New Draft on Direct Taxes Code may create disappointment

The New Draft Direct Taxes Code was released for public discussion on August 12, as promised by the finance minister in his Budget Day speech. The main object is to simplify the country’s complex direct tax laws and to make it simpler and easier for tax payers to comply with. The focus of the code is to improve the efficiency of the Indian tax system, by introducing moderate levels of taxation and expanding the tax base. The code also considers all other direct taxes. If enacted in the current state, the code will come into effect from 1^st April, 2011.

There are several clauses which give reason to the taxpayer to smile. On the other hand, there are some proposed reductions/removals in the existing deductions as well, which are bound to cause disappointment.

Though the tax rates largely remain same, the income slabs have been significantly increased. The highest tax rate of 30% will now be faced only if taxable income in a year exceeds Rs 25 lakh. Further, surcharge and cess, which added another 2-4% to the tax rates, are now proposed to be abolished.

The proposed changes would immediately increase the levels of net income for all categories of tax payers. This move is welcome as it would put more cash into the hands of the individuals to spend thereby increasing consumption and giving a boost to the economy.

Another important proposal is to increase the maximum limit for tax deductions on account of savings in prescribed instruments (under Section 80C) from Rs 1 lakh to Rs 3 lakh. The most interesting new item is payment of tuition fees for children education (for 2 children).

The tax deduction which is currently available to salaried persons on account of House Rent Allowance (HRA) provided the employee actually pays rent be removed is now proposed and it will be a point of considerable disappointment to many salaried employees.

It has so far been an important source of tax savings to persons living in costly cities who do not own homes. With the deductions on home loans also going away, employed people will find housing expenditure going up.

The current deduction rate of 30% in the case of rental incomes from house property of gross rent for repairs etc is proposed to be reduced to 20%. In addition, the deduction granted of interest on housing loan in case of self occupied house property is sought to be removed (currently, interest cost not exceeding Rs 150,000 is allowed as a deduction). Hence there are no benefits available for loans taken for self occupied house property.

The code also provides that any amount received under the scheme of voluntary retirement, gratuity received on retirement or death, commuted pension would be exempt if the same is transferred into a fund designated as the Retirement Benefits account and would be taxable only in the year in which it is withdrawn.

Some significant changes are proposed in the area of capital gains tax. Security transaction tax (STT) is proposed to be abolished and all capital gains would now be taxable as any other regular income. Therefore, persons indulging in the stock market may need to shell out more taxes.

The due date of filing of tax returns has been advanced to June 30 from July 31 for individuals so there will be more work to be done in April and May as after then.

Hence, the proposed code does provide the tax payer substantial relief by increasing the slabs, but at the same time, it also takes away the exemptions and deductions which were available to the common man and which people have become so used too.

As this proposal would have far reaching impact on almost the entire working population of the country, it is likely to be a matter of considerable debate and discussion. It remains to be seen how it finally takes shape.

Indian stocks outperform on London Stock Exchange & AIM

Indian companies listed on the London Stock exchange and its junior exchange, AIM, have consistently outperformed the FTSE and AIM 100.
For the quarter ended June 2009, the index, which tracks the performance of Indian stocks on AIM and the main market in London, rose 76% from the start of the year and 72% from the beginning of April. This compares with a decline of 4% of the FTSE 100 for the year, and rise of 7% since the beginning of April. The AIM 100 has risen 34% from the beginning of this year, and 28% from the beginning of April.

It does not mean that Indian stocks have not seen severe drops in their share prices since the beginning of the recession. Sectorally, while property companies have lost their charm, infrastructure and energy companies have been better off this reflects a shift in investor interest in certain sectors.

According to Grant Thornton, which produces the India Watch tracker in conjunction with the London Stock Exchange, this performance illustrates that the downturn has not undermined the positive outlook for Indian companies, despite the occasional fracas with shareholders.

The India Watch Index covers Indian companies listed on AIM or the main market, including GDRs, and only includes companies domiciled in India.

OIL India IPO at Rs 1,200-1,450

Higher than the market expectations, the government plans to fix the price band of Oil India’s proposed initial public offer at Rs 1,200-1,450 per share. The company will raise up to Rs 3,500 crore through the IPO by selling 12% of its equity. Looking at the public response of NHPC issue, it appears that faith on Government based companies among investor is very strong. In addition, the government is expected to mop up around Rs 3,000 crore through divesting 10% of its stake in the oil explorer to three government-run oil marketing firms. On the expanded equity base after the IPO, the market value of OIL India will be between Rs 29,000 crore and Rs 35,000 crore.

Though the government is not giving its shares through the public issues as it had done in the case of NHPC, it will gain substantially from the pricing of the IPO. A high IPO price will offer it higher earnings when it sells its 10% stake in OIL to three oil-marketing companies — Indian Oil (5%), Hindustan Petroleum (2.5%) and Bharat Petroleum (2.5%).

The PSU concluded a series of roadshows in overseas markets on Monday. A final decision on price band will be taken by the empowered group of ministers scheduled to meet shortly. The IPO is supposed to open on September 7.

After the completion of the OIL issue, the government is expected to raise over Rs 5,000 crore, including Rs 2,000 crore through sale of NHPC shares, in the current year, much beyond the disinvestment target of Rs 1,120 crore mentioned in the Budget 2009-10. Last financial year, Oil India reported core earnings or profit before depreciation, interest, tax and amortisation of Rs 3,722 crore on a turnover of Rs 7,241 crore. OIL is a premier Indian national oil company engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of LPG. OIL is mainly engaged in exploration and production of crude oil and gas in north-eastern states. The North-East accounts for its entire crude oil production and majority of gas output. Rajasthan is the other producing area of OIL that contributes 10% of its total gas production.

Euro Continues Rally on Eurozone

The euro gained versus the dollar and other several currencies today as countries like Germany and France indicated a unexpected growth for the previous quarter, surprising traders and analysts, raising the positive sentiment towards the Eurozone currency.

A perfect scenario for a bullish pattern in the euro-dollar chart was set today as the German and French economies grew in the second quarter, as the Federal Reserve affirmed yesterday that interest rates in the United States shall remain low for an extended period of time, forcing the dollar down versus most of the 16 main traded currencies. Today, speculations indicate that a report is likely to show an economic rebound for all the current Eurozone country members, which is also favoring the outlook for the euro, which has been bearish since last week when it reached the highest level in months.

The euro is likely to remain high during the day if the report confirms the Eurozone diminishing contraction. Risk has returned to markets, and signs coming from main economies in Europe like Germany and France helped the euro to pare half of last risk aversion wave losses in the beginning of the week, but it is hard to determine until what level it may climb, since markets remain highly volatile.

EUR/USD traded at 1.4262 as of 9:47 GMT from a previous rate of 1.4155 yesterday. EUR/JPY traded at 137.35 from 135.23 yesterday.

If you want to comment on the Euro’s recent action or have any questions regarding this currency, please, feel free to reply below.

Crude Oil Reverts Canadian Dollar Falling Trend

After losing for five consecutive days, the Canadian currency rebounded versus its U.S. counterpart as stocks in Toronto climbed and the crude oil rebounded followed by most of the main traded commodities.

The Canadian dollar, which reached a 10-month high versus the greenback during the past week, returned to more reasonable rates as pessimism came back to equities markets following the end of the past week. Today, the Canadian trade deficit diminished more than forecasts, helping to loonie to climb with favorable crude oil prices and stock markets movements.

USD/CAD traded at 1.0877 as of 17:32 GMT from a previous rate of 1.1075 just a few hours earlier.

If you want to comment on the Canadian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Dollar Slides Before Fed Meeting

The dollar, which rebounded since last Friday as economic reports did not reflect a favorable situation in Asia and Europe, declined slightly versus the euro today, before tomorrow’s Fed Meeting.

The Federal Reserve is due to meet to tomorrow and will probably declare that benchmark interest rates in the United States will remain low, affecting the greenback outlook today versus multiple main traded currencies, as low interest rates are always negative for investors to purchase assets in a country.

EUR/USD traded at 1.4222 as of 17:21 GMT from a previous rate of 1.4100 six hours earlier.

If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Inflation Figures Affect Pound Performance

The pound started another day losing versus the dollar and the euro in the European session as the Bank of England affirmed that the 2 percent inflation target won’t be met, raising concerns regarding the British economy’s health.

The yen was one of the biggest winners today versus the pound, after Bank of England Governor Mervyn King stated that it will take time for the Great Britain banking sector to recover from the current delicate situation, lowering traders’ bets that interest rates will be raised this year in the United Kingdom. The current recession and credit shortage in the British Isles are likely to set the monthly inflation below the 1 percent barrier, indicating the seriousness of the British financial system situation. It is unlikely that the Great Britain will initiate a substantial recovery before 2010, which weighs massively on the pound.

The previous week rally for the British currency was almost entirely pared as international news, mainly from China, and grim speculations domestically annulled the pound’s chances of continuing to climb further. Due to a extremely liberal credit pre-crisis credit system, the British Isles are being one of the must punished regions in the world with the consequences of the global slump.

GBP/USD traded at 1.6441 as of 10:44 GMT from yesterday’s rate of 1.6457. EUR/GBP climbed to 0.8603 from 0.8574 yesterday.

If you want to comment on the Great Britain pound’s recent action or have any questions regarding this currency, please, feel free to reply below.

Yen Continues Rally on Chinese Minister Statement

The yen is being traded at the highest level in August as Asian stocks declined again, pushing the Japanese currency up for a third day in a row, since bearish markets rise attractiveness for the safe profile of the yen.

The best performing currency this week among the 16 most traded is the yen, which is benefiting from a new wave of risk aversion that made traders to purchase safer assets. Today, China’s Commerce Minister made an statement referring to yesterday’s disappointing report regarding Chinese exports, suggesting that even with all efforts provided by the government, China is not responsible to regulate exportation demands, adding another bit of pessimism towards the Asian economic future. CIT Group Inc, which made the news recently on bankruptcy concerns, is delaying the last quarter report, which is not a good factor for banking equities market sentiment.

Several reasons are enlightening traders’ perspectives towards the economic recovery, and it could be already understood that a fast pace solid revival is not coming, which is negative for equities markets and risky assets, favoring the yen. The global economy is likely to recovery, but its uncertain how long it will take and what economic growth levels are sustainable, making a confusing market to rise attractiveness for safer bets.

CHF/JPY traded at 88.09 as of 8:21 GMT from a previous rate of 89.47 yesterday. CAD/JPY fell to 86.31 from 88.83.

If you want to comment on the Japanese yen’s recent action or have any questions regarding this currency, please, feel free to reply below.

Polish Zloty Down as Rally May Halt Economic Growth

The Polish currency, which was climbing systematically during the previous two months as signs of economic recovery attracted traders to this emergent European Union economy, had a sharp decline this week as the current currency rates may affect the economic recovery in the nation.

Poland’s economy was the best performer among the 10 eastern European union members in the first quart of this year, after the national government cut taxes to stimulate the economy the zloty climbed 14 percent versus the euro, a rally which is raising concerns about the future conditions of the Polish economy. Today the zloty had the sharpest fall in two months, leading a day of declines in the currency market for eastern European countries, as pessimism brought investors back to safer markets.

EUR/PLN closed today in Warsaw at 4.1736, from an opening price of 4.1215, making the zloty to slide more than 1.5 percent.

If you want to comment on the Polish zloty’s recent action or have any questions regarding this currency, please, feel free to reply below.

Brazilian Real Declines Further on China’s Industrial Output

The Brazilian real is having its worst week since the beginning of July as pessimistic news rose risk aversion among traders, damping demand for the Brazilian currency high-yielding profile.

Today several reports in China brought equities and commodities markets down as exports and loan conditions deteriorated in the Asian country, raising concerns that one of the key-world economies may face an extended period of recession, affecting emergent market currencies like the South Korean won and the Brazilian real, which is at the lowest level since the beginning of August.

USD/BRL traded at 1.8601 as of 18:01 GMT from a previous rate of 1.8450 yesterday.

If you want to comment on the Brazilian real’s recent action or have any questions regarding this currency, please, feel free to reply below.

Chinese Industrial Outlook Decline Pushes Yen Up

Several negative numbers in China today brought worldwide investors to purchase yen-priced assets as pessimism and confusion regarding the global economic situation have returned to financial markets, favoring the safe profile of the Japanese currency.

The yen gained versus most of the 16 main traded currencies today after reports in China posted a worse-than-expected rise for the national industrial output also indicating negative exports and new loans numbers, raising risk aversion among traders this Tuesday. The South Korean won was one of the biggest losers versus the yen as the Asian nation’s central bank affirmed that it will maintain an accommodating monetary policy, damping demand for the won. The Australian and the New Zealand dollar also posted sharp falls versus the yen as stocks markets went down worldwide, which is negative for commodity-linked currencies like the Aussie and the kiwi.

Analysts suggest that the falling Chinese lending numbers will make it harder for equity markets to be sustained at high levels, and the yen benefits from this negative scenario in stock exchanges around the world. Volatility still remains extremely high as levels of risk appetite and risk aversion are changing overnight during the past few weeks, now, with a renewed risk aversion, investors are choosing the yen to invest.

EUR/JPY traded at 136.68 as of 11:41 GMT from a previous rate of 137.94 yesterday. AUD/JPY followed, being traded at 80.51 from 81.75.

If you want to comment on the Japanese yen’s recent action or have any questions regarding this currency, please, feel free to reply below.

Australian Dollar Down on Chinese Negative Data

The Australian Dollar lost today against several currencies like the yen and the U.S. dollar after a negative report in China pushed investors back to safer assets, damping demand for the Aussie’s riskier profile.

The Australian currency lost the most in a week today after Chinese banking data came worse-than-expected by economists, showing a slide in new lending figures and a disappointing rise for fixed-assets investments, indicating that one of the main global economies may still face further months of recession. The New Zealand dollar as well as its Australian counterpart are considered high-yielding currencies despite the current low interest rates in both countries, and these negative reports in China affected the Aussie and the kiwi today, paring much of last week’s gains versus the yen and the greenback.

Economists affirm that last week’s euphoria stimulated forecasts to be set higher, and the Chinese numbers today frustrated most of traders, which were attracted to refuge currencies like the U.S. dollar and the Japanese yen to provide more safety to their portfolios. The currency market tends to remain very volatile until the global economic conditions remain uncertain, and it is hard to predict what direction high-yielding currencies will take towards the end of the year.

AUD/JPY fell to 80.73 as of 10:54 GMT from a previous rate of 81.70 in the intraday comparison. AUD/USD followed the same trend from 0.8417 to a current price of 0.8363.

If you want to comment on the Australian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Mexican Peso at 4-Month High on U.S. Recovering Data

The Mexican peso started the week at the highest level in 4 months as the United States are signaling that the path out of recession has been already started.

The Mexican currency climbed to a 4-month high as the United States, Mexico’s main traded partner consuming more than 80% of its exports, is likely to revive its economy as reports last week brought investors’ confidence back to purchase dollar-priced assets, consequently favoring the U.S. dependent Mexican economy.

USD/MXN traded at 12.924 as of 21:15 GMT from a previous rate of 12.955 in Friday.

If you want to comment on the Mexican peso’s recent action or have any questions regarding this currency, please, feel free to reply below.

Euro Slides on Economic Conditions Comparison

The euro fell today versus the U.S. dollar and several other main traded currencies as speculations indicated that a number of economic zones are likely to grow faster and sharper than the Eurozone.

The euro had its most intense loss versus the greenback today as most of economic analysts believe that the United States is offering more solid conditions for an economic revival than the Eurozone or Japan, being today’s decline the sharpest in 3 months. A common believe among traders suggest that the United States is providing more fundamental data for an economic recovery in 2010, which is still not certain in the European Union.

EUR/USD traded at 1.4140 as of 21:04 GMT from an opening price of 1.4197 yesterday.

If you want to comment on the Euro’s recent action or have any questions regarding this currency, please, feel free to reply below.

.K.’s Recession Concerns Push Pound Further Down

The pound started this week continuing Friday’s bearish trend after the Great Britain government affirmed that the current asset purchasing program will be expanded, raising concerns that the British financial system is still in a delicate situation.

Today during the start of the European trading session, U.K. gilts rose and the pound lost versus most of the 16 main traded currencies as the outlook for the British economy stills more negative than most of other global economic regions. The quantitative easing program to be expanded by the Bank of England halted the strongest winning streak for the pound which brought it to a 10-month high versus the dollar and a 1-month high versus the euro, as these measures can be interpreted as an attempt to rescue the problematic economic situation in the country.

A rare economic phenomena in the U.K. is leading analysts to believe that the end of the current recession will not be necessarily followed by times of prosperity, which is definitely weighing on the pound. The artificial credit system made the United Kingdom to be one of the most economically successful countries in the European Union for many years, but from now on, the Brits will have to rely on different methods to bring growth back to the nation’s economic figures.

GBP/USD fell to 1.6627 as of 11:23 GMT from an opening price yesterday of 1.6685. EUR/GBP climbed to 0.8539 from 0.8499.

If you want to comment on the Great Britain pound’s recent action or have any questions regarding this currency, please, feel free to reply below.

Yen Climbs After Japanese Government Report

The Japanese currency started this week with a more attractive outlook as the Japanese government indicated through several reports, that the Asian nation may be finding its way out of recession, spurring demand for yen, which has been attractive lately only due pessimist global economic indicators.

During the darkest moments of the global slump, the Japanese currency tended to be attractive mostly when investors were looking for a refuge currency, as instability was high and markets extremely volatile. Today, several domestic factors brought the yen up versus most of the main traded currency, as exports expanded, machine orders rose and speculations led investors to believe that a number of Japanese exports repatriated overseas assets, creating a favorable scenario for the yen to benefit from. Machine orders in the Japan were definitely the main factor that brought the yen up today, since it was the first climb in number of orders in four months, which can be understood as an important sign of economic recovery in the region.

Today’s positive day for the yen can be also linked to the return of foreign investors to Japanese stocks, which had a long period of unattractiveness due to the national and global crisis. If the Japanese economy starts indeed to revive, yen is likely to rise, but at a contained pace, decreasing its current high volatility.

EUR/JPY traded at 138.18 as of 10:19 GMT from an opening price of 138.47. USD/JPY followed, from 97.24 to 97.65.

If you want to comment on the Japanese yen’s recent action or have any questions regarding this currency, please, feel free to reply below.

Pound Declines on Bank of England Statement

The pound declined in the end of this week, after the Bank of England affirmed that it will expand the current asset purchasing program in order to assure Britain’s financial system sustainability.

After reaching a nine-month high versus the greenback and gaining consistently versus the euro, the pound lost sharply towards the end of the week as the Bank of England stated that it will proceed its asset purchase program, mentioning that quantitative easing is still necessary to assure stability in the British economy. During this week, the pound traded above 1.70 versus the greenback, being the first time it crossed this mark in 2009, as signs of economic recovery raised investor’s confidence to purchase attractive pound-priced assets, but several factors still weighed on the pound’s outlook, halting a 3-week rally towards the end of the week.

Even if this week global economic reports and figures helped traders to invest further in riskier assets, the specific situation in the British financial system still remains rather complicated, as the Bank of England indicated this Friday, considering the current situation as fragile, which caused a mass evasion of capital from Great Britain’s equities markets this Friday, affecting the pound directly.

GBP/USD ended the week at 1.6685 after crossing the 1.70 mark one day earlier.

If you want to comment on the Great Britain pound’s recent action or have any questions regarding this currency, please, feel free to reply below.

Brazil’s Real Rebounded on U.S. Optimism

The Brazilian real, currency which had its rally halted yesterday as negative reports pushed stocks and commodities down around the world, climbed again today as U.S. employment data came better-than-expected.

The Brazilian currency was one of those who benefited today from a U.S. employment report which indicated less job cuts in the nation for the month of July in comparison with June, renewing optimism and increasing risk appetite among traders. Several currency strategists suggest that the Brazilian real is likely to gain further, remaining the best performing currency this year.

USD/BRL traded at 1.8260 as of 19:18 GMT from a previous rate of 1.8391.

If you want to comment on the Brazilian real’s recent action or have any questions regarding this currency, please, feel free to reply below.

Improved Jobs Data Pushes U.S. Dollar Up

The U.S. dollar pared this week’s losses versus the euro as employers cut less-than-expected jobs in the country, adding optimism to the world’s wealthiest economy.

The dollar reached a seven-week high versus the yen and gained versus most of the 16 main traded currencies as a report in the U.S. indicated that fewer jobs were cut in July than in June, suggesting that employment conditions are improving in the North America, which reflected positively for the greenback outlook, making the U.S. currency to end the first week gaining versus the euro, after 2 consecutive weeks of losses.

EUR/USD traded at 1.4160 as of 18:56 GMT after being traded at 1.4381 hours earlier.

If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Rising Unemployment Affects Canada’s Dollar Performance

The U.S. dollar pared most of this week’s losses versus its Canadian counterpart as a report today indicated that the number of job cuts in Canada was higher than what economists predicted.

After trading at a 10-month high in the beginning of the week, the Canadian dollar reverted its winning streak and declined even further today as a government report indicated that employment figures shrank much beyond economists forecasts, making the loonie to be traded at a one-week low after the report was published. Commodities and stocks decline influenced by weaker corporate and banking earnings pushed the Canadian currency down this week, as traders fled riskier assets to seek safety in more conservative investments like bonds and currencies like the Japanese yen and the U.S. dollar.

The Canadian dollar was overpriced and today’s job data was the perfect excuse for traders to profit and make the loonie to return to more realistic levels, according to currency specialists. This week, even the Bank of Canada showed concerns regarding the loonie’s rapid rise, and today’s movement could be even be considered adequate for the Canadian economy.

USD/CAD declined sharply after the employment report being traded at 1.0836, a significant rise from yesterday’s rate of 1.0735.

If you want to comment on the Canadian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Yen Gains on Renewed Crisis Concerns

The yen gained versus several currencies like the euro and the pound as equities markets are ending the week with a rather negative performance, as banks posted losses today.

The Royal Bank of Scotland Plc posted its results for the first half of the current year, indicating unexpected losses, which influenced banking shares in stock markets today, creating a negative sentiment that brought investors to the safety of the Japanese currency, which always benefits from pessimist economic scenarios. Allianz SE, one of the world largest insurance groups also published negative figures, which influenced stock exchanges even further to the red zone. The yen gained versus all 16 major currencies, after a beginning of the week that favored higher-yielding trading options, being emergent market currencies like the Brazilian real, the most profitable investment options.

As long as the economic directions remain unsettled, the risk aversion levels will be determinant for currency markets. Currency strategists affirm that every negative report or corporate account figures will reflect immediately in a bullish sentiment towards the yen, often associated as being the safest refuge in currency markets.

GBP/JPY traded at 159.45 as of 11:24 GMT from a previous rate of 162.15 yesterday. EUR/JPY followed, from 137.45 to 136.76.

If you want to comment on the Japanese yen’s recent action or have any questions regarding this currency, please, feel free to reply below.

Canadian Dollar Down as Oil Declines

The Canadian dollar had a second day of negative performance as unemployment in the nation is expected to grow further, damping demand for the loonie.

After several days breaking records versus its U.S. counterpart, the perfect scenario for a reversal in the Canadian dollar trend occurred today, as stocks and commodities fell, influencing negatively the loonie’s performance. Reports due tomorrow are likely to indicated improved employed conditions in the U.S., speculations which helped the greenback to pare some of its latest losses versus the loonie.

USD/CAD traded at 1.0770 as of 22:41 GMT from yesterday’s rate of 1.0700.

If you want to comment on the Canadian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Brazilian Real Falls on Commodities Decline

Brazil’s real, the best performing among the 16 most traded currencies had the most significant fall in more than a month as commodities declined today, pushing investors away from the South American currency.

A number of important Brazilian exports had a decline in their prices today as U.S. services industries contracted, forcing virtually all commodities down today. Brazil is one of the biggest global supplies for grain and metallic commodities, and today’s decline brought the real to the first negative performance in a week.

USD/BRL traded at 1.8255 as of 22:21 GMT from an opening price of 1.8141.

If you want to comment on the Brazilian real’s recent action or have any questions regarding this currency, please, feel free to reply below.

NHPC IPO overbid 3.5 Times

NHPC, India's biggest hydroelectric power generator, opened for subscription. The issue received good response on the first day itself and was subscribed fully within five minutes.

As per the data available on the NSE website, the NHPC IPO has already been subscribed 3.54 times so far. It received bids for more than 594 crore shares as against the issue size of 167.73 crore shares. The issue closes on August 12, 2009.

Qualified institutional investors were the main supporters to the issue with their portion being oversubscribed 6 times.

The price band has been fixed at Rs 30-36 per equity share of face value Rs 10 each and the company will garner around Rs 5,032-6,039 crore from the issue.

Should you subscribe?

Moneycontrol conducted a poll to check if investors must apply for the public issue or not (see complete poll results on page 2). Most brokerages and market analysts believe that this is a good buy. SP Tulsian of sptulsian.com says, "It has always seen that government IPO, leaves enough scope for prospective investors to make money and this can be expected from NHPC IPO as well."

Brokerage house IndiaInfoline agrees and recommends a 'subscribe', "NHPC’s operational performance has been amongst the best in the industry with its availability index always beating the benchmark. This coupled with a robust financial performance, with a core RoE of over 20%, places it better than many of its listed peers. India Infoline believes NHPC is in a sweet spot to capitalize on the growth opportunity in the power sector. And expect NHPC’s earnings to witness an 18% CAGR over FY09-12, recommend Subscribe."

As for the price, SMC Global says that it is recommended to apply in IPO even at the upper band of Rs 36. (Get all brokerage reports in table 1)

On the other hand, CLSA feels valuations are demanding at Rs 36 per share, reports CNBC-TV18. "We see NTPC as a far better play in the power sector. Return on Equity is inferior to NTPC and Power Grid."

Sanju Verma, CEO- Institutional Business, Proactive Universal Group, also says investors that can avoid NHPC from a valuation perspective. "NHPC at 21 times forward earnings was at Rs 36 per share. Moreover, NTPC’s return on equity would always be 7% higher than NHPC".

Encouraging job report pushes US stocks higher

Unemployment rises les thane expected for last month

US stocks ended with good gains for the week that ended on Friday, 07 August, 2009. The gains were led by healthy economic reports, mainly in the housing and employment sectors. There were also a large number of earnings reports, and most of them beat expectations.

The Dow Jones Industrial Average gained 198.46 points (2.2%) for the week to end at 9,370.07. Tech - heavy Nasdaq gained 21.75 (1.1%) to end at 2,000.25. S&P 500 gained 23 (2.3%) to end at 1010.48. With this week's gains, the Dow, Nasdaq and S&P 500 have surely consolidated their positions to their best levels of the year.

Seven of the ten sectors gained during the week led by the financial
, industrial and consumer discretionary sectors.

Among manor names that reported earnings during the week, Cisco reported a 18% year-over-year drop in revenue in fiscal Q4, matching expectations, with earnings slightly beating estimates due to the company's cost cutting measures. Cost controls helped Procter & Gamble (PG) top quarterly EPS estimates. But its revenue of $18.66 billion disappointed investors as it was well short of the $19.32 bln consensus.

Among economic data for the week, the positive tone was set early in the week as ISM Manufacturing Index made its seventh straight increase, coming in at 48.9 for July. While the sub-50 reading indicates contraction in the manufacturing sector, the number was still better than the 46.5 expected. Separately, construction spending data for June made a surprise 0.3% increase. It was expected to fall 0.5%.

In the housing data, the National Association of Realtors reported that Pending Home Sales rose 3.6% in June, better than the expected increase of 0.7%. Low prices, low mortgage rates, and the first-time buyer tax credit continued to be attractive inducements for prospective buyers.

In the US market on Friday, 07 August, 2009, The Dow Jones Industrial Average ended higher by 113.8 points at 9,370.07. The Nasdaq Composite Index, ended higher by 27.09 points at 2,000.25. S&P 500 ended higher by 13.4 points at 1,010.48.

The Labor Department reported on Friday, 07 August, 2009 that the unemployment rate, in July, 2009 unexpectedly fell to 9.4% as nearly a half a million people dropped out of the labor market. U.S. nonfarm payrolls declined by 247,000 to 131.5 million in July, the 19th consecutive month of job losses. It was the fewest lost payroll jobs since last August, 2008.

But the number of people who've been out of work longer than six months soared by a record 584,000 to 5 million, accounting for more than a third of all unemployment for the first time on record.

Among earning reports, AIG was a primary leader in the financial sector after posting its first profit since 2007. What's more, the company's earnings exceeded expectations. On the other hand, Ambac Financial plummeted after reporting a considerable loss for the second quarter.

In the currency market on Friday, the dollar index, a six-currency gauge of the greenback's value, rose by almost 1.2%.

Crude prices ended lower on Friday, 07 August, 2009. Prices fell as the dollar strengthened following an upbeat job report from the Labor Department in US. Inspite of the drop, crude managed weekly gains. On Friday, crude-oil futures for light sweet crude for September delivery closed at $70.93/barrel (lower by $1.01 or 1.4%). During intra day trading
, it rose to a high of $72. For the week, crude ended higher by 2.1%.

For the year 2009, Dow is up by 6.8%. The Nasdaq and S&P 500 are up by 26.8% and 11.9% respectively.

NHPC High priced offer

NHPC is the largest hydroelectric power generating company in the country. It has 13 operating hydro electric power (HEP) plants with an installed capacity of 5,175 MW including two power stations of total 1,520-MW capacity set up through its joint venture subsidiary Narmada Hydroelectric Development Corporation (NHDC). Current total generating capacity is 5,134.2 MW, taking into account the downgrade of the capacity ratings of Loktak and Tanakpur power stations by the Central Electricity Authority. All the existing power projects of the company (excluding the JV subsidiary) are located in the northern and north-eastern states such as Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Manipur and Sikkim. The two HEP stations are in Madhya Pradesh.

NHPC is constructing 11 additional hydroelectric projects, which are expected to increase the installed capacity by 4,622 MW. These plants, barring Teesta Low Dam IV, are mostly in the north and northeastern states and scheduled to be commissioned between December 2009 and March 2013. The Teesta Low Dam IV project is coming up in the Darjeeling district of West Bengal. NHPC is awaiting government sanction to build another five projects with an anticipated capacity of 4,565 MW on its own and another 2,166-MW capacity projects through certain JV projects. In addition, the company is surveying and investigating proposals for nine additional projects totaling 7,255 MW of anticipated capacity.

Apart from development and operation of HEP projects, NHPC also develops, designs, and delivers HEP station to clients. The company has executed two HEP projects, i.e. Kurichhu HEP in Bhutan and Devighat HEP in Nepal, on contract. Further, it also provides technical, management advisory and consultancy services to domestic and international clients. So far it has completed 76 consulting assignments and had 17 consulting assignments on hand end May 2009. NHPC also acts as an agency for implementing rural road development and rural electrification programs in India on request from the government of India. It earns fixed agency fee as determined mutually.

The current public offer has two components: Disinvestment from the Union government‘s existing holding 55,91,24,672 equity shares of Rs 10 each (4.5% of post- issue equity) and fresh issue of 1,11,82,49,343 equity shares of Rs 10 each (9.1% of post- issue equity). While NHPC will not get any amount from offer for sale (which will go to the government), the proceeds from fresh issue will be used to part finance the construction and development of Subansiri Lower in Arunachal Pradesh, Uri II in J&K, Chamera III in Himachal Pradesh, Parbati III in Himachal Pradesh, Nimoo Bazgo and Chutak in J&K, and Teesta Low Dam IV (in West Bengal) power projects as well as for general corporate purposes.

Strengths

Operational efficiency track record of the existing power plants is strong.

Proven execution capability in designing, executing, completing HEPs.

Improvement in customers' bill realization over the last six years following the recommendation of Ahluwalia Committee and one-time settlement of past dues.

The Nimoo Bazgo (45 MW) and Chutak (44 MW) HEPs in J&K were registered by the executive board of Clean Development Mechanism (CDM). These two projects are scheduled to commission in August 2010 and February 2011, respectively, and will generate carbon credit. Also pursuing CDM registration for other projects.

Weaknesses

HEPs are typically associated with longer execution period as well as high execution risks: geological, hydrological as well as environmental. Rehabilitation and resettlement issues are obstacles and often result in delays in the completion of projects. Moreover, there is little return on equity investments made during project execution.

Supplies 12% of the energy generated free to the respective state or its utilities or the electricity board as per the MoUs signed with the respective state governments following the power purchase agreements.

Among others, the tariff includes annual fixed charge (AFC) consisting of primary energy charge and capacity charges. However, under the new tariff policy effective from 1 April 2009, the capacity index has been replaced with the normative annual plant availability factor (NAPAF). Capacity charge for a power generating station will constitute 50% of the AFC and will be calculated using a formula that takes into account the NAPAF and the actual plant availability factor achieved. Earlier, if the capacity was available, the capacity charges could be recovered. Now, capacity has to actually operate at or above NAPAF. So if there were insufficient water, which prevents the plant from operating at or above NAPAF, the capacity charge would be adversely affected, even though the unit might have available capacity. Also, earlier capacity charge was equal to AFC less the primary energy charge. Now, 50% of AFC will depend on capacity charge. So this has introduced volatility in AFC, capacity charge and revenue, especially when water availability is poor.

Valuation

Consolidated sales of NHPC rose 19% to Rs 3493.71 crore and net profit by a modest 3% to Rs 1244.15 crore in FY 2009. On post-IPO equity of Rs 12300.74 crore, the EPS for FY 2009 works out to Rs 1 and the PE is 30-36 times at the offer price band of Rs 30-Rs 36. In comparison, thermal power major NTPC quotes at a PE of 22 times its FY 2009 consolidated EPS. The per MW valuation works out to Rs 3.76 crore (on the lower price band) to Rs 4.52 crore (on the upper price band) compared with Rs 3.58 crore per MW of NTPC.

Hydropower is typically characterized by high fixed costs and low operating costs. Against this background, the per-MW valuation of NHPC is ahead of thermal or other power plants. While the seasonality in thermal power is low, it is very high for hydropower projects.

Excel Infoways to list

Shares issued by Excel Infoways via initial public offering will list on August 3, 2009 (Monday) on the bourses. The issue price has been fixed at Rs 85 a share. Its NSE ID is EXCELINFO and BSE ID is 533090.

Excel Infoways had received mild response from investors and was subscribed 1.87 times.


Non-institutional investors and retail investors helped the issue to get subscribed; their portion subscribed 5.3 times and 2.64 times, respectively.

The issue had opened on July 14, 2009. The price band was fixed at Rs 80-85 per share.

The company raised over Rs 48 crore from this issue and the issue constituted 26.77% of the fully diluted post issue paid up capital of the company. The promoters hold 70.52% post the issue.

The company will utilise the money received from the issue for setting up new facilities and for strategic investment or joint ventures. And the rest of the money will be utilised for general corporate purpose and issue expenses.

Income from operations for the year ended March 31, 2009 stood at Rs 18.60 crore as against Rs 23.09 crore. The profit after tax for the same period was at 14.85 crore versus Rs 14.34 crore.

Excel Infoways is a BPO (Business Process Outsourcing) and Customer Contact Center based in India. It provides offshore BPO services to clients primarily in telecommunications and financial sector.

Adani Power IPO subscribed 4 times: Should you invest?

Adani Power initial public offering (IPO) witnessed huge investor interest and was subscribed 3.96 times on the first day of subscription. The issue received bids for 98,59,43,010 shares as against the issue size of 30,16,52,031 shares, as per the data available on the NSE website.

Qualified institutional investors have given strong response to the issue followed by non-institutional investors. Their portion subscribed 7.5 times and 2.1 times, respectively.

Also read: Subscribe to Adani Power IPO: Experts

According to the sources, maximum bids were at Rs 100 a share, reports CNBC-TV18.

The price band has been fixed between Rs 90 and Rs 100 per equity share. The minimum bid lot has been fixed at 65 equity shares by the company in consultation with the global coordinator and book running lead manager. The issue will close on July 31, 2009.

The issue constitutes 13.84% of the post-issue paid-up equity share capital of the company. The issue includes a reservation of up to 8,000,000 equity shares for eligible employees. The issue less the employee reservation portion comprises a net issue of 293,652,031 equity shares. The net issue will constitute 13.47% of the post-issue paid-up equity share capital of the company.

The company intends to utilize the net proceeds of the issue to part finance the construction and development of Mundra Phase IV Power project for 1,980 MW and fund equity contribution in its subsidiary, Adani Power Maharashtra Limited, to part finance the construction and development cost of power project for 1,980 MW at Tiroda, Maharashtra.

The equity shares offered through the red herring prospectus dated July 14, 2009, of the company are proposed to be listed on the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited.

The global coordinator and book running lead manager for the issue is DSP Merrill Lynch Limited. Book running lead managers for the issue are Enam Securities Private Limited, IDFC-SSKI Limited, JM Financial Consultants Private Limited, Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited, ICICI Securities Limited and SBI Capital Markets Limited.

NHPC IPO to open on price band set at Rs 30-35/sh

SK Garg, CMD, NHPC said, IPO price band set at Rs 30-36 per share. “The price band is based on 2 times price-to-book ratio," he said. The IPO issue will open on August 7 and close on August 12," Garg added.

He further said, the overall mandate from the government is 24%, but they have asked the company to go for in the first tranche with only 10% of fresh equity and plus 5% of disinvestment. “We have mandate to issue up to 24% stake,” he added. The company’s current capacity was at 5175 MW and plans to increase to 9600 MW by 2013, Garg added.

Here is a verbatim transcript of the exclusive interview with SK Garg on CNBC-TV18. Also watch the accompanying video.

Q: Share with us the price band and how did you arrive at the pricing?

A: The price band has already been decided by the board and we are going ahead with that, it is Rs 30 at the lower end and upper band is Rs 36. The valuations which we have done and then we had taken it to the government and the board, it is basically on the book value to price which we have worked out. We had taken a decision that to price it in Rs 30-36 band and we have decided to open up on August 7 and issue will be closing on to 12 August 2009.

Q: You are raising 15% out of which 5% is the government’s disinvestment which means it goes straight to the government and you get 10%, how much does that 10% translate into at the price of Rs 30 or at Rs 36 and what are you planning to do with that money?

A: The overall mandate from the government is 24% but they have asked us to go for in the first tranche only 10% of fresh equity and plus 5% of disinvestment, of the government’s own equity. So in all we are coming to the market in 15%, if we take the upper band of Rs 36, then it translates into Rs 6,000 crore, so out of Rs 6,000 crore 2/3rd will be flowing to us say Rs 4,000 crore and Rs 2,000 crore will go to government of India. Rs 4,000 crore inflow to us, which will be spending on our projects which are under construction right now, we have seven projects lined up which will be funded out of this equity inflow to the company and 1/3rd will go to the government of India.

Q: You are having the price to book value of 2, lets see one year ahead, on an expanded equity what would be your price to book, looking at 36 being the price, what would it be in the next year or the year after next because you are also adding significant capital investments, have you looked like how it looks in 2010-2012 assuming the Rs 36 price?

A: It will certainly be better if you ask me because we are on a mega expansion spree right now. We have lined up almost 11 projects which right now we are working and one by one which are coming on steam also. So with that, what we are hoping is that by the end of 2013, our capacity would be touching around 9,500 MW. So a lot of investment as you rightly mentioned it will be coming and fructifying into and giving yield on that ROE also. So there will be an impressive book value as against the current which we have around 2 plus.

Q: Could you just walk us through going into September, then December and then going into March quarter, how much new incremental capacity do you see it being added or is most of it back ended, so perhaps it is coming in 2010?

A: Right now my capacity is 5,175 MW with 13 power stations. I will be commissioning one more project this year which is 120 MW and it may come in the month of December and January this year itself, it is in Jammu and Kashmir. Apart from that, another six projects we will be delivering in 2010-11 and the total capacity will be around 2,200 MW, rest one project we are likely to give in 2011-12 and one would be coming in 2013 December. So in all by 2013 or so, the total capacity of this company is nearing 10,000 MW, that will be our capacity. So one after another, 2010 is the base year where we are going to deliver almost six projects to the nation and so as you see, huge capacity is going to be added and followed by other big projects which we have got time which is Arunachal Pradesh, which partly it will come in this plan and partly it will be just coming on the first year of the 12th Plan period and one project we are slated to give in 2013 December which is in Himachal Pradesh.

Raj Oil Mills IPO subscribed 1.24 times

Raj Oil Mills initial public offering (IPO) closed today. It had opened for subscription with an initial public offering of 95,00,000 equity shares of Rs 10 each with a price band of Rs 100 to Rs 120 per equity share on July 20, 2009.

It received bids for 1,17,99,000 shares as against its issue size of 95,00,000 shares and was subscribed 1.24 times till 17 hours IST, as per data available on the NSE website.



Subscription details

Investors Times

Qualified institutional buyers 0.75

Non institutional investors 3.98

Retail individual investors 0.77

Total 1.24

Non-institutional investors supported the issue on the last day to get subscribed fully; their portion subscribed nearly 4 times.

The issue size will be Rs 95 crore at the lower end of the price band and Rs 114 crore at the upper end of the price band. The issue would constitute 26.38% of the fully diluted post-issue paid-up capital of the company.

The proceeds from the proposed issue are expected to be deployed for setting up various facilities at Manor, Thane district, Maharashtra. These would include a refinery of 200 TPD, which can process Sunflower, Soyabean, Groundnut, Palm, Cotton Seed oils; a crushing unit of 200 TPD for Groundnut and Copra; a Palm Fractionation unit of 100 TPD; and a Vanaspati Ghee unit of 50 TPD, a Ayurvedic and Cosmetic unit of 5 TPD and In-house Blow Moulding Plant for PET Bottles.

The proposed issue will also fund setting up of crushing unit of 200 TPD for sesame and mustard at Bagru, Jaipur district, Rajasthan; for brand promotion, expansion of Marketing & Distribution network and for setting up of Research and Development facilities. The margin money for working capital requirement and issue expenses will also be met out of issue proceeds.

The book running lead manager is Karvy Investor Services Limited. The co-book running lead managers are India Capital Markets Private Limited and PL Capital Markets Private Limited.

The equity shares offered through the Red Herring Prospectus of the company are proposed to be listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE).

Raj Oil Mills is engaged in the business of Crushing and Oil Filtration with a capacity of 5,000 TPA and 30,000 TPA respectively. It markets products under the following brands: Cocoraj (Coconut Oil), Cocoraj Cool (Ayurvedic Oil), Guinea Groundnut Oil (Double Filtered Oil), Guinea Lite Groundnut Oil (Refined Oil), Guinea Lite Sunflower Oil (Refined Oil), Guinea Lite Cottonseed Oil (Refined Oil), Guinea Lite Soyabean Oil(Refined Oil), Tilraj Til Oil, Mustraj Mustard Oil and Cocoraj Jasmine. The aforementioned products are sold under three umbrella brands --- ‘Cocoraj’, ‘Guinea’ and ‘Raj’. These brands are in existence for more than 5 decades. Due to its vast experience in the edible oils business, the company has strong in-house manufacturing capabilities, wide product portfolio and brand presence.

The company’s business strategy is to maintain versatile manufacturing capabilities, produce high quality products and market a wide product range. The company’s networth comprising share capital, reserves and surplus as on December 31, 2008, is at Rs 100.33 crore. Its total assets are at Rs 162.47 crore.

Adani Power IPO: KRChoksey

KRChoksey has come out with its research report on Adani Power's initial public offering (IPO). Adani Power will open for subscription with an initial public offering of 301,652,031 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process on July 28, 2009 and will close on July 31, 2009. The IPO price band is fixed at Rs 90-100 per share.

The research firm has recommended investors to subscribe to the issue.

KRChoksey's report:

The company's management team has strong execution capabilities with an established track record, knowledge in the power generation sector and strong understanding of the domestic market. Further, the vertically integrated business model, long-term fuel tie ups and the tax exemptions enjoyed at the Mundra Power plants on account of APL being a co – developer in Mundra SEZ (and Tiroda project will be subject to MAT), would lead to higher margins and thus result in higher RoE (50%). We have valued the company based on the profitability (EV per EBITDA) and capacity (EV per MW). Based on both these parameters, we believe that the company’s fair value is slightly higher than the price band of the IPO (Rs 90 – 100). Further, given the current market sentiment towards the power sector and interest in the sector by the investors, we expect the issue to get significantly over-subscribed. Thus, we would recommend our investors to 'SUBSCRIBE' to the company’s IPO. Based on our calculation, the company’s fair value comes at Rs 104 per share, we thus believe that the downside risk is negligible and one can look into the issue for listing gains.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Market may remain volatile ahead of F&O expiry

Equities may remain volatile next week as investors rollover positions from July 2009 contacts to August 2009 contracts ahead of expiry of July 2009 futures and options (F&O) contract on Thursday, 30 July 2009. Profit taking cannot be ruled out after a recent sharp surge in share prices triggered by firm global cues and encouraging Q1 results of India Inc. Improvement in India's annual monsoon rains in July 2009 augurs well for companies in the fertilizers, agrochemicals, automobiles, and fast moving consumer goods sectors.

Investors will keenly watch the remaining Q1 June 2009 result of India Inc for further cues on the health of the corporate sector. The Q1 June 2009 results announced so far have been encouraging, with lower costs helping bottom-line growth. The combined net profit of 451 companies rose 17.4% to Rs 30691 crore on 5.5% growth in sales to Rs 2,02,529 crore in Q1 June 2009 over Q1 June 2008.

India's largest private sector bank by operating income ICICI Bank will announce its Q1 June 2009 result on Saturday, 25 July 2009. Tata Motors, Reliance Infrastructure, State Bank of India, Reliance Communications, NTPC, Hindustan Unilever, Tata Steel, DLF, Mahindra & Mahindra and Hindalco Industries, will announce their quarter ended June 2009 result next week.

Among non-Sensex stocks, Shasun Chemicals, Bank of India, Ispat Industries, Punj Lloyd, Karnataka Bank, Balrampur Chini, Bank of Baroda, Mic Electronics, Dena Bank, Vijaya Bank, among others, will announce their quarter ended June 2009 result next week.

India's monsoon rains were 15% above normal in the week to 22 July 2009, the second consecutive week of above-average rainfall after an exceptionally dry patch at the start of the season. Higher rainfall filled up India's main reservoirs to 23% of capacity in the past week up from 14% a week ago, helping hydropower supply, which accounts for a quarter of India's total generation capacity. Total rainfall since the beginning of June 2009 was 19% below average, improving from a 27% deficit in the previous week, the India Meteorological Department on 23 July 2009. More than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.

Investors will keenly watch for any surprises in central bank's monetary policy review on Tuesday, 28 July 2009. The central bank is likely to keep rates on hold at its policy review on Tuesday. The Reserve Bank of India (RBI) cut the repo rate, or its key short-term lending rate, by 425 basis points to 4.75% in six steps since October 2008 as it tried to guard a slowing economy against the global financial crisis. The central bank also slashed the reverse-repo rate by 275 basis points since early December 2008 and brought down the cash reserve requirement by 400 basis points to 5% since early October 2008 to keep credit flowing.

Government's stimulus measures late last year to counter slowdown in domestic economy have started to bear fruits. The latest economic data indicated improving economic activity. The six infrastructure industries -- crude oil, refining, coal, electricity, cement and steel -- together grew at an annual rate of 6.5% in June 2009, faster than the previous month's rise of 2.8%, data showed on Thursday, 23 July 2009. The infrastructure sector accounts for 26.7% of India's industrial output.

Inflation based on the wholesale price index declined 1.17% in the year through 11 July 2009, compared to previous week's fall of 1.21%, data released by the government showed on Thursday, 23 July 2009.

The market will closely watch global stocks which jumped to multi month highs on signs of revival in global economy. US stocks surged sending the Dow Industrials above the key 9,000 mark for the first time in seven months as strong corporate profits and rebounding US home sales spurred optimism about the economy. Sales of US existing homes rose for the third consecutive month in June 2009 by 3.6% to an annual rate of 4.89 million, up from 4.77 million in May 2009, the National Association of Realtors (NAR) said on Thursday, 23 July 2009.

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