Dawn of 6th Jan 09

STOP PRESS: IN 10Y sees historical low of 4.86% , Asian shares rise 7 days in a row, Liquidity surplus, OIL rises on tensions, USD continues march,

Ispat asks for relief, Worhadt to issue bonds – corporate bonds primary on a rise, Housing finance 4th Qtr at 400 billion INR, Tech Mahindra tries to merge with Satyam

RUPEE

Ø INR edged lower in opening deals on Tuesday following the USD’s gains against some Asian currencies but gains in regional stock markets are stemming a sharp slide. INR was at 48.6350/6400 a shade weaker than Monday’s close of 48.56/58. Asian stocks edged up for a seventh day on Tuesday, boosted by hopes for a global economic recovery later in 2009, though the rising yen and falling high-yielding currencies suggested such optimism was limited.

BONDS

Ø Yields should trade in a narrow range on Tuesday, with expected large borrowings by the government to bridge its fiscal deficit keeping investors wary. Additional government borrowing could push up the 10-year to 5.25-5.50 % by March. . 10Y closed at 5.17 % on Monday, after diving to an all-time low of 4.86 % in early trade, but above Friday’s close of 5.07 %.

STOCKS

Ø Rallied 3.2 % on Monday to their highest close in 2M as rate cuts and an economic package to boost faltering economic growth drove financials, cement and autos higher. Sentiment was also lifted after markets across the world climbed as low prices and hopes for a global economic recovery later this year prompted a shift into riskier assets.

Ø “While we welcome these counter-cyclical measures as a timely boost to confidence, we do not think that they will materially change the growth outlook,” Goldman Sachs said in a report. It continued to expect Indian economic growth to slow to 6.7 % in FY09 and 5.8 % in FY10.

CALL

Ø Rates ended at more than 6-month lows on Monday as cuts in key rates by the RBI improved cash conditions in the banking system. The call rate closed at 4.25/4.35 %, a level last tested on June 20, 2008 and compared with Friday’s close of 5.00/5.15 %. It had closed at 4.70/4.80 % in an illiquid market on Saturday. Banks parked a total of 574.90 billion INRs through the reverse repos, indicating surplus cash in the banking system.

GLOBAL

Ø DJIA 8,955.52 -79.17 Nikkei 9,144.67 +101.55 FTSE 4,579.64 +17.85 US10y 2.485 +0.122 EUR 1.3581 Yen 93.14 Gold 853.50 Crude 48.46

Ø U.S. stocks fell on Monday as investors booked profits after last week’s run-up, while concerns about slowing cell phone sales hit shares of the biggest telecommunications companies.

Ø FTSE gained 0.4 % on Monday, adding to its post-Christmas rally, with Vodafone in demand, and oils firmer, outweighing a fall in defensive pharmaceutical and tobacco stocks.

Ø Nikkei rose 1.1 % on Tuesday, the first full trading day of 2009, as Canon Inc and other exporters rose on a weaker yen amid hopes for the new U.S. administration taking office later this month.

Ø USD firmed on Monday, underpinned by news of a planned U.S. stimulus package and increased expectations of interest rate cuts by major central banks

Ø Gold slid more than 3 % in Europe on Monday as the strengthening USD knocked the metal’s appeal as a currency hedge, and oil prices retreated from highs.

Ø Copper slipped almost 4 % on Monday before paring losses, as a USD rally weighed on most industrial metals. Profit-taking added to the pressure on nickel, tin and lead.

Ø Oil prices rose 5 % on Monday as Israel’s deepening incursion into Gaza and a dispute between Russia and Ukraine over natural gas heightened fears of supply disruptions.

INDIA FRONT PAGE

Ø Tech Mahindra has approached Satyam for an all-share merger. It is looking to merge itself with Satyam but gaining control of the combined entity.

Ø Ispat Industries which owes about 60 billion INRs to financial institutions, has approached lenders for a second debt restructuring package. It has asked for a reduction in interest rates and an extension of the payment schedule.

Ø Government is likely to allocate 40 billion INRs to finance state transport bodies to help replace ageing bus fleets over the next six months in a bid to stimulate demand for commercial vehicles.

Ø Twenty-one housing finance firms have assessed their fund requirements during the fourth quarter at around 400 billion INRs.

Ø Wockhardt Ltd is in talks to issue NCD worth 2.5 billion INRs to LIC Insurance Corp of India as part of its efforts to raise 5 billion INRs for repaying its foreign debt.

Ø Great Offshore Ltd have pledged 800,000 shares, or 2.15 % of the firm, to a unit of Bharati Shipyard in lieu of the loan extended by the latter. This takes the total pledged stake to 14.87 %.