Urban Cooperative Banks RBI Directive

2nd March 2012,Friday

The Reserve Bank of India on Thursday directed the management of urban co-operative banksto keep their financial positions strong, failing which, it said, it could resort to tough measures, including cancelling their licences.

If a co-operative bank's deposit erodes beyond 25%, the central bank would issue a showcause notice for cancellation of the licence of the bank concerned, which it calls supervisory action. Other conditions are not specific.

The action "would increase in terms of severity as the financials deteriorate and could include restriction on pre-mature withdrawal of deposits, freeze on the level of advances/deposits, prohibition in acceptance of deposits, issue of showcause for cancellation of banking licence etc," the RBI said in a statement.

Banks should shore up capital if it falls below the regulatory requirement of 9%.

"The management of the bank should identify the cause of deterioration and take necessary corrective actions on its own, with a view to improving the financial position of the bank," said the RBI. "Such corrective action should be prompt as any delay could be detrimental to the interest of the depositors and other stake holders of the bank," it said.

"The corrective action should include measures for augmenting capital, close monitoring of NPAs and their recovery especially the large NPAs, improving profitability by curtailing expenses, mobilising low-cost deposits, etc, depending on the nature of the deficiency," said the RBI.

"The UCBs should also prepare time-bound specific action plan for bringing about necessary improvement in their functioning and the board of directors should monitor the progress in implementation of the action plan in every meeting of the board," it said.

If the management failed to revive the bank, the RBI would initiate supervisory action, which would include active monitoring.

This would be followed by pre-emptive actions aimed at arresting further deterioration of the financial position of the bank concerned, the central bank said. "The extent and nature of supervisory action would depend on the level of capital adequacy and the extent of erosion in deposits, if any, in the bank," said the RBI.

What is Delta Hedging

2nd March 2012,Friday

An options strategy that aims to reduce (hedge) the risk associated with price movements in the underlying asset by offsetting long and short positions. For example, a long call position may be delta hedged by shorting the underlying stock. This strategy is based on the change in premium (price of option) caused by a change in the price of the underlying security. The change in premium for each basis-point change in price of the underlying is the delta and the relationship between the two movements is the hedge ratio.

For example, the price of a call option with a hedge ratio of 40 will rise 40% (of the stock-price move) if the price of the underlying stock increases. Typically, options with high hedge ratios are usually more profitable to buy rather than write since the greater the percentage movement - relative to the underlying's price and the corresponding little time-value erosion - the greater the leverage. The opposite is true for options with a low hedge ratio.

Business House Performance

1st March 2012,Thursday

Anil Ambani Group Performance

Scrip	Jan Close	Feb Close	% Change
RELCAPITAL	359.9	404.05	5.35
RPOWER	101.15	119.45	2.22
RELINFRA	535.85	593.9	1.67
RCOM	99.25	94.5	0.26

Bajaj Group Performance

Name	Jan Close	Feb Close	% Change
BAJAJELEC	173.9	185.55	2.4
BAJAJCORP	102.15	115.6	-1.04
BAJAJFINSV	449.2	641.85	-1.33
BAJAJ-AUTO	1601.3	1801.6	-1.75

FII Inflow

1st March 2012,Thursday

The investment by overseas investors into Indian stock market since the beginning of 2012 has crossed $7 billion level, out of which more than $5 billion were pumped in the month of February.

The Foreign Institutional Investors (FIIs) infused a net amount of $5.1 billion (about Rs 25,212 crore) during February, taking the total for 2012 so far to $7.1 billion for the Indian stocks.

Market analysts attributed strong FII inflows to signs of a reversal in RBI's monetary policy and the subsequent impact of improved liquidity position. They expect the positive trend to continue further, given that the liquidity conditions remain strong.

During February, FIIs were gross buyers of shares worth Rs 79,898 crore, while they sold equities amounting to Rs 54,686.6 crore, translating into a net investment of Rs 25,212 crore ($5.12 billion), as per data available with market regulator Sebi.

This is the highest monthly net investment by FIIs in equities since October 2010, where they had infused Rs 28,563 crore.

The foreign fund houses also infused Rs 1,0016 crore ($2 billion) in the debt market last month. This takes the overall net investments by FIIs into debt markets to Rs 25,987 crore ($5 billion) so far this year.

"FIIs have been infusing money into the Indian market due to change in RBI's monetary policy that have added liquidity to the system. This liquidity will help in growth of the country," Wellindia Executive Director Hemant Mamtani said.

"Indian market will continue to witness inflows in the whole year, if the liquidity conditions remain strong," he added.

Strong surge in FII inflows in 2012 so far has helped boost the equity markets, as also the rupee.

The stock market barometer Sensex has gained 15% in 2012, despite a fall of about 3.2% last month. The index finished at 17,752 on February 29.

FIIs had mostly stayed away from Indian equities in 2011. They flocked towards the debt market last year with a net investment of Rs 20,293 crore, while pulling out Rs 2,812 crore from equities.

China Economy

1st March 2012,Thursday

China's factories grew more than expected in February as new export orders for big firms bounced back, a government survey showed, while a private-sector report portrayed a different picture of smaller companies lagging behind the rebound.

China's official purchasing managers' index (PMI) rose to 51.0, above expectations of 50.7 and higher than 50.5 in January, while the final reading of the HSBC PMI stood at 49.6, a shade higher than January's reading of 48.8, but still under the 50-point threshold demarcating expansion from contraction.

Export orders showed a bigger divergence, with the government's new export orders sub-index rising to 51.1 in February, the first indication of expansion in four months and the highest reading since May 2011.

The HSBC PMI export sub-index slid to an eight-month trough of 47.5, suggesting orders were shrinking.

It is not uncommon for the two data series to diverge in their findings. They use differing survey samples and the government survey is only partially seasonally adjusted -- a vital distinction given the Chinese Lunar New Year holiday disruption to production cycles.

"In the past six years, the month after Chinese New Year always saw a rise of PMI readings. Therefore, PMI data in January and February should be taken with a grain of salt," Ting Lu, China economist with Bank of America/Merrill Lynch in Hong Kong wrote in a note to clients.

The twin data sets underline that a rebound in the vast Chinese factory sector should prevent a hard economic landing, but that it has yet to be secured, signalling to analysts that it is too early to think that the government will ease back from pro-growth fine-tuning of economic policy.

The market perception is that small firms in particular are in need of the banking system liquidity and other support that the government has unveiled in a series of policy tweaks since its fine-tuning campaign started in the second half of 2011.

The Australian and New Zealand dollars, already buoyed by robust domestic data, edged higher against the US dollar after the dual PMI readings.

Copper though held steady after having fallen more than 1% on Wednesday.

"The headline number improved, but the outlook is not very promising as inventory built up quickly and new orders only rose slightly. Other evidence from loan supply and sector-level data also signal further weakness," said Nomura's chief China economist, Zhang Zhiwei.

"The China Securities Journal reported that new loans in February may be just around RMB500bn, versus the Consensus of RMB800bn. Steel production in the first 20 days of February was weak. The property and export sectors continue to cool down in the first two months of 2012," he wrote in a client note.

The official PMI was at its highest level since 51.2 in September, the figures from the National Bureau of Statistics showed.

"The February PMI continued to pick up, further confirming a trend that the economy is stabilising," Zhang Liqun, a researcher with the Development Research Centre of the State Council, said in the official statement.

"Different from January, last month's expansion in the manufacturing sector is mainly driven by heavy industries. But the export and investment demand is expected to ease in the coming months, albeit at a slower pace. Input price is accelerating evidently, a reflection of rising imported inflation," Zhang said.

Rupee Weakens

1st March 2012,Thursday

The rupee fell further in afternoon trade on Thursday on concerns over a widening current account deficit amid a recent rise in global oil prices, a fall in the euro and weaker domestic shares.

* Dealers do not expect the rupee to rise much in the run-up to the federal budget scheduled on March 16 on worries about high inflation, slowing growth and a high fiscal deficit.

* At 2:21 pm, the rupee was at 49.20/21 to the dollar, weaker than Wednesday's close of 49.0050/0150.




A surge in Brent crude globally is fanning fears of increased demand for dollars by India, which imports about 80% of its oil requirement.



* So far, dealers said, there has not been much dollar inflow into the government share sale in Oil and Natural Gas Corp that aims to raise at least $2.5 billion.

* Defence-related dollar buying also added to the rupee's weakness, dealers said.

* The euro fell in Asia as investors cut bullish positions after key events including the European Central Bank's cash injection passed without surprise.

* Most emerging Asian currencies also fell as investors took profits from recent gains after the European Central Bank's fresh liquidity injections and as Federal Reserve Chairman Ben Bernanke failed to provide clear signs of more policy easing.

* India's economic growth slowed to 6.1% in the three months to December, the weakest annual pace in almost three years, as high interest rates and rising raw material costs constrained investment and manufacturing.

Videocon Q4 down

1st March 2012,Thursday

Diversified business conglomerate Videocon Industries today reported 46.77% decline in net profit for the fourth quarter ended December 31, at Rs 86 crore.
The company had posted a net profit of Rs 162.36 crore in the same period previous year.

The sales during the October-December also went down by 2.4% to Rs 3,073 crore from Rs 3,151 crore in the year-ago period, Videocon Industries said in a filing to the BSE.

For the entire 2011, Videocon's net profit stood at Rs 545 crore, while the sales were at Rs 12,919 crore, it said.

"The figures for the current year are for a period of 12 months as against 15 months in previous period," the company said.

Reacting to the results, shares of the company were quoting down by 0.11% at Rs 185 apiece on the BSE in late afternoon trade.