Indian Economy: News and Discussion (June 8 2008)

Katare · Post by **Katare** » 16 Sep 2008 21:04

There are many difference between ICICI and failing american banks/Financial institution. ICICI has raised a lot of primary capital from stock market to fund its growth. They have had two mega followon public offers in last five years of boom. I think ICICI is way better capitalized than some of these over exposed american investment banks. ICICI also has a huge low cost public deposit kitty that is growing fast unlike lehman/Merrilll who were mainly investment banks/brokers.

Suraj · Post by **Suraj** » 16 Sep 2008 21:34

John Snow wrote:Full convertability is the answer, but comes with its own perils and pleasures

Full convertibility is far too premature right now. We need exchange rate stability just as much as interest and inflation rate stability. Just treating full convertibility as some sort of holy grail is too much of a marketing mantra rather than desire for action driven by a fundamental need or requirement. Understanding those needs are more important than focussing on means (like convertibility).

As far as the Rupee goes, as I mentioned earlier, the volatility elsewhere will cause contract to unravel, which appears to be pretty much what's happening. It's a given considering RBI has not given sufficient freedom for Rupee futures trading to be conducted in India, as a result of which it is based offshore, particularly in Dubai. The RBI should at least permit means for domestic entities to hedge against exchange rate volatility, but they taken the ban it approach instead, with only recent efforts to establish a currency futures market.

satya · Post by **satya** » 16 Sep 2008 22:05

RBI along with major Indian banks ( both Govt & pvt. ) should enter in to forex market on a learning curve through offshore companies to understand the nitty-gritty of daily trends at min. and only if we are successful to have atleast 1 in top 10 currency trading banks then we go for full convertibility in addition to other factors till then it will like giving away our economic freedom on platter to Anglo-americans .Recent currency fluctuations are clear indicators .

( Top 10 currency traders are from US, UK , Japan & France only )

JMTs

Suraj · Post by **Suraj** » 16 Sep 2008 23:35

General currency trade centres may be in the western world, but the Rupee futures trade is primarily based in Dubai, if I recall right. RBI should have taken the lead to implement a forward contracts and futures market, under proper supervision. Instead they took the cliched sarkari view that saw an emerging market dynamic, and decided to ban it in the hope that it would go away. All they did was move it offshore, outside their control, while the implication of the offshore actions now affect the very currency they issue. Sooner or later, someone's going to write about this in the press, indicating how RBIs inaction partly led to the current Rupee volatility.

Katare · Post by **Katare** » 18 Sep 2008 09:38

Sensex @12600

Singha · Post by **Singha** » 18 Sep 2008 12:01

some key answers here:-

AGRICULTURE
Quiet Revolution

While Asia reels from a food crisis, India is benefiting from three years of investment in farming.
By Jason Overdorf | Newsweek Web Exclusive
Sep 12, 2008 | Updated: 11:24 a.m. ET Sep 13, 2008

The food crisis earlier this year hit developing countries particularly hard, but India has fared surprisingly well. That's partly because India had already gone through a crisis of its own, three years ago, when surpluses were depleted; agricultural output was hardly growing; and farmers were committing suicide in record numbers. For this reason, agricultural productivity has been a hot-button issue for Prime Minister Manmohan Singh. To keep his party in power, Singh needed not only to increase food production, but also to increase farmer incomes and end a debt crisis. Despite these gains, India lags behind China and Vietnam in productivity. P.K. Joshi, director of the New Delhi-based National Centre for Agricultural Economics and Policy Research, spoke with NEWSWEEK's Jason Overdorf about the challenges India faces. Excerpts:

NEWSWEEK: India produces only about half as much rice per hectare as China, the world's largest producer, and just about a third less than Vietnam. Why are India's crop yields so low?

P.K. Joshi: We need not compare China's yield and India's yield, because of several reasons. The first reason is that India is a very heterogenous country, from irrigated area to rain-fed area and rice is also grown in very marginal areas. So the average productivity seems to be very low. If we look to our irrigated areas, the yields are very high compared to any part of the world, and in rain-fed areas they are low because of less water and other factors. In China, they are using more than two-and-a-half times [the fertilizer that] Indian farmers are [using]. And China is growing hybrid rice, which has very high potential, and because of their governance system, they distribute the seed, and the farmers have to produce that variety.

In India, we have a democratic society, and the farmer is free to choose any variety or any hybrid. If the farmer has enough money to buy good seed, he does. But if not, he uses his own seed (from the year before). Another reason is the length of growing season. You know, in China, they take one crop per year. If you see our farmers, in Punjab they are growing rice and wheat in one year. In Haryana, rice and wheat. In some parts of West Bengal, the entire Indo-Gangetic Plain, three rice crops are being taken up per year. So if you compare the double crops, it will be on par with the Chinese one crop per year.

Should India be doing more to encourage farmers to use hybrids?

Yes, definitely. If we are speaking particularly about rice, then I would say that in rice, the hybrids have very high potential. There's a difference between high yielding varieties and hybrids. A hybrid is a cross between two different male and female plants, but the varieties are self-pollinating, so the hybrid has higher potential.

One issue for India's agricultural productivity appears to be water scarcity. Does India need more irrigation projects?

We do not have a water scarcity. But the issue of water management is important. We need to harvest water; use it more appropriately, use it more judiciously.

Has India invested sufficiently in agriculture, or has it fallen behind China and other Asian nations?

These countries are investing huge in agricultural research and also in agricultural development programs. In India, we [used to have] a huge surplus--if you go only six years back we used to have a huge buffer stock [of food grains]. [Unfortunately] we wanted to get rid of that buffer stock, either by subsidizing food or through many different social safety net programs. We started reducing poverty through these distribution programs, so investment in agriculture was reduced. And I would tell you that right now, this government has started increasing investment in agriculture, but it's still lower than what it used to be in 1970, if we compare in terms of percentage of agricultural GDP.

Why hasn't India been able to boost agricultural investment further? Singh has talked about this as a big issue since he came into office.
During the last three years, a lot of investment has been done in the agriculture sector because there was a serious crisis in Indian agriculture three years ago. Everybody was talking about agrarian distress. Farmers were committing suicide. And agricultural growth was less than 2 percent, while the target was 4 percent and more. The government [made] agriculture [a top] priority. Investment started increasing. Programs were tuned to increase agricultural production. [Prices were controlled] so they didn't rise as quickly as they did in the global market. The result was that when there was a serious food crisis around the world this year, India was almost comfortable. We were importing wheat two years ago, but for the past two years we have not thought about importing wheat. We now have a surplus in rice as well as wheat.

For several years, the growth rate of India's agricultural output has been slow. Apart from more investment, what does India need to do to rejuvenate the green revolution?
We expect the same kind of green revolution, which we witnessed in the mid 60s and early 70s. But we have an unnoticed revolution in Indian agriculture. If you look at sugar production, if you look at cotton, or dairy milk production, poultry or fish, or horticulture--which is vegetables and fruits, even maize--you see that the production of these commodities has remarkably increased. Also, you will notice that this year we had record food grain production--230.5-million tons. We have not seen that kind of food production during the green-revolution days. At that time, the reason we realized it was a revolution was that we were hungry. There was a famine in 1966, and suddenly production increased. Now that kind of hunger is not there, so we are ignoring the increase in production.

The introduction of genetically modified crops has been a controversial topic in India. Why are Indian farmers and activists concerned about GM foods?
Among activists, the apprehension is that [GM crops] may adversely affect [human] health. There's no evidence so far, globally, that it will. But activists [worry about] playing with nature and using genes from other organisms to change another species. The proponents feel that the future lies with these genetically modified crops, because the [cultivation] area is shrinking for crops, and you have to increase production. Production can be increased only by increasing productivity.

Even during the green revolution period, when high-yielding varieties came, there was a lot of apprehension. I still remember in 1967-1968 activists saying that it would create [stomach ulcers and that] the taste is not good. From the health point of view, the nutritional point of view, there was no negative effect during the green revolution. So may be the case with genetically modified commodities.

A lot of farmers seem to be shifting from essential grains to horticulture and cash crops to take advantage of the end consumer's higher spending power. Is it a concern from a food security standpoint that they're switching away from food grains?
As our incomes are increasing, as urbanization is taking place, as globalization is unfolding, the demand of the consumers is shifting away from cereal based diets to high-value commodities or processed commodities. Horticulture crops like fruits and vegetables have increased, milk products have increased. You now see lots of ice cream parlors--demand for processed dairy products [is rising]. Farmers are responding.

All these commodities are perishable in nature. If there is a sudden increase in production, there is a flood in the market and prices crash like anything because farmers cannot store these commodities. So what we need are good cold-storage facilities, we need the cold chains [to refrigerate products on the way to market]. And I feel that the government alone can't develop so many cold storage facilities or these cold chains. The participation of the private sector is very important, in this context, to integrate the markets.

Why does so much of India's agricultural production spoil on the way to market or in storage? I've read some estimates that peg the waste as high as 40 percent.
Largely, it is the perishable commodities. In the case of grains, it is only through rats and rodents and some storage problems. But in perishable commodities the waste is extreme. This is because the markets are not well integrated; there are missing markets; the roads are not good.

SaraLax · Post by **SaraLax** » 18 Sep 2008 22:21

X-Posting the query from Global Economy thread

Acharya wrote:
http://www.progressivehistorians.com/20 ... ntons.html

Thanks for the link !.... i found the below pasted from one of those related links in that web page useful

Carter Glass, that old foe of banks entering into the stock market insured that the Banking Act of 1933 contained four key provisions:

* Section 16 - restricted commercial national banks from engaging in most investment banking;

* Section 20 - prohibited any member bank from affiliating in specific ways with an investment bank;

* Section 21 - restricted investment banks from engaging in any commercial banking; and

* Section 32 - prohibited investment bank directors, officers, employees, or principals from serving in those capacities at a commercial member bank of the Federal Reserve System.
Now the question...
- Is there any similar legislation in India which prevents/restricts/controls the Investment banks and commercial banks joining hands and their interests (or one organisation donning both roles) from attempting to swindle money from the common depositors under severe business scenarios ?.

(I see that banks like ICICI, HDFC, Kotak - are present in all sorts of finance businesses like retail banking, investment banking, corporate banking, PE business, Insurance, Venture Capital-atleast ICICI, Mutual Funds, Securities, Retail broking & etc.)

These guys seem to be already an 'all-in-one' organisation similar to what might be the outcome of the BoFA+Merill Lynch merger.

There is always a possibility that, fooled in to ideas of invincibility after years of continuous rapid growth - these organisations could get carried away in their businesses when there is liquidity boom and do the unthinkable where a few arms of their business can blow away all the money (ofcourse illegally by cooking the books and to attempt salvaging their reputation) brought in by the other arms (retail - specifically) of their business. { badly mauled UBS and Citigroup of present days - could be referred to as a some what less intense analogy to the situation that i am stating above }

What legislations exist in India presently to keep such super-finance organisations under leash and prevent them from bringing down the whole economy crashing when they go down after indulging in reckless lending and insuring business practices ?.

Knowledgeable people - Please help enlighten us with some answers for above queries.

Katare · Post by **Katare** » 19 Sep 2008 01:21

Sara,
There is one huge difference between US and India – Level of regulations

RBI regulations are so strict that most liberals claim that they are strangulating financial innovation and growth in India. For example RBI even controls how many ATMs a bank can open to which floor it can put them on!!!

In USA regulations have fallen so far behind of market innovations and new instruments that it’s not even funny. Some of the regulations have been out sourced to rating agencies and so called independent researchers. It is a classic case of conservative capitalism gone too far to the right.

Suraj · Post by **Suraj** » 19 Sep 2008 02:01

As mentioned earlier, the RBI has only recently permitted Rupee currency futures trading in India. An upbeat article about it:
Great expectations

The launch of currency futures earlier this month has been, in my view, a great step forward in the liberalisation of the Indian economy. For the first time, an Indian entity can bet on the external value of the rupee, whether or not it has an underlying foreign exchange exposure. This, in fact, is capital account convertibility, and the RBI is to be congratulated on taking this step.

while I applaud the move, it is important that we don’t get carried away with great expectations — we need to understand what is the real role that currency futures can play in an economy, and as a step towards greater deregulation of financial markets.

First of all, for the economy at large, the impact will likely be relatively minor and at a second order. Contrary to the belief apparently held by the regulators, the government and the ever-eager exchanges, I can’t see currency futures having any value as a hedging tool. They are not used as such anywhere in the world and there are several reasons for this. First of all, while futures do enable the hedging of price risk, they do so by creating basis risk (if your exposure falls due on a date other than the settlement date), and cash flow risk (mark-to-market margin requirements). The cost of managing these risks, when added to the total cost of trading (margins, brokerage, etc), will not, in most cases, outweigh the price risk that is sought to be hedged.

While there may certainly be some hedging — most of which will come from commodity arbitrageurs who do not have access to any other market for hedging — it is hard to see the futures market providing significant economic value to the corporate sector. [Once options are permitted and tenable, which requires the build-up of considerable futures liquidity, they may provide something of a hedging window for companies, in general.]

However, there is a second-order impact that currency futures will provide to the economy, which is of increasing liquidity in the forex market, albeit modestly. The real impact will come from enabling domestic players, like mutual funds, PDs, arbitrage houses and hedge funds, which are currently at a disadvantage to banks, to access this additional window for diversifying risk as they seek trading profits. This will attract more savings into the market, enhancing liquidity, generally leading to better allocation of capital and a deeper, more liquid market.

Of course, to get there the current start-up regulations need to be substantially amended. First of all, regulators need to recognise that banks are a key player in currency futures markets, functioning largely as liquidity providers. The current regulations hit banks with a double whammy, since any position they take in the futures market has to be backed by margin (as does that for any other player), while also being carved out of the banks’ existing overnight position limit, which is also backed by capital. Thus, they are being double charged and it will be impossible for them to really step into this arena — a few $5 million or $10 million deals notwithstanding.

The second important change that is needed is to quickly permit FIIs and NRIs to access this market. Not only would this begin to hammer a nail into the coffin of the NDF market, it would also add to domestic liquidity, which, needless to say, is the only criterion for the success of a futures contract. The good news is that at the launch both the SEBI chairman and the Finance Minister spoke of opening this notch quite soon, and with Dr Subbarao apparently ready to accelerate reforms, we could see this change sooner rather than later.

Katare · Post by **Katare** » 19 Sep 2008 05:35

Looking at Stock market world over.....

US market down 25%

EU- ~ 30%
Emerging Market - ~40%
India - 40%

Russia - 50%
China - 66%

vina · Post by **vina** » 19 Sep 2008 12:40

Ladies & Gents.. Just wanted to let every know that since I am not the one track, bashing the Govmint and Neta Babugiri bloke, (I am one track only when coming to bashing Commies

), I was blown away by an experience that happened recently. And it is this.

IT IS NOT YOUR FATHER"S SBI ANYMORE

I used to think that the bank of allahabad /whatever ad they show on TV with a young whipper snapper going with dad to the bank and wrinkling up his nose in distaste and then simply falling head over heels was the usual corny, marketing, made for TV garbage , far removed from reality .. Atleast in the case of SBI , I was proved wrong.

In the withdraw from ICICI and put it in other safe banks syndrome, I asked SHQ to withdrawn a part of her money from ICICI (she has all her holdings there) and we wanted to put the money in SBI. We had no idea where the SBI was in the neigbhorhood close to where we live, nor any PSU bank.. We bank with ICICI, Citi and HSBC .

SHQ's father spoke with the manager of his neighborhood bank in Chennai and he in turn spoke with his counter part in our neighborhood in Bangalore and two officers (one a manager I think) showed up at home to open a relationship account and take a Fixed Deposit!

(I wasnt at home, SHQ handled it) . I simply couldn't absolutely believe it! . This is not the SBI one is used to dealing with back in the 70s and 80s and early 90s at all. This was chalk and cheese. Those guys were actually nice, did all the paperwork at our home and actually smiled! and promised to deliver the ATM, passbook, checkbook etc within one day

.

The big advantage with ICICI was that the relationship management agent used to come home anytime we called (sat, sun/weekend as per conveneince) and do all the paperwork and everything. No need to go the bank during week days and queue up and put up with surly clerks manning the counter!. That and the call center and e-banking and all the tech jazz.

SHQ couldn't believe it either. She told me that she told the SBI guys that this was not something she had expected from SBI. They said, oh , we have undergone a sea change, and we are very different today. SHQ raised the question of safety and the SBI guys said, not to worry maam. After RBI , we are the safest possible in the country. We are an institution going back 400 years!.

They also threw a nice "feel good" line and asked SHQ to come visit the bank over the weekend to get to know the branch and say hello and that it was a "Personal Banking" branch and that we wont have any crowds to get hassled with.

I had never believed that the PSU guys could change. Given the experience in my early years, I avoid them like the plague. But this is unbelievable!. I keep hearing that BSNL has changed beyond belief as well...( i havent had the guts to call them and it has always been Airtel /Touchtel since I R2Ied).. Now I am willing to give the benefit of the doubt to the "reformers" who claimed that they will modernize and reform the PSUs , though I am still a disbeliever in that.

If something as crusty as SBI could change, who knows , Air Parasite could change as well one day , atleast before hell freezes over.

Singha · Post by **Singha** » 19 Sep 2008 14:34

yeah but without an introduction from existing customer try opening an account there.
they will kick you out promptly.

they came running to your place because they sensed a fairly big sum of money at
stake. the real deal is with small retail customers.

they dont really need to run after the small customer because much of the central
and state govt accounts are kept in SBI.

vina · Post by **vina** » 19 Sep 2008 15:43

Singha wrote:yeah but without an introduction from existing customer try opening an account there.
they will kick you out promptly.

they came running to your place because they sensed a fairly big sum of money at
stake. the real deal is with small retail customers.

they dont really need to run after the small customer because much of the central
and state govt accounts are kept in SBI.

I agree with all that you said.

But think of it. I have never ever heard of any PSU bank babu pick up the phone and talk to another guy to do something for you ever. Nor have I heard of PSU bank babus coming to your place at 6:45 in the evening to open an account!. Those to things , at least in my experience is simply unprecedented!.

Come on, these are the guys, who promptly slam the counter shut in your face 10 minutes before banking hours.. (10 to 2 onree.. thank you.)and promptly decamp at at 4:45 or 5:00 or whenever. Wild horses couldn't have dragged a babu for anything connected with work after office hours earlier!.

BTW does ICICI relationship agent types show up at home for all customers or is it just for "high net worth" ?. I think SHQ is classified as "high net worth" with ICICI and they were trying to get her to upgrade to a chi-chi "Titanium" account or something, so that she doesn't have to stand in the line with the hoi-polloi if she goes to a bank. Of course, SHQ doesn't go to the bank at all and she turned it down . internet does make you so lazy and of course she has "brilliant" ideas like surrendering her personal credit card and getting an add on card on my credit card , so that "accounting is easier"

)

vina · Post by **vina** » 19 Sep 2008 16:08

I hope all you cunning Yindoos who had jumped in this news of the fed bailout this morning are smart enough to lock in your profits and exit.. Moi bet some money on ICICI bank and exited after locking in some Rs 50.x per share. Remember, this is the weekend, and I would finish the week with a nice profit locked in for the weekend dinner on a high note, rather than sit on exposed positions over the weekend . In these highly volatile times, one never knows.

Have a nice weekend party everyone with the spoils of pillaging the volatility..

vina · Post by **vina** » 19 Sep 2008 16:22

Oh.. and I think this relief rally will peter out the next two weeks. What the reconstruction company will do will force the financial services companies to expose the skeletons in their cupboards.

All the toxic mortgages and other asset back securites will be sold at a tens of cents (lower ranges) to the dollar. That will be the market clearing price for those securities and all the firms will have to write down these assets to these prices, irrespective of how they valued them in their books, given that there was essentially no market there. The cunning jewish bania bernanke and gentile bania Paulson will be very careful to make sure that they make profits in the long run.. They will buy the best assets at close to the last observed trade of 22cents to the dollar that Merrill sold it's assets off to Lone Star and other assets at below that price. They are not going to be generous.

I think this will result in further write offs and more calls for capital

, but the death spiral on de-leveraging , asset impairment and more collateral would have been broken. The Fed has put the bottom of the market fairly in place. I expect a couple of hedgefunds to stumble as well.

But that said, these round of write offs will be the final ones in the banking sector and the credit markets will start to open once more.

What will be interesting to watch is what the Fed and Congress extract from the banks in terms of regulation in exchange for the bale out.

Where is Bade Saar ? Like I said, he is a natural in high finance, he should have been a finance whiz and not a fyzzicist

.

Just like he mentioned, the Govermund will end up owning most of America , both literally and physically. While the Commie Chinese have all the land under domain under control by fiat, US ends up owning most of Real Estate assets in America by financial default.

So much for the bill of rights and right to property and all that. Commie China and US of A , same same no ?

kumarn · Post by **kumarn** » 19 Sep 2008 17:16

vina wrote: The Fed has put the bottom of the market fairly in place.

Vina ji, then are you suggesting that the last low in stock market is probably the bottom? How about the Indian market?

vina · Post by **vina** » 19 Sep 2008 17:38

No..

Please read what i wrote carefully. The next bottom, I think could be the bottom. The bottom that comes after all the skeletons come crashing out of the cupboards.. All the guys in the hock will clean it out the moment the Reconstruction Corp is set up.

But frankly, all this is massively inflationary. By many accounts close to a trillion dollars worth of liquidity is going to get injected into the system. Interest rates will remain high I think. But the necessary thing that will get accomplished that markets will start working again. They have taken the sharp nearly lethal pain and spread that intensity in to a persistent burning throb that will last for nearly a decade

Panda's dollah reserves are going to nose dive in value.

.

kumarn · Post by **kumarn** » 19 Sep 2008 18:07

vina wrote:No.. Please read what i wrote carefully. The next bottom, I think could be the bottom.

Thanks a lot for your reply vina ji! I will wait for the next bottom with my gun powder dry

But wait a min, all my gun powder is kept with a private bank, Kotak mahindra. And all your prediction about some of these going belly up is making me quite jittery. Also read about you transferring to SBI and went to the branch and got myself the forms.

But why do you think they will collapse? Not that I am taking any chances! They are well capitalized, don't have direct exposure to the us tamasha, and as someone pointed out, most of the loans in real-estate in india is prime+. Could you please care to elaborate? I have practically no knowledge of economics and finance.

Rupesh · Post by **Rupesh** » 19 Sep 2008 19:26

MUMBAI: ICICI Bank, India's second largest lender, is extremely healthy and has ample capital, it chief executive said on Friday to try to allay fears about the bank's exposure to the global credit turmoil.

ICICI had made full disclosure of its exposure and the impact of troubled assets would be minimal on its profit and balance sheets, KV Kamath said.

"I just want to reiterate ICICI Bank is an extremely healthy institution," he told television news channels. "We literally doubled our capital last year. It is sitting with us." The bank has a net worth of 470 billion rupees ($10.2 billion), he said. ICICI shares fell more than 22 percent in the seven session ended Wednesday on concerns about its exposure to the global financial crisis system could hurt it.

The stock hit a two-month low on Thursday before recovering to end the day up 2.8 percent. At 0814 GMT on Friday, the shares had risen another 6.5 percent to 613 rupees in a Mumbai market that was up 4.6 percent "Indian banks are in a different position, and indeed ICICI Bank, being an Indian bank with limited exposure to the global market place, a strong balance sheet and a strong capital adequacy position, is different from a global bank," he said On Thursday, ICICI's joint managing director, Chanda Kochhar, said the bank's total exposure to foreign markets was equal to about 4 percent of its total balance sheet and bank could still post healthy profits and maintain capital adequacy.

ICICI, with total consolidated assets of $103 billion, said on Tuesday said it held 57 million euros ($81 million) of senior bonds issued by Lehman Brothers, and would increase its provision on the debt by about $28 million to cover half of that exposure.
Brokerage Edelweiss Capital has said it expected ICICI to post about $200 million in losses on bonds, including debt issued by Lehman.

Kamath, who is also chairman of industry body Confederation of Indian Industry, also said a economic slowdown was unlikely to spark a surge in non-performing loans in the industry immediately. Earlier, the chairman of State Bank of India, the country's biggest bank, said at a conference in Bhavnagar in west India that it had a $5 million exposure to Lehman and expected to recover 60-70 percent of that, the bank's press relations agency said.

http://economictimes.indiatimes.com/New ... 502941.cms

vina · Post by **vina** » 19 Sep 2008 20:21

kumarn wrote:Thanks a lot for your reply vina ji! I will wait for the next bottom with my gun powder dry But wait a min, all my gun powder is kept with a private bank, Kotak mahindra. And all your prediction about some of these going belly up is making me quite jittery. Also read about you transferring to SBI and went to the branch and got myself the forms.

But why do you think they will collapse? Not that I am taking any chances! They are well capitalized, don't have direct exposure to the us tamasha, and as someone pointed out, most of the loans in real-estate in india is prime+. Could you please care to elaborate? I have practically no knowledge of economics and finance.

Dude.. I never said anything about any bank in India collapsing. I am talking about bank failures in US and UK. The effects in India are spillovers. Dont put words in my mouth and get me and BRF in trouble as rumor mongers.

kumarn · Post by **kumarn** » 19 Sep 2008 21:18

vina wrote:
kumarn wrote:Thanks a lot for your reply vina ji! I will wait for the next bottom with my gun powder dry But wait a min, all my gun powder is kept with a private bank, Kotak mahindra. And all your prediction about some of these going belly up is making me quite jittery. Also read about you transferring to SBI and went to the branch and got myself the forms.

But why do you think they will collapse? Not that I am taking any chances! They are well capitalized, don't have direct exposure to the us tamasha, and as someone pointed out, most of the loans in real-estate in india is prime+. Could you please care to elaborate? I have practically no knowledge of economics and finance.
Dude.. I never said anything about any bank in India collapsing. I am talking about bank failures in US and UK. The effects in India are spillovers. Dont put words in my mouth and get me and BRF in trouble as rumor mongers.

This is what you had said earlier:

BR ahead of the curve as always!! . We were just talking about how to skip ICICI and park funds in good 'ol PSU banks yesterday. proved right again.

But frankly this 57m Euro / 375 cr is chicken feed. The Lehman thing is not the biggie. AIG is. If they default then all hell will break loose. AIG is in the hock for $75 b or so, and no way in hell they are going to raise that. even if they do , it is delaying the inevitable. AIG is the counter party /guarantor of a lot of derivates deals and in many many swap transactions. I am sure the gun slinging ICICI cowboys have massive exposure in all kinds of swaps . The cowardly Yindoo bania PSU banks, except SBI , are all too meek and small to be playing such games..

I just heard from a colleague that in India too, deposits only upto Rs 100,000 are guaranteed, just like the US FDIC's $100,000. Huge food for thought that. Be very careful of the soundness of the bank you are parking your money with in these times. FDs etc are not guaranteed.

Sorry if I misunderstood you.

vina · Post by **vina** » 19 Sep 2008 21:40

kumarn wrote:This is what you had said earlier:
BR ahead of the curve as always!! . We were just talking about how to skip ICICI and park funds in good 'ol PSU banks yesterday. proved right again.

But frankly this 57m Euro / 375 cr is chicken feed. The Lehman thing is not the biggie. AIG is. If they default then all hell will break loose. AIG is in the hock for $75 b or so, and no way in hell they are going to raise that. even if they do , it is delaying the inevitable. AIG is the counter party /guarantor of a lot of derivates deals and in many many swap transactions. I am sure the gun slinging ICICI cowboys have massive exposure in all kinds of swaps . The cowardly Yindoo bania PSU banks, except SBI , are all too meek and small to be playing such games..

I just heard from a colleague that in India too, deposits only upto Rs 100,000 are guaranteed, just like the US FDIC's $100,000. Huge food for thought that. Be very careful of the soundness of the bank you are parking your money with in these times. FDs etc are not guaranteed.
Sorry if I misunderstood you.

Pls quote the entire context at which I said that. Selective reading of just one post in isolation distorts things. The post you quoted was in in the context of the news of of the ICICI exposure to Lehman.

But even before that news came. this is what I had said about the entire thing and how to go to cash or near cash away from securities and park that cash in PSU banks and if you read carefully the need to diversify to derisk.

All in all.. hold your horses boys. Sick to cash and near cash.. I had mentioned 6 months ago , that for the next 1 year on a risk adjusted basis the Fixed Deposit, which gave around 9 to 10% was the best bet. I still stick with that. Nothing else will give you that kind of safe return.

Just a word of advice.. Run to the good "safe" PSU bank (IOB, Canara etc ) and put your money. Stay away from ICICI etc. ICICI are a bunch of gun slinging cowboys .Diversify your money and dont put all in one place. SBI the govt will guarantee it, so they should be okay as well,despite the exposure to real estate and other doubtful stuff like 2 wheeler and personal loans.

Time to be extremely risk averse.

Bade · Post by **Bade** » 20 Sep 2008 01:18

vina-saar, I get only a few insights once in a blue-moon in this non-fizziks world that you work in. So I look forward to your regular fatwas but cannot take any action on it. So I remain in the soup onlee, being cooked slowly.

Vipul · Post by **Vipul** » 20 Sep 2008 01:22

India Sept qtr advance tax seen up 25 pct y/y.

yvijay · Post by **yvijay** » 20 Sep 2008 05:12

Can anybody explain the concept of 'short selling'. I understand that the sellers realise profits by betting on shares that are in downfall. But, how does the guy who loans the shares benefit from this process? He may get some money for laoning the shares, but if the price of the share falls, doesn''t he loose the money? Thanks.

Satya_anveshi · Post by **Satya_anveshi** » 20 Sep 2008 06:29

Stoke Ticker: XXX
Current Stock Price: $ 10.00
Your position: Zilch
You have information that it is going to tank (to let's say $5.00).

At T0 -> You short this stock (500 in number); (you realize 500*10 = $5000)
At T1->, your information turns out to be correct; You return borrowed stock ($5 * 500 = $2500).

You pocket the cool $2500. You made money out of thin air

(sorry...due to the information you have..Lucky you).

Get it?

yvijay · Post by **yvijay** » 20 Sep 2008 07:04

^ But where do I get those shares from? I have to borrow them from some one, isn't it? So, How does the lender benefit from this shares? Is it because he bets on the shares on a long term basis and charges fees for loaning the shares.

Satya_anveshi · Post by **Satya_anveshi** » 20 Sep 2008 07:11

yvijay wrote:^ But where do I get those shares from? I have to borrow them from some one, isn't it? So, How does the lender benefit from this shares? Is it because he bets on the shares on a long term basis and charges fees for loaning the shares.

When you short, the broker does that arrangement without the lender even knowing that you borrowed his shares. Lender doesn't care because if dividends are announced, that will be promptly placed into his account. If he intends to sell, broker pulls stock from another account.

Also, broker can do it multiple times which increases leverage. This also happens to be the major cause of all the grief that shorting brings with it. However, this is complicating the situation. Hope you get it.

Suraj · Post by **Suraj** » 20 Sep 2008 07:34

yvijay: Please use google for such simple questions.

vina · Post by **vina** » 20 Sep 2008 08:46

This is what I wrote about yesterday. Jewish Bania Bernanke and Gentile Bania Paulson need to make long run profits. Like a columnist in Washington post joked about it, maybe the need to rename the Reconstruction Corp as "Vulture Mac" or something.

The New York Times

September 20, 2008
Talking Business
A Hail Mary Pass, but No Receiver in the End Zone
By Joe Nocera

It was the end of the worst week for financial markets since 1929, and Treasury Secretary Henry M. Paulson Jr. looked sleep-deprived.

He had begun the week agreeing to let Lehman Brothers go bankrupt, arguing that the government had to stop putting taxpayers’ money at risk. Then, midweek, he brokered a deal to rescue the American International Group with an $85 billion loan from taxpayers — arguing that the risk to the financial system was too high to allow the world’s biggest insurer to fail.

Neither move had done anything to stop the financial tsunami. So on Friday morning, just as the markets were opening, Mr. Paulson unveiled the government’s latest attempt to stop the bleeding. Maybe it was because he was so tired, but there was none of the glass-half-full blather that is de rigueur for a cabinet secretary. Instead, his flat, just-the-facts-ma’am voice and weary body language conveyed an unusual sense of urgency.

The core issue, he said — the mistake that had led to all the other mistakes — was that “lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing.” True. As for Wall Street, toxic mortgage-backed securities had become “frozen on the balance sheet of banks and financial institutions.” He added, “The inability to determine their worth has fostered uncertainty about mortgage assets and even about the financial condition of the institutions that own them.” True again.

And that really is the crux of the matter — the financial system has seized up. But so far, the government’s actions haven’t helped. Letting Lehman go bust may have sounded good at the time, but it has had disastrous consequences.

It has led to complete chaos in the multitrillion-dollar market for credit-default swaps and was a crucial reason Morgan Stanley was forced to scramble to stay alive this week. It is also why questions were raised about the viability of Goldman Sachs, a firm with a pristine balance sheet and almost none of the bad assets that are bringing down other firms.

The rescue of A.I.G. further undermined confidence because, within the space of several days, the government did a complete about-face. The bailout suggested the Treasury Department was as confused about what to do as the rest of us.

So rather than help solve the crisis, the Treasury Department has actually contributed to the biggest problem in the market right now: an utter lack of confidence.

Nobody understands who owes what to whom — or whether they have the ability to pay. Counterparties have become afraid to trade with each other. Sovereign wealth funds are no longer willing to supply badly needed capital because they no longer know what they are investing in. The crisis continues because nobody knows what anything is worth. You simply cannot have a functioning market under such circumstances.

Will this latest round of proposals end the crisis? I know the stock market reacted joyously on Friday, but I’m not hopeful. One solution being promoted by the Securities and Exchange Commission — to make life more difficult for short sellers — is a shameful sideshow. A second solution, which Mr. Paulson announced Friday morning, requires money market funds to create an insurance pool to cover themselves against losses.

That may provide comfort to investors who equate money funds with savings accounts, but it is fraught with moral hazard.

And the third solution — the big megillah — is Mr. Paulson’s plan to create a new government mechanism to buy mortgage-backed securities from big banks and investment houses. Once they are off those companies’ books, life can return to normal — or so Mr. Paulson hopes.

He acknowledged that it would likely cost taxpayers “hundreds of billions of dollars.” I think it will cost more than $1 trillion.

It is a weird tribute to the scale of this crisis that Mr. Paulson felt he had no choice but to rush this proposal out, because as the day progressed it became increasingly clear that the Treasury Department didn’t yet know how this mechanism was going to work. It is an idea of a plan more than an actual plan. In football, they would call it a Hail Mary pass. Sometimes, of course, a Hail Mary pass is completed for a touchdown. But most of the time they fail.

Let’s take a closer look at the government’s latest response.

KILL THE SHORT SELLERS It’s understandable why people get upset at short sellers in tough times. As President Bush put it Friday, short sellers are “intentionally driving down particular stocks for their own personal gain.” But that perception is more myth than fact, and in any case, it’s not the dynamic here. Stocks are falling because companies made huge mistakes that have caused them a heap of trouble. Indeed, in July and August, short interest in financial stocks declined by 20 percent. Why did the stocks continue to go down? Because there were too many sellers and not enough buyers: it’s that confidence thing again. Blaming the shorts is classic blame-the-messenger behavior.

The S.E.C. jihad against short sellers, which includes the banning of short selling on 799 stocks and forcing disclosure of large short positions, is nothing more than playing to the crowd. It is simply appalling that as one firm after another vaporizes — firms, let’s remember, that the S.E.C. was supposed to be regulating — the only thing the agency can think to do is flog the shorts.

There were so many better moves it could have made. After Bear Stearns fell, it could have sent SWAT teams into all the other financial firms to assess their mortgage-backed paper. It could have then announced to the world the health of each firm, which would have helped the market regain some confidence. It could have forced firms to disclose their mortgage-backed holdings so that counterparties could evaluate them. It did none of these things.

Then again, maybe the S.E.C. is trying to cover up its own culpability in this crisis. Four years ago, the agency pushed through a rule that allowed the big investment banks to take on a great deal more debt. As a result, debt ratios rose from about 12 to 1 to more like 30 to 1. Guess what Lehman’s debt ratio was when it went bust? Yep: 30 to 1.

SAVE THE MONEY MARKET FUNDS The precipitating event here was the news that the Reserve Fund, a money market fund that caters to institutions, had “broken the buck” and was paying investors 97 cents on the dollar. That is only the second time that’s ever happened, and it had to scare investors, because most of us have come to think of money market funds as being the equivalent of bank savings account — perfectly safe.

In the aftermath, investors in the various Reserve money market funds pulled $58 billion out in the space of a week, leaving the firm with only $7.1 billion. If that same fear had spread across other money funds, it could well have led the funds to stop accepting short-term commercial paper. That would have been a disaster, because big companies rely on the commercial paper market to finance their day-to-day needs.

Under the circumstances, insuring the money market funds probably makes sense. It will calm investors and keep the commercial paper market functioning. But think about the moral hazard! It bails out poorly managed money funds — the ones most likely to break the buck — at the expense of funds that haven’t taken the extra risk that causes a sudden drop in value.

And then there’s this: If you have your money in a bank account, only $100,000 is insured. But if you have it in a money market fund — which usually has a slightly higher yield precisely because it has a small element of risk — you now have unlimited insurance. It’s the world turned upside down.

THE BIG MEGILLAH For the last few weeks, a growing chorus of voices has called for the establishment of a new Resolution Trust Corporation, the entity the government devised in the wake of the savings and loan crisis to take over, and eventually sell off, the assets of failed S.& L.’s. On Wednesday, that chorus got its most powerful voice, when Paul Volcker, a former Federal Reserve chairman, co-authored an op-ed article in The Wall Street Journal.

That crisis, however, was very different from this one. Most of the assets in the S.& L. crisis were real estate — which are always going to have value. And the government didn’t have to acquire them; it simply took them over and, over time, sold them. This time, the assets are complex derivatives of uncertain value that the big firms will actually be selling to the government.

But how is the government going to assess these securities — and what price will it pay for them? In many cases, these securities aren’t being sold because they are still overvalued on a firms’ books. That is, their mark-to-market price is unrealistically high. Will the government buy it at the too-high price? If it does, the firms won’t have to take additional write-downs — but it will constitute a huge, unjustified bailout of Wall Street. (More moral hazard.)

But what if the government drives a hard bargain, and gets the securities for what they are really worth — 20 cents on the dollar, say, instead of 50 cents? In that case, the firms would have to take yet more enormous write-offs, which would further damage their balance sheets, and they would have to raise billions more in capital. Maybe the removal of these bad assets would allow the firms to raise the capital. But maybe not — meaning one or more could conceivably have to file for bankruptcy, creating yet another spasm of financial turmoil. It’s a huge roll of the dice by the government.

Finally, there is the question of how much it will ultimately cost. “Institutions so far have written down $550 billion globally of bad debt,” said Daniel Alpert, managing director of Westwood Capital. “We think that when you add up all the problems in the residential housing market still to come — further erosion of housing prices, mortgage foreclosures and so on — we are going to need another $1 trillion of write-downs.”

In other words, for all the toxic securities that Wall Street has acknowledged holding, there will be yet more mortgage-backed paper that will go bad as the housing market continues to fall. As much as we all hope the worst is over, it’s probably not.

And as much as we might hope that the government finally has the answer, it probably doesn’t.

Singha · Post by **Singha** » 20 Sep 2008 08:55

Shorting in financial stocks was effectively banned by the western countries yesterday.

US - 799 stocks
UK - 29
Aus, Nz, Ireland, Switzerland etc also followed suit.

the bear attack on the survivors seems to be over for now....depends how long the
energy shields hold up. Scotty down in engine room reports depleted levels of
dilithium crystals....warp engines are out, we are on impulse power only.

yvijay · Post by **yvijay** » 20 Sep 2008 10:03

Thanks Satya_anveshi.
I'm sorry Suraj.

Suraj · Post by **Suraj** » 21 Sep 2008 06:21

Manufacturing policy on anvil

For the first time in decades, India is set to have a comprehensive policy to promote manufacturing. A committee headed by National Manufacturing Competitiveness Council (NMCC) chairman V Krishnamurthy has called for the creation of a body to monitor issues related to the sector.

The committee submitted its report to Prime Minister Manmohan Singh today.

The report comes at a time when the Indian manufacturing sector, which has a share of over 17 per cent in the country’s GDP, is going through a rough patch.

Currently, there is no manufacturing policy that governs the sector. The NMCC had prepared a National Strategy for Manufacturing in 2006.

The report also calls for setting up of a permanent body to monitor developments in the sector and recommend suitable policy actions, in line with the proposed manufacturing policy.

The other recommendations of the group include directing macroeconomic policies, like those on taxation, trade, technology and FDI, towards promoting the manufacturing sector.

Moreover, the group has also suggested specific policy interventions for employment intensive and strategic manufacturing industries. These include textiles, leather, aviation as well as defence-related industries.

The NMCC has been maintaining that in the past 20 years, the growth of the manufacturing sector has been stagnating at around 7 per cent. “In order to achieve an average economic growth rate of 9 to 10 per cent in the medium to long term, the manufacturing sector needs to grow at about 12 to 14 per cent. Such growth is also required from the point of view of absorbing the surplus workforce now dependent on the rural sector,” the NMCC release said.

The PM had constituted this group in early 2008, to suggest both short-term and long-term measures to deal with the ailing manufacturing sector. Members of the group include secretaries to the finance ministry as well as Departments of Revenue, Commerce, Industrial Policy and Promotion, and Textiles.

Diversified manufacturing/services (Reliance) and private financials (ICICI) have seen a crimp in their Q2 profits, which is reflected in the fall in their advance tax payments:
Advance tax collection falls 11% in Q2

Provisional advance tax collections for the second quarter (Q2) of the current fiscal stood at around Rs 40,000 crore, nearly 11 per cent lower than in the same period last year.

The Q2 advance tax payments were made by September 15 this year. Based on their profitability projections, companies pay 45 per cent and non-corporates pay 30 per cent of their tax liability in the period. Advance tax payments are, therefore, a leading indicator of the profitability of companies. Oil and financial sectors saw a moderation in the payments.

India’s largest oil exploration firm, ONGC, retained its position as the top payer of advance tax. However, at Rs 2,412 crore, its tax payout is almost the same as in the corresponding quarter last year, when it had grown 17 per cent.

Indian Oil Corporation did not pay any advance tax in the second quarter, compared with Rs 447 crore it paid in the corresponding quarter in the last fiscal.

Mumbai, which contributes over 40 per cent of the total advance taxes, has seen a mere 8 per cent growth in the second quarter.

India’s top private lender, ICICI Bank, and diversified conglomerate Reliance Industries saw a 22 per cent and 5 per cent decline in the payments, respectively.

However, the country’s largest lender, State Bank of India, posted a robust 48 per cent increase in advance tax payment to Rs 1,560 crore, as compared with Rs 1,054 crore in the same period last fiscal. Tata Steel saw a massive 125 per cent increase in the payment.

Raj Malhotra · Post by **Raj Malhotra** » 21 Sep 2008 09:15

Satya_anveshi wrote:Stoke Ticker: XXX
Current Stock Price: $ 10.00
Your position: Zilch
You have information that it is going to tank (to let's say $5.00).

At T0 -> You short this stock (500 in number); (you realize 500*10 = $5000)
At T1->, your information turns out to be correct; You return borrowed stock ($5 * 500 = $2500).

You pocket the cool $2500. You made money out of thin air (sorry...due to the information you have..Lucky you).

Get it?

Add one more complexity, there is no information but as a big big bank-firm you decide to sell and sell massively, to the extent nobody else can buy. So the stock tanks. you make money out of thin air, no info, no stock just shorting by leveraging.

Problem-somebody does buy, you & your broker are bankcrupt

kumarn · Post by **kumarn** » 22 Sep 2008 12:36

vina wrote:
kumarn wrote:This is what you had said earlier: Sorry if I misunderstood you.
Pls quote the entire context at which I said that. Selective reading of just one post in isolation distorts things. The post you quoted was in in the context of the news of of the ICICI exposure to Lehman.

But even before that news came. this is what I had said about the entire thing and how to go to cash or near cash away from securities and park that cash in PSU banks and if you read carefully the need to diversify to derisk.

All in all.. hold your horses boys. Sick to cash and near cash.. I had mentioned 6 months ago , that for the next 1 year on a risk adjusted basis the Fixed Deposit, which gave around 9 to 10% was the best bet. I still stick with that. Nothing else will give you that kind of safe return.

Just a word of advice.. Run to the good "safe" PSU bank (IOB, Canara etc ) and put your money. Stay away from ICICI etc. ICICI are a bunch of gun slinging cowboys .Diversify your money and dont put all in one place. SBI the govt will guarantee it, so they should be okay as well,despite the exposure to real estate and other doubtful stuff like 2 wheeler and personal loans.

Time to be extremely risk averse.

Vina ji, I notice that you never mentioned a possible collapse, just the need to run to the PSU banks, and to stay from ICICI etc. My apologies for putting words in your mouth.

Singha · Post by **Singha** » 22 Sep 2008 12:56

BW

India's Reliance Industries Joins the Oil Club
Reliance has pulled light sweet crude from 8,000 feet beneath the Bay of Bengal with high-tech, high-cost deep-water drilling
BW Exclusives

by the Associated Press

MUMBAI, India—Mukesh Ambani, one of the world's richest men, held a large beaker of greenish sludge in his hands, the first drops of light sweet crude that his company, Reliance Industries, has pulled from deep beneath the Bay of Bengal.

That sludge, Ambani says, is India's ticket to energy independence and Reliance's entry into the club of global energy majors. "This accomplishment marks a strategic and emotional inflection point for every Indian. It proves that we can disprove the naysayers of the world, who had written off India's ability to produce its own oil and gas," he said Sept. 21.

Reliance has started production as global oil majors are facing diminishing new discoveries and increasingly powerful oil companies—both private and state-run—from the developing world.

High-Tech Feat

Pulling oil from 8,000 feet beneath the cyclone-prone, choppy waters of the Bay of Bengal is a technological feat, the sort of high-tech, high-cost deep-water drilling that was once the province of just a few of the world's top oil companies. It also comes at a propitious time for India, the world's fifth-largest energy consumer. The nation imports about three quarters of its oil and has been staggering under growing oil and gas import costs and an onerous oil subsidy bill. Within 18 months, oil and gas production from block D6 of the Krishna Godavari basin will increase India's domestic production by 40%, potentially shaving about $20 billion from the nation's $77 billion oil import bill, according to Reliance officials.

The company says the 2,952 square mile block holds 2.5 billion barrels of oil equivalent, 80% to 85% of it natural gas.

India still ranks low on the list of oil-producing nations, and the find is unlikely to put a big dent in global demand for oil, which the International Energy Agency pegs at 86.8 million barrels per day.

Only the Beginning

But Reliance insists this is just the beginning. "India is not short of hydrocarbons. It just hasn't been explored well," P.M.S. Prasad, president of Reliance's oil and gas division, said on Sept. 21. Reliance controls 40 exploration blocks in India, including several more in the Krishna Godavari basin. Ambani called the start of production a "major victory" for India in its battle for energy security. "We can now confidently look forward to proRduction from a series of other fields," he says.

First, however, Reliance must resolve a very Indian problem: An increasingly high-profile fraternal dispute that pits Mukesh Ambani against his younger brother Anil, who has sued Reliance Industries over the gas deposits. Until that litigation is resolved, Reliance Industries, which expects to start natural gas production in January, can't sell a cubic foot of gas from the D6 block.

The brothers have long squabbled over their father's sprawling industrial empire, which was divided between them after he passed away six years ago. Prasad says he hopes India's courts—which are notoriously slow—will make a ruling soon. "We believe the court will make a decision in the near future. Someone will have to make a decision about whether we continue to transfer $20 billion of wealth a year," he said.

The Bombay High Court next meets Sept. 29 to consider the case. Canada's Niko Resources, which has a 10% stake in the project, and Reliance, India's largest company by market capitalization, have invested $8.7 billion in developing the block.

Suraj · Post by **Suraj** » 23 Sep 2008 06:20

India Eases Loan Rules for Infrastructure Companies

India today eased borrowing rules allowing companies building roads, ports, utilities and other infrastructure projects to borrow more from overseas, a finance ministry release said.

Infrastructure companies can borrow as much as $500 million for rupee expenditure, compared with the maximum of $100 million currently. The new rules will come into force when the Reserve Bank of India notifies them, the finance ministry said.

The move will help companies including Larsen & Toubro Ltd. and GVK Power and Infrastructure Ltd. access less expensive funds from overseas after the central bank in July raised the benchmark interest rate to a seven-year high to fight the fastest inflation since 1992. Higher inflows may also help stem a decline in the currency, the third-worst performer in Asia this year.

``The government doesn't want infrastructure funding to get hurt as it's critical to the economic growth,'' said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor's. ``It will help companies access funds at cheaper costs.''

India's Rupee Has Best 2-Day Gain in Decade as Funds May Return

India's rupee headed for the biggest two-day advance in a decade on optimism investors will return to emerging markets after the U.S. government announced a plan to contain financial-market turmoil.

The Indian currency climbed to the highest in more than a week after the U.S. Treasury proposed buying as much as $700 billion in financial assets to clean up banks' balance sheets. The rupee strengthened as Asian stocks rallied, adding to speculation funds are increasing purchases of regional assets.

``The rupee is gaining from receding risk aversion among investors and traders as the U.S. plans special measures to bail out the financial system,'' said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. ``Stock markets across Asia are relaying positive sentiment.''

The rupee rose 0.8 percent to 45.4525 per dollar at the 5 p.m. close in Mumbai, adding to the 1.4 percent gain on Sept. 19, according to data compiled by Bloomberg. The currency's 2.23 percent advance since Sept. 18 is the biggest two-day gain since January 1998. Eleven of the 15 most-active Asian currencies strengthened today.

India Targets Record Wheat Harvest on Seeds, Sowing

India, the world's second-biggest wheat grower, aims to produce a record quantity of grain for a second year by encouraging farmers to use high-yielding seeds and early sowing.

The government has set a target of 78.5 million metric tons, compared with an estimated 78.4 million tons this year, the farm ministry said on its Web site today. Wheat, sowed in October and harvested in March and April, accounts for more than 70 percent of the nation's winter-sown grain output.

A record harvest may help Prime Minister Manmohan Singh head off a food shortage that pushed inflation to a 16-year high last month. India imported 1.79 million tons of wheat since July 2007 to build its stockpiles, helping fuel last year's 77 percent gain in prices on the Chicago Board of Trade.

Wheat has fallen 46 percent from a record $13.495 a bushel set on Feb. 27 after growers from Australia to India seeded more of the grain to capitalize on prices. Wheat for December delivery rose as much as 2.2 percent to $7.3375 in after-hours trading on the Chicago Board of Trade today.

India will use 909,000 tons of wheat from its reserves to ensure domestic supplies are adequate during the festival season that starts next month, the government said last week.

India To Raise Limit on Foreign Investment in Debt

India may allow overseas investors to buy more government and company bonds, the Economic Times reported, citing unidentified finance ministry sources.

A panel of officials from the federal government, the central bank and the stock market regulator may consider the plan to raise the investment cap in its next meeting, the newspaper reported.

In June, India raised the amount of government bonds foreign institutional investors can purchase to $5 billion from $3.2 billion, according to the newspaper. It also doubled the limit on overseas investment in corporate bonds to $3 billion, the Economic Times said.

Higher overseas investment in bonds are in line with the government's plan to boost capital inflows and improve liquidity in the bond market, the newspaper said.

vina · Post by **vina** » 23 Sep 2008 16:43

Sensex back to where it was before the $700bn fed bailout rumor on Thursday night. Remember, I had told all you cunning Yindoos to book your profits and run on Friday evening!..

. Many stocks have fallen back to their near Thursday levels. Toldja that this relief rally was going to peter out..

Like I said, it all depends on what the Jewish Bania Bernanke and Gentile Bania Paulson decide to pay for the toxic clean up charges.

Rescue Ray /Vulture Mac /Baillie Mae whatever they call it, is going to be the savior.

But nice Mutli Mega Ton boom engineered by the Finance Whizz kids no ? ..The implosion primary (subprime credit), set off the boosted fission secondary (Freddie and Fannie) and that in turn triggered the tertiary fusion and set off a multi mega ton city buster boom that flattened New York and London and wiped out Investment Banking...

Now the Fed and Treasury are out with the decontamination suits and NBC protected vehicles, trying to clean up the toxic fallout.

pradeepe · Post by **pradeepe** » 23 Sep 2008 17:55

pandyan wrote:there was a surprising twist to "Prison Break" series yesterday. they were blending current financial turmoil to the overall plot...the company's objective is to destroy others wealth and profit from rebuilding....

Someone must have switched Haliburton's manifesto with the script...

ramana · Post by **ramana** » 23 Sep 2008 21:32

X-posted.. Member R. Vaidya wrote in DNA.

---------------
R. Vaidya's article posted in full

India should re-joice at the Decline of US institutions

http://www.dnaindia.com/report.asp?newsid=1192432

Failure of American financial institutions is a reason to rejoice
R Vaidyanathan
Tuesday, September 23, 2008 03:16 IST

The decline of the West is a pre-requisite for the emergence of India as a global power.

I have been closely watching the reaction of our press, particularly the business papers and TV channels, to the implosion that has taken place in the Western financial markets and institutions.

Lehman Brothers, the original cotton trading company of the mid-nineteenth century fame from Alabama, is no more.

US government is acting like the erstwhile Soviet Union in nationalising institutions and bailing out market mayhem.

Our experts and analysts are pathetic in responding to this. Some of them are whining and the rest ad nauseam repeating about globalisation and impact on India, etc. It proves once again that the colonial gene is embedded in all of us and it refuses to recognise opportunities and turns advantageous as disasters.

First thing first. The decline of these institutions — many more to come — is the best thing that has happened to countries such as India, which are poised to play a larger role in global financial affairs.

Let us have some facts. India had 25% of global income in 1500 through 1700; by 1820, this was down to 17% and by 1951 to 5%; in 1998, the country’s share stood at 5.5% (according to Angus Maddison in The World Economy: A millennial Perspective, OECD Development Centre Studies -2007; Table-B-20 Appendix B; pp263).

We need to reclaim our position in the world — it is just returning to where we were. By 2025, we should have at least 25% of global GDP.

This requires strategic thinking and a new mindset. We are not going to be easily accepted as a global power. There is going to be a tussle between existing powers, declining powers and emerging powers.

Nobody is going to offer the seat in the top table to us by request or by supplication. We need to earn it and be in a position to demand it. We need national purpose and a single minded devotion to achieve it.

The decline of the global financial institutions provides great opportunities since our growth is primarily due to our domestic savings.

Foreign direct investment and foreign institutional investment put together is not more than 8% in relation to our gross savings in any one of the past several years.

Also, nearly 80% of our domestic savings of 35% comes from household savings. In comparison, the USA has meagre or negative household savings.

It has been running a consumption economy for too long, sustained by the savings of other countries, particularly Asian. It has also taken financial convergence to the extreme — anybody can do anything.

Otherwise, it would be difficult to explain a good old traditional insurance company such as AIG having such significant exposures in derivative products.

It is important to recognise that Europe is past, USA is the present and countries like India are the future. USA is slowly getting into a situation of the UK, which started declining after the Second World War.

What should India have done?

Immediately after the collapse of Freddie Mac and Fannie Mae and the crisis in many investment banks, our finance ministry should have called a meeting of major banks, industrialists and some — shall I say obscenely rich — NRIs and announced the readiness of some Indian groups to acquire some of these institutions after due diligence.

This is just to put the cat among pigeons and announce to the world that we have arrived. It is not required that we should acquire these sick entities.

It is just to express our readiness and also to tell the world that we want orderly transition as a responsible global power. It is not late even now, since many more commercial banks of US origin are in the queue.

However, India was silent and generally mumbling that we are not affected, etc. It was behaving like a small sidekick country.

The country should call for an alternative global financial architecture, which is built on the real economy and not on the paper economy.

The disconnect between stock markets and the real economy was accentuated by the derivative markets where the tail had begun to wag the dog.

This fact has been told many a time by many from countries such as India.
India and China should play an important role in evolving the alternative global financial architecture and for which we should start working.

The existing institutions have failed and the existing market mantra has been exposed in the most compromising position wherein the market and government are caught in the act.

Unless we internalise the fundamental truth that the decline of the West is a pre-requisite for the emergence of India as a global power, we are not going anywhere.

To do that, we need to be pro-active and not supplicant. After all these acts of thievery, thuggery and market manipulations and mis-sales, it is interesting that no one categorically and unambiguously and unequivocally proclaims that the US financial system is a big sham and the regulations are totally ineffective and the marauders and vandals have been running major institutions from smoke-filled pubs .

That is the fact.

To build a new architecture, India should take the lead. Unfortunately, we have the US lobby, Chinese lobby, Pakistan lobby and all sorts of lobbies in the Capital, but no India lobby yet.

Until we do, we cannot but be mouthing inanities and discussing inconsequential things.

The author is professor of finance, Indian Institute of Management — Bangalore, and can be reached at [email protected].

The views are personal and do not reflect that of his organisation.

I fully agree. I was shocked that no move was made to acquire the distressed properties. And no one understood the opportunity that was being presented. The impact of this meltdown is that, the India related milestones forecast in RAND reports/Goldman Sachs reports were all being advanced in India's favor and yet there is no understanding.
ramana