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Indian stock mkts taking cues from US, Asia: FM

New Delhi, March 17: The government on Monday said Indian stock markets are taking cues from the US and Asian markets, even though the sub-prime mortgage crisis has only moderately impacted the credit and financial flows into the country.

"The sub-prime mortgage market crisis will not directly affect us, because except one private sector bank, which has made its exposure, none of our public sector banks has any exposure to sub-prime mortgage market," Finance Minister P Chidambaram said in his reply to a debate on the budget 2008-09 in Rajya Sabha.

"But, when crisis moved from sub-prime mortgage market to housing market, and now housing market to the credit market, there is impact upon India. There is impact in terms of credit flows and financial flows...But, at the moment, I believe that impact is second order impact and a moderate impact," he said.

As regards the stock markets, they take cues from developments in the US and Asian markets, he added.

"In fact, we now have to track what is happening in Asian markets. Hong Kong, Tokyo and Shanghai open before Indian market opens, and if you watch closely, you will find what is happening in Asian markets is impacting the Indian stock market," he said.

The benchmark BSE Sensex was down by more than 800 points, as Nikkei fell by 454.04 points, Shangai by 142.63 points and Hong Kong's equity index Hang Seng by 1,152.50 points.

Global markets tumble after Bear Sterns takeover

London, March 17: Global markets plunged Monday on news that JPMorgan Chase, backed by the US government, had to rescue troubled Bear Stearns, with investors struggling to gauge how much worse financial markets could get.

"Its difficult to call where the bottom is," said Richard Hunter, a broker at Hargreaves Lansdown in London.

Oil prices hit a record in Asian trading, US stock index futures fell sharply and the dollar hit record lows.

JPMorgan said Sunday it would buy Bear Stearns for USD 236.2 million — USD 2 a share — in a stunning fall for one of the world`s largest and most venerable investment banks. The bank was dragged down by its exposure to bad mortgages, the same burden that has led to more than USD 150 billion in write-downs by banks worldwide.

European stocks fell in morning trading. The U.K.`s benchmark FTSE 100 dipped 2.3 percent to 5,503.6 while France`s CAC 40 slid 2.7 percent to 4,468.28. Germany`s DAX slipped 3.3 percent. Financials were especially hard hit, with Switzerland`s UBS down 9 percent.

"There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.

Investors were already skeptical about the JP Morgan deal, which was completed with the backing of the US government.

"Just buying an investment bank does not solve the problem," Hunter said. "Markets are prodding (the US government) to inject public funds."

News of the acquisition of Bear Stearns stunned investors just before markets opened in Tokyo and Seoul. Both fell sharply before paring some losses in afternoon trading.

Japan`s benchmark 225 index sank 3.7 percent to close at 11,787.51 points, its lowest in more than 2 1/2 years. Hong Kong`s Hang Seng index fell 5.2 percent to finish at 21,084.61.

Across the Asia-Pacific region, all major stock indexes were down, including markets in Australia, China, South Korea, Indonesia and the Philippines. India`s Sensex dropped 5.1 percent in afternoon trading.

"We are worried" about what comes next, Shim Jae-youb, a strategist at Meritz Securities in Seoul, said of concerns that other banks may collapse.

Shim said investors were on guard ahead of the release of quarterly earnings reports from big US investment banks this week, including Lehman Brothers Holdings Inc., Goldman Sachs Group Inc., and Morgan Stanley. Bear Stearns called off its report.

In an extraordinarily move, the Federal Reserve cut the discount rate, its lending rate to financial institutions, to 3.25 percent from 3.5 percent, effective immediately. The Fed also created another lending facility for big investment banks to secure short-term loans that would be available to big Wall Street firms on Monday.

The Fed was also widely expected to again cut its headline interest rate, the fed funds rate, by as much as a full percentage point to 2 percent at a regular meeting set for Tuesday.

In currency trading, the dollar plunged as low as 95.72 yen — its lowest since August 1995 — dragged down by a gloomy outlook for the American economy and prospects for lower interest rates. The euro rose to a record high USD 1.5903.

Japanese officials quickly called for calm in the currency markets, but did not announce any plans for intervention to shore up the greenback by buying up dollars.

Oil prices, meanwhile, hit an all-time trading high in Asia as the greenback`s tumble and the decline in stock markets prompted investors to seek shelter in commodities such as crude oil. Light, sweet crude for April delivery spiked to a record USD 111.80 a barrel in electronic trading on the New York Mercantile Exchange.

On Friday, US stocks sank after the announcement of a Fed plan in conjunction with JPMorgan to alleviate the liquidity crisis at Bear Stearns touched off concerns about the severity of credit troubles in the world`s largest economy. The Dow Jones industrial average fell 194.65, or 1.60 percent, to 11,951.09.

Wall Street appeared poised for another drop when trading resumed Monday morning. Dow index futures were down 164 points, or 1.4 percent, to 11,818, while the Standard & Poor`s 500 index was down 21.7 points, or 1.65 percent, to 1,291.6.

Further slides in Asian markets are likely, said Ismael Cruz, the governor of the Philippine Association of Securities Brokers and Dealers, Inc.

"The outlook is very grim," he said.

Jindal group enters into USD 2 bn deal with Japanese co

New Delhi, March 17: Two Jindal group companies -- JSW steel and JSW energy -- have signed a 10-year deal worth more than USD two billion with a Japanese shipping firm for sea transportation of coal.

The two firms have entered into contracts with Tokyo-based Kawasaki Kisen Kaisha ltd to transport coking coal and steaming coal to them.

"... An en bloc deal of 10 Consecutive Voyage Charter (CVC) contracts, duration of which are for 10-year each, was concluded and signed with JSW steel limited and JSW energy limited," Kawasaki Kisen Kaisha said in a statement issued in tokyo today.

Coal would be transported to the two companies by 10 vessels and the freight revenue from the 10 vessels is expected to be over two hundred million dollars per year, it added.

"...The total transport volume for the two companies under the en bloc deal could reach around 12 million tonnes per annum by 2015, when all the vessels enter the service," the statement said.

The Japanese company also known as K-line would be transporting coal to India from Australian, Indonesian, South African and Chinese ports.

According to the statement, Sajjan Jindal-led JSW steel is set to expand the existing steel mill in Vijayanagar and to build two additional steel mills in Jharkhand and West Bengal and poised to be the largest steel maker in India.

JSW energy, a power generation company belongs to the same group, also has aggressive plans to expand the generation capacity to 15,000MW (including coal thermal plants and hydro-power plants) by 2015, it added.

Cairn India raises Rs 2,535 cr through share sale

New Delhi, March 17: Cairn India has raised Rs 2,534.6 crore (625 million dollars) through preferential allotment of shares to companies, including Petronas of Malaysia.

Petronas International Corporation Ltd (Petronas) raised its stake in Cairn India Ltd to 12.7 per cent by subscribing to 6.33 crore equity shares out of the 11.3 crore shares sold by the company's parent, Cairn Energy Plc.

Petronas currently has 9.93 per cent stake in Cairn India.

Orient global tamarind fund PTE Ltd subscribed to 4.97 crore equity shares at Rs 224.30 a piece, a company statement said.

Following the preferential allotment, Cairn Energy's shareholding in the company has come down to 64.86 per cent from 68.99 per cent.

Shares of Cairn India were trading at Rs 219.10, down 4.07 per cent in the morning trade on the Bombay Stock Exchange.

New UK immigration system makes software trade harder`

London, March 17: A new points-based immigration system in Britain may make it harder for developing countries to export software systems to the country, Trade Minister Kamal Nath said in an interview published on Monday.

Kamal Nath added that new restrictions on migration were not in keeping with Britain`s claims to be behind free international trade in services.

"We are not asking for more permanent immigration," he said in the interview, noting that India was still studying the new system.

"We are talking about people coming in for a month or so to integrate software systems."

Nath, who said that the change to the new system ran the risk of becoming a "retrograde step", added that the restrictions may prevent Indian software companies from servicing existing warranties, or selling new systems that required on-site maintenance in future.

"In the liberalisation of services, the temporary movement of people is an important thing," he said.

Britain`s new immigration system awards points to prospective migrants based on a variety of factors, but only affects non-EU citizens who wish to immigrate to the country.

Oriental Bank to expand branches to 2,000 by 2010

Mangalore, March 17: Public sector lender Oriental Bank of Commerce (OBC) plans to expand its branches to 2,000 by 2010, a senior bank official said on Monday.

At present, the bank has 1,308 branches with 79 extension counters spread across 22 states and three union territories and plans to reach 2,000 branches by 2010, OBC executive director Allen C Pereira told reporters during the opening of bank's 1,309th branch here.

The bank has received licenses from the Reserve Bank of India to open 80 new branches in the country, of which five are in Karnataka, he said.

Besides, one branch each in Bangalore, Hospet, Ramanagaram and Shimoga would be opened in the next three to five months, he said.

All branches in the country are interconnected through core banking solution and offer anywhere banking services including internet banking, he said.

The bank has been focusing on lending to agriculture, SMES including tiny industries, housing, education besides retail segments, he said.

The bank has helped form 4,000 self-help groups and lent about Rs 200 crore, he said.

The bank is planning to foray into insurance business, he said, adding an application has been made in front of the IRDA for R1 clearance.

Federal Reserve Taking Rarely-Used Steps to Steady Shaky Financial Sector


WASHINGTON (AP) -- The Federal Reserve is primed to aggressively cut a key interest rate even lower on Tuesday, racing to contain spreading financial fires that threaten an economic meltdown.
President Bush declared "we're in challenging times" and huddled Monday with top economic officials -- including Fed Chairman Ben Bernanke, Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox.
On Wall Street investors were still skittish. The Dow Jones industrials, in an erratic session, closed up 21.16 points, after having plunged nearly 200 points early in the day. Other stock indexes fell.

With the quick collapse of the investment bank Bear Stearns, fears are mounting about whether other financial companies may fall. Many believe the country has already sunk into recession and all the problems -- if not contained -- will deepen and prolong the pain.

"The Fed is on high alert -- something you don't see but once every quarter century; maybe, in this case, since the Great Depression. This is a very unusual period," said Mark Zandi, chief economist at Moody's Economy.com.

That's because the Fed is having to fight multiple battles at the same time: a housing collapse, a severe credit crunch and Wall Street turmoil that threatens the stability of the entire U.S. financial system. All those problems feed on each other, creating a vicious cycle that can be hard for the Fed and other Washington policymakers to break. The weight of those troubles is like a millstone on the ailing economy.

"Now the issue is fighting the deeper recession," said Brian Bethune, economist at Global Insight. "It has kind of moved to another level. The fires are spreading," he said.

To limit the damage, Bernanke and his colleagues may ratchet down a key interest rate, now at 3 percent, by as much as a full percentage point, to 2 percent, which would put that rate at the lowest it has been since late 2004. Because that rate affects a wide range of rates charged to millions of consumer and businesses, it is the Fed's most potent tool for reviving economic activity.

If that happens, commercial banks' prime lending rate on certain credit cards, home equity lines of credit and other loans would drop by a corresponding amount to 5 percent, from 6 percent currently. The Fed's goal, since embarking on a rate-cutting campaign in September, is to induce people and businesses to boost spending, thus bolstering the economy.

However, with the panicky mind-set that has swept over investors since last summer, credit -- even at a lower cost -- has become harder and harder to get as financial institutions, which racked up huge losses due to soured investments in mortgage-linked securities, became increasingly wary of lending and hoarded cash. So the Fed took a series of other unconventional maneuvers to deal with those problems and to restore confidence.

The Fed, in a bold action on Sunday, agreed for the first time to let big investment houses get emergency loans directly from the central bank. The new lending facility -- similar to one that's been available to commercial banks for years -- started Monday and will continue for at least six months. It marked the broadest use of the Fed's lending authority since the 1930s.

Also Sunday, the Fed approved a $30 billion credit line to engineer the takeover of Bear Stearns.

Senate Majority Leader Harry Reid, D-Nev., was critical. "The Federal Reserve's latest actions appear to shift large risks to taxpayers, who may find themselves on the hook for billions in worthless securities."

Countered Paulson: "Bear Stearns had a liquidity crisis, and so we felt it was very important that this be resolved as a way to minimize impact on our economy ... This is the right outcome."

Democrats accused Bush of not doing enough to relieve the broader economic situation.

"Now we are in the soup and we better get ourselves out of it before the consequences get drastic," Democratic presidential contender Hillary Rodham Clinton told reporters. Barack Obama said: "History will not judge President Bush kindly for his failure to act in a way that could've prevented or alleviated this economic crisis."

House Speaker Nancy Pelosi, D-Calif., who is advocating extending unemployment benefits and other relief measures, said "more must be done to begin to reverse the economic mismanagement of the past seven years."

The new lending facility -- described as a cousin to the Fed's emergency lending "discount window" for banks -- is geared to give financially-squeezed major investment houses a source of short-term cash on a regular basis.

That's important because those big investment houses have key roles in the financial system. If one fails or is having difficulty, it could put the whole financial system in jeopardy. These big firms have complex relationships with many players in the system, including hedge funds, commercial banks and others.

A range of collateral -- including investment-grade mortgage backed securities -- will be accepted to back the overnight loans. The Fed also on Sunday lowered its emergency lending rate to banks -- and now to big investment houses -- by a quarter-point to 3.25 percent.

"These steps will provide financial institutions with greater assurance of access to funds," Bernanke told reporters in a conference call Sunday evening. Bernanke, a scholar of the Great Depression, has been stretching for innovative ways to deal with the credit and financial crises.

The Fed has the power "in unusual and exigent circumstances" to expand emergency lending to other types of companies and even to individuals if they are unable to secure "adequate credit" from other banking institutions. Thus, economists said there's the possibility that -- if current relief maneuvers weren't sufficient -- the Fed could extend emergency credit to a wider variety of recipients.

The Fed acted on Sunday just after JPMorgan Chase & Co. agreed to buy rival Bear Stearns Cos. for $236.2 million in a deal that represents a stunning collapse for one of the world's largest and most venerable investment houses. Just on Friday the Fed had raced to provide emergency financing to cash-strapped Bear Stearns through JPMorgan. Days earlier the Fed announced a set of other unconventional steps to thaw out a credit market in danger of freezing shut.

The flurry of unconventional steps may risk putting the public into a more skittish frame of mind, some said.

"It all kind of sends a conflicting message -- making people more nervous," said Bethune. "Why is the Fed every week coming out with another major injection of liquidity or a bailout? What are they doing in Washington?"

In communicating with Wall Street and Main Street, sometimes fewer public utterances by Fed officials may be prudent during turbulent times. "Some talk is best left with your wife over a glass of wine in the evening," Bethune said. "Talking publicly sometimes is not the way to go."

Associated Press writer Ben Feller contributed to this report.

JGB futures ease from 5-year highs as stocks rise
Mon Mar 17, 2008 9:31pm ..............................TOKYO, March 18 (Reuters) - Japanese government bond futures eased from five-year highs on Tuesday as a recovery in Tokyo share prices prompted players to book profits after a sharp rise over the past week.

JGB futures staged their biggest one-day rise since September 2003 on Monday as the takeover of Bear Stearns and the Federal Reserve's latest emergency steps failed to relieve investor concerns over the broadening U.S. credit market troubles.

A near 4-percent plunge in Tokyo shares and the dollar falling to a 13-year low against the yen on Monday also put pressure on foreign players and hedge funds to continue unwinding bad bets on curve-flattening positions, which weighed on super-long maturities.

The gains in JGBs were almost entirely driven by futures, led by trend-following hedge funds and funds betting on the macroeconomic outlook, while Japanese investors remained cautious ahead of the March 31 fiscal year-end bookclosing.

"Activity usually slows around this time of the year and Japanese investors refrain from aggressively buying, so the sharp market moves are most likely related to the unwinding of positions and need to cut losses on bad bets," said Mari Iwashita, senior strategist at Daiwa Securities SMBC.

With the benchmark yield falling to its lowest level in three years, and shorter maturities hovering around levels that could only be justified by a Bank of Japan interest rate cut, JGBs may look appealing to those seeking to book profits on any assets to cover losses from the stock market plunge or credit products.

"A sharp decline in Tokyo share prices will likely prompt investors to take profits wherever they can," Iwashita said.

June 10-year futures 2JGBv1 were down 0.11 point at 141.59, after falling as low as 141.37. Futures hit a fresh five-year high of 142.00 in the evening session on Monday.

Avoid SEZs in prime agriculture land: ARC

New Delhi, March 17: Sweeping changes in policy regarding setting up of Special Economic Zones, comprehensive policy to tackle Left wing extremism, code of conduct for parties indulging in "identity politics" were highlights of a latest Administrative Reforms Commission report.

The report of the Commission, chaired by Veerappa Moily, was submitted to Prime Minister Manmohan Singh, also touched upon the sensitive issues of Schedule Caste and Tribes, inter-state water disputes, problems of Northeast and judicial reforms. Referring to the setting up of SEZs, the Commission in its seventh report titled "Capacity Building for Conflict Resolution" said "the extremely liberal tax holidays provided both to export units and developers require reconsideration". It favoured avoiding use of prime agriculture land for setting up of SEZ besides limiting the number of such zones, with a larger size located preferably in the backward areas. The proportion of land that is permitted to be used by the promoters of SEZs for non-processing activities should be kept to minimum and the government should encourage promotion of such SEZs which were promoted by the farmers, it said adding there should be a strict adherence to environmental regulations. Referring to the Left Wing Extremism, the Commission while favouring negotiations with the extremist outfits as an important mode of resolution, also asked for a specialised police force similar to Grey Hounds of Andhra Pradesh to tackle the menace. The ARC called for an urgent need to break the nexus between illegal mining, forest contractors, transporters and extremists as it provided financial support for the extremist movement. "To achieve this, special anti-extortion and anti-money laundering cells should be established by the state police," it said. Taking note of the repeated opposition by naxal groups against construction of roads in areas dominated by them, the Commission said "as a temporary measure", government agencies should rope in Border Roads Organisation in place of private contractors. The Commission, while deliberating on the agrarian distress, called for providing adequate and timely facilities like banking, self help groups to farmers in rural areas besides diversifying risk coverage measures such as weather insurance schemes and price support mechanism. The ARC report also spoke about "identity politics" and said political parties should evolve a code of conduct on the forms of "dissent permissible in our democratic set up". "This could be incorporated in a law, which would apply to all political parties and their functionaries. Enforcement of the law could be entrusted to the Election Commission. "The law should also stipulate punitive action against political parties and their functionaries violating the prescribed forms of democratic dissent by providing for criminal cases to be filed against them and imposing fines as deterrent," the report said. Moily told reporters that report favoured evolving of consensus that "identity politics would be played within the space provided by democracy and not allowed to develop into intractable conflicts leading to violence."

Oil rebounds over USD 106 after massive fund sell-off

Singapore, March 18: Oil rebounded on Tuesday, but was 5% off its record peak of the previous day as investment funds capped their exposure to commodities in the face of crumbling global financial markets.

US crude rose 52 cents to USD 106.20 a barrel by 00:43hrs GMT, after sliding USD 4.53 or 4.11% in its worst single day percentage decline in more than seven months to settle at USD 105.68.

London Brent crude was 55 cents higher at USD 102.30 a barrel.

World financial bourses tailspinned on Monday after JPMorgan Chase & Co stepped in to rescue the ailing investment bank Bear Stearns for a bargain buy of USD 2 a share.

"The big sell-off you saw in the previous session was triggered by financial concerns...there was also profit taking ahead of the Federal Reserve meeting tomorrow," said Jim Ritterbusch, President of Ritterbusch & Associates.

The US Federal Reserve, which expanded lending to securities firms for the first time since the Great Depression in an attempt to shore up confidence, will meet later today to decide on an interest rate cut aimed at preventing a meltdown of the financial system.

"What the Fed does will impact the value of the US dollar...as the dollar weakens there will be a scramble for hard assets like oil and commodities like gold," Ritterbusch said.

Oil traded in a wide range on Monday between a record high of USD 111.80 to as low at USD 103.23 a barrel as investment funds sold off holdings, while gold dropped to USD 996.30/997.10 per ounce after hitting a historical high of USD 1,030.80 an ounce in the previous session.

Oil prices could come under further pressure, analysts said, as refined products prices have fallen sharply, making it less profitable for refiners to turn oil into fuel.

Ministers of the Organization of the Petroleum Exporting Countries have repeatedly said high oil prices are not related to fundamentals, but are the result of speculation and the US dollar's fall.