Dawn of 2nd Jan 09

2009: India exports fall, trade deficit widens, 10Y sees 5.18% (biggest annual fall in 7 years) , 68,700 Cr. Liquidity, Stocks rise to 2009 but corporate earnings?

PHEW !!! 2008 OVER: Worst historical fall in commodity and stock markets but ring in New Year with a rise, Cu 3% up

RUPEE

Ø INR is expected to start little changed on Friday following tepid overseas cues, but widening trade and current account deficits may prompt investors to buy USDs. India’s exports fell to $11.5 billion in November, while imports grew at a sluggish pace of 6.1 % to $21.57 billion, leaving a trade deficit of $10.07 billion for the month. The USD started the new year on a subdued note as tentative signs of an easing in risk aversion benefited higher-yielding currencies like the Australian and New Zealand

Ø INR ended at 48.76/78 on Thursday, off an intraday trough of 48.845, its weakest since Dec. 25, according to Reuters data. It had fallen 19 % in 2008 to 48.70/72. FII withdrew $13.3 billion from the stock market in 2008, a key factor in the INR’s steepest yearly fall since a balance of payments crisis in the early 1990s.

BONDS

Ø Yields are expected to ease on Friday as investors bet on aggressive monetary easing, but supplies of 100 billion INRs ($2 billion) later in the session may check a sharp fall in yields. Rate cut expectations were boosted after WPI fell to a near 10-month low & exports dipped again as countries from the US to the eurozone and Japan grappled with recession.

Ø 10Y ended at 5.29 %, above 5.25 % at close on Wednesday when it hit 5.18 % during trade, its lowest since May 2004. The yield fell 254 basis points in 2008, its biggest yearly fall in seven years.

Ø Oil prices fell more than 4 % on Friday, kicking off 2009 on a weak note as traders bet a late-day rally that drove up prices 14 % on Wednesday was overdone.

CALL

Ø Rates closed lower on Thursday as banks had completed their borrowing requirements ahead of the reporting Friday. Call rates closed at 5.20/5.25 %, down from Wednesday’s close of 6.40/6.50 %. banks parked a total of 687.15 billion INRs with it at the two reverse repo auctions, indicating surplus funds in the banking system.

STOCKS

Ø Kicked off the new year on a positive note, rising 2.7 % on Thursday, but analysts were unconvinced about a quick turnaround after the market had dropped more than half in 2008 in its worst slump ever. Hopes for a coordinated stimulus package and rate cuts to revive Asia’s third-largest economy underpinned the market, though worries remained about dismal corporate earnings caused by a global economic downturn and financial market turmoil. “A good start to a year is always encouraging and it seems the rally has some more steam left,” said Gajendra Nagpal, CEO of Unicon Financial. “In the short term, however, we will see a serious fall if the results disappoint a lot.”

GLOBAL

Ø DJIA 8,776.39 +108.00 Nikkei 8,859.56 +112.39 FTSE 4,434.17 +41.49 H Seng 14,702.55 +315.07 US10Y 2.219 EUR 1.3985 Yen 90.71 Gold 865.00 Crude 43.35

Ø Wall Street closed out its worst year since the Great Depression on Wednesday after an unstoppable credit crisis and a dreadful economic outlook left investors questioning their faith in stock markets, however the DJIA rose 108 points, or 1.25 %.

Ø Britain’s FTSE 100 index closed out 2008 on Wednesday with its biggest annual fall since its launch in 1984, sent reeling by the global credit crisis and looming worldwide recession however benchmark registered its third straight daily rise, closing up 41.49 points, or 0.9 %, at 4,434.17 in thin trade in a shortened New Year’s Eve session.

Ø Nikkei stock average fell 42 % in 2008, the worst loss in its 58-year history, though the benchmark gained 1.3 % on its final half-day of trade

Ø USD rose on Wednesday and posted its first yearly gain against a basket of currencies since 2005 as the worst financial crisis in 80 years led investors to take refuge in the greenback.

Ø Gold rallied late on Wednesday on investor short-covering before the New Year’s break, bucking softer oil prices over the last few months as the metal burnished its reputation as a safe haven in a turbulent 2008.

Ø Copper prices bounded higher by almost 3 % Wednesday after China raised the value added tax on a range of metal ore imports, but metals across the board were poised for their largest

Ø U.S. crude oil rose 14 % on the final trading day of 2008 in thin pre-holiday trade on Wednesday, tracking a jump in gasoline as a slowdown in domestic refinery activity sparked fears of tightening fuel supply this winter.

INDIA FRONT PAGE

Ø FM has asked the telecom department to double the floor price for 3G spectrum, which could delay auctions further.

Ø Ranbaxy missed its December 2008 deadline to launch an anti-migraine drug as the US regulator is yet to give its approval.

Ø Jindal Stainless Ltd has acquired chrome ore assets in the Middle East and Europe for $2 million. It has also formed a JV with a group of chrome ore miners in the UAE, in which it will hold a majority stake.

Ø Infosys is looking at ways of increasing synergies with its BPO arm and is working on integration and business plans to maximise profits.

Ø IRDA has brought down the solvency requirement by 7-10 % for ULIP plans, the fastest block of policies in life insurance basket.

Ø Carborundum Universal is planning to set up a new micro grits plant in Kochi at an investment of 620 million INRs to cater to the photovoltaic industry.

Ø Moser Baer will raise 2 billion INRs for its photovoltaic unit, from a group of investors to fund the expansion of its solar business.

Ø Orchid Chemicals is awaiting US FDA nod for its anti-bacterial product Tazo-zip, which will be a key driver of its revenues.

Ø The second stimulus package, to be announced shortly by l government to arrest an economic slowdown, will mainly cover the infrastructure, housing and commercial vehicles sectors and will be backed by a strong dose of monetary measures. However, there was not much scope for tax concessions.

Ø Aberdeen Asset Management is in the process of setting up a $1 billion real estate fund in India. The money would be invested over the next three years.

Government may consider on Friday PepsiCo India Holdings Pvt Ltd’s plea to waive the mandatory 49 % disinvestment in bottling units. PepsiCo has been seeking a waiver as 100 % FDI is now allowed in the food processing sector.