Dawn of 5th Jan 09

Return of the sovereign: RBI slashes rates, eases liquidity , Govt unveils stimulus package , Yields headed for lifetime low ? see 5.04%. World Stocks , Commodities (Nickel up 16% , Copper up 8%) , Oil all rally on hope diminishing grim data .

Earnings season : There is but one truth : The balance sheet

RUPEE

Ø Opens Stronger at 48.34 .in morning trades. INR eased in afternoon trade on Wednesday as a drop in shares hurt sentiment while oil refiners bought USDs for import payments on the last day of 2008. Oil refiners and importers generally buy USDs at the end of each month to make payments for their imports, dragging the currency lower.

BONDS

Ø Yields are expected to fall to more than five-year lows on Monday, following deep interest rate cuts and reductions in banks’ cash reserve requirements by the RBI. India slashed its main interest rates by 1 %age point on Friday, its fourth cut in four months, and tried to draw more funds into the country to boost growth as it warned of a tough year ahead. 10-year yield ended at 5.07 % on Friday, after falling as low as 5.04 %, its lowest since October 2003. It had closed at 5.29 % on Thursday.

STOCKS

Ø Indian shares are set to start higher on Monday after hefty rate cuts by the RBI and measures by the federal government to boost growth, but concerns about quarterly earnings could cap gains. Financials, construction, autos and cement stocks will be in focus after India slashed its main lending rate by 1 %age point late on Friday, its fourth cut in as many months, eased overseas borrowing and enhanced tax breaks.

CALL

Ø Indian cash rates closed lower on Friday after demand for funds diminished on last day of the reporting fortnight as most banks had already made arrangements for meeting their reserve requirements. Call rates closed at 5.00/5.15 %, lower than its previous close of 5.20/5.25 %. Govt sold 100 billion INRs worth of bonds earlier in the day, the cash settlements for which will take place on Monday. Liquidity in the system was expected to stay unaffected by the auction due to buyback of intervention bonds on Thursday. However, the RBI bought back only 35.80 billion INRs of market stabilization scheme (MSS) bonds on Thursday out of the notified 100 billion INRs.

GLOBAL

Ø DJIA 9,034.69 +258.30 Nikkei 9,043.12 +183.56 FTSE 4,561.79 +127.62 H Seng 15,323.52 +280.71 US10Y 2.362 EUR 1.3889 Yen 92.06 Gold 874.50 Crude 46.52

Ø U.S. stocks started the new year with a big jump on Friday as investors looked beyond yet another piece of grim economic data on hopes that a recovery is on the horizon after adisastrous 2008.

Ø FTSE rallied nearly 3 %on its first trading day of 2009 and extended its winning run to four sessions on the back of commodities stocks. Defensive drug makers fell after outperforming last

Ø Nikkei 1st session of 2009 up 2.1 % and at its highest level for nearly 2 months, buoyed by hopes this year will be better than last, when the Nikkei lost 42 %.

Ø USD rallied to a three-week high against the yen on the first trading day of 2009 on Friday after a strong performance on Wall Street encouraged risk appetite.

Ø Gold slipped 1 % on Friday, pressured by a stronger USD, but bullion will resume its rally in 2009 if the metal can continue to thrive as a monetary vehicle during economic turmoil.

Ø Nickel soared almost 16 % on Friday on buying ahead of annual rebalancing by major commodity indices, while copper advanced and tin jumped more than 8 %.

Ø Oil prices jumped 4 % Friday amid rising tensions in the Middle East and a dispute between Russia and Ukraine over natural gas supplies that spawned worries over fuel availability in Europe.

INDIA FRONT PAGE

Ø SEBI may make it mandatory for founders, or majority shareholders, who have pledged their shares to financial firms, to make disclosures to stock exchanges about the extent of the holding pledged.

Ø British Airways is in talks to pick up 25 % stake in budget carrier Go Air and officials from both the firms will meet next month in London.

Ø India is working on a 300 billion INRs bailout package for state-run oil refiners to compensate for the losses incurred on fuel sales at government-controlled prices.

Ø Satyam and some of its institutional investors are exploring a merger with another software firm and is in talks with HCL Technologies

Ø BSE board is likely to consider allowing its two strategic investors – Singapore Exchange and Deutsche Boerse to increase their stakes.

Ø SBI is reviewing plans to open branches in Lahore and Karachi in the wake of the present tensions with Pakistan. However, the bank is not scrapping its Pakistan plans.

Ø Sona Koyo Steering Systems Ltd is in talks with private equity investors for raising close to $100 million to part-finance some expansion and acquisition plans.