As we predicted, a fresh downturn may have started
The market recovered from its early low, taking a cue from European markets. The Sensex ended at 16,835, lower by 159 points (1%) while the Nifty shut at 5,060, down by 33 points (0.6%). Bourses plunged sharply in the early morning session on the back of weak Asian markets. The market traded range-bound till mid-morning when it touched an intraday low of 16,551. It staged a solid recovery in the afternoon session paring most of the early session’s loss.
Asian markets were down on Monday on concerns over the economic recovery of the eurozone and weak US earnings data, dampening investors’ appetite for risk. Key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan fell by 0.77% to 5.07%.
US stocks were down on Friday (14th May) on weak earnings from retailers, Senate backing for limits on credit card fees and concerns over the sustainability of European public debt. The Dow was down 163 points (1.5%) to end at 10,620. The S&P 500 was down 21.76 points (1.8%) to 1,135.6. The Nasdaq was down 47.5 points (1.9%) to close at 2,347.
The World Trade Organisation (WTO) said that the Doha Trade talks should be pushed forward to help countries emerge from the global economic crisis. The International Monetary Fund (IMF) said that some countries should control their expenditure; however, large economies can wait till 2011.
Gold prices are on a rise as investors, worried by the debt crisis in the eurozone, are taking refuge in the yellow metal. Purchase of gold-backed exchange traded funds has sent the yellow metal to a record high near $1,250 an ounce this month.
Back home, Foreign Institutional Investors (FIIs) were net sellers on Friday, offloading stocks worth Rs381 crore. Domestic Institutional Investors (DIIs) were net buyers of Rs164 crore. The rupee was down on the weak equity market and strengthening of the dollar against the euro.
Larsen & Toubro (L&T) (up 5%) has posted growth of 28% and 31% in sales and operating profit in the March quarter over the year-ago period. At the end of the March quarter its order book stood at Rs1 trillion. The board has recommended a dividend of Rs12.50 per share (in the previous year, it was Rs10.50 per share).
Reliance Industries (RIL) (down 2.6%) and SIBUR, Russia’s leading petrochemical company, have signed a memorandum of understanding (MoU) to set up a joint venture in India. This new joint venture will produce butyl rubber at RIL’s integrated petrochemical site at Jamnagar in Gujarat. As per the agreement, SIBUR will provide proprietary technology for butyl rubber polymerisation and its finishing while RIL will supply monomers and provide the JV with world-class infrastructure and utilities.
McNally Bharat Engineering Company (down 4%) has received orders for design, supply, erection and commissioning for a power project in Tripura for a total value of Rs9.91 crore. The scheduled time for completion of this project is 17 months. The second order is for another power project in Tripura for Rs17.27 crore. The scheduled time for completion is 18 months.
KSK Energy Ventures (up 2.4%) has announced the commencement of power generation from the first 135MW unit (out of four such units of 135MW each) of its 540MW coal-fired project in Maharashtra.
Only 15% of India's defence equipment can be described as state-of-the-art and nearly 50% is suffering obsolescence, according to the Department of Industrial Policy and Promotion
The industry ministry today proposed foreign direct investment (FDI) up to 74% in the defence sector from the present 26%, stating urgent upgrade of equipment in the armed forces was needed as a bulk of them suffered from obsolescence, reports PTI.
The Department of Industrial Policy and Promotion (DIPP), however, said the hike in FDI need not mean any commitment on procuring from companies, which have set up the facilities in India.
"There need not be any commitment on procurement and these players will have to participate in the request for proposal (RFP) to technically qualify and also compete in the financial bid," DIPP said in a discussion paper.
It has sought views of different stakeholders till 31st July this year.
"Only 15% of India's defence equipment can be described as state-of-the-art and nearly 50% is suffering obsolescence...there is, therefore, an urgent need to enhance the deterrent and the operational capabilities of the armed forces...," the DIPP added
Since the entire issue has been placed in the public domain, the DIPP clarified that the suggested policy should not be construed as the firm views of the government.
About 80% of users of credit cards in India do not pay any interest to banks, by using the grace period, reveals a senior RBI official
Ever wondered why there are fewer calls from telemarketers offering you a platinum, lifetime free credit card? It has nothing to do with the Do Not Disturb (DND) facility from telecom operators. Credit cards have become unprofitable, especially after various banks suffered huge delinquencies in 2005-07, the boom years. Since the bankers or card issuers are not earning much money on credit cards, you now have to really struggle to get one.
Speaking at a seminar on banking services, organised by Moneylife Foundation, Kaza Sudhakar, chief general manager, customer services department, Reserve Bank of India (RBI) said, "Earlier there were complaints that I don’t want a credit card, now there are complaints that I am asking for a card and banks are not giving one. That’s because credit cards are not a profit-making business. Banks are losing money on credit cards."
On an average, there are higher interest rates associated with credit cards—ranging from 1.5% to 4% per month. However, this has not deterred people from opting for a credit card, simply because it gives a user the much-needed flexibility to repay. Credit cards also come with a grace period, where the user can pay his credit card balance in full within the specified time period which can go up to 45 days.
"There may be higher interest rates associated with credit cards, but about 80% of people don’t pay interest charges on a credit card (They may be using the grace period smartly, thus avoiding interest),” said Mr Sudhakar.
According to reports, there are about 26 million (2.6 crore) card users in India with an average person’s wallet containing at least one debit and credit card. However, out of these cards, only 50% are active or in use. Out of the active users almost 80% or about 1.04 million (10.4 lakh) users are not paying any interest on their credit cards, leaving all the issuers with just 260,000 (2.6 lakh) users from whom they can earn some money.
A few years ago or before the 2008 recession, people used to receive a lot of marketing calls for credit cards, free for life from any annual fee. Now the trend seems to have reversed. With the slowdown, many people defaulted on their credit card payments. Usually, during a slowdown, the number of defaults goes up rapidly. However, people don’t default on their home or car loans, since there is a danger of the creditor taking possession of the collateral. However, the same is not true for a credit card. Even if the user defaults on his credit card payment, the recovery takes much more time.
According to media reports, India’s second largest lender ICICI Bank Ltd has closed around 1.5 million credit card accounts, thus reducing the number of its total credit card users to 7 million. Other card issuers like State Bank of India, HDFC Bank Ltd, Citibank, HSBC and Standard Chartered Bank are also following the same route, but nobody likes to talk about it openly.
On the other hand, the number of debit card users is increasing. “We are seeing a shift in consumer behaviour as debit cards take on a greater role in everyday spending. More places that were traditionally cash only—from rail operators, to restaurants to retailers—are now accepting payment cards, so consumers can enjoy convenient access to their funds by using their debit cards with a level of control and protection not offered by cash,” said Uttam Nayak, country manager, South Asia, Visa.
Echoing the same sentiment, Piyush Khaitan, managing director of transaction management company Venture Infotek said, “Banks are going slow on credit card issuance and have been promoting spends through debit cards by offering various incentives to consumers such as loyalty rewards, discounts by select retailers and cash-back options. The increasing acceptance of debit cards at both physical and online merchants is also driving spends through debit cards."