Dawn of 2nd Feb09

INR weakens in Jan on FII outflow, No auction may cause 10Y to fall, Fiscal Deficit widens as govt. steps up aid, Liquidity surplus.

US economy contracted in Jan at the fastest pace in 27 years, Hitachi says biggest loss ever of $7.8 billion

Reliance retail operations team exits, corporate results disappoint.

Rupee
INR should drop on Monday as weaker regional stocks raise concerns of more FII fund outflows amid growing global economic gloom. INR opened at 48.60 . INR shed 0.3 % in January to 48.87/88 per USD after FII pulled out more than $1 billion from Indian shares. JPY rose against major currencies on Monday after poor economic data in the US and the EUR zone heightened investors’ fears about a prolonged economic recession.

Bonds
Yields could ease on Monday on hopes there will be no auction of bonds this week, but with more supplies expected before the end of March sentiment will remain subdued. RBI’s indicative calendar shows the government is scheduled to sell bonds for 70 billion between Feb. 6-9. But the government has not confirmed the dates so far. 8.24 % ended at 6.17 % on Friday, off an intraday peak of 6.31 %, a level last seen on Dec. 11, and above Thursday’s close of 6.11 %. 7 state governments will sell 10Y SDLloans for 47.49 billion INRs on Feb. 5. India’s fiscal deficit during April to December jumped to $44.5 billion as the cash-strapped government stepped up spending to stimulate a slowing economy.

Stocks
Indian shares to open lower on weakness in Asian markets . Indian shares provisionally closed 2 % higher on Friday after domestic funds bought into firms with earnings potential such as Reliance Industries The SENSEX provisionally rose 2.03 %, or 187.13 points, to 9,423.41 after opening 1.4 % lower.

Call
Indian cash rates ended flat for the third day in a row near the RBI’s reverse repo rate of 4 % on Friday as most banks had already met their reserve needs on the reporting day. Call money rates ended at 4.10/4.20 %, unchanged from Thursday’s close. Banks parked a net 564.60 billion INRs with the central bank in its daily money market operations, showing cash is surplus in the system.

Global
DJIA 8,000.86 -148.15 Nikkei 7,955.75 -38.30 FTSE 4,149.64 -40.47 H Seng 13,059.95 -218.26 US10Y 2.851 EUR 1.2725 JPY 89.84 Gold 919.50 Crude 41.74

U.S. stocks closed out their worst January ever with another slide on Friday after data showed the economy contracted at the fastest pace in nearly 27 years in the fourth quarter.

FTSE fell on Friday to end the month lower, extending last year’s dismal performance, as heavyweight commodity stocks slipped, though banks and property firms offered some support.

Nikkei stock average fell 0.5 % on Monday as Hitachi Ltd plunged after it warned of a record $7.8 billion annual loss on weak sales, a firmer JPY and restructuring costs amid growing global economic gloom.

USD rose against the EUR on Friday, on track for its best month since October, as evidence of a prolonged slump on both sides of the Atlantic added to the greenback’s appeal as a safe haven for investors.

Gold rallied to a near four-month high on Friday, fueled by flight-to-quality buying and an overall increase in asset allocation toward bullion as an investment.

Copper ended off its session lows in a mild short-covering bounce late Friday, but remained mired in a downtrend as surging inventories and dismal economic data reinforced the bleak outlook for global economic growth and demand.

Oil futures rose on Friday after OPEC signaled it may deepen its record output cuts, countering a U.S. report showing energy demand shrinking more quickly than previously thought.

Indian Front Page
The Nissan Motor Renault alliance wants to induct a third partner into its $1.1 billion Chennai factory project, which is scheduled to manufacture cars and sport utility vehicles by 2010.

Reliance Industries owned Reliance Retail has deferred its cash and carry operations with the entire operational management headed for an exit.

Navis Capital Partners, that owns a majority stake in Nirula’s, has put the Delhi-based fast food chain on the block again and has appointed NM Rothschild to advise it on a possible sale.

Suzlon Energy is planning to raise money through an ADR (American depositary receipt) issue or a preferential allotment of shares, after suspending plans to raise 18 billion INRs via a rights issue.

Steel producer Monnet Ispat & Energy Ltd has entered coal washing, mining and exploration by floating three new divisions to offer these services.

National Highways Authority of India, has sent notices to Hyderabad-based developers Madhucon Projects Ltd and Progressive Constructions Ltd classifying them as non-performers for delaying work on some World Bank-funded highway stretches.

The government may revive a proposal limiting the number of ultra mega power projects (UMPP) awarded per developer. UMPPs are the centrepiece of the government’s attempts to add over 50,000 megawatt of power generation capacity through 13 such projects that will come up though competitive bidding by private power developers.

IOB is expected to start operations in Malaysia through a JV with BOB and Andhra Bank. The JV is expected to commence operations by the end of 2009.