of speaking English the ‘US style’ with an eye to retaining its market share in the dwindling IT education sector and has invested Rs 50 crore for the programme.

NIIT has launched the country’s largest IT education centre in South Extension in New Delhi. The 12,000-sq ft state-of-the-art centre has 12 computer labs with nearly 300 computers. The centre integrates counselling and aptitude-testing areas with a student services one, that includes a touch-screen internet kiosk, a library and a cafeteria.

Speaking at the launch of the new centre, Narayanan said, “Through the new centre, we continue with our endeavour of providing quality IT training that we are offering through over 2500 centres in 38 countries.”

“We at NIIT always strive to give the very best to our students. The South Extension centre will cater to the diverse IT training needs of different segments,” Narayanan added.

The new centre will cater to students seeking careers in computers and executives wishing to imbibe new IT skills on one hand, and school children and housewives having their first brush with computers on the other.

“Computers have emerged as the ‘coolest’ career in an MTV study covering 1,619 young Indians between the age groups of 15-24 in six Indian metros and we introduced new products like CareerEdge that go with the aspirations of today’s youth seeking any career,” said Narayanan.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 49.06	HK $1	Rs.  6.20*
UK £1	Rs. 71.63	SW Fr 1	Rs. 30.75*
Euro	Rs. 45.39	Sing $1	Rs. 26.90*
Yen 100	Rs. 39.33	Aus $1	Rs. 27.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5400	Gold Std (10 gm)Rs. 5270
Gold 22 carat	Rs. 5100	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8250	Silver (Kg)	Rs. 8170
Silver portion	Rs. 8350	Silver portion	   NA

Stock Indices

Sensex		3114.05		-61.44
BSE-100		1579.76		-24.48
S&P CNX Nifty	1026.75		-18.55
Calcutta	 108.96		- 0.96
Skindia GDR	 517.31		- 8.43
   
 

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