The Hindu Business Line : Weekly News Round-up

In a bid to ease the current cash crunch in the financial system, the Reserve Bank of India last week effected a cut of 150 basis points in the cash reserve ratio to 7.5 per cent from 9 per cent. The first CRR cut of a 50 basis points was announced on Monday and subsequently another cut of 100 basis points came about on Friday; Both were made effective from October 11. The revision in CRR has released Rs 60,000 crore into the banking system.

The SEBI board on Monday lifted the October 2007 restrictions on issue of participatory notes by foreign institutional investors with immediate effect, a move widely perceived to help bring in more funds to lift the sagging capital markets. FIIs can issue P-Notes against securities, including derivatives, as underlying assets. The P-Note limit of 40 per cent of an FII's total assets under custody has also been done away with. Some marketmen see this as a move to enhance liquidity in the market.

The Indian rupee continued its free fall against the dollar during the week, depreciating mainly due to the crash in the domestic equity market and sustained demand for the greenback. The domestic currency opened lower on Monday at 47.38/40 and breached the psychological mark of 49, touching a new low of 49.30, before settling at 48.46 on Friday, netting a loss of Re 1.36 during the week. The Rupee's movement was characterised by high volatility after the RBI announced the CRR cut to bolster the liquidity position in the markets.

Even as the stock market bled heavily, gold recorded big gains on domestic bourses on Friday with a phenomenal spurt of over Rs 500 per 10 grams. The spot market for gold rallied to Rs 14,300 per 10 grams, the highest price recorded in rupee terms till date. Traders attributed this to the traditional rise in demand during the festival and marriage season.

The annual Wholesale Price Index-based inflation rose to 11.80 per cent for the week ended September 27, below the previous week's annual rise of 11.99 per cent, as per data released by the Ministry of Commerce and Industry on Friday. Inflation during the corresponding period in the previous year was, however, significantly lower at 3.36 per cent, mainly on account of a price drop in primary articles such as maize, gram, raw wool and cotton, tomatoes and onions, and also in manufactured products including cotton yarn, polyester staple fibre, groundnut and gingelly oil, pipes and tubes and cement.

The Tatas' Rs 1 lakh dream car `Nano' will now roll out from an integrated project near Sanand town in Ahmedabad district, from the same cattle farm for the establishment of which during a severe famine in 1900 his great grandfather, Jamsetji Tata, had donated Rs 1,000. Tata Motors plans to launch the Nano in the last quarter of this financial year. More than 60 ancillary units are expected to come up at the Nano premises.

Companies in the mining, exploration and refining sectors are to get a boost in terms of better and larger access to overseas funding, with the Government expanding the definition of "infrastructure" under the external commercial borrowing policy to include these three sectors. With this move, companies in these sectors can now avail of borrowings of up to $500 million a year for rupee expenditure under the approval route. The only rider is that borrowings in excess of $100 million should have a minimum average maturity of seven years.

The week's beginning did look as if commodities had fallen into a bottomless pit across the board, save gold. The credit market seizure that forced Lehman Brothers' to go bankrupt and pushed Merrill Lynch into the arms of Bank of America, squeezed speculators who had driven commodities to record highs. The fall in commodities was led by crude dropping below $80 a barrel. It was quoting at $78 a barrel on Friday. Copper, nickel, zinc, lead and aluminium also fell near their two-year lows. Palm oil, coffee, sugar, soyabean, cocoa and corn also declined.

Gold was the only saving grace, which rose sharply to $871.60 on Friday as investors sought a safe haven from the credit crisis.

Infosys Technologies Ltd reported a 30.2 per cent rise in net profit for the September quarter, beating its own and Street estimates. Net profit for the said quarter stood at Rs 1,432 crore on revenue earnings of Rs 5,418 crore, as compared to Rs 1,100 crore on revenues of Rs 4,106 crore in the corresponding quarter of previous fiscal. The sequential revenue growth in rupee and dollar terms was at 11.6 per cent and 5.3 per cent respectively.

Compiled by M J Madhavan
Podcast by S Vasudevan