Shift in bearing may cap Bay storm strength

Vinson Kurian

Thiruvananthapuram, Dec 5 Thursday’s depression in the Bay of Bengal has intensified into a deep depression on Friday, just a churn away from being classified as a cyclone, but slight shift in coordinates could weigh in to alter storm strength and direction.

According to the Joint Typhoon Warning Centre of the US Navy, the storm, numbered 07B, has of late shown a tendency to move along a more northerly track than seen earlier, guiding itself into a region massed by vertical shearing winds.

ALREADY AFFECTED

These shearing winds can lop off the top of a building storm, undermining its strength. A JTWC update cited satellite imageries to assess that 07B may already have been affected in this manner, with the low level circulation centre around which the storm builds getting partially exposed along the western flank.

Convective bands should ideally wrap into a closed core for the system to grow in strength. But incursion of dry winds or close proximity to land could work against consolidation in this manner despite obliging surface waters.

07B is forecast to continue to move to the northwest-to-west-northwestward direction (a net northerly bias to the track) that would bring it face to face with shearing winds.

TN FOR LANDFALL?

This may minimise 07B’s development as it moves in for a landfall which JTWC now figures could take place even along the southeast Indian coast (Tamil Nadu coast) by Saturday night or early Sunday morning.

In this context, the forecast by India Meteorological Department (IMD), the Regional Specialised Meteorological Centre for Indian Ocean (both the Bay of Bengal and Arabian Sea), is instructive.

The IMD update said on Friday that overnight’s depression over the southeast Bay moved west-northwestward and intensified into a deep depression at 5.30 a.m. It remained practically stationery about 650 km southwest of Port Blair, 1,100 km southeast of Chennai and 800 km east-southeast of Triconmalee.

The system is likely to intensify further and move in a west-northwesterly direction towards north Sri Lanka, Tamil Nadu and Puducherry coast during the next three days.

RAINS FORECAST

Rain or thundershowers are likely at many places over Andaman and Nicobar Islands and at a few places over coastal Tamil Nadu and Puducherry during the next 24 hours and at most places, thereafter.

Mainly dry weather is being forecast for the rest of Tamil Nadu, Kerala, Lakshadweep, Rayalaseema and coastal Andhra Pradesh during next 24 hours but scattered to fairly widespread rain or thundershowers thereafter. Isolated heavy to very heavy falls is likely over coastal Tamil Nadu and Puducherry commencing from Saturday night.

Squally winds speed reaching 55-65 km/hr in speed and gusting to 75 km/hr are likely along and off the Tamil Nadu and Puducherry coasts from Sunday morning.

`HIGH’ SEAS

Peak winds could gust to even 85 km/hr on Sunday and Monday. Sea condition will be very rough to ‘high’ along these coasts and fishermen have been advised not to venture out. Extended forecasts up to Wednesday spoke of fairly widespread rainfall activity over extreme south peninsula and the Andaman and Nicobar Islands.

Meanwhile, a moderately strong western disturbance is set to enter northwest India around the same time with a likely embedded cyclonic circulation. It is expected to cause scattered precipitation over the western Himalayan region and adjoining plains of northwest India.

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Carmakers offer discounts to clear stocks at retail end

Our Bureau

New Delhi, Dec. 5 Automobile companies are all set to entice customers by offering them the best deals on cars. Having witnessed the sharpest drop in sales last month and a pile up of inventory at the retail end, companies and dealers are offering high concessions on various models to exhaust their stocks.

Maruti Suzuki, for example, has almost doubled the concession on Wagon R and M-800.

The company increased discount on its Wagon-R to Rs 25,000 plus insurance for December as compared with Rs 12,000 and insurance the previous month. Even on M-800 it is giving a price cut of Rs 4,500 and insurance as compared with Rs 2,000 last month.

On its compact car, Alto, the concession is up to Rs 7,000. Hyundai too announced selling its flagship model Santro at Rs 2.99 lakh. The slowdown in the economy and reduced financing on vehicles by banks have led companies like Hyundai to provide attractive deals even to customers for its newer and best selling models like i10 by offering free accessories worth Rs 5,000 and insurance. US carmaker Ford’s Indian subsidiary has lowered prices of its mid size sedan Fiesta by Rs 91,000.

Dealers say that the discounts offered this month have been tempting as next month the model year will change. “Many of the customers do not want to buy a year end model. Hence to clear the stocks, companies usually offer good deals,” said a dealer.

The strategy of higher cuts is also amid fears that December could be worse. Almost all auto companies posted the sharpest decline in sales in November. Maruti Suzuki saw domestic sales fall by 27 per cent, Hyundai by 23 per cent and Mahindra by 12 per cent on its Logan.

“November has been very dull for all manufacturers. And December being the year end is even worse. So all companies want to liquidate their stocks,” said a Honda car dealer.

Markets this week

The Sensex opened on a positive note on Monday but changed direction and closed more than two per cent lower following a spate of bad news from the domestic economy and weak global equity markets. The Sensex ended 252 points down at 8,839 while Nifty closed at 2682, down by 72 points.

LIC takes its stake beyond five per cent in three public sector banks - State Bank of India, Bank of India and Allahabad Bank, according to BSE data.

During October-November, LIC acquired 1.67 crore shares representing 2.64 per cent stake of SBI from the secondary market. It also acquired 9.6 lakh shares of Bank of India on 11th November, hiking its stake to 5.14 per cent. It bought over 1.09 crore shares in Allahabad Bank, taking its stake to 8.84 per cent as on November 12.

The mutual fund industry's assets under management (AUM) fell seven per cent in November. Their AUM now stands at Rs 4,02,029 crore against Rs 4,31,860 crore in October.

For efficient use of margin capital by market participants, SEBI on Tuesday announced extension of cross margining across the cash and derivative segments for all categories of market participants.

Earlier, this facility was available only for institutional trades. However, only the index based stocks and stock futures will be eligible under the new cross-margining scheme.

Shares ended weaker on Tuesday, led by blue-chips and auto companies, over concerns about the global economy, but short-covering towards the end pared early losses.

The Sensex ended down 100.63 points at 8,739 and the Nifty fell 25 points to 2,658.

Indian Shares closed flat on Wednesday after a volatile session. The Sensex ended up 8 points at 8,747. after rising to 8,855 in opening trade, buoyed by positive global cues and expectation of interest rate cut by the RBI. On the NSE, the Nifty index closed flat at 2656.

NSE has revised upwards the market lot for 243 stocks in the derivative segment.

As per data put out by NSE, these changes would take effect on the farther month contracts - March 2009 series. The upward revision ranges between two and 14 times.

The benchmark indices surged on Thursday, sparked by a lower inflation rate, and expectations of a stimulus package from the Government to boost the economy.

The Sensex surged by 482 points to close at 9230 and the Nifty gained by 131 points to end the day at 2788.

The inflation rate for the week ended November 22 was at 8.4 per cent, which created hopes of a substantial cut in interest rates by RBI on Saturday.

Indian stocks tracked the European markets which were up in early trade as the European Central Bank, Britain and Sweden made big rate cuts to shore up their economies.

Indian companies will now have one year's time to launch their IPOs or rights issues after the clearance of draft prospectus by SEBI.

SEBI at its board meeting on Thursday decided to extend the validity of its approval for IPOs and rights issues from three months as of now to one year, subject to updating of documents by the issuer.

Fund managers welcomed the decision on Thursday making listing mandatory for close ended schemes of mutual funds, and disallowing early exit from these schemes.

The European Central Bank on Thursday slashed its benchmark lending rate by 75 basis points to 2.5 per cent.

The Bank of England has cut the bank rate by 1 percentage point to 2 per cent.

The BSE benchmark Sensex on Friday tanked 265 points to close below 9,000-mark on heavy selling by funds in blue-chips led by the information technology, realty and metal segments owing to profit booking at higher levels. The Sensex closed at 8,965.20, down 264.55 points. On the NSE, the Nifty ended lower by 73 points at 2,714.40 points.

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Will Indian auto parts cos break into Japanese clubs?

T. Murrali

Chennai, Dec. 5 The Japanese auto industry has begun exploring possibilities of sourcing components from India.

A two-day event, organised jointly by the Automotive Component Manufacturers Association (ACMA) and Japan External Trade Organisation (JETRO), saw the presence of 22 large potential buyers from Japan.

Pointing out that this is the first time that JETRO is conducting such an event in India, experts in the auto components industry said that the event shows a first-time interest in India by the Japanese.

India imports from Japan auto components 10 times more than what it exports. Imports from Japan (Rs 2,413 crore) grew 72 per cent in 2007-08 over the previous year. Exports to Japan, which grew 11 per cent last year, were still nothing much to write home about, at Rs 205 crore.

Japanese small car major Suzuki entered India as a joint venture in 1981. Today, it buys 97 per cent of the components domestically, but buys practically nothing for its plant in Japan. The reason could be ‘keiretsu’, a tradition under which an OE buys its requirements from a close group of associates. Keiretsu assures the associates of business and lets the OE have a control over quality and price.

So Japan has made Asean countries, especially China, Thailand and Malaysia, its manufacturing suburbs, but India is yet to break into the club.

This is despite there being 200 Japanese entities in India — joint ventures as well as wholly-owned subsidiaries. Seven of them are vehicle manufacturers.

Yet, Japan accounted for 1.4 per cent of India’s exports of auto components (Rs 14,130 crore) last year. North America accounted for 28 per cent and the EU, 38 per cent.

In contrast, Japan is buying more from other countries. Japan’s imports from China, Thailand and South Korea are growing.

Are things changing?

But now, following its decision to reduce dependence on any one country, Japanese auto industry is looking at India as a probable sourcing destination.

Japanese representatives at the expo said India is by far more stable and robust economy to work with than their Asean counterparts.

Twenty-two Japanese companies, including Denso, Hitachi, Honda Siel Cars, Mikuni India, Mitsubishi Heavy Industries, Renault Nissan Technology & Business Centre, showcased their products that they were keen to source from India. Similarly, about 30 Indian auto component manufacturers, including Amtek, Caparo, GNA, IP Rings, LGB, Rane and Hi-Tech Gears also displayed their wares.

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PSBs play it safe with nostro accounts in US

C. Shivkumar

Bangalore, Dec. 5 Public sector banks have now begun restricting their correspondent account balances to a handful of US banks.

Senior banking sources said that nostro account balances or correspondent accounts were maintained with 17 banks, including Wachovia, till about 3 months ago.

A nostro balance is that one bank maintains with a foreign bank in foreign currency.

Bankers said that the Reserve Bank of India has now sought details of the number of nostro account balances with the various US banks. Besides the RBI intervention, a series of US bank failures have made domestic bankers cautious.

Nostro accounts

At least 22 banks have failed in the US. In many of these institutions, domestic banks, both private and public sector, had maintained correspondent accounts.

Domestic bankers said that the RBI also advised them to hold their nostro balances only with large banks that have clearing operations. Accordingly, bankers said that most of them have now restricted their nostro accounts to such clearing banks in the US.

The bankers said nostro balances were parked are Citibank, Wells Fargo, JP Morgan Chase and Bank of America.

But even with these banks, nostro balances were restricted only to trade finance requirements. Consequently, the nostro balances of all the banks in the country were only about one per cent of the export receipts or about $1.6 billion.

Bankers said that most of the balances were either repatriated to India or held in US Government Treasuries at low yields.

Resisting temptation

This was despite the high interest offered on US dollar deposits. Six-month certificates of deposits in the US banks are currently as high as 4 per cent.

Yet given the uncertain financial conditions in the US, Indian banks are staying away from the high-yield offerings. Some banks preferred repatriating the resources and investing them in domestic treasury bills, where the yields were slightly better.

Besides, the bankers said that the failure of some of the US banks and the lack of the coverage under the Federal Deposit Insurance Scheme were likely to lead to provisioning of some of the balances.

Vostro accounts

Nostro balances are treated as assets though they are not risk weighted. This is because Indian banks also maintain a mirror account as a liability in the form of correspondent account of the foreign bank or as a vostro account. This obviated the need for risk weighting such accounts. Yet, there are fears that despite the mirror accounts, the prospects of nostro balances becoming sticky are high.

Consequently, some Indian banks were also resorting to holding correspondent account balances in overseas branches and subsidiaries of other domestic banks as risk mitigation measures. Large domestic banks, like the State Bank of India, already have a large presence in the US.

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Outdoor media, hoardings going vacant on poor market sentiment

Varada Bhat

Mumbai, Dec. 5 A few weeks ago, when your car zoomed across the neon-lit streets in Mumbai, there was a glitzy illuminated sign that promised you the comfort of a luxury apartment at an affordable price or a telecom company that kept buzzing with unlimited free calls.

But now due to slowdown in businesses coupled with downturn in the economy, outdoor media companies can’t find more innovations to illuminate their blank sites.

Big ad spenders such as HDFC, Reliance and ICICI are shying away from fat-budget campaigns outdoors, said Mr Sudhesh Paul, Business Development Manager with Bright Outdoor Media (Pvt) Ltd, which has a 50 per cent market share in the ‘Out of Home’ business in Mumbai.

Mr Paul says last week, one of the top private sector conglomerates terminated a six-year contract with Bright outdoor on several locations in the country by giving one month’s notice.

“Sixty per cent of our sites are vacant now,” Mr Alt aaf Shaikh Director of Mumbai-based Roshan Publicity told Business Line. The company once boasted of a clientele of Airtel, Bajaj, ICICI Prudential and HSBC.

Slashing bookings

According to Mr Shaikh, new campaigns are becoming shorter and softer in length as advertising budget is pruned.

“One of the telecom companies, which launched its operations in Mumbai in August, had an initial booking worth Rs 2 crore, which got slashed to Rs 75 lakh,” Mr Paul added.

Traditionally, during the festive season from October to December, the outdoor companies used to hold bid for prime locations, but now due to the financial turmoil, the billboards are falling vacant.

According to Mr Anant Raj, Account Manager with Primesite (the outdoor arm of Mudra Communications), says that his financial clients have stripped the launches of their new products and schemes due to dampened consumer sentiment in the markets.

According to a media guide of a leading outdoor agency, on an average, hoardings cost Rs 18-20 lakh a month, kiosks cost Rs 3500-15,000 a month and gantries cost Rs 3-6.5 lakh a month.

Media efficiency

Although Mumbai and Delhi comprise 50 per cent of the outdoor market in numbers, 70 per cent of values in terms of money are coming from tier II and tier III cities that have also been affected drastically.

Mr Amish Tripathi, IDBI Fortis Life Insurance National Head (Marketing and Product Management), said, “We have started focusing on the efficiency of each media. We are selectively choosing media, through which we are getting lot of yields.”

Mr Sanjay Pareek, President of Percept Out-of-Home, a division of Percept Holdings, feels corporates have also realised that the television is a cost-effective medium, considering the increasing penetration.

“The sheer boost in airtime inventory due to recent launches of new channels has resulted in dropping down of rates. Even we are advising our clients to shift from outdoor to television,” he said.

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