BREAKING NEWS

BREAKING NEWS: Banking giant Citigroup says it will sell its India retail banking operation and some of its affiliates to one of the largest European Bank. News from close sources reveral HSBC (Asia-Pacific) could be in the race leading for complete Indian Operations buy out. The deal could be worth Rs33,139 crore plus.

Reliance Industries Hires 17 Banks to Arrange $1 Billion Loan

BREAKING NEWS

BREAKING NEWS:After American Express and Bank of America, Citibank is likely to become the third American Bank to Sell its Banking operations in India-this is a result of Citigroups financial problems in the US, and follows its $ 7 bn sell-off of european operations.

israel attack prepration on iran make europe mkt down by 1% frm high n so the our mkt too.. these days, news n rumours change technicals to opposite side in seconds.. i want tht these news channels should be banned in mkt hours(osi) BETTER SIT BACK AND WATCH. EXIT ALL UR POSITIONS. BE IT BEAR OR BULL.from a frn!!!!!!!!!!!!!!!

MADHUCAN PROJECTS

MADHUCAN PROJECTS GET AN EPC ORDER WORTH 9.89 BILLION (mkt info)

Infosys

Infosys Shares Fall in Mumbai After Morgan Cuts Rating on Demand Concerns Infosys Technologies Ltd., India's second-largest software-services provider, fell in Mumbai trading after Morgan Stanley downgraded the stock on concern that demand from U.S. customers may slow further

News 14-July

14-July-08
News

Headlines for the day

Corporate News Headline
BHEL bagged a contract worth Rs. 217.5 mn to set up a 600 MW thermal power plant in the southern state of Tamil Nadu. (ET)
Tata Steel is planning to acquire an iron ore mine in Western Australia, which has billions of tonnes of reserve of the commodity. (BS)
JSW Steel would explore the possibility of importing iron ore from its mine in Chile and sell it in the local market. (BS)

Economic and Political Headline
The WPI based inflation rate for the week ended 28 June rose to 11.89%, as against 11.63% in the previous week, due to an increase in the prices of primary goods and manufacturing products. (ET)
The growth in the IIP during May, 2008 slipped to 3.8%, as against 10.6% in the same month of 2007. (BS)
The US trade deficit unexpectedly shrank 1.2% to USD 59.8 bn in May from a revised USD 60.5 bn in April as the cheaper dollar spurred gains in exports, helping make up for the soaring cost of imported oil. (Bloomberg)

Walchandnagar Industries Ltd

Walchandnagar Industries Ltd is engaged in the business of manufacturing of Heavy Engineering Products, Foundry & Machine Shop and Others. The Heavy Engineering segment is the major business segment of the Company registering 88.2% of its sales during the fiscal year ended September 30, 2006. Other segments include the unit at Dharwad (India) for manufacturing pressure and temperature gauges and sector mechanisms; Walchand InfoTech services division, and hospitality business.

Net sales went up to Rs. 163 Cr as compared to Rs. 157 Cr on YOY basis a 4% growth. Its net profit went up 38% YOY during Q4FY08.

WIL will be one of the major beneficiaries of Indo-US Nuclear deal passed recently as it will open up new growth avenues in nu}

RBS issues global stock and credit crash alert

RBS issues global stock and credit crash alert
By Ambrose Evans-Pritchard, International Business Editor

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets. Such a slide on world bourses would amount to one of the worst bear markets over the last century.

RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.

"I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names. "Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said. US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.

The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said.
"The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.

Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.

"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.

Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

Barclays Forecasts Inflation At 17%, USD/Re at Rs 46 By December 2008

Barclays Bank: No Light In Sight

India's Inflation will continue to accelerate, fiscal risks are picking up and financial asset prices are headed south, in our view.; WPI inflation could hit 17% by September 2008; Our end-2008 repo rate forecast is 10.5-11.0% versus market expectations of 9.5%; The rate currently stands at 8.5%.; Our forecast for the FY 08/09 fiscal deficit is 3% of GDP versus the government’s 2.5% of GDP; Expect USD/INR to rise to 44 in the next few weeks and to 46 within the next six months.


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

New Market Terminology !!!!

New Market Terminology !!!!

BSE - BOMBAY SE EXIT

NSE - NATION SE EXIT

F/O - FUTURE OVER

NIFTY - NO INCOME FOR THIS YEAR

FII - FRAUDULENT INTERNATIONAL INVESTOR

PE - PLUNGE ENDLESS

EBITDA - EXIT BEFORE IT TUMBLES DOWN AGAIN

QIB- QUIXOTIC INDIAN BLUNDER

HNI - HAS NO IDEA

FII - FURIOUS IMPOVERISHED INVESTORS

PMS - PREMEDITATED SCAM

SIP - SUICIDE BY INVESTING PATIENTLY

FUND MANAGER - LAST YEAR'S ACE STOCK PICKER NOW LOCKED UP IN AN ASYLUM

INVESTOR - SOMEONE WHO IS BROKE

BROKER - WORSE OFF THAN AN INVESTOR

CORRECTION - THE NEXT DAY AFTER YOU BOUGHT SHARES

MOMENTUM BUYING - THE FINE ART OF BUYING HIGH AND SELLING LOW

VALUE BUYING - THE ART OF BUYING LOW AND SELLING EVEN LOWER

FII Selling Continues

FII Selling Continues Unabated-Rs 552 crore on July 10, 2008

FII trading activity on NSE and BSE on Capital Market Segment

The following is combined FII trading data across NSE and BSE collated on the basis of trades executed by FIIs on 10-Jul-2008.

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category Date Buy Value Sell Value Net Value
FII 10-Jul-2008 1896.89 2448.56 -551.67


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

It’s Your ‘Outcome’, not Income that Matters

Dear Investors

Most people out there always talk, or worry about how much money they make. They compare salaries for jobs. They get second jobs to supplement their income. They leave jobs to go make more elsewhere. Everything they do in life is based on the final end of year income. How much did company reimburse that medi claim you made for the year?

Well, I've learned that this is the absolute worst way to judge your financial situation. In fact, it doesn't matter how much you make. Your financial situation has very little to do with your income.

It has everything to do, though, with your expenses, or what I like to call your 'outcome'.

Expenses are the key to getting rich. As Robert Kiyosaki said in his book 'Rich Dad, Poor Dad', the definition of wealth is how many days you can live without working. In order to live everyday without working, you must have more passive income than expenses. Passive income is defined as income you gain without having to do any physical work (i.e. collecting rent checks, music royalties, stock dividends, etc.).

In our education system, they teach us to do well, go to college, and get a prominent job with a great salary. However, let's look at some of the jobs. Most doctors go to school for umpteenth years, and then get out and have to build their practice. They make nice incomes, but they also usually have very high expenses due to student loans and the cost of their education.

A doctor may make over INR 20,00,000 / year. But add in a family, education bills, insurance cost, taxes, natural debt, and everyday expenses, and your 'Outcome' is maybe about INR 250,000/year. Now let's take a cop. A clerk does not have to go to school for that long, if at all. He makes a salary of somewhere INR 160,000 - INR 250,000 (at least in Chennai). That sounds like a lot less than the doctor, but it's not.

The clerk has very little, if any, expenses. He spends very little money on anything except everyday expenses. He also only works 5 days/week, so he has 3 2 days to do something else to supplement his income. At the end of the year, he probably had the same 'outcome', if not better, as the debt-ridden doctor.

Now, not every doctor is left with student loans. Not every clerk is debt free. It is not necessarily the job I am criticizing. I am speaking about the thought process this country teaches in its education system. They expect you to want to go out and make the highest salary, but they don't teach you anything on how to handle your expenses, how to properly buy a home, or how to balance your finances. They expect you to learn it on your own.

Until a good friend handed me 'Rich Dad, Poor Dad', my financial education was non-existent. I thought you got rich by making the most money every year. I didn't know anything about passive income, balancing finances, or even what the real definition of being rich is. After I read this book, and countless others like it, I started to understand what it means to be wealthy. I made it my goal to further my financial education every day.

This made my goals easier to choose. It made decisions easier to make. I now had an education to base them on. The one thing that definitely stood out was….it's not your income, it's your 'outcome'. It does not matter how much money you make, it's how much you keep. Controlling your expenses is the key to getting rich, not your income.

I'm curious about everyone else's take on the lack of financial education most Indians have. Feel free to comment on any situations you have experienced in your life that may be related. I'd love to start a discussion on this topic so we can all learn a little more….

Rising prices of fuel. - Nice one to think about

Nice Logic - It May Work !!




A man eats two eggs each morning for breakfast. When he goes to the
Kirana store he pays Rs. 12 a dozen. Since a dozen eggs won't last a
week he normally buys two dozens at a time. One day while buying eggs
he notices that the price has risen to Rs. 16. The next time he buys
groceries, eggs are Rs. 22 a dozen.

When asked to explain the price of eggs the store owner says, "The
price has gone up and I have to raise my price accordingly". This
store buys 100 dozen eggs a day. He checked around for a better price
and all the distributors have raised their prices. The distributors
have begun to buy from the huge egg farms. The small egg farms have
been driven out of business. The huge egg farms sell 100,000 dozen
eggs a day to distributors. With no competition, they can set the
price as they see fit. The distributors then have to raise their
prices to the grocery stores. And on and on and on.

As the man kept buying eggs the price kept going up. He saw the big
egg trucks delivering 100 dozen eggs each day. Nothing changed
there. He checked out the huge egg farms and found they were selling
100,000 dozen eggs to the distributors daily. Nothing had changed but
the price of eggs.

Then week before Diwali the price of eggs shot up to Rs. 40 a dozen.
Again he asked the grocery owner why and was told, "Cakes and baking
for the holiday". The huge egg farmers know there will be a lot of
baking going on and more eggs will be used. Hence, the price of eggs
goes up. Expect the same thing at Christmas and other times when
family cooking, baking, etc. happen.

This pattern continues until the price of eggs is Rs. 60 a dozen. The
man says, " There must be something we can do about the price of
eggs".

He starts talking to all the people in his town and they decide to
stop buying eggs. This didn't work because everyone needed eggs.

Finally, the man suggested only buying what you need. He ate 2 eggs a
day. On the way home from work he would stop at the grocery and buy
two eggs. Everyone in town started buying 2 or 3 eggs a day.

The grocery store owner began complaining that he had too many eggs in
his cooler. He told the distributor that he didn't need any eggs.
Maybe wouldn't need any all week.

The distributor had eggs piling up at his warehouse. He told the huge
egg farms that he didn't have any room for eggs would not need any for
at least two weeks.

At the egg farm, the chickens just kept on laying eggs. To relieve
the pressure, the huge egg farm told the distributor that they could
buy the eggs at a lower price.

The distributor said, " I don't have the room for the %$&^*&% eggs
even if they were free". The distributor told the grocery store
owner that he would lower the price of the eggs if the store would
start buying again.

The grocery store owner said, "I don't have room for more eggs. The
customers are only buying 2 or 3 eggs at a time. Now if you were to
drop the price of eggs back down to the original price, the customers
would start buying by the dozen again".

The distributors sent that proposal to the huge egg farmers but the
egg farmers liked the price they were getting for their eggs but,
those chickens just kept on laying. Finally, the egg farmers lowered
the
price of their eggs. But only a few paisa.

The customers still bought 2 or 3 eggs at a time. They said, "when the
price of eggs gets down to where it was before, we will start buying
by the dozen."

Slowly the price of eggs started dropping. The distributors had to
slash their prices to make room for the eggs coming from the egg
farmers.

The egg farmers cut their prices because the distributors wouldn't buy
at a higher price than they were selling eggs for. Anyway, they had
full warehouses and wouldn't need eggs for quite a while.

And those chickens kept on laying.

Eventually, the egg farmers cut their prices because they were
throwing away eggs they couldn't sell.

The distributors started buying again because the eggs were priced to
where the stores could afford to sell them at the lower price.

And the customers starting buying by the dozen again.

Now, transpose this analogy to the gasoline industry.

What if everyone only bought Rs 200.00 worth of Petrol each time they
pulled to the pump? The dealer's tanks would stay semi full all the
time. The dealers wouldn't have room for the gas coming from the huge
tanks. The tank farms wouldn't have room for the petrol coming from
the refining plants. And the refining plants wouldn't have room for
the oil being off loaded from the huge tankers coming from the oil
fiends.

Just Rs 200.00 each time you buy gas. Don't fill up the tank of your
car. You may have to stop for gas twice a week, but the price should
come down.

Think about it.


Also, don't buy anything else at the fuel station; don't give them any
more of your hard earned money than what you spend on gas, until the
prices come down..."

...just think of this concept for a while.

Follow up on the G8 Summit - India, China and the speak on climate change….

As promised, here is the follow-up to my last post on the happenings of the first 2 days on G8 summit in toyako in Japan.

After yesterday's session of the G8 summit, today, the leaders of the group of eight met with the leaders of eight other emerging economies, namely India, China, Brazil, South Africa, Mexico, Australia, South Korea and Indonesia. These sixteen countries together account for 80 percent of global greenhouse gas emissions.

Climate change has dominated the discussions at this year's G8 summit in Japan. Yesterday, the leaders of the Group of Eight countries had decided to half the global emissions by 2050. However, in today's discussions, only Indonesia, Australia and South Korea have supported the G8's vision. All developing countries argued hard that it was developed countries who sacrificed nature during their growth and industrialization and now they should bear the brunt of taking on the expenses of curbing carbon emissions.

However no consensus could be achieved on the proposed target of carbon emissions, and leaders 'safely stuck to their target' of 50% less by 2050.

These countries have agreed to cut their greenhouse emissions but they avoided setting specific targets for the same. Chinese President Hu Jintao said that China being a developing country was on the path of industrialization and improving people's welfare. United States is already opposed to committing to firm targets without assurances that big emerging economies will act too. Experts are doubtful that any substantial steps to fight global warming will be taken unless the new U.S. president assumes office in January 2009.

Besides climatic changes, the meet also agreed on the need to address rising oil and food prices and global inflation. Most of the growth in energy demand is coming from emerging economies. However, other than Russia, the G8 does not include any major oil exporter. In contrast, Iran's OPEC governor said that there was no shortage of oil and blamed the G8 countries for the surge in prices. According to him, OPEC supplies crude oil at a rate that is more than the market needs.

Only time will tell about the effects of this year's G8 summit. Next year's G8 summit is scheduled to be held in Italy where the Group of Eight will hold talks with the eight booming economies.

Hear what others have to say about the G8 Summit, which took place in Japan. Also post interesting stuff on G8 or anything you'd like to say.

CLSA: Ultimate Beneficiaries Of the US Financial Crisis would be Gold & Gold Stocks Not Oi

The global economy faces pressure from two contrasting sources, as described in the new quarterly Asia Maxima (Fire and Ice, 3Q08). The ice refers to the continuing savage credit crisis, a process which should be fundamentally deflationary. The fire refers to the oil-led commodity boom, a trend which should be fundamentally inflationary. Both these contrasting trades have so far continued to work for investors.
· This paradoxical situation cannot continue forever. If the ongoing credit crisis has implications for real economic growth, then it must eventually have bearish implications for the commodity complex. But the oil-led commodity complex has also benefited from the growing debris in the financial sector and from the perception that the Fed will do anything to try to prevent a further downturn in US growth. In this sense, the world has moved informally, and doubtless temporarily, on to a new oil standard.
· The continuing vigour of the oil-led commodity complex is a sign that money has begun to move away from the asset-inflation game, which has been in play ever since the benign disinflationary era in the Western world commenced with former Federal Reserve chairman Paul Volcker’s crushing of inflation at the start of the 1980s.
· The current continuing US centred “credit crisis” is not just another crisis which the Fed can bail out, leading to another credit-driven bull cycle in America. The manic excesses seen in the recently concluded credit boom mark the peak of American domination of global capitalism. The present credit crisis is the strongest possible evidence that the post 1945 “Bretton Woods” era of the US dollar paper standard is drawing to a conclusion.
· In the short term the only thing that matters for Asian stock markets is the price of oil. Asian central banks are perceived to be behind the curve in responding to the energy and food price shock. For those countries with widening current account deficits, there is also concern about further currency depreciation caused by deteriorating terms of trade, which would further fuel inflationary pressures.
· While the current oil and food driven inflation scare in Asia represents a one-off bearish relative price shock, the long term case for a structural increase in core inflation in Asia is much more bullish for the Asian domestic demand equity story.
· While oil stays so high, the potential for action from the US Congress grows ever more likely. Still, GREED & fear remains of the view that policy action is most likely to be focused on the more narrow issue of “commodity speculation”.
· The fundamental reality is that the credit excesses would never have reached such ludicrous excesses had Western central banks not kept encouraging via their actions the ridiculous notion that financial institutions would never be allowed to fail. Meanwhile, GREED & fear continues to believe that the most vulnerable economy globally remains Britain, not America.
· If the swing away from the market will inevitably occur in the West, the same will not happen in Asia and the emerging markets. This year’s oil-driven sell off in Asian equities amounts in the longer term to a fantastic buying opportunity. The reason is that the global economy will move inevitably to a new equilibrium where growing Asian consumption patterns will be a key if not the key driver of growth.
· The world has only moved temporarily on to an oil standard as capital flees to real assets in a vote of confidence against the Fed specifically and the US dollar paper standard system in general. GREED & fear continues to believe that the ultimate biggest beneficiaries of this trend will be gold and gold stocks, not oil.
· The long-term performance of the Asia ex-Japan thematic portfolio has begun to erode, though for now it still remains reasonably respectable. However, the portfolio declined by 17.9% in US-dollar terms in 2Q08, compared with a 8.6% decline in the MSCI AC Asia ex-Japan index and a 3.2% decline in the S&P500. Owners of the portfolio are still recommended, as has been the case since mid-2007, to short Western financial stocks as a necessary hedge given the collateral risk posed to Asian stocks by the unwinding of the credit bubble. This hedge worked well last quarter.
· The Japan absolute-return thematic portfolio marginally outperformed the Topix last quarter rising by 9.7% in yen terms compared with a 8.8% gain in the Topix. Higher oil prices are causing inflationary expectations to rise, which could just bring forward Bank of Japan tightening. GREED & fear’s view remains that higher short term and long term yen interest rates would be bullish for the Japanese stock market.


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

REASON ,,,,,,,,,FOR MONDAY
IF MARKET GOES UP.............INFY RESULT WAS GOOD ,,,,,,,MARKET IS EXTREME SOLD ZONE,,,,,,,,,,,SO FII R BUYING ,,,,,,,,,,,,,,
IF MARKET COME DOWN ,,,,,,UDAY MUKERJI WILL SAY ,,,,,,,,,,,CRUDE OIL IS UP,,,,,THERE IS FUTHER DOWN SIDE ,,,INFY RESULT WAS NOT TO MARKET EXPATATION,,,,,,,,,,,,

S&P cuts Outlook On Select Banks and Financial Institution

Standard & Poor's on Tuesday lowered its outlook on diversified banks and other diversified financial services companies to "Negative" from "Neutral," warning that some may need to cut dividends and raise additional capital to cover mounting loan losses.

"Credit quality is deteriorating rapidly, particularly for home equity and credit card loans," wrote equity analyst Stuart Plesser. "We believe that high gasoline prices coupled with rising unemployment levels and steadily falling home prices will lead to significantly higher charge-offs in 2008 versus last year."

Though commercial loan growth has remained solid, Plesser is concerned that credit may deteriorate in this loan category as well.

"Due to ongoing writedowns, some banks will likely need to raise additional capital, which we believe will become more difficult as the year progresses and probably come at the expense of existing shareholders," Plesser said.

Of the diversified banks, which include Comerica Inc., U.S. Bancorp, Wachovia Corp. and Wells Fargo & Co., U.S. Bancorp is the only bank in the subindustry with a "Buy" rating.
"We believe this bank is the best capitalized and most conservative lender in our coverage universe," Plesser said.

U.S. Bancorp shares lost 19 cents to $27.70 in afternoon trading. Shares hit a 12-month low of $27.31 earlier in the session.

Of the diversified financial services group, which includes JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. Plesser favors JPMorgan and rates the stock a "Buy," saying that it is better capitalized than its peers.

Overall, Plesser said the major diversified financial services firms are better positioned than in the past to weather an economic cycle as regulatory easing has allowed them to gather more services under one roof. "We see the key challenge for larger companies as being the ability to build optimal business mixes that can sustain superior revenue and earnings growth," he said.

JPMorgan shares lost $1.10, or 3.2 percent, to $32.83 in afternoon trading. Shares hit a 52-week low of $32.33 earlier in the session.

Citigroup shares fell 30 cents to $16.46 after reaching at a year low of $16.46 earlier in the session. Bank of America dropped 95 cents, or 4 percent, to $22.92.


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

Lehman Brothers-Sinking or Swimming?

Lehman Brothers Holdings Inc shares tumbled to an eight-year low on Thursday as the investment bank was battered by rumors -- later discredited -- that some key counterparties had pulled business away from it.

Pimco, the world's biggest bond fund, said it continued to trade normally with Lehman as did giant hedge fund SAC Capital, but the bank's shares still slumped 12 percent, their biggest percentage drop in a month. Lehman bonds also weakened.

Lehman Brothers has battled investors who say the investment bank is undercapitalized given its large mortgage exposure. The U.S. Securities and Exchange Commission is probing whether investors betting on Lehman's decline are spreading rumors about the company, a person familiar with the matter told Reuters in March.

At some point, Lehman's shares, which closed at $17.30 and are down more than 75 percent over the last year, could raise questions for customers considering trading with the company, said Ralph Cole, portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon.

"But as long as they can borrow from the Federal Reserve, Lehman should be OK," Cole added.

Still, Lehman rumors abounded on Thursday. Jon Najarian, a founder of website optionmonster.com, said: "We are hearing a rumor that Pimco is pulling money out of Lehman."

Reuters spoke with at least three other traders who cited the Pimco rumor on Thursday as the main reason for the drop in Lehman's shares -- to as low as $15.73 -- but the three requested anonymity.

Pimco's Chief Investment Officer Bill Gross, speaking on cable network CNBC, said: "We're not reducing our risk to Lehman." The world's largest bond fund is not reducing the length of trades it will enter with Lehman, nor is it reducing the dollar size of trades, he added.
Earlier in the day, Mark Porterfield, a Pimco spokesman, told Reuters: "Pimco continues to trade with Lehman."

A Lehman spokesman declined to comment.

The cost of insuring Lehman's debt against default for five years rose 0.40 percentage point to 3.25 percent, or $323,000 per year for every $10 million of debt insured. Separately, Jonathan Gasthalter, a spokesman for SAC Capital, said: "SAC is continuing to do business with Lehman Brothers as usual."

Lehman, the fourth-largest U.S. investment bank, has repeatedly said it has enough liquidity to meet its needs. It raised $6 billion of capital in June, and $4 billion at the beginning of April.

Lehman's holding company has over $100 billion of assets it could easily sell or finance.
Rumors of mayhem at investment banks have been legion in recent weeks, and have proven false. Goldman Sachs on June 11 was said to be preparing for a large write-off, but its second-quarter earnings report the following week showed just an 11 percent decline in profit.

On June 30 Lehman was said to be selling itself for $15 a share, a discount of about 25 percent at the time. The bank remains independent.

Markets are particularly skittish about rumors of banks in distress after a run on the bank at Bear Stearns in March forced what was once the fifth-largest U.S. investment bank to sell itself.

THE OPEN WINDOW

Pimco's Gross said that with the U.S. Federal Reserve opening up financing facilities to investment banks, there should not be any questions about dealers' solvency. Lehman's share price movement came only because of questions about its future profitability, he said.
Pimco, a unit of giant German insurer Allianz (ALVG.DE), has about $812 billion in assets under management.

Federal Reserve Chairman Ben Bernanke said on Tuesday that the U.S. central bank may keep one of its emergency lending facilities for the Wall Street firm open longer than it had initially intended.

But even with this support, Lehman had $60.8 billion of real estate, mortgages and related securities as of May 31, well above the accounting value of its equity. The company recorded a $2.8 billion loss in the second quarter after recording $3.7 billion of write-downs.

Critics of the company say it has not written down assets enough, and further charges could force more capital raising.

Concerns about Lehman's mortgage exposure heightened on Thursday amid anxiety about the capital of Fannie Mae (FNM.N) and Freddie Mac (FRE.N). Former St. Louis Federal Reserve President William Poole said the two major U.S. mortgage finance companies were insolvent and might need a government bailout, according to Bloomberg News.

"You have to think these guys have a boatload of exposure to Fannie Mae and Freddie Mac," said Matt McCormick, analyst at Bahl & Gaynor Investment Counsel in Cincinnati.


Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

Nothing in this article is, or should be construed as, investment advice.

India headed towards diesel shortage : One way it can be overcome

When diesel ran out of supply from fuel stations in Chennai and Bangalore recently, it was the first indication that the country is headed for a shortage of the most popular fuel in the country.

The demand for diesel is rising at 25 per cent annually, while the crude oil refiners are capable of catering to only 12-15 per cent growth.

"A crisis in the availability of diesel is a strong possibility till new refinery capacities come up," said a Hindustan Petroleum Corporation [Get Quote] Limited official, which operates around 9 per cent of the country's refining capacity.

The country's refineries produced around 58 million tonnes of diesel in 2007-08.

Diesel is about 31 per cent cheaper than petrol because of higher subsidies. As a result, its consumption outstrips that of petrol by nearly four-and-a-half times.

The ratio could be skewed further in favour of diesel in the days to come. In contrast to the 25 per cent growth in the demand for diesel, growth in petrol demand is 10-11 per cent.

Over the last 8-9 months, diesel demand has grown further due to increased use in power generators. "The demand growth is due to higher use of diesel in generator sets," said Sarthak Behuria, chairman of Indian Oil Corporation [Get Quote], which controls over 40 per cent of the country's oil refining capacity.

The demand from industry has also increased as prices of other fuels such as naphtha have nearly doubled in the last year.

The three government-owned refineries -- IOC, HPCL and Bharat Petroleum Corporation [Get Quote] -- cannot increase the production of diesel from their refineries as it would have to be done at the cost of either kerosene or aviation fuel production.

"We can cut kerosene or aviation fuel production, but that would again affect the availability of these fuels," said BPCL Director (refineries) RK Singh.

Diesel production constitutes around 35 per cent of the total petroleum products produced by the government-owned oil refineries, while kerosene makes up 8 per cent and aviation fuel around 6 per cent.

The oil refineries are, however, working on various ways to tackle this shortage.

"One option could be that we increase diesel production at the expense of kerosene, and import kerosene instead which can be done at zero duties," Singh said.

IOC, on the other hand, is attempting to control the demand by stopping sale of subsidised diesel from fuel stations to people other than vehicle owners.

"The 25 per cent growth in demand is unreal. Our refineries are geared up to meet the normal growth of 12-15 per cent," said IOC's Behuria. He said the company would not cut production of other fuels to produce more diesel.

The price of petroleum products in the global markets is higher by around 14-15 per cent than the price of crude oil.

"The basic problem is that we do not have the money to import petroleum products," said another senior IOC official. The company imports crude oil to produce the petroleum products the country needs.
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Anyway, without substantiating with hard-numbers, I have the following idea:-

Today the three predominant uses of diesel in our country are:
1. Transportation (trucks & buses) - a basic necessity in our large country affecting common man.
2. Power generation - primarily for inhouse consumption by industries / generator sets for pumps etc
3. Diesel variants of 'Pleasure cars' - right from small cars to high-end models.

In my view, one way to bring down consumption of diesel or at the least stop the oil refinery PSUs from bleeding would be to price diesel sold to 'diesel' car owners at par with that of petrol. This would bring down mindless use of this scarce fuel by car owners because it is cheaper than petrol. Impact on common man would not be there because trucks & buses would be left out of this move. By increasing shift to LPG / CNG for trucks & buses - at times by judicial interference as in Delhi, further reduction in diesel consumption can be achieved.

Of course it will require political will from those in power. I don't have the hard numbers relating to quantum of Diesel variants of automobile cars or their consumption to back up this suggestion. May be those who track this sector can pitch in.

And sure, it will face a strong opposition from the automakers.

And yes, as Sriram suggested let is Bike it up...(it is only 22 Kms for me from home to office!). Or better still let us walk.