Crude holds the key for Indian market: Friday Market Preview

Overnight, Wall Street closed at its best in three months, boosted by strong economic indicators and signs of a possible resolution to the Libyan crisis. Tracking the US markets, the Asian pack was higher in early trade on Friday
A retreat in crude prices, along with positive cues from the global markets, indicates a green opening for the Indian market. Overnight, Wall Street closed at its best in three months, boosted by strong economic indicators and signs of a possible resolution to the Libyan crisis. Tracking the US markets, the Asian pack was higher in early trade on Friday. The SGX Nifty was 40 points higher at 5,594 compared to its previous close of 5,554.

The local market opened in the red on Thursday as concerns about high crude prices led investors to book profits early in the day. Yesterday’s trading session was an extremely volatile one. The Sensex and Nifty opened gap down at 18,318 and 5,478, respectively. During the initial hours of trading, the market fell to its intra-day low of 18,254 and 5,468. However, both the indices hit intra-day highs of 18,604 and 5,571, reacting to the news that the Libyan situation is likely to reach a peaceful solution. A sharp sell-off, however, followed immediately and the market went into the red in the afternoon. Eventually, the Sensex closed 43 points up at 18,490, while the Nifty rose 14 points to 5,536.

Markets in the US closed at their best in three months on strong economic data and signs of a possible solution to the Libyan crisis. Initial jobless claims fell by 20,000 to 368,000 in the week ended 26th February, beating analysts’ expectations of a rise to 395,000. The total number of people receiving unemployment insurance fell to the lowest level since October 2008. The Institute for Supply Management’s index of non-manufacturing businesses rose to 59.7, the highest level since August 2005, from 59.4 in the previous month.

This apart, same-store sales rose 4.3% last month, as compared to forecasts of a gain of 3.8%, the 18th straight monthly gain from September 2009.

The Dow surged 191.40 points (1.59%) at 12,258.20. The S&P 500 gained 22.53 points (1.72%) at 1,330.97. The Dow and S&P 500 posted their biggest one-day gains since 1st December. The Nasdaq rose 50.67 points (1.84%) at 2,798.74.

Markets in Asia were in the green in early trade today on cues from the US markets and a retreat in crude prices. The European Central Bank indications of a hike in interest rates next month and speculations of a possible solution to the Libyan crisis also boosted investor sentiments.

The Shanghai Composite gained 0.05%, the Hang Seng surged 1.12%, the Jakarta Composite gained 0.86%, the KLSE Composite advanced 0.94%, Nikkei 225 jumped 1.56%, the Straits Times was 1.06%, the Seoul Composite gained 1.14% and the Taiwan Weighted rose 0.81%.

Back home, the government may consider giving approval to the London-listed mining group Vedanta Resources’ $9.6 billion acquisition of Cairn India next week, oil minister S Jaipal Reddy said yesterday.

Mr Reddy said his ministry had last week circulated a Cabinet note listing issues for approval.

Vedanta had on 16th August last year announced buying majority stake in the company that owns the nation’s largest onland oil field, from UK’s Cairn Energy. The deal is to close by 15th April.


RBI governor: Banks need to offer better rates to encourage savings, achieve growth

D Subbarao says banks must lower net interest margins, improve efficiency  

New Delhi: Banks need to raise deposit rates in order to encourage savings, and lower lending rates to help the country achieve double-digit growth, RBI governor D Subbarao said today.

“For double-digit growth that we aspire, we need to save so that we can invest more. For that to happen, we need to encourage savings, which means that banks will have to raise interest that they offer to depositors and they have to reduce interest they charge from borrowers. In technical terms, what you understand is that the net interest margin has to come down,” he said on the sidelines of an event organised by the Institute of International Finance. Currently, banks pay up to 9.5% interest on fixed deposits.

Dr Subbarao stressed that Indian banks need to improve efficiency to catch up with their counterparts in the other nations. “They (Indian banks) have to reduce non-interest expenses including wages and salaries, reduce transaction costs, provision cost... bring in productivity enhancement, reduce NPAs and leverage on technology,” he said, reports PTI.

On meeting Basel III capital requirements of Indian banks, Dr Subbarao said, “At the aggregate level, Indian banking system meets Basel III capital standards. In fact, they are comfortably above Basel III requirement at the aggregate level.” However, he agreed, “It is quite possible that a few individual banks may have to augment capital (to meet Basel III norms).”

As per the Basel II rules, proposed by the Basel Committee on Banking Supervision, banks would have to raise the level of top-quality capital known as core Tier 1 to 7% of their risk-bearing assets by 2019. Currently, core Tier 1 requirement is 2%.


ONGC follow-on public offer deferred to April

Delay over appointment of one independent director to meet SEBI listing requirements

New Delhi: The government has pushed back the Rs 11,500 crore share sale of state-owned Oil and Natural Gas Corporation (ONGC) to the next fiscal and the public offering is now slated to open on 5th April, a senior official said today.

The follow-on public offer (FPO) was originally scheduled to open on 15th March, but has now been rescheduled. “The rescheduling is partly because of delay in appointment of independent directors on ONGC board to fulfil Sebi’s listing requirement,” he said.

As per the schedule now drawn, the FPO would open on 5th April and close on 8th April, reports PTI.

The government is selling its 5% stake or 427.77 million equity shares in the FPO that in today’s closing price of Rs269.85 on the Bombay Stock Exchange (BSE) will fetch over Rs11,540 crore. Post offer, the government stake in ONGC would come down to 69.14% from the current 74.14%.

Roadshows to promote the share offering in the nation’s biggest explorer and highest profit earning company, which were to be held in India and aboard from 2nd March to 9th March, have now been rescheduled to begin on 21st March.

The official said ONGC was ready with its red-herring prospectus (RHP) for the FPO but is awaiting appointment of at least one independent director on its board to meet market regulator SEBI’s listing requirement. ONGC has six functional directors, besides the chairman. It also has two government nominee directors taking the total strength of functional/promoter directors to nine. Against this, the company, at present, has four independent directors and needed five more to meet SEBI’s listing norm of having equal number of executive and non-executive directors.

However, since ONGC is without a permanent chairman and the vacancy of director for human resources has not been filled, the effective strength of full-time functional directors together with government-nominee directors is down to seven. To meet the SEBI norm, three independent directors need to be appointed, which given the timelines is not possible. So, the government plans to withdraw its two nominee directors, bringing down the strength of functional directors to five.

The file pertaining to appointment of one independent director is already with the cabinet committee on appointments and once that is cleared, ONGC would meet the SEBI norm, he said.

ONGC last month received the report of independent auditors who certified the company's oil and gas reserves, a mandatory requirement for explorers making public offers.

A group of ministers headed by finance minister Pranab Mukherjee would decide on a price band for the FPO on 1st April. Bank of America Corp, Nomura Holdings, HSBC Holdings Plc, JM Financial Services, Citigroup Inc and Morgan Stanley are managing the FPO.


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