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US Economy: Automaker and Porn Bailout

Posted by Manish Agrawal on Thursday, 22 January, 2009

Car makers are going through a government-sponsored rescue plan. They aren’t the only ones asking for help – porn moguls are trying to cash in too.

The US automotive industry has long been plagued with problems. These problems have been exacerbated by the recent financial meltdown resulting in a bleak future for American car manufacturers. Read the rest of this entry »


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UK Economy: RBS Losses at Record High

Posted by Manish Agrawal on Thursday, 22 January, 2009

Royal Bank of Scotland announced it would report losses before write-downs of £7 to £8 billion for 2008. This has caused its shares to sink 67%.

Furthermore, it will report losses of assets related to its 2007 ABN Amro acquisition of nearly £20 billion. This beats even Vodafone’s record losses of £15 billion in 2006. Jobs will be lost as well, according to the bank. Read the rest of this entry »

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Market Await Policy Cues To Tide Over Slowdown

Posted by Manish Agrawal on Monday, 15 December, 2008

With shrinking industrial production (IIP) numbers for November intensifying fears of a sharper economic slowdown in India, investors are awaiting suitable policy responses. There is an anticipation of second tranche of fiscal sops from the government and additional interest rate cuts by the central bank. 
In addition to domestic triggers, investors will keep a close watch on the extent of rate cuts in the US, comments on the interest rate outlook by the Federal Reserve on Tuesday and a likely bailout package for the troubled automobile giants. The Fed is expected to cut the benchmark rates by 50 basis points to 0.5% as part of its attempts to revive consumer spending. 

Analysts said the US is unlikely to allow auto giants, including General Motors and Ford, to fail as this will have severe implications on an already-sagging economy. The resurgence of the US is considered to be critical for most emerging markets, including India as it consumes roughly 15% of the world’s exports.  Back home, analysts believe that any measures taken by the government and RBI to protect India from a global recession will assuage nervous investor sentiment only temporarily. There will be no immediate impact on India’s weakening economy. 
“While the government’s fiscal stimulus package and monetary measures are positive, they are unlikely to reverse the slowdown in growth and the downside risk appears to be increasing,” said Citigroup economists Rohini Malkani and Anushka Shah in a report. 
With the market already rebounding 10% off its low and the uncertain investment climate, brokers are advising clients against purchasing aggressively. However, they do not rule out more upsides. 

“The risk-reward ratio is certainly not favourable at the moment. We are advising clients to take it slow,” said an official at brokerage Sharekhan. The markets may correct another 20% from current levels, going by the general perception. 

Credit Suisse expects the Sensex to revisit 9,000 “again and again ahead of the elections in 1H09E (first half of 2009)”. It ended at 9,370.87 on Friday. 

“In 2H09E, the market could rebound sharply if the general elections end with a conclusive result and a reformist government. Otherwise, the Sensex could remain at the bottom-of-range valuations, trading around 9,000 for a while more, as consensus expectations continue to contract,” the investment bank added

Source: Economic Times

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Your credit card may have terror cover

Posted by Manish Agrawal on Thursday, 11 December, 2008

The kin of those killed in terrorist attacks such as the recent one in Mumbai may want to double-check victims’ credit cards for personal accident cover.

Terror attacks are automatically included in policies that cover “death due to any cause” and claims by beneficiaries must be honoured, the insurance regulator and card issuers say. Read the rest of this entry »

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Home Loan May Be Cut, RBI To Ease Risk Norms

Posted by Manish Agrawal on Thursday, 11 December, 2008

 State-owned banks are planning to cut rates on small-ticket home loansby up to 300 basis points by Friday, as RBI separately considers ways to help the banking sector make small home loans available at cheaper rates and relaxed norms, bankers said. 
“We have decided to bring down interest ratesfor loans up to Rs 20 lakh by 200 basis points while loans up to Rs 5 lakh would be cheaper by 300 basis points,” UCO Bank chairman and managing director SK Goyal told ET. 

Oriental Bank of Commerce (OBC) and Bank of India are also considering rate cuts by the end of this week, officials told ET, although the extent could vary significantly. The planned cuts will bring down rates for home loans up to Rs 20 lakh to between 8% and 10%. Nearly 80% home loans are below this amount. 

Meanwhile, RBI is likely to lower risk weightages for home loans of up to Rs 20 lakh, according to government officials and bankers with knowledge of the central bank’s thinking. Banks have to assign credit risks to all their assets, which vary between 0% and 100%, depending on the asset’s risk. Based on the risks, they have to maintain minimum capital. A lower risk weightage will allow banks to give more loans without raising more capital. 

A finance ministry official, who asked not to be named, said RBI could also ease provisioning norms in case of small housing loans. Banks have to keep certain moneyaside — known as capital adequacy ratio, or CAR, in banking parlance — for every loan. Currently, the CAR is set at 9%, which means for every loan of Rs 100 that carries 100% risk, banks have to keep aside Rs 9 as capital to cover the risk. 

“In case of housing loans, at present, RBI prescribes a risk of 75%. We expect that the central bank may reduce this to 50% for loans up to Rs 20 lakh,” said OBC executive director SC Sinha. This will mean that banks will need to set aside a smaller amount of capital to protect against defaults. Several banks are also likely to reduce the amount of margin money that customers need to put up for loans up to Rs 20 lakh, government officials said. For the past few months, banks have sought anywhere between 20% and 25% of the house’s value as margin from customers before approving loans. This could come down by 5 percentage points, and banks will be able to lend up to 85% of the house’s value. RBI is expected to come out with final guidelines on this issue by next week. 

Banks such as SBI had increased the requirement of margin money for housing loansin October in the wake of a shortage of liquidity in themarket. “The finance ministry and RBI have taken enough steps to ease liquidity conditions in the market…In such a situation, it is desirable that banks should bring down the margin requirement. However, the final decision rests with individual banks,” said another finance ministry official, who also did not wish to be named. 
In a fiscal stimulus package announced earlier this week, the government had said it would take steps to ensure cheaper housing loans for small borrowers. It is expected that public sector banks (PSBs) will come out with relaxed rules for home loans up to Rs 5 lakh and those between Rs 5 lakh and Rs 25 lakh.

Source Link :,curpg-1.cms

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IIM-A entry’s tougher than Stanford, Harvard

Posted by Manish Agrawal on Wednesday, 10 December, 2008

 Is the Indian Institute of Management, Ahmedabad (IIM-A), the country’s premier business school, better than the best international management schools like Stanford or Harvard when it comes to the executive management programme? The answer is yes if the comparison is based on the GMAT scores required for admission. Read the rest of this entry »

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The new Finance Minister: economist or politician?

Posted by Manish Agrawal on Wednesday, 10 December, 2008

The Capital was rife with speculation on Tuesday about who would be the next Finance Minister. At one point it was even thought that the swearing-in ceremony would be held today. The rumours picked up pace when the Prime Minister went to make the routine pre-parliament session call on the President. 

But a phone call to the Rashtrapati Bhavan met with the answer, “There can be no swearing-in on a public holiday as it is Eid.”

The rumours started on Monday when a senior minister of state said the appointment was imminent. Soon several names were doing the rounds, including that of a former chief minister. More names got added to that list.

The choice is between appointing politicians or economists. The dominant school of thought has always been that politicians make better finance ministers. This is because the job is not merely a technical one but also consists in a large measure of having to balance conflicting political and economic considerations.But Dr Manmohan Singh disproved that theory. However, he would also maintain that he had become a politician and was no longer only an economist.

It is also important that the new appointee should have the approval of the Congress party. The outgoing Finance Minister, Mr P. Chidambaram, was asked who he would like his successor to be. He said he would prefer someone from the Congress party.

Since Independence only one professional economist has been appointed to the job. That was Dr Singh.

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Posted by Manish Agrawal on Wednesday, 10 December, 2008

With the investors coming to terms with the economic slowdown and the stock market mayhem, they have become not only cautious but more selective about which sectors and stocks to invest in. While sectors such as steel and cement are now facing the cold shoulder of the investor, it is also found that the once sought after infrastructure companies aren’t the favorites either. The counters, which commanded huge premium on the bourses, made new peaks, and looked justified even at very high valuations just a year ago, today find themselves touching new lows with sharp corrections in their valuations.  Read the rest of this entry »

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Social security & new breed of international workers

Posted by Manish Agrawal on Tuesday, 9 December, 2008

Historical Background: Sometimes it is essential to understand the historical context even in the context of taxes. With the objective of providing social security coverage to the working population of independent India, the Provident Fund Act (PF Act) was introduced way back in 1952. The basic purpose of its introduction was to provide a blanket to the employee during retirement or to his or her dependents in case of the employee’s early demise. The spirit of the legislation was to inculcate the habit of saving. Read the rest of this entry »

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Job cuts darken outlook for world economy

Posted by Manish Agrawal on Tuesday, 9 December, 2008

TOKYO: Another wave of job cuts darkened the outlook for the global economyTuesday as Sony announced 8,000 layoffs, while Japan revealed it was even deeper in recession than previously feared. 
Sony, seen as a bellwether of corporate Japan, said it would cut investment in its electronics business by 30 percent, axe 10 percent of its manufacturing sites and exit unprofitable businesses to cope with the economic downturn. 

The announcement came just hours after Tokyo said its economy shrank 0.5 percent in the three months to September — 1.8 percent on an annualised basis — even worse than initially estimated. 

“The data suggests that the economy is contracting faster than previously thought, and the depth of the recession will be more severe,” said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong. 

Asian stock markets were mixed after strong gains overnight on Wall Street where hopes mounted that economic stimulus measures will ease the US recession. 

Tokyo ended 0.8 percent higher but Hong Kong fell 2.05 percent, Sydney 0.8 percent and Shanghai 2.54 percent. 

Europe’s main stock markets opened slightly lower Tuesday, with London slipping 0.56 percent and Paris and Frankfurt both down 0.90 percent. Global shares had surged Monday after US president-elect Barack Obama vowed to make the largest investment in infrastructure since the 1950s to revitalise the slumping economy. The Dow Jones Industrial Average leapt 3.46 percent. 

“Gains reflected optimism that massive infrastructure spending planned by the Obama administration will end recession in the world’s biggest economy,” said Dariusz Kowalczyk, chief strategist at CFC Seymour in Hong Kong. 

Optimism was tempered by news that Japan slipped even deeper into recession in the third quarter than previously thought, underscoring the challenging outlook for the global economy. 

“The data highlights the tough spot in which the Japanese economy is finding itself,” said Kowalczyk. 

More US job cuts and a bankruptcy filing by one of America’s biggest newspaper publishers also injected a dose of caution into markets. 

Dow Chemical announced it would cut about 5,000 full-time jobs, while industrial conglomerate 3M said it was laying off nearly 1,800 people. 

US media conglomerate Tribune Co., the owner of The Los Angeles Times and The Chicago Tribune, said it filed for bankruptcy protection in the face of a sharp drop in revenue and a heavy debt load. 

At the same time, expectations mounted that lawmakers may throw crisis-hit American automakers a financial lifeline to avert an industry collapse. 

After US stock markets closed, Democrats in Congress announced Monday that they will introduce a bill making available as much as 15 billion dollars in immediate aid for the troubled US automobile industry.

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