Dawn of 5th Feb 09

Yields rise on govt. borrowing , more borrowing in interim budget, Bank Stocks may be hurt by rate cut, Borrowing does not impact liquidity?- Cash Surplus.

Kraft , glum people eating less cheese in recession, but tech. and services better of , Panasonic rises on loss of 4.2$ billion, Copper upbeat on China is the tide turning?

Tata Motors owes 12 billion INR, BANKS DEFER ISPAT DUES, RBI opens door to hedging FREIGHT

Rupee
Ø INR was trading flat in early deals on Thursday, as Asian shares provided little direction and the dollar was steady against major currencies. * At 9:07 a.m., INR at 48.8250/8350 , compared with Wednesday’s close of 48.82/83.

Bonds
Ø Yields rose on Thursday to fresh 8W highs on heightened fears of additional government borrowing in the coming weeks. At 9:14 the yield on the 8.24 % was at 6.53 %, a level last tested on Dec. 10, and above Wednesday’s close of 6.49 %. On Wednesday, Economic Affairs Secretary Ashok Chawla told Reuters India would announce any extra borrowing for the rest of the fiscal year ending March in the interim budget on Feb. 16.

Stocks
Ø Rose for a 2nd day on Wednesday, driven largely by rally in global markets, but there was resistance as investors treaded cautiously on the back of sluggish demand. The main index held a modest gain of 0.6 % at close, after coming off from a rise of more than 2 % in the morning as bank stocks faltered after a senior policy adviser said the RBI may cut interest rates later this month. Traders said banks, which are already battling rising bad loans, would face more pressure on profit margins in the near term when rates are cut as their main source of funds were term deposits locked into higher costs.

Call
Ø Rates ended nearly flat on Wednesday due to cash surplus in the banking system and tepid demand for funds in the interbank market. Call closed at 4.10/25 %, virtually unchanged from Tuesday’s close of 4.10/20 %. Dealers said the 70 billion INRs of debt sales on Friday is too little to impact cash conditions. They see call rates hovering around current levels until mid-March, when advance tax payments by companies drain cash out of the system. Banks parked 672.60 billion INRs through the reverse repo auctions on Wednesday, more than 587.70 billion INRs on Tuesday, indicating increasing cash surplus.

Global
Ø DJIA 7,961.68 -116.68 Nikkei 7,972.06 -66.88 FTSE 4,228.60 +64.14 HSeng 13,051.97 -11.92 US10Y 2.923 +0.037 EUR 1.2835 Yen 89.35 Gold 905.00 Crude 40.32

Ø U.S. stocks fell on Wednesday as a glum profit forecast from Kraft Foods signaled that consumers are skimping even on the basics and investors worried that efforts to rescue banks could wipe out shareholders. A report showing that the vast service sector shrank less than expected in January curbed technology losses, helping the Nasdaq finish near breakeven.

Ø Firmer-than-forecast UK and U.S. data calmed investor nerves on Wednesday, lifting Britain’s top share index1.5 % by the close, with miners rallying after BHP Billiton reported an increase in profits.

Ø Nikkei stock average fell 0.8 % on Thursday as Canon Inc and other tech shares slipped on worries about the U.S. economy, but hopes for Chinese economic steps boosted shippers, providing support. Panasonic Corp shares rose 1.4 % to 1,107 yen after the world’s No.1 plasma TV maker warned it would post an annual loss of $4.2 billion, just slightly bigger than expectations, with market players saying that some of the steps it announced — such as cutting 15,000 jobs — were likely being viewed favorably.

Ø USD rose versus the yen on Wednesday after a report showed the U.S. service sector in January shrank less severely than expected

Ø Gold climbed above $900 an ounce on Wednesday on demand for the metal as a safe store of value, but remained range bound as the markets awaited direction from a raft of financial news due later in the week.

Ø Copper rose to a one-week high on Wednesday after reports of Chinese purchases and upbeat data from China and the United States helped extend a midweek rally and raised hopes the pace of the global economic downturn may be slowing.

Ø Oil settled near $40 a barrel on Wednesday, down slightly after the U.S. stock market fell and a government report showed a larger-than-expected build in U.S. crude inventories.

India Front Page
Ø Tata Motors < owes more than 12 billion INR in unpaid dues to its suppliers and vendors.

Ø Diageo wants more than the initial less-than-15 % stake in offered in Vijay Mallya controlled United Spirits Ltd <

Ø India Hospitality Corp is looking to sell a substantial stake or completely exit Mumbai-based Mars Restaurants and has valued the business at around $150 million.

Ø IDBI Bank , ICICI Bank , IFCI and UTI have deferred steelmaker Ispat Industries’ payment of 5.86 billion INRs by 18 months.

Ø Ashapura inechem Ltd is in talks with an American firm to sell a stake in its proposed 42 billion INRs alumina project in Ratnagiri, Maharashtra.

Ø Maruti Suzuki is developing replacements for its popular hatchback, Wagon-R, and multi-purpose vehicle Omni Van.

Ø SAIL cost on its expansion plans has gone up by 44 % to 780 billion INRs even as the board members of the company are yet to sanction the cost overrun.

Ø RBI has allowed domestic oil companies and shipping companies to hedge their freight risks.