RBI to auction Rs 14,030 cr under special repo window

The Reserve Bank on Friday said Rs 14,030 crore are available under the special lending window set up by the central bank to deal with the redemption pressures of mutual funds.


On 14th October, the RBI had decided to conduct a special 14-day repo auction at 9 per cent per annum for Rs 20,000 crore, with a view to enable banks to meet the liquidity requirement of mutual funds.


Despite offering funds at a reasonable rate to lenders, only a few banks participated in the window, owing to their limited headroom on the first day.



Following the poor response from banks, the RBI decided to keep the facility open till banks cumulatively avail Rs 20,000 crore.


Welcoming the decision on the special window, Finance Minister P Chidambaram had said, "Government has been informed by the mutual fund industry that against their borrowings from the banks they will give as security mainly certificates of deposits of the bank themselves."



Mutual fund industry had sought a facility for accessing funds and "consequently, the government requested SEBI and RBI to meet on Friday and address the issue," he had said.



The settlement for the special repo would be conducted separately and on gross basis, RBI had said.


The RBI further said that this facility would be in addition to repo/reverse repo auctions conducted under Liquidity Adjustment Facility and Second Liquidity Adjustment Facility.

Sensex ends below 10k level, touch over 2-year lows

The Bombay Stock Exchange benchmark Sensex on Friday sank to more than two-year lows under 10,000 points on panic selling by funds and general investors.


After a promising start, the Sensex dropped by 606.14 points, or 5.73 per cent, to 9,975.35, a level last seen in June 2006.

The key-index dipped to 9,911.32 during the day and a high of 10,786.93.

Similarly, the wide-based National Stock Exchange index Nifty tumbled by 194.95, or 5.96 per cent, to 3074.35 after touching the day's low of 3046.60 and a high of 3335.95 points.

Marketmen said the Sensex dipped to the lowest level in over two years on concerns of a sharp global economic slowdown and sluggish corporate earning.

They said a series of measures announced by the government and the Reserve Bank of India failed to check rising capital outflow by foreign funds.

The market barometer turned significantly down as market major Reliance Industries dropped by 6.58 percent, DLF Ltd. by 10.34 per cent, Bharti Airtel by 7.47 per cent, ICICI Bank by 5.61 per cent and State Bank of India by 8.42 per cent.

Sector-wise, Realty stocks suffered the most as segment index meltdown by 10.25 per cent at 2,524.89 followed by Power sector index by 8.09 per cent at 1,712.27.

US Home building at 17 year Low

Construction of new US homes fell more than expected last month to reach its lowest level in almost 18 years, Commerce Department figures have shown.

The number of new houses and apartments being built in September declined 6.3% compared with the same month in 2007.

This fall was much more severe than the 1.6% dip that analysts had expected.

Analysts predict that housing construction will fall throughout 2009, and only grow again when the banking sector and wider economy recover.

Until then, would-be new homeowners are finding that they either cannot afford to get their first mortgage, or that banks are reluctant to lend.

Without these would-be customers, homebuilders are cutting back on the number of new houses they build.

'Slide continuing'

The report showed that 817,000 new homes were built across the country last month on a seasonally adjusted basis, the slowest pace since January, 1991.

The fall in the construction of one-room apartments was even more pronounced, falling 11% from a year earlier to 544,000, the lowest figure since August 1982.

The study added that the downturn in construction was most notable in the north-east of the country.

Mark Zandi, chief economist at Moody's Economy.com said the fall in construction was "a significant weight on the economy".

"Not only is housing demand falling, but builders can't get credit to build homes," he added.

"The slide in construction will continue into next year."

Fellow analyst, Peter Kenny of Knight Equity Markets, added that construction levels will not rise again until the current glut of unsold properties is sold.

"The housing inventory overhang needs to be digested in order for us to move forward," he said.

Early falls for New York shares

US shares opened 200 points lower on Friday, after official figures showed a sharper-than-expected fall in the number of new homes being built.

The Dow Jones industrial average recovered slightly to trade down 90 points or 1.0%.

European share indexes have fluctuated throughout the day and were trading higher by the early afternoon.

The FTSE 100 was up 2.6%, while Germany's Dax index was up 0.9% and France's Cac 40 had risen 1.8%.

It comes at the end of a week of rallies and slumps, unseen since the crash of 1987.

Rallies and slumps

Stock markets have been rising and falling all week as investors try to decide how severe the global economic downturn will be.

"This is the most volatile week we've seen," said Thierry Lacraz, strategist at Swiss bank Pictet in Geneva.

"The sole intelligent thing is to remain on the sidelines and not make any huge bets."

In his latest effort to reassure the markets, US President George W Bush told the US Chamber of Commerce it would take time for his administration's financial rescue plan to work.

"It took a while for the credit system to freeze up, it's going to take a while for the credit system to thaw," he said, adding that the rescue moves were "big enough and bold enough to work".

Among other developments:

Credit rating agency Fitch downgraded Hungary's outlook from "stable" to "negative" as it considered that the global financial crisis had increased the country's credit risk
The Prague stock exchange fell 10.2% to 842.8 points, its lowest point for four years
Oil prices rose above $72 a barrel on expectations that Opec would decide to cut production at its upcoming meeting
Share indexes in South Korea and Australia fell back slightly, though markets were relatively stable compared with recent gyrations
The Nikkei index climbed 235.37 points or 2.8% to end at 8,693.8, having lost more than 11% on Thursday
The Hang Seng in Hong Kong closed barely changed
German bank shares were helped by news that the German parliament had passed a 500bn euro ($672bn; £389bn) bank rescue package
Bombay's Sensex closed down 5.7% or 606.14 points at 9,975.35

Switzerland unveils UBS bail-out

Switzerland is taking steps to strengthen its largest bank, UBS, becoming the latest European government to unveil a banking rescue plan.

UBS is raising 6bn Swiss francs ($5.3bn; £3.1bn) from the government.

It will also be able to transfer up to $60bn of distressed assets to a fund supported by the Swiss central bank.

Credit Suisse was also offered government assistance but was instead able to raise 10bn Swiss francs from major global investors.

The Swiss National Bank (SNB) said its moves would help to stabilise the financial system and was favourable for the development of the Swiss economy.

"The SNB is convinced that it will result in a sustainable reduction of the strains in the Swiss financial system," it said.

The government also said it would moderately increase the guarantee on bank deposits, echoing steps taken by other European countries.

Thankful

UBS has been one of the heaviest losers from the sub-prime crisis.

It will transfer its exposure to the US mortgage market and other assets to a fund controlled by the central bank.

The fund will be financed by $6bn from UBS and a $54bn loan from the central bank.

The SNB will receive interest on the loans and is entitled to a share in any profits the fund makes.

The Swiss National Bank said it was a "highly unusual" and "unprecedented" operation.

However, it said the risk of losses was limited because UBS had already made aggressive write-downs on its risky positions.

The additional $6bn capital injection means the Swiss government will emerge with a temporary 9.3% stake in UBS.

UBS thanked the Swiss government and central bank authorities for finding a "commercial solution".

"In these turbulent times, we want to ensure that we do everything possible to safeguard the solidity of our bank," said Peter Kurer, chairman at UBS.

"Their efforts and decisiveness to act swiftly demonstrates the professionalism of the Swiss financial centre."

Profit

UBS also announced that it made a small net profit of 296m Swiss francs in third quarter, mainly due to its wealth management business. Its investment banking arm made a loss of 2.8bn francs.

Credit Suisse said it expected to make a loss of 1.3bn Swiss francs in the three months to September.

The bank said that the Qatar Investment Authority was among the group of global investors that had helped the bank to shore up its finances.

Credit Suisse had been required by the SNB to strengthen its capital base.

"Over the past few months we have had a constructive and close dialogue with regulators about future capital requirements," said Brady W. Dougan, the bank's chief executive.

Global shares carry on tumbling

European shares have been trading lower following dramatic falls in Asia that saw Tokyo's Nikkei index fall 11%.

Global falls have largely wiped out the gains earlier in the week, as fears of recession cancelled out any optimism from government bank rescue packages.

In early trading, London's FTSE 100 fell 2.3% while the Cac 40 in Paris and the Dax in Frankfurt both fell 3.1%.

On Wednesday, New York's Dow Jones saw its worst one-day percentage fall since October 1987, closing almost 8% down.

In Tokyo, the Nikkei 225 index fell more than 1,000 points, closing down 11.4% at 8,458.45
Hong Kong's Hang Seng fell 7.6% to 14,785.60 points
Australia's main share index fell 6.7% while India's was down 4%
Fears of a protracted downturn also hit oil prices with benchmark US light, sweet crude for November delivery at a 14-month low of $71.64 a barrel

Oil slides again, now 50 percent off record highs

Oil prices slid further on Thursday as the global credit crunch and fears for slowing energy demand took their toll, with prices now down about 50 percent from July's record highs.

US light, sweet crude fell $2.44 to $72.10 a barrel. London Brent crude fell $2.31 to $68.49 a barrel.

Oil prices are about half what they were in July this year, when they hit a record above $147 a barrel.

"The market is just very worried about a severe international economic downturn," said David Moore at Commonwealth Bank of Australia.

"They're thinking that oil consumption will be weaker than expected."

On Wednesday, US economic data showed that retail sales fell 1.2% in September, a sign that consumers were tightening their belts.

Also the US central bank's Beige Book report, which reflects the economic conditions, said the economy had showed further signs of contraction, fanning fears that the US economy is already in a recession.

According to Mr Moore, oil cartel group Opec is tipped to cut production when it next meets in November.

Inflation slips to 11.44 percent on falling oil prices

Inflation fell to 11.44 percent for the week ending 4th October on account of decline in oil prices and manufactured goods, giving some respite to the government which is battling the impact of global meltdown.


The inflation was 11.80 per cent a week ago.

The index for fuel prices declined by 1.1 percent on account of lower prices of naphtha, aviation turbine fuel and furnace oil.


The inflation figures were released in the first half of the day, as against the normal practice of making the data public on Thursday evening, even as the stock markets tumbled by over 700 points by mid-day on Thursday.


The rate of price rise eased mainly on account of prices of those petroleum goods which are linked to international crude prices that declined to below USD 75 a barrel in recent weeks.



The prices of naphtha during the week declined by 11 percent, aviation fuel by 6 percent and furnace oil 5 percent. Bitumen, however, became dearer by 4 percent.


In the manufactured goods category, the index, measured movement in the wholesale prices, declined by 0.5 percent on account of cheaper imported edible oil, steel, pig iron and lead ingots.


However, in the foods category, several items like fruits and vegetables, pulses and cereals became dearer during the week.



The index for the week ending September was revised up at 12.82 percent as against the provisional figure of 12.63 percent

India, Brazil, S.Africa for action to contain financial crisis

With financial crisis gripping the developed world, India, Brazil and South Africa said those responsible for it should be held "liable" and asked the US and Europe to take urgent action to prevent such "unprecedented turbulence" from reaching developing nations.


The three leading developing economies raised questions over financial management of the developed world and advocated a new international initiative to bring about structural reforms in the world's financial system which entails stronger systems of multinational consultations and surveillance.

In an effort to ensure that the impact on them is minimum, the three countries at a trilateral summit at New Delhi on Wednesday, decided to immediately convene a meeting of their Finance Ministers and Governors of central banks to evolve a joint strategy.

Addressing a joint press conference with Presidents of Brazil and South Africa after the summit, Prime Minister Manmohan Singh said the three leaders exchanged views in depth on the financial crisis and other challenges.

"We agreed on some ideas to tackle them and to collaborate closely as the international community grapples to find satisfactory solutions," he said.

"To this end, we have decided to instruct our Finance Ministers and Governors of central banks to convene a meeting, as soon as possible, in order to establish a coordination mechanism," Singh said.

Brazilian President Luiz Inacio Lula da Silva said the US and Europe should take immediate action to ensure that the crisis does not "reach the developing countries that did not participate in this financial casino."

India seeks reforms in UN, G-8

With financial crisis gripping the developed world, Prime Minister Manmohan Singh on Wednesday raised the pitch for reforms in the UN, G-8 and other international institutions of governance and emphasised that the voice of the developing countries should be heard.

Inaugurating the India-Brazil-South Africa (IBSA) Summit in New Delhi, he said the Doha round of WTO talks should be approached purposefully so that these negotiations are concluded in a "manner that promotes development and inclusive growth".

"We are meeting against the backdrop of international financial crisis," he said addressing the third Summit of the three leading economies of three continents.



"Our voice on how to manage this crisis in a way that does not jeopardise our development priorities needs to be heard in international councils," Dr Singh said in the presence of Brazilian President Luiz Inacio Lula da Silva and his South African counterpart Kgalema Motlanthe.


The Prime Minister underlined the need for renewed effort, more than ever before, for the reform of institutions of international governance whether it is the UN or the G-8.



Singh also talked about the challenges posed by increase in energy and food prices and the problem of terrorism, saying these "threaten our development effort".



Underlining the importance of IBSA, he said the forum is "uniquely placed" to cooperate in these areas.

Noting that India, Brazil and South Africa are "dynamic developing economies" located in three different continents, the Prime Minister said "IBSA has an important role to play internationally."



He underlined that the three countries "have a key role to play in ensuring equitable global growth and in contributing to international stability."



Contending that IBSA has become a role model for effective South-South cooperation, Singh said the forum provides a platform for the three countries to learn from each other's experiences and to synergise complementaries in a mutually-beneficial manner.



He said the working groups of the IBSA are making efforts to identify concrete projects and activities for trilateral cooperation.



"Our focus must constantly remain on implementation so that the benefits of our cooperation can be brought to the doorsteps of our people."



The Prime Minister said improving connectivity among IBSA countries "remains a challenge and must remain a strategic objective".

Jet Airways cuts 1,900 jobs to cut costs

Battling a clawing downturn enveloping the aviation industry, Jet Airways on Wednesday announced laying off 1,900 jobs across all operations that will result in savings of USD one million a month.


"It is an unfortunate decision, which all of us in the company regret but it is an attempt to save the company and the jobs of the remaining employees," Jet Airways Executive Director B Saroj Dutta told reporters at the airlines headquarters in Mumbai on Wednesday.

"A total of 1,900 people are being served separation notice. 800 have already been served notice. In the next few days the others will also be served notice. It is an attempt to save the jobs of remaining 11,100 employees," he said.

He said the decision to terminate the employees, which will result in savings of USD 12 million a year, had nothing to do with the alliance entered into with Kingfisher.



"It (alliance) has nothing to do with the workforce of the companies. These are independent decisions."



Kingfisher has laid-off nearly 300 jobs and may announce more cuts across the board in the coming days.



The airline chief Vijay Mallya gave enough hints of it, saying the company would do whatever it takes to cut costs.



Dutta said all sections and activities of the company were being covered by this action, which the airline said was inevitable in view of the declining traffic volumes.



The sack order evoked protests from Raj Thackeray, who warned that no Jet flights would be allowed from Mumbai in case the airline did not reconsider the decision.



But, Dutta said: "They (politicians) are diligent and rational people and they know what the aviation industry is going through."



He also denied any cartelisation, saying the alliance with Kingfisher was just rationalisation and cooperation.

Govt hints at bailout package for airlines; awaits report

Against the backdrop of airline industry's demand for a Rs 4,750 crore bailout package, Civil Aviation Minister Praful Patel has expressed disappointment over the approach of some ministries on sops for the sector.


"We need a consensus," he said while regretting that "many departments are not taking a positive approach."

Taxes on ATF and charges for aviation services could be eased to help airlines fly out of the crisis fuelled by high jet fuel costs and the world economic slowdown, he said.



But the government is awaiting the recommendations of an official panel in this regard.



"It is a tough time for the entire aviation industry worldwide... Government is sensitive to the problem... I have already given (the Prime Minister) an overall picture... after which a committee was constituted. But its recommendation will take sometime," he told reporters in Hyderabad on Wednesday.



Airlines, both private and state-owned that are already facing high fuel costs, are now reeling under the effects of the global financial crisis with drop in premium air traveller numbers.



"We can reduce fuel bills by cutting taxes or ask oil companies to cut base price for airline industry, landing, parking and route navigation charges could also be reduced for a small period of time," said Patel, who was in Hyderabad for the India Aviation-2008, civil aviation expo.



The airlines have sought a bailout package worth Rs 4,750 crore to tide over the crisis spawned by fuel costs and poor load factor.



"If tomorrow no plane flies on the Indian skies, who is there to answer. There is a bad patch in the industry and it needs to be resolved," he said.



Patel said that many airlines had complained to him that banks and lending institutions were not happy to lend to them.



"This will be on top of my agenda. I will meet the Finance Minister, will also meet bankers and ask them not to put undue pressure on airline industry, because it is infrastructure. They should keep some open window for the sector." he said.



The panel appointed to look into the bailout plan for airlines has in turn constituted a sub-committee, which is looking into the finer details of the Rs 4,750 crore package sought by the industry.



The sub-committee is expected to submit its report to the panel shortly, after which a comprehensive report would be presented to the Aviation Ministry.



The crisis in the industry has already forced Jet Airways and Kingfisher Airlines to strike an operational alliance, prune staff strength and routes to cut costs.



Earlier inaugurating the expo, Patel said India provided a huge investment opportunity in the aviation sector, and that about 200 to 300 billion dollars would be required in the next 10-15 years for development of aviation infrastructure.



There were about 400 old or unused airports in the country that could be brought into operation in a phased manner, he said.



Apart from regular air traffic, helicopter tourism, general and business aviation should also be exploited as they held huge potential, Patel noted.



Govt may provide Air India Rs 2,500 cr to see through crisis



The government may provide flag carrier Air India up to Rs 2,500 crore in the absence of funds from the market route, to help it stay in the skies right through the global financial crisis.



"It is owned by the government and as like any owner of a company, government should be ready to infuse liquidity into it. Air India has a very small liquidity base of Rs 145 crore and with an estimated aircraft of Rs 40,000 crore it is absolutely unacceptable.


"There is need to infuse further liquidity to make Air India a viable entity," Civil Aviation Minister Praful Patel told reporters in Hyderabad on Wednesday.


The 77-year-old airline, which initiated a fleet renewal programme three years ago and merged with its sister airline Indian last year, has proposed infusion of Rs 1,000-1,500 crore of equity capital.


It is also looking for soft loans to the tune of Rs 1,000 crore from the government that can be repaid over a period of time.


The airline like its private sector competitors has been facing a drop in traffic, especially premium air travellers a fallout of the global economic slowdown.



Asked about plans for the Air India IPO, Patel said there is no discussion on public listing and that there was "no point in talking about that at this juncture."