Dawn of 18th Dec 08

INR Opens higher, FII returns 440$mil, GSECS 4.5 years high, WPI Reuters forecast 7.49%, India? Corporate Governance, US Stocks tumble : Fed Euphoria Fades, USD crashes against EUR.JPY, Cu loses 4%, OPEC cut –Oil still falls, : Bad News : ACC shuts plant, Air India Bail out , Mines Close

INR

Ø INR opened up at 47.35 , should nudge higher on Thursday following the USD’s weakness against some Asian currencies, but demand for the U.S. currency from oil refiners could limit the Indian unit’s gains. INR closed at 47.67/69 per USD on Wednesday, 0.5 % above Tuesday’s close of 47.92/93. It had climbed to 47.22 during trade, its highest since Nov. 10. 1M NDF were at 47.55/65, stronger than the onshore spot rate. December, FII’s have been net buyers of Indian shares worth about $440 million, which has underpinned the INR.

BONDS

Ø Yields are set to drop to fresh 4-½ year lows on Thursday, falling for a ninth consecutive day, on rising hopes for an easier monetary policy after a big U.S. rate cut and cooling inflation. 10Y ended at 5.80 % on Wednesday, a shade above an intraday low of 5.79 %, its lowest since July 2004 but below Tuesday’s close of 5.99 %. WPI FORECAST AT 7.49 % REUTERS POLL.

STOCKS

Ø Fell 2.6 % on Wednesday and software major Satyam plummeted by nearly a third after it abandoned a deal for two firms and sparked concerns abroad over corporate governance. Satyam Computer Services tumbled 30.2 % to a 4-year low of 158.05 INRs as investors, furious at a plan to pay $1.6 billion for control of a construction and a real estate firm that senior management held stakes in, bolted.

Ø Cement firm ACC fell 9.2 % to 486.30 INRs after the country’s single largest producer said it was shutting down a clinker plant in northern India for 15 days on rising stocks and poor demand in the region.

CALL

Ø Cash rates ended flat on Wednesday as tax outflow concerns were offset by comfortable cash conditions in the banking system. Call rates ended at 6.40/6.50 %, unchanged from its Tuesday close. “The only trigger today was the advance tax outflows, otherwise, most banks have covered their borrowing needs and liquidity is comfortable now,” said a dealer at a state-run bank. RBI absorbed a net 120 billion INRs from the banking system via its daily money market operation indicating there is some surplus cash in the system.

GLOBAL

Ø DJIA 8,824.34 -99.80 Nikkei 8,687.04 +74.52 FTSE 4,324.19 +15.11 H Seng15,503.03 +42.51 US10Y 2.183 -0.077 EUR 1.4420 Yen 87.74 Gold 870.00 Crude 40.41

Ø U.S. stocks fell on Wednesday as the government’s effort to stave off a deep recession raised worries about mounting public debts and blunted optimism stemming from the Fed’s rate cut.

Ø FTSE ended higher on Wednesday, with heavyweight commodity stocks offsetting weakness in banks led by HSBC

Ø Nikkei average fell 0.6 % on Thursday, with a much stronger yen hurting exporters such as Kyocera Corp and after Wall Street fell as initial optimism from the Federal Reserve’s rate cut faded.

Ø USD tumbled against major currencies on Wednesday, hitting its weakest level in more than 13 years versus the yen, a day after the Federal Reserve slashed interest rates to virtually zero.

Ø Gold futures ended 3 % higher Wednesday on follow-through buying as the Federal Reserve’s aggressive rate cut underscored mounting economic problems, bolstering bullion’s alternative investment appeal.

Ø Copper lost more than 4 % on Wednesday as demand concerns increased because of a worsening economic outlook and outweighed the benefits of a weaker USD.

Ø Oil prices dropped to their lowest in more than four years on Wednesday after OPEC announced a record supply cut that dealers said may fail to fully offset slumping world energy demand.

INDIA FRONT PAGE

Ø The government has rejected a proposal by Tata Investment Corp seeking permission to bring in foreign direct investment in to the company as such investments are not allowed in “investment companies”.

Ø The civil aviation ministry has moved a draft cabinet note proposing a bailout package worth 25 billion INRs for National Aviation Co of India Ltd, which runs Air India. The final package is likely to be put in place by January.

Ø Budget carriers SpiceJet, Indigo and GoAir are likely to cut fares by 8-10 % from January. Kingfisher Airlines, Jet Airways and Air India are working on plans to reduce fares by 600 INRs per ticket.

Ø The Foreign Investment Promotion Board has cleared a proposal by German plastic moulding maker Ralf Schneider to set up a wholly-owned subsidiary in India, setting aside objections raised by its former partner Larsen & Toubro

Ø The government of the eastern state of Orissa has decided to reduce the land requirement of 10 mega steel projects and appointed a consultant after receiving complaints about firms demanding more land than they needed for the projects.

Ø Tata Capital plans to raise up to $500 million from domestic and overseas investors for the initial corpus of its private equity fund. It is also expanding in other areas such as investment banking, retail banking, corporate finance and retail loans.

Ø The government is considering a proposal to extend tax exemptions to venture capital funds investing in energy-efficient technologies. Other measures being considered include an income tax exemption for energy service firms.

Ø The fall in iron ore prices has forced more than 20 mines to shut down in eastern India, and distress sales by miners in November has pushed up iron ore export figures.

Ø Jet Airways is working towards leasing out its surplus aircraft on long-term agreements and creating a continuous source of lease revenues.