The announcement of the award of National Honour on the Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, raised interest at the money market last week. Dealing banks, traders as well as investors in the market, local and international, were concerned about the implication of the recognition on the current state of the market in the medium and long-term.

Although cost of funds remains high in the money market, THISDAY investigations revealed that some banks have actually cut their lending rates significantly to make it easy for big corporations to access funds, hitherto starched in their coffers.The big corporates, mainly the prime customers of the banks with thriving businesses in the food sector, manufacturing and processing, telecommunications and services among others, are accessing credit from banks at rates in the region of 11 per cent per annum, which is quite low compared to average maximum lending rate in the market at over 20 per cent.

A treasury with one of the banks explained: “There is no high risk premium on the transactions, unlike when lending to other customers of the bank.” He added: “These are people and organisations that the banks have been dealing with, have come to understand their businesses and can predict the future. Remember that the operating business environment in Nigeria is difficult and so when a customer comes to the bank to borrow money, he doesn’t just have to contend with the cost of the funds to the bank but the risks associated with his business, since a bank puts all that into consideration before arriving at the interest rate” he said.

The Central Bank of Nigeria (CBN) noted at the end of its monetary policy committee meeting last week that developments in interest rates structure indicated that the retail lending rates were still relatively high even though they were declining.According to the Committee, average maximum lending rate dropped to 22.56 per cent in May 2010, from 23.45 per cent in December, 2009. Also, average prime lending rate fell to 18.77 per cent in May 2010, from 19.03 per cent in December 2009.The result of trading activities at the inter-bank money market showed Nigerian Inter-bank Offer Rates (NIBOR), which had remained at about 1 to 2 per cent increasing last week.

The inter-bank lending rates rose to 8.25 per cent on average from 2 per cent the previous week after NNPC caused a major outflow, by withdrawing about N100 billion from the system. There was outflow to foreign exchange and fixed income securities purchases. There was also a dry up of the fiscal inflow in the system, both factors causing the rates to rise, one of the traders said.The NNPC reportedly sold about $600 million to some banks in the last two weeks and recalled part of the naira proceeds to its CBN account last week in compliance with CBN’s monetary control measures.

At the foreign exchange market, the naira, which gained 5 kobo at the first bi-weekly auction last Monday lost the 5 kobo at the second auction (last Wednesday) to exchange N148.50/$1. At the inter-bank market, the naira eased to N150.22 to the dollar from 149.70, which ended its two-week rally against the dollar.

Interest, Lending, Inter-bank, Securities Trading

As stated earlier, the big corporates majorly – the prime customers of banks with thriving businesses in the food sector, manufacturing and processing, telecommunications and services among others are accessing credit from banks at rates in the region of 11 per cent per annum, which is quite low compared to average maximum lending rate in the market at over 20 per cent. But lending rate to the private sector remains high, with the flow of credit falling to the very low levels.

The CBN in its market and economy review last week noted that as at May, 2010 aggregate domestic credit (net) grew by 12.38 per cent over the December 2009 level, and by 29.72 per cent when annualised, which was still below the 2010 indicative target of 55.54 per cent. Credit to government (net), which grew substantially by 50.87 per cent over end-December 2009 (or 122.1 per cent on annualised basis), was the major contributor. Credit to the private sector declined by 1.88 per cent (or 4.51 per cent on annualided basis), in contrast to the growth benchmark of 31.54 per cent for 2010.

The CBN further disclosed that the substantial growth of credit to government (net) against the backdrop of declining private sector credit reflected the risk aversion of banks to lending to non-government borrowers, adding that the “Committee believes that in order to provide the private sector with the necessary credit to grow the economy, further efforts are needed to unlock the credit market in order to enhance the flow of credit to the real economy.

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Local equity markets are witnessing huge volatility approaching the last hour of trade. Importantly, local markets are defying gravity and are trading in the green notwithstanding the subdued European markets wherein major markets have lost more than 1%. Most of the Asian markets also settled in the red, reflecting the persistent uncertainty in the global economic arena. Back home, Technology, Auto and Public Sector Undertakings segments are the leading gainers in the BSE sectoral space while Metal and Power sectors are in the negative terrain. Nifty is finding tough resistance at 5,000 level and it is currently trading a tad-lower than this psychological level. Key benchmark indices are likely to settle on a flat-positive note which will be significant given the turbulent global equity markets. The market breadth on the BSE was in favour of advances in the ratio of 1445:1261 while 111 shares remained unchanged.

The 30-share BSE Sensex advanced by 48.86 points or 0.29% to 16,620.89. The index touched a high and a low of 16,697.05 and 16,571.45, respectively.

The BSE Mid-cap and Small-cap indices gained 0.13% and 0.30%, respectively.

TECk up 1.19%, Auto up 0.88%, Public Sector Undertakings (PSU) up 0.49%, Information Technology (IT) up 0.47% and Capital Goods (CG) 0.45% were the main gainers in the BSE sectoral space.

On the other hand, Metal down 0.75%, Power down 0.22% and Bankex down 0.15% were the main losers in the BSE sectoral space.

RCom up 9.41%, ONGC up 3.36%, Bharti Airtel up 3.13%, Reliance Infra up 2.87% and Hero Honda up 2.36% were the major gainers on the Sensex.

On the flip side, Tata Power down 2.35%, Hindalco Industries down 1.92%, Jindal Steel down 1.49%, Wipro down 1.38% and HDFC Bank down 1.02% were the major losers on the index.

Meanwhile, the Cabinet decision to hike price for natural gas of $4.20 per mmBtu (million British thermal units) has been implemented from Tuesday, June 1, which will push up the production costs for power and fertilizer companies. Natural gas to power and fertiliser units is being sold at revised rates from June 1, but for city gas projects the hike will come into effect from June 8.

Last month, the Cabinet had approved the raising of gas price from Rs 3,200 per thousand cubic metres ($1.79 per mmBtu) to Rs 6,818 per thousand cubic metres ($3.818 per mmBtu). After adding royalty, the price for user industries would be Rs 7,500 per thousand cubic metres or $4.2 per mmBtu.

From the price hikes, ONGC and OIL would gain about Rs 5,000 crore and Rs 700 crore in revenue respectively. Similarly, GAIL India would gain Rs 150-200 crore in revenue annually.

The 50-share S&P CNX Nifty advanced by 15.25 points or 0.31% to 4,985.45. The index touched a high and a low of 5,008.60 and 4,967.05, respectively.

RCom up 9.76%, Idea up 7.45%, Ambuja Cements up 3.37%, ONGC up 3.26% and Bharti Airtel up 3.15% were the top gainers on the Nifty.

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The key benchmark indices provisionally ended a choppy trading session with small gains. Equities rebounded from a near 1% fall on Monday, 22 March 2010, triggered by worries higher interest rates may hamper the ongoing strong economic rebound. The BSE 30-share Sensex was provisionally up 30.14 points or 0.17%, up close to 85 points from the day’s low and off closet to 90 points from the day’s high. Metal and pharma stocks rose.

Auto stocks fell for the second day in a row due to rate hike worries. Index heavyweight Reliance Industries jumped. But, the market breadth, indicating the overall health of the market was negative in contrast to a strong breadth earlier in the day. World stocks rose.

The market was volatile as traders rolled over positions in derivatives segment from the March 2010 series to the April 2010 series ahead of the expiry of the near-month March 2010 derivatives contracts on Thursday, 25 March 2010. The market surged in early trade, The Sensex had lost nearly 1% on Monday, 22 March 2010, after a surprise hike in short term interest rates by the Reserve Bank of India (RBI) which it announced after trading hours on Friday, 19 March 2010.

The market pared gains soon after an initial rally. The market further trimmed gains in morning trade, after moving a in a narrow range in morning trade. The market once again moved in a narrow range in mid-morning trade. The key benchmark indices recovered from lower level after erasing almost the entire intraday gains. However, the intraday recovery proved short-lived. The market slipped into the red in afternoon trade. The key benchmark indices regained positive zone in mid-afternoon trade.

Rollover of Nifty futures from March 2010 series to April 2010 series was about 40% at the end of Monday’s trade. Rollover in Mini Nifty futures was about 31% and the market wide rollover stood at about 36%. In individual stocks, GTL, National Aluminum Company, Reliance Power, GTL Infrastructure, and Bharti Airtel, have witnessed high rollover. But rollover was low in REC, Dish TV, Essar Oil, ITC and Welspun-Gujarat Stahl Rohren till Monday.

The stock market remains closed on Wednesday, 24 March 2010, on account of Ram Navmi
The government will allow private-sector firms to issue infrastructure bonds to raise funds for projects, Finance Minister Pranab Mukherjee said on Tuesday. Prime minister Manmohan Singh today said there is a need to spend $1 trillion in infrastructure in the five years to 2016/17.
Mukherjee said the capacity of banks to fund infrastructure projects is stretched and new sources had to be tapped, including allowing private firms to issue infrastructure bonds. The availability of equity, both domestic and FDI (foreign direct investment) continue to remain an area of concern, he said. ” We have still not completely succeeded in exploiting the full potential of insurance and pension funds for deployment in the infrastructure projects,” Mukherjee said.

India plans to spend $514 billion in the five years to 2011/12, and Mukherjee said this goal was proceeding as per schedule.

The Reserve Bank of India (RBI) after trading hours on Friday 19 March 2010, unexpectedly raised interest rates from record-low levels, citing intensifying inflationary pressures and a steady economic recovery. The market had widely expected the RBI to raise rates soon, but the timing of its 25 basis-point hike for its key lending and borrowing rates, before the April 2010 policy review caught market men by surprise.

The RBI raised the repo rate, the rate at which it lends to banks to 5% from 4.75% and reverse repo rate, the rate which it absorbs funds from the system to 3.50% from 3.25% with immediate effect. India is the second major economy after Australia to start raising interest rates with signs of global recovery emerging and local price pressures picking up. China has raised its banks’ reserve requirements but has left its rates unchanged.

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Benchmark indices are trading around the neutral line in the absence of any clear trigger. Markets are trading in a tight-range at this point of time. However, BSE mid-cap and small-cap indices have gained significant strength today. Riding on strong advance figure for Q-4 of FY10, index heavyweight RIL (Reliance Industries Limited) has advanced more than 2% and clearly has been providing life-support for the benchmark indices. Asian markets are trading mixed with negative bias. Oil & Gas, Capital Goods and Consumer Durables segments gained by more than 1% while stocks from Banking and Fast Moving Consumer Goods sectors are putting maximum selling pressure on the broader indices. The broader indices were in favour of the advances in the ratio of 1433:1078 while 85 scrips remained unchanged.

The 30-share BSE Sensex rose 17.37 points or 0.10% to 17,182.36. The index touched a high and a low of 17,213.34 and 17,150.06, respectively.

The BSE Mid-cap and Small-cap indices advanced by 0.40% and 0.76%, respectively.

The main gainers in the BSE sectoral space were Oil & Gas up 1.62%, Capital Goods (CG) up 0.84%, Consumer Durables (CD) up 0.83%, Auto up 0.57% and Healthcare (HC) up 0.51%.

The main losers in the BSE sectoral space were Bankex down 0.78%, Fast Moving Consumer Goods (FMCG) down 0.63%, Public Sector Undertaking (PSU) down 0.38%, TECk down 0.10% and Reality down 0.08%.

In the wake of surging prices of milk and other dairy products, the government has decided to remove the duty on skimmed milk powder (SMP) and some other dairy products. The surging prices of milk have been one of the major contributors in the current high food inflation rate. The government had recently mentioned that the sale price of milk has increased by Rs 1-7 per litre in the country from January 2009.

The Revenue Department has issued a notification in this regard and has allowed the dairy industry to import up to 30,000 tonne SMP at zero duty in a financial year. As per the existing norms, the dairy industry is allowed to import only up to 10,000 tonne SMP at 5% duty under tariff rate quota (TRQ).

The major gainers on the Sensex were RIL up 1.80%, L&T up 1.43%, Sun Pharma up 1.40%, ONGC up 0.94% and Hero Honda up 0.86%.

The major losers on the index were Bharti Airtel down 1.99%, HDFC Bank down 1.76%, ITC down 1.35%, ACC down 1.22% and JP Associates down 1.04%.

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Asian markets are trading firm on Wednesday with investors going in for some hectic buying, tracking a positive close on Wall Street overnight and higher commodity prices. Hopes of a global economic recovery on the back of the European Union’s move to help Greece get out of its debts and some encouraging reports from across the globe are also bolstering sentiment to a significant extent.

Financials, resources and industrials stocks are among the notable gainers in the Australian market. Stocks from various other sectors are also trading firm. The benchmark S&P/ASX 200 index is up 96.2 points or 2.1% at 4,664. The broader All Ordinaries index is currently trading at 4,683, up 92.4 points or 2% over its previous close.

On Tuesday, the S&P/ASX 200 index had ended up 22.3 points or 0.49% at 4,568, while the All Ordinaries index moved up 20.4 points or 0.45% to 4,591.

Among bank stocks, ANZ Bank is up 3.5%, National Australia Bank is trading higher by 3.3%, Westpac Banking Corporation is gaining about 2% and Commonwealth Bank of Australia is up with a gain of 2.5%. Macquarie Group is trading higher by 1.4%.

In the materials space, BHP Billiton is up 1.8%, Rio Tinto is gaining about 2.8% and Newcrest Mining is trading higher by 3.75%. Bluescope Steel, Orica, Incitec Pivot, Fortescue Metals and Lihir Gold are also trading notably higher.

Among energy stocks, Woodside Petroleum is up 1.6%, Santos is gaining 1.65%, Oil Search is up 2.2% and Origin Energy is trading stronger by about 2.5%.

Shares of Warrnambool Cheese & Butter Factory Co Holdings Ltd are up nearly 8% after the group received an improved takeover offer from Murray Goulburn Co-Operative Co Ltd. On Tuesday, WBC had reported a significant rise in first-half profit and said its outlook is positive.

Coffey International is down nearly 8% due to weak results. The global engineering and project management provider’s net profit fell 20% to A$10.85 million in the six months to December 31, from A$13.51 million in the prior corresponding half. Operating earnings before interest, tax, depreciation and amortization fell 14% to A$31.1 million. The company has blamed a strong Australian dollar exchange rate and the global financial crisis for the fall in its first-half profit.

On the economic front, an index measuring skilled job vacancies in Australia added 1.6% to 44.4 in February compared to the previous month, the Department of Employment and Workforce Relations said. That follows a 1.1% monthly increase in January.

Among the individual components, marketing and advertising positions jumped 9.9% on month, while metal trades and construction jobs also were sharply higher. The availability of health profession and accounting positions saw significant declines. By region, New South Wales, South Australia, Western Australia and Tasmania saw an increase in skilled vacancies, while Victoria, Queensland and the Northern Territory all saw declines.

A forward-looking index measuring the Australian economy added 1.3 points or 0.5% in December compared to the previous month, the Westpac/Melbourne Institute index revealed, coming in at 245.8. That follows the 1% monthly increase in November. On an annualized basis, the index jumped 6.2% after jumping 5.4% on year in the previous month. The survey also showed that the coincident index climbed 1 point or 0.4%.

In the currency market, the Australian dollar opened notably higher thanks to the positive close on Wall Street overnight. The Aussie was quoting at US$0.9008-US$0.9011 in early trades, up 0.85% from Tuesday’s close of US$0.8932-US$0.8937. The Australian dollar is currently trading at 0.9007 to the U.S. dollar.

The Japanese stock market is trading firm on Wednesday with investors picking up stocks cutting across various sectors.

The benchmark Nikkei 225 index, which rose to 10,258, was up 210.37 points or 2.1% at 10,245 at the end of the morning session.

The mood is so positive that just three stocks out of the 225-stock strong Nikkei 225 index are currently down in the red.

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After getting off to a good start, the local equity markets continued to add weight in the mid-morning session tracking strong global cues. The BSE Sensex and the S&P CNX Nifty touched fresh highs and were trading near those levels. The bears were bleeding in trade as the bulls were dominating the entire sectoral space of the Bombay Stock Exchange (BSE). Metal stocks were the major gainers in trade led by Tata Steel, Hindalco Inds and Sterlite Inds up anywhere between 4.35% and 3.23%. Tata Steel has posted its first consolidated profit in four quarters for the three months ended on December 31, 2009. Stocks from consumer durables, realty and capital goods space were also doing well at this point of time. All the 30 components of the BSE’s sensitive index were trading in the green. Second line stocks were also witnessing value picking from investors. The market breadth on the BSE remained strong; the gainers thrashed the losers in a ratio of 1729:557 while 61 shares were unchanged.

The 30-share BSE Sensex zoomed 227.61 points or 1.40% to 16,454.29. The index touched a high and a low of 16,457.11 and 16,228.91, respectively.

The BSE Mid-cap and Small-cap indices gained 1.31% and 1.20%, respectively.
In the BSE sectoral space the main gainers were, Metal up 2.92%, Consumer Durables (CD) up 1.90%, Realty up 1.76%, Capital Goods (CG) up 1.57% and Bankex up 1.51%.

There were no losers in the BSE sectoral space.
Meanwhile, the chairman of Prime Minister’s Economic Advisory Council (EAC) C Rangarajan, on Tuesday, said that India should move towards the path of fiscal consolidation as the economic growth was resuming.

Rangarajan said that the process of fiscal consolidation must begin now as the economy was picking up again while the fiscal deficit, at the level it currently is, will be unsustainable in the long run. Hit first by the global commodity rally and then the recession in advanced economies following the events of September 2008, the Indian government was forced to take expansionary fiscal policies which pushed the deficit to a 16 year high of 6.8% in FY10.

Tata Steel up 4.35%, Hindalco Inds up 4.27%, Sterlite Inds up 3.23%, L&T up 2.23% and Tata Power up 2.13% were the major gainers on the Sensex.

There were no losers on the benchmark index.
The Indian government said on Tuesday that all the hurdles in the way of the much-awaited auction of third generation (3G) radio spectrum had been cleared, although there was yet no clarity regarding the possible timing of the event. The auction has been delayed thrice owing to differences between telecom and defence establishments on availability of spectrum.

But union communications minister said that the Ministry was yet to receive directions from the Law Ministry as well as the Finance Ministry. ‘There is no clarity yet. I am waiting for directions from the Finance Ministry and the Law Ministry and have not got any from them,’ said A Raja.

The S&P CNX Nifty soared 1.44% to 4925.45 from its previous close of 4855.75. The index touched a high and a low of 4926 and 4857.60, respectively.

Tata Steel up 4.43%, Hindalco Inds up 4.33%, Sterlite Inds up 3.38%, Tata Power up 2.62% and L&T up 2.33% were the top gainers on the Nifty.

While Idea down 0.09% and Hero Honda down 0.08% were the only losers on the broadly followed index.

Among Asian markets, Hang Seng advanced 1.77%, Jakarta Composite rose 0.67%, KLSE Composite added 0.84%, Nikkei 225 surged 2.57%, Straits Times gained 1.10% and Seoul Composite soared 1.66% and.

The local markets pared their early gains and entered into the negative terrain during the last hour of trade. Most of the Asian equity markets were trading in the green. Meanwhile, the Indian rupee registered a 16-month high against the dollar, riding on the disappointing US jobs data. The broadly followed 30-share Sensex was hovering around the previous close of 17,540. Realty, PSU, Metal, Auto and TECk sectors were the major gainers in the index. The market breadth on the BSE was positive in the ratio of 2172:752 while 52 shares remained unchanged.

The BSE Sensex was up 10.20 points or 0.06% at 17,550.49, with the intraday high and low of 17,776.57 and 17,529.89 respectively.

The BSE Mid-cap and Small-cap indices were up by 0.91% and 1.79% respectively.

Among the sectoral indices, Realty up 2.62%, PSU up 0.87%, Metal up 0.87%, Auto up 0.83% and TECk up 0.78% were the major gainers.

On the other hand, Oil & Gas down 0.78% was the only loser on the BSE sectoral space.

The major gainers on the Sensex were DLF up 2.64%, Jaiprakash Associates up 2.17%, Hero Honda up 1.76%, Maruti Suzuki up 1.76% and Grasim Industries up 1.47%.

RIL down 1.20%, BHEL down 1.19%, Hindalco Industries down 1.04%, Wipro down 0.89% and ICICI Bank down 0.36% were the top losers on the benchmark index.

The government has ruled out any plans to merge BSNL (Bharat Sanchar Nigam) and MTNL (Mahanagar Telephone Nigam). Speculation were rife on this matter on the backdrop of the two PSUs (Public Sector Undertakings) registering persistent losses. However, the Centre is mulling to sell part of its stake in BSNL and is likely to proceed further in this regard very soon.

In a move aimed at pushing the consolidation in the Indian banking industry, the finance ministry is likely to appoint private consultancy firms to help guide the large public sector banks on their way to acquire the smaller ones. The finance ministry earlier had an informal meeting with five of the biggest banks to discuss the agenda of consolidation where bankers were urged to explore various avenues for consolidation and come up with a roadmap whenever they felt comfortable. While the bigger banks have been working in this direction, the progress has been slow.

The 50-share S&P CNX Nifty was up by 9.85 points or 0.19% to 5254.60 from the previous close of 5244.75 with an intra day high and low of 5287.20 and 5227.80, respectively.

The top gainers on the Nifty were Unitech up 4.21%, ABB up 3.36%, PNB up 3.10%, Axis Bank up 3.06% and DLF up 2.78%.

On the other hand, the top losers were Cairn down 1.75%, BHEL down 1.34%, RIL 1.31%, Hindalco down 1.01% and Power Grid down 0.86%.

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