Indian biz industry at gunpoint of terror: Experts

36 hours after terrorists struck in the heart of Mumbai in planned and synchronized attacks, its important to understand how these attacks will impact voters' trends ahead of elections next year. What impact will it have on the business climate and will it hit international capital flows? Experts like Vinod Sharma, Political Editor, The Hindustan Times; James Lamont, Bureau Chief-Delhi, The Financial Times; and MJ Akbar, Chairman and Director of Publications, Covert, delve deeper.

  

James Lamont, Bureau Chief-Delhi, The Financial Times, said globally, the attacks are perceived to be targeted at the business interests in the country and Mumbai as a financial centre.

 

India has been suffering from global crisis; and last thing that needed to add to the fire was this attack, which has escalated terror threats in India. “The Taj Hotel in Mumbai is where every big industrialist or cheap executives of any global companies, that has anything to do with India, has possibly stayed in that hotel, so its been seen as an attack on business interest and Mumbai as a financial center. Thus international businesses will now review their India plan,” he added.

 

Vinod Sharma, Political Editor, The Hindustan Times, said, as far as rural India is concerned it's the real India which is the bigger India, so inflation and unemployment will be major issues going forward. But the country should fight unitedly and keep aside their internal differences.

 

India’s economic welfare is more important than fighting terrorism, as the economic crisis is impacting huge masses of people, he said.

 

On similar lines, Lamont said expatriates working in Mumbai will be jittery. However, international agencies around the world will help India, as threat is global, and not just Indian.

 

He feels the security and infrastructure has to be tightened and improved, but whether the city authorities will learn from lessons of these attacks needs to be watched.

 

Meanwhile, Sharma said, terrorist attack is aimed at gathering sustained publicity for long time. Terrorists have targeted landmarks frequented by foreigners; thus capital inflows will be brought to its knees in due time if nothing done.

 

Impact of terror attack on elections:

 

Sharma said terrorism will impact voters’ mind in big cities like Mumbai and Delhi. “Political parties should let voters know that they are serious about fighting terror. Inflation and unemployment will be major issues going forward, but the country should fight unitedly keeping aside their internal differences. India’s economic welfare is more important than fighting terrorism, as the economic crisis is impacting a large mass of people.”

 

This view is also shared by Akbar. He feels the Congress may be headed for a meltdown in Maharashtra. The balance of Congress may change. “I imagine the congress might do better in Orissa, Kerala, but in most sage the congress would loose a distinct 2-3%, which can be a very decisive vote. It will certainly lose in the Hindi heartland and this would have a very big impact on UP, for instance.”

 

He said it is a combination of anti incumbency over ten years, plus rising consolidated anger against completely ineffective government both in the state and in the centers.

                                               

Sharma said, “I don’t think any government which gets elected to power in India or anywhere else in the world to give a 100% guarantee that there shall be no terrorist attacks and if there are any terrorist attacks then there could be conviction which comes only with evidence."

 

The kind of police system that we have inherited in this country and the training of this system which will take enough time, conviction again is a major problem, even if we reduce the political interference element to a large extent, so it’s a battle that the country has to fight unitedly and not fight over so to speak, he added.

 

Om similar lines, Lamont said, the Prime Minister was talking about possible links with neighbors and by that he means Pakistan and Bangladesh, but whether it is an Al-Qaeda attack which has an international network right across the world or this is an attack similar to those attacks on Western Capital is still to be known, but it has escalated the terror threats in India. 

Six hostages killed at Oberoi Trident: NSG

The National Security Guard (NSG) and the Marine Commandos early on Friday rescued 40 guests from The Trident Hotel (formerly known as Oberoi), 36 hours after they were taken hostage by terrorists believed to be affiliated to Lashkar-e-Toiba (LeT).

A heavy exchange of fire between the security personnel and the terrorists was reported soon after the rescue. One terrorist was reportedly killed in the crossfire.

An NSG official said at least six hostages were feared dead.

“Terrorists don’t want to listen to anything. They are not ready to surrender. They are threatening to kill all the hostages,” he said.

At least 100 persons, including a World Bank official, are still suspected to be trapped inside the hotel.

The rescued hostages, many of who are foreign nationals, were swiftly escorted to a private bus, as anxious relatives and family members present outside the hotel heaved a sigh of relief.

Police had to resort to lathi charge to bring the crowd of curious onlookers under control.

The National Security Guard and the Marine Commandos are into the final assault against terrorists at the Oberoi hotel. The assault team has sanitised parts of the Oberoi Trident.

Another NSG official informed CNN-IBN that room intervention operation was underway at the Oberoi, where two more floors are yet to be sanitised.

“A room intervention drill entry is made in every room, following which we check each and every thing without any collateral damage. It takes about four to five minutes,” he explained.

"Final assault is yet to happen," he added.

Meanwhile, Army sources claim that the terrorists were provided commando training by Pakistan Army. They also suggested that the terrorists were provided boats and other logistical support by the Mumbai underworld.

Terror strikes to hit long-term FIIs funding: Nirmal Jain

Growth in gross domestic product, or GDP, for Q2 FY09 has come in at 7.6% as compared to 9.3% YoY, and 7.9% QoQ. A CNBC-TV18 poll had estimated it at 7.25%.

 

Commenting on similar lines,

Nirmal Jain, Chairman and Managing Director, India Infoline, said the market has already factored in a lower gross domestic product or GDP, growth for Q3 and Q4 FY09. “However, the current numbers are better than street expectations.”

 

He said there is no immediate impact of terror attack, but in the long run FIIs will react. “Given the terror attacks, we need tough government measures to assure investors, as FIIs won't put in money in India easily, despite good economic data.”

 

He feels hotels, airlines and tourism are likely to be in for a few tough quarters.

 

Here is a verbatim transcript of the exclusive interview with Nirmal Jain on CNBC-TV18. Also watch the accompanying video.

 

Q: 7.6% is not a bad number for Q2 but we haven’t had any great reaction from the market. Do you think the market is overwrought about Q3 and Q4?

 

A: The market reaction is not there, because the market sees by whatever is happening in Mumbai and the terrorist attack on the city. If you look at the last two days Asian markets and the US markets, they have done well, but Indian markets have been flat. Primarily, this underperformance is cognizance of what is happening in the business capital of the country and at this point in time market volumes are low and 7.6% in Q2 is fine. But, the market probably has factored in declining Q3 and Q4 and this always comes in the lag effect, as one probably would expect much fluent growth in Q3 and Q4. The market is slightly positive than what was expected, so I don’t think there is much of a reaction to this.

 

Q: What about the events of the past few days? Do think there might be any long-term impact for our market or as in the past we will manage to put it behind us?

 

A: There will be some impact, in fact India’s business is conducted in Mumbai and Mumbai’s business is conducted in Taj and Oberoi, so we might be naïve to assume that there will be no impact. But we have seen in the past in China there were events like Tiananmen Square, investors even left it behind after sometime. So if the government is able to come and demonstrate that we can tighten our security, we can make the city much safer, then probably investor will look back at this country. There will be definitely some impact in this country for next two to three quarters, because most of the foreigners, who come for Foreign Direct Investment (FDI) or Foreign Institutional Investor (FIIs) investment or even for conferences, they stay in these hotels and such negative publicity in terms of all the international newspapers headlines are about Mumbai.

 

There will be some impact and impact wouldn’t be felt in copule of days, but next couple of quarters you will see that impact becomes visible in the foreign investment in the country. Markets won’t react, foreigners won’t react by putting in more money so easily, positive news can come in the form of much better agricultural production, may be oil price cut, inflation numbers coming down, Reserve Bank of India (RBI) bringing down interest rates. So even all these positive news will not attract much of foreign capital as it otherwise would have in the next few quarters.  

 

Q: What do you do with the whole infrastructure space with the specific relevance to the kind of growth we have seen and the talk that there has been of some kind of an infrastructure spend or stimulus for the sector?

 

A: I think the government is facing elections in next few months and also the entire focus politically will be on the terrorist, and they would not like to lose much vote to opposition based on all the developments. So, infrastructure will take backseat for sometime. A lot of spending would come from public sector and government on infrastructure ought to have come in next few quarters, but that probably won’t happen. So, one will wait for elections to get over and new government to come in before we look forward to flow of investment in the infrastructure sector.

Mumbai terror to impact capital flows: Mark Konyn

Mark Konyn, CEO, RCM, a company of Allianz Global Investors, said investor sentiment will be hit in the short-term because of the Mumbai terror strikes. "Since foreigners have been targeted, it might have a dampening effect on tourism. The overall perception towards India will be hit and international capital flows will be under significant pressure."

 

Here is a verbatim transcript of the exclusive interview with Mark Konyn on CNBC-TV18. Also watch the accompanying video.

 

Q: Give us a word on the kind of terror attacks you have been hearing of and reading about in Mumbai and whether you think that is going to make any medium-term impact or long-term impact on FII sentiment?

 

A: Certainly, and the world has been shocked by the images that we have been getting out of Mumbai.

 

Typically, when we have seen similar outrages in other parts of the world, it does immediately hit investor sentiment but depending on how quickly things get back to normal, it proves to be typically quite short lived.

 

The worrying aspect here is that uncharacteristically these attacks and outrages have been targeted directly at foreigners and venue sites which are frequented by foreigners in Mumbai. So, I think that is one aspect that foreign visitors and travellers will be looking at.

 

It may have a dampening effect in terms of how quickly international investors come back into the market. Of course, most international investors have pulled back significantly this year in any event with some USD 13.5 billion or so already withdrawn from the Indian market.

 

Q: Relatively speaking, in a world which is just basically trying to get back on its feet in terms of liquidity, do you think it puts India to relative disadvantage or do you think that would be overstating the case?

 

A: It clearly is not going to help overall perception and risk appetite, but it is difficult to assess in these types of situations. However, in any event, international capital flows, we are talking about the equity markets, are already under significant pressure. We have got the threat of deflation now as a result of all this deleverage which is at play in global markets.

 

We have seen central banks internationally trying to throw a lot of money at the problem, trying to improve liquidity, certainly take positions from the government’s perspective to improve solvency and the net effect is quite marginal. This is because of the tremendous amount of leverage that was built up in the financial system particularly in the United States; it is starting to unwind. So as liquidity looks like it is improving, corporations, individuals, financial institutions, in particular, are taking the opportunity to try and draw down some of that debt and reduce their obligations.

 

The net result is that we are not seeing any flow through in terms of confidence, in terms of the way the banks are lending to each other and to end-users and the way in which credit markets are behaving generally.

 

So without that improvement, international capital flows are going to be pretty scarce over the next six months, we would estimate. Thus, in that environment, emerging markets generally don’t perform well and as we know, the Indian economy has been quite extensively dependent at the margin on international fund flow.

 

So, clearly they are going to be lacking anyway. To what extent this outrage that we have seen over the last few days in India has an impact that remains to be seen but one would expect it not really to disrupt the picture too significantly and certainly not longer-term. We wouldn’t expect to see any disruption. The issue really remains how quickly can the world economy get back on its feet.

GMR Infrastructure plummets 5.2%

GMR Infrastructure had touched an intraday high of Rs 54.95

and an intraday low of Rs 51.50. At 12:22 pm, the share was quoting at Rs 51.90, down Rs 2.9, or 5.29%.
 
It was trading with volumes of 373,797 shares. On Wednesday the share closed up at Rs 54.80.

Share Price Movement During The Last 12 Months
Period	Price	Latest Price	Gain/Loss (Rs.)	% Gain/Loss
3-Days	53.00	51.90	-1.10	-2.08
5-Days	54.70	51.90	-2.80	-5.12
7-Days	53.40	51.90	-1.50	-2.81
15-Days	69.85	51.90	-17.95	-25.70
1-Month	49.50	51.90	2.40	4.85
3-Month	101.10	51.90	-49.20	-48.66
6-Month	134.00	51.90	-82.10	-61.27
9-Month	182.90	51.90	-131.00	-71.62
1-Year	242.60	51.90	-190.70	-78.61

 

 

 

 

 

 

 

 

 

 

Currently -80.68% below the 52-week high of 268.70

Currently 13.82% above the 52-week low of 45.60

Aban Offshore declines 4.3%

Aban Offshore had touched an intraday high of Rs 706.40 and an intraday low of Rs 667. At 12:27 pm, the share was quoting at Rs 675.90, down Rs 30.5, or 4.32%.

It was trading with volumes of 46,489 shares. On wednesday the share closed down 0.18% or Rs 1.25 at Rs 706.40.

Share Price Movement During The Last 12 Months
Period	Price	Latest Price	Gain/Loss (Rs.)	% Gain/Loss
3-Days	759.65	675.90	-83.75	-11.02
5-Days	746.35	675.90	-70.45	-9.44
7-Days	782.00	675.90	-106.10	-13.57
15-Days	974.15	675.90	-298.25	-30.62
1-Month	652.85	675.90	23.05	3.53
3-Month	2143.35	675.90	-1,467.45	-68.47
6-Month	3883.50	675.90	-3,207.60	-82.60
9-Month	3826.30	675.90	-3,150.40	-82.34
1-Year	4775.20	675.90	-4,099.30	-85.85

 

 

 

 

 

 

 

 

 

Currently -87.48% below the 52-week high of 5,400.00

Currently 10.8% above the 52-week low of 610.00

Buy JMC Project, target of Rs 97: KRChoksey

KRChoksey Research has maintained its buy rating on JMC Projects (India) with a target of Rs 97 in its November 17, 2008 research report. "Company’s sales increased by 76.4% y-o-y to Rs 325.5 crore. The PAT was flat at Rs 6.8 crores. We have reduced our sales estimates for FY09, as there is no visibility of fresh order inflows. However, we anticipate order execution will be at expected pace. The EBITDA margins have been revised downward, mainly due to an increasing trend in construction expenses."

"Interest cost estimates have been revised upwards due to an increase in interest cost during the quarter. It will impact the PAT margins of the company by 27bps. We have given additional liquidity discount of 10% to company’s multiples. We therefore downgrade our target price to Rs 97, maintaining a BUY rating, with an upside potential of 51.5%," says KRChoksey's research report.

Buy Axis Bank on declines: Baliga

Ambareesh Baliga of Karvy Stock Broking is of the view that one can buy Axis Bank on declines.

Baliga told CNBC-TV18, "In Axis Bank one should look at lower level and buy more because I don’t see an issue here; people believe that there could be an issue with the SME sector where Axis Bank has an exposure but clearly looking at the performance, which it has given in the past I don’t see the NPA’s rising much more from here and there could be possibly a rise of 0.2 or 0.3% but there is already there in the price to a very large extent, so if it falls about 5% to 8% from here you should try and average out and look at the next up move, which possibly is around 9-12 months away."

Buy HDIL at lower levels: Bose

Technical Analyst, Rajat K Bose is of the view that one can buy HDIL at lower levels.

Bose told CNBC-TV18, "Among all the real estate stocks, HDIL stands as the best bet there. You can buy at lower levels expecting a bounce. But other than that if you take Unitech for instance my feeling is that Unitech still has far more downside in the sense that if it were to break Rs 39 levels, then it can break the earlier low and the projections that can be made on the charts, is actually suggesting that somewhere between Rs 20-50, this sock might find a bottom, although that might sound a bit scary but that is the kind of technical projection you can make."

He further added, "If I have to trade real estate stocks at all, then I would rather prefer HDIL because that has the best possibility of giving a bounce on the upside. Although currently I would not be looking at it may be intra-day there would be a good bounce in HDIL today, but as I said that may be I would be looking at them towards the end of the week or may be early next week, then they might offer even better opportunities."

Disclosure: It is safe to assume that analyst and his clients may have an investment interest in the above stock/sector.

Buy HCC, target of Rs 60: Motilal Oswal

Motilal Oswal has maintained its buy rating on Hindustan Construction Company (HCC) with a target of Rs 60 in its November 12, 2008 research report. "We expect HCC to report net profit of Rs 844 million in FY09 (a downgrade of 21%) and Rs 1.1 billion in FY10 (a downgrade of 37%), largely driven by slower execution and increased interest costs. This translates to an EPS of Rs 3.3/sh in FY09 (up 19% YoY) and Rs 4.4/sh in FY10 (up 34% YoY)."

"Based on SOTP valuation, we arrive at a price target of Rs 60/sh comprising: core business at Rs 35/sh (8x FY10E), Lavasa at Rs 20/sh (50% discount to NAV), Vikhroli Corporate Park Rs 5/sh (25% discount to NAV). HCC is trading at reported PER of 15.2x FY09E and 11.3x FY10E. Maintain Buy," says Motilal Oswal's research report.

Buy ITC: Motilal Oswal

otilal Oswal has maintained its buy rating on ITC in its November 5, 2008 research report. "High conversion of plain to filter is a big positive and concern of a sharp volume decline has been arrested. Margins are expected to improve as the full impact of price increase will be reflected in 3QFY09 onwards. New FMCG business
would continue to remain under investment mode and is likely to post a loss of Rs 4 billion in FY09."

"Management has indicated new personal care launches in 4QFY09. Operating margins in the Paper & paperboard segment are expected to improve in the coming quarter as there is a decline in coal prices and 120000 TPA pulp units capacity will get stabilized. New 100,000 TPA writing and printing paper units will boost the performance going forward. Management has guided for lower sales and profit growth in Hotel business due to global melt down. The stock trades at 18.9x FY09E EPS of Rs 9 and 16.3x FY10E EPS of Rs 10.5. We maintain Buy," says Motilal Oswal's research report.

Buy Punj Lloyd: Sukhani

Technical Analyst, Sudarshan Sukhani is of the view that one should buy Punj Lloyd.

Sukhani told CNBC-TV18, "Punj Lloyd belongs to that infrastructure construction sector, which I think is now giving much better chart patterns. This is not going to go against the broad market, but if at all you have a sense that something is going up then Punj Lloyd is the first stock that you should be buying."

Disclosure: Analyst has delta neutral positions in the Nifty and investments in the shares.

Subprime crisis due to over-eager investors: Greenspan

American Economist Alan Greenspan said credit crisis is a tsunami that policymakers did not anticipate, reports CNBC-TV18. He said that the subprime crisis was caused by over-eager investors.   “We are in the midst of once in a century credit tsunami. Central banks and governments are being required to take unprecedented measures. Given the financial damage to date, I cannot see how we can avoid a significant rise in the layoffs and unemployment."   Greenspan said the stabilisation of home prices is necessary for recovery and added the market freeze will begin to thaw when home prices stabilise. He feels that government's move to support the financial sector are correct. "Those who believed lenders would protect shareholders are shocked."

Wall Street slips on economic concerns; Dow down 443 pts

US markets logged their biggest two-day point decline on record on economic concerns and poor earnings. Weekly jobless claims continue reflecting weak labor market and retailers reported weak monthly same-store sales data. The shrinking economy

crushed earnings at companies from Blackstone to News Corp.

Crude prices were around $ 60/bbl while gold prices tumbled. Bonds gain. Dollar was mixed against other major currencies. Monthly jobs report for October is due today. It is expected to show an up tick in unemployment up to 6.3%. Prospect of a very grim payrolls number today fueled the sell off further.

The Dow plunged 443.48 points, or 4.85%, to 8,695.79. The S&P 500 index lost 47.89 points, or 5.03%, to 904.88, and the Nasdaq composite index declined 72.94 points, or 4.34%, to 1,608.70.

A look at how the Indian ADRs performed:

Name Infosys Sify Rediff.com India Satyam Wipro ICICI Bank HDFC Bank MTNL Tata Comm Dr Reddy's Lab Tata Motors Patni Computer Sterlite Ind

Symbol INFY SIFY REDF SAY WIT IBN HDB MTE TCL RDY TTM PTI SLT

Price 24.72 1.32 2.56 13.81 7.37 16.68 62.9 2.97 19.71 8.30 4.50 5.35 4.71

Change -2.89 -0.11 -0.04 -1.07 -0.69 -0.46 -3.18 -0.06 0.03 -0.09 -0.18 -0.35 -0.87

Change% -10.47% -7.69% -1.54% -7.19% -8.56% -2.68% -4.81% -1.98% 0.15% -1.07% -3.85% -6.14% -15.59%

Volume 3,602,033 76,770 64,192 1,305,292 607,950 4,642,538 718,538 134,014 362,218 174,163 865,452 214,785 4,525,821

High 24.43 1.32 2.50 13.4 7.30 16.06 62.36 2.93 19.05 8.16 4.20 5.27 4.35

Low 27.13 1.43 2.66 14.52 7.99 17.39 67.09 3.14 20.87 8.74 4.50 5.69 5.17

Mkts not out of woods yet: Experts

Ajay Bodke, Senior Fund Manager, IDFC MF; and Sudarshan Sukhani of Technical Trends feel markets are not out of the woods yet.

 

According to Bodke, global cues would continue to be negative for sometime to come. "We are truly in a global recession. Globally, the attempt will be to try to pull back the economy. So, the delay breaking process that is on will continue globally for sometime. It is still a few quarters too early on a global scale to be out of the woods.”

 

Sukhani said the primary trend is down. "We are in a bear market. The intermediate trend, which was up for a few days, turned down when we made lower highs. The minor trend has been down as we drifted today to almost 2,700,” Sukhani said.

 

Here is a verbatim transcript of Ajay Bodke and Sudarshan Sukhani’s interview on CNBC-TV18. Also watch the accompanying video.

 

Q: What is your own sense of what kind of path this market is mapping by the time we are done with this year, more to the upside you think or to the downside?

 

Bodke: As you rightly said, we are not out of the woods yet. My sense is that global cues would continue to be negative for some time to come. We already have seen Japan and Korea going into recession. The US posted a -0.3% GDP in the last quarter — the third of the calendar year 2008. It is widely expected that the GDP will de-grow quite sharply in Q4 calendar year 2008. Overall, the IMF is estimating that the global economy will grow at just 0.2% in calendar year 2009. Anything below 3% is considered recessionary by them on a global scale.

 

So, truly we are in a global recession. The bonded effort from central banks globally to aggressively ease monetary policy but again in countries like Japan, it is 30 basis points from 0%. In the US, although the target Fed Funds rate is 1%, the effective Fed Funds rate is just 0.25%. So, to that extent, the maneuverability of the monetary stimulus is becoming more limited – the diminishing gains.

 

So, now I think what is left clearly is a global coordinated fiscal stimulus. We already have seen China giving USD 586 billion of stimulus over a two-year period, although some people are questioning how much of it is incremental because a large part of it also has been something that has been announced previously. We have had Japan giving a USD 125 billion stimulus; we had America giving a very large stimulus. Germany has been lagging behind with a very small 12-billion euros stimulus.

 

But as we move ahead we would see more and more governments — despite being deep in the red in terms of the fiscal position — forgetting that for the time being and trying to revive the economy because of the big scary word: depression, it is something that we are looking at.

 

So, globally the attempt will be to try to pull back the economy. So, the delay breaking process that is on will continue globally for some time. It is still a few quarters too early on a global scale to be out of the woods.

 

Q:  What’s the problem with private-sector banks; today the relatively stronger ones like Axis Bank touched a new low, all of them actually, what’s bothering the market there?

 

Bodke: The concerns for the banking sector as a whole are sharp spike-ups in delinquencies that are expected in next couple of quarters. In my interaction with some of the bankers — both public and private — the fears of certain sectors like real estate, textile, steel, auto, auto-ancillaries, and a slowdown hitting these sectors, some of the companies announcing a halt in production, all these issues are going to lead to a sharp spike in non-performing assets. It is the asset quality concerns that have suddenly come to the fore and have led to sentiment getting impacted in these banks.

 

At the same time, the Reserve Bank of India has rightly taken these counter-cyclical measures in terms of reducing the standard provisions from 2% to say 0.4% in case of certain sectors and certain mortgages of above Rs 20 lakh from 1% to 0.25%. At the same time, they have also reduced the risk rates but here again the concern is that is this basically portending the fact that the asset quality is going to deteriorate. Hence, the banks have been given some sort of levy. This is the concern that has been dogging the banking sector.

 

Q: How much would you read into today’s Nifty pullback or do you think the trend remains firmly down?

 

Sukhani: The primary trend is down. We are in a bear market. The intermediate trend, which was up for a few days turned down when we made lower highs. The minor trend has been down as we drifted today to almost 2,700. In two hours, we saw a pullback — that’s good but there is nothing much to read in it. These small swings are going to continue but that doesn’t change the trend of the market which is clearly down. I don’t even think day traders can catch much of these moves. Swing traders cannot even try to catch them. So it is a volatile market. It sometimes moves up and it sometimes moves down but the clear direction is downward.

 

Q: The other problem is that a lot of stocks made new intraday lows compared to what we saw on October 27. Does that become the benchmark even technically – that market or stocks are trending towards the October levels again?

 

Sukhani: Yes, I think so. Some of them made those lows today. Some of them are likely to make them in the next few days or next few weeks. The trend is that we went up to 3,240. Next time when we went up, we failed to touch 3,240. We made a lower high. Today we have decisively made a lower low. That’s the classical pattern for a bear market and we are in one since the last ten months. So these new lows are expected and they are just the affirmation that yes, the bear market is alive and kicking.

 

Q: We spoke about banks earlier but [it is] not just banks. Look at all the interest-rate sensitives – infrastructure, real estate – all of them sold off quite sharply. Is the market getting apprehensive that more rate cuts will not come very soon?

 

Bodke: The market is expecting that aggressive rate cuts will happen and happen very soon. In fact on the back of the aggressive CRR cuts [that happened recently], the market is even expecting further CRR cuts, further repo rate cut and further reduction in the SLR. All three should happen.

 

There are also a couple concerns on the infrastructure side. The first concern is that it takes a good 15-18 months for someone to do the initial groundwork to put in infrastructure project up for tendering. Clearly the sense that we are getting after talking to lot of large construction and engineering majors is that the risk appetite has got reined in so much that the belief in the PPP, or public-private partnership, model itself is now being called into question. They [infrastructure majors] don’t want to take any balance sheet risk.

 

They want again to go back to the contracting business simply because they are not able to raise their part of the equity for a financial closure of a project. Foreign funds have totally dried up. Access to equity markets has been choked off. So that is a concern that is dogging a lot of players in this sector. Secondly, and we have seen this whenever any large elections are announced — roughly three months before and three months after any elections — there is a kind of a freeze that sort of happens in so far as the bureaucracy is concerned. So that apprehension again is there as we moved closer and closer to general elections.

 

Thirdly, clearly the sharp up-moves that one had seen in commodities and interest rates have led to apprehensions in the minds of a lot of entrepreneurs. So all these put together the most vulnerable sector among the three engines of growth: exports, consumption and investments; I see investments as one of the large vulnerable sectors.

 

Q: What are these two charts telling you now: Axis Bank and Punj Lloyd?

 

Sukhani: Much to my disappointment, banking has again literally collapsed. Axis Bank is telling us that there is more pain and more downside. It is one of the better banks but that doesn’t help anything at all. PSU banks were a favourite. Axis Bank in the private sector was one of my best choices but this is not a time again to go and buy banks.

 

Punj Lloyd is a much better opportunity in the construction and infrastructure sector. Whenever this market bottoms out, even if it is ready for an intermediate uptrend, I would say that sector should outperform and Punj Lloyd should outperform in that sector.

 

Q: What about the trading favourites now which got smashed today – stocks like Chambal Fertilisers and HDIL?

 

Sukhani: People have forgotten what HDIL was once. I don’t think real estate needs to be commented on — just stay away from it. The fertiliser sector has been smashed again. This is a bear market. I don’t control it. The market has its own wisdom. So sometimes, the momentum stocks are pushed up — some favourites are pushed up — Reliance Capital fell to Rs 565 today. The idea is: don’t try to buy. At least don’t try to take a long position without a stop-loss. We assume these things will continue to happen.

Ambani Leads $200 Billion Loss Among India's Richest

By Subramaniam Sharma and M.C. Govardhana Rangan

Nov. 13 (Bloomberg) -- Mukesh Ambani and Lakshmi Mittal led India's richest in losing $200 billion this year as the global financial crisis triggered a plunge in stocks and property values, Forbes Asia said.

The combined wealth of India's 40 wealthiest people slumped 60 percent to $139 billion, the magazine said today in an e-mailed release. Mittal, 58, lost his top position to Mukesh Ambani of Reliance Industries Ltd. Mittal lost $30.5 billion after the world's biggest steelmaker ArcelorMittal extended production cuts. The net worth of Mukesh Ambani, 51, dropped 58 percent after demand for petrochemicals made by Reliance Industries slumped and oil refining margins shrank.

There are 27 Indians with a net worth of $1 billion or more, compared with 54 last year. The key Sensitive index declined 53 percent this year and is set for its worst annual performance on record. At the same time, there are 456 million Indians who live on less than $1.25 a day, according to the World Bank.

``Indians who felt the heat of the meltdown have not exactly become paupers,'' said Anup Kumar Sinha, professor at the Indian Institute of Management Calcutta, in Kolkata. ``They will probably realize anew the importance of the real economy and reconcile to the vagaries of the financial markets.''

Wealth Erosion

Last year, 14 Indian billionaires didn't make it to the list of the 40 richest. The wealth of Anil Ambani, 49, was eroded on concern Reliance Communications Ltd., India's second-largest mobile-phone operator, may find it difficult to raise money to expand amid a credit crunch and increased competition.

Mukesh and Anil split the Reliance Group in 2005 in a deal brokered by their mother and have since expanded their businesses to include oil exploration, media and supermarkets.

Vijay Mallya, chairman of United Spirits Ltd., Gautam Thapar, chairman of papermaker Ballarpur Industries Ltd. fell off the list, the statement said.

Amongst the biggest losers of wealth are India's real-estate tycoons as a five-year rally in property prices and borrowing costs that had climbed to a seven-year high deterred home buyers.

Kushal Pal Singh, 77, is ranked fifth. That's lower than his last year's fourth position. DLF Ltd., the nation's biggest developer, declined 77 percent this year. Earlier this month, the company said its hotel venture with Hilton Hotels Corp. may be delayed by 12 to 18 months as it seeks funds for new projects.

Ramesh Chandra's Unitech Ltd., the nation's second-biggest developer, fell 90 percent this year. Last month his son Sanjay Chandra, who is the managing director of Unitech, blamed ``criminal'' speculators for the record 50 percent one-day plunge in the stock on Oct. 24.

Market Meltdown

More than $29 trillion has been erased from the value of global equity markets as credit losses and writedowns climbed to $950 billion in the worst financial crisis since the Great Depression. The Stoxx 600 declined 44 percent in 2008, headed for its worst year on record.

China's richest lost 57 percent of their wealth in the past year amid plummeting stocks, falling property values and wrong-way currency bets, Forbes Asia said on Oct. 30. The mainland's 40 wealthiest people are worth $52 billion, the magazine said.

India has taken several steps to ease a credit crunch and protect the economy from a global slowdown. The Reserve Bank of India this month cut interest rates and reduced the amount of money lenders must hold in reserve.

Slowing Growth

Prime Minister Manmohan Singh this week said the country's economy will grow between 7 percent and 7.5 percent in the next financial year starting April 1. In the current year, the central bank has forecast an expansion of 7.5 percent to 8 percent.

Asia's third-biggest economy will be able to return to a 9 percent growth trajectory as its large market and diversified industrial base will help the nation overcome the global financial crisis, Singh said on Nov. 10.

India may be the first in Asia to emerge from a downturn, helped by local consumption and a drop in commodity prices, Sharmila Whelan, senior economist at CLSA Asia-Pacific Markets said this month.

``During the pathway to recovery, the stress will be on local demand more than on a shrinking global demand,'' said Sinha of the Indian Institute of Management. ``Once the dust settles, global flows of real goods and services will be as important as before.''

Indian billionaires such as Sunil Bharti Mittal, 51, built his phone-services business Bharti Airtel Ltd. to cater to the needs of the world's second-most populous nation. The government started opening up the economy in 1991, ending its monopoly in industries ranging from telecommunications to aviation.     

If Japan Bounces Back in the New Year, Investors Will, Too

Japan has been an infuriating country for U.S. investors for almost 20 years now, since its benchmark Nikkei 225 index hit its trading high of 38,957 in late December 1989. The market then dropped steadily to a third of its peak value by the end of 1998, zoomed back up to 20,000 in March 2000, fell to a low of 7,600 in March 2003, and then recovered to 17,600 in June 2007.

Now, however, it has swooned to 8,695, infuriating global investors. And there’s two ways to look at it.

You can regard it as hopeless case, a market stuck in permanent recession.

Or you can look at the money investors made in 1998-2000 and 2003-2007 and say: “It’s down close to 8,000 again, lads. Time to pile in!”

On the whole, I’m inclined to the second view.

Burst Bubbles

Japan made a number of mistakes in the 1990s – most notably in allowing its public sector to grow so much that it delayed the recovery from the inevitable downturn brought on by the huge Japanese stock market and real state bubbles of 1985-1990.

However, the Japanese economy’s productivity hasn’t stopped growing: According to The Conference Board Total Economy Database, the world’s second-largest economy grew at an average annual rate of 2.0% from 1990 to 2007, outstripping the U.S. productivity growth rate of 1.8%, and the 1.6% rate of Germany, for instance. Thus, Japan’s economy retains considerable dynamism, and being almost two decades from its bubble excesses, has worked the bad debts and overvaluations out of its system.

One factor that tends in the opposite direction is the September ascent to power of new Japanese Prime Minister Taro Aso.

Back in 2003, before Aso came to power, then-Prime Minister Junichiro Koizumi had finally (it seemed) quelled the public spending barons in Japan’s Liberal Democratic Party and cut back infrastructure investment. Koizumi’s two successors were both similarly committed to spending restraint – highly necessary in a country whose debt had peaked at 180% of gross domestic product (GDP). However, Prime Minister Aso also is a believer in “stimulus,” and with so many bad examples internationally (and others – such as China’s – so new that we can’t yet pass judgment on them), it seems inevitable that he will relax Japan’s budget discipline. This may help the country’s slowing economy in the short run, but in the long run it threatens to return Japan to its stagnant state of the late 1990s.

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Nevertheless, Aso’s first stimulus program – announced Oct. 31 – was a fairly modest $30 billion (about 27 trillion yen), or roughly 6.0% of GDP. What’s more, only $5.56 billion (about 5 trillion yen) of that outlay represents actual new spending, with the rest represented by tax rebates and service-charge reductions. So, while Japan’s deficit and debt will increase, the government’s share of the economy won’t increase much. This brings hope that Aso will remain sufficiently restrained in new public spending programs to allow the Japanese economy to start growing again.

The financial markets seem to think the outlook for renewed growth is quite good; the yen has been very strong in the last few months, reaching a level of Yen 92 = $1 that it had only touched in the middle 1990s (Yesterday, Yen 95.95 = $1 USD).

Of course, it doesn’t hurt that Japanese banks – restrained from rapid expansion in the 2003 to 2007 time frame because of their previous bad debt problems – had been lucky enough to avoid most of the U.S. subprime mortgage mess. This is all bodes well for carefully chosen Japanese stocks.

Reaping Profits

With faster productivity growth than the United States, a reasonably valued stock market, and some degree of shelter from the storms afflicting the rest of the world, Japan is an essential home for a portion of your international investments. While Tokyo will most definitely be affected by a continued decline in the worldwide stock markets, if viewed solely on its own merits, the Japanese stock market seems more likely to rise than fall. You never know: We could be close to the beginning of a long, secular bull market – it has been a full generation since the last one. More likely, the market will just bounce a bit. Still, even bounces are worth buying.

In terms of which Japanese shares to buy, the major electronics and consumer goods exporters should be avoided – their earnings have been decimated in the past few months. One exception to this is in the auto sector: Honda Motor Co. Ltd. (ADR: HMC) has a better model range and is better aligned for a world marketplace plagued by expensive fuel and environmental pressures than any other manufacturer on the planet. But it too has been knocked back by the problems of auto manufacturers in general.

Honda’s American Depository Receipts (ADRs) are down about 36% from their 12-month highs. But at about 9.0 times estimated earnings to March, with a dividend yield of 3.6%, they seem a good value.

The profit problems of the major Japanese high-tech companies have caused the entire tech sector to suffer earnings reverses – except the domestically oriented cellphone company NTT DoCoMo Inc. (ADR: DCM). Naturally, DCM’s sales and earnings have been growing only slowly in Japan, because the wireless-communications market is saturated. But the company addressed this problem on Nov. 12 by shelling out $2.7 billion for 26% of the Indian cellphone company Tata Teleservices Ltd., entering into a technical cooperation agreement.

As of Sept. 30, India had 315.3 million cellphone subscribers, up 51% in the year and surpassing the overall U.S. population for the first time. With a forward Price/Earnings (P/E) ratio of 13 (based on earnings to March), and a dividend yield of 3.0%, DCM is also a bargain – given the technological improvements in the sector and its new growth potential in India.

Finally, a “fundamental” product – and one that’s primarily domestically oriented – is the chief business of Wacoal Holdings Corp. (ADR: WACLY), the world’s largest manufacturer of intimate apparel. Wacoal dominates the Japanese market, which accounts for 85% of its sales. Any economic recovery in Japan is likely to be domestically based, thanks to sluggish export growth and the strong yen. Hence, Wacoal is well positioned to benefit. The stock is trading at about 20 times forward earnings to March, and has a dividend yield of 2.2% – pricier than the other two, but worth a modest investment.