The Hindu Business Line : Weekly News Round-up

Barack Obama emerged victorious over his Republican rival John McCain in the US presidential race on Tuesday and is set to take over as the 44th President of the United States in January 2009. He is America's fifth black senator, and from being a no-experience Senator of just over two years to the President of the US, his journey has been truly remarkable. Mr Obama received 364 of the electoral college votes against 163 of Mr McCain's.

The Houston-based Franklin Bank Corp., controlled by Mr Lewis Ranieri, was shut down by US regulators on Saturday, making it the 18th U.S. bank to be seized this year amid mounting real-estate losses and slumping home sales, say agency reports. The bank, with $5.1 billion in assets and $3.7 billion in deposits, was closed down by the Federal Deposit Insurance Corp (FDIC). The closely held Prosperity Bank acquired all the deposits of Franklin, the FDIC said in a statement on Saturday. Franklin had under it total assets of $5.1 billion as on September 30, 2008, with total deposits at $3.7 billion

The country's foreign exchange reserves declined for the sixth consecutive week, falling by as much as $5.532 billion to touch $252.883 billion for the week ended October 31. The reserves have fallen by more than $31 billion in the past one month alone. Sustained dollar selling by the Reserve Bank in the forex markets, large FII funds outflow from the domestic equity markets, and revaluation of the reserves put pressure on the country's reserves.

Bank of India on Wednesday announced a 75 basis points cut in its benchmark prime lending rate to 13.25 per cent with effect from November 6, 2008. The bank has also decided to reduce deposit rates by 50 basis points with effect from December 1. Many public sector banks have reduced their BPLRs by 50 to 75 basis points over the last few days.

October has really been a cruel month for Indian mutual funds with assets under management seeing the sharpest fall in recent times. All the 30 fund houses (of the total 37) which reported their monthly Assets under managements on Monday have posted a drop in their asset base. Reliance MF, the country's largest fund house in terms of asset base, has reported a more than 17-per cent fall in its assets, losing Rs 15,400 crore in value in October, while HDFC, the second largest, saw a 12-per cent drop in its assets. Other top mutual funds such as ICICI Prudential, UTI and Birla Sun Life are yet to release figures.

Auto majors Tata Motors and Mahindra & Mahindra have shown a decline in sales in October. Tata Motors has reported a 20 per cent decline to 39,729 units in October against the sales figures of 49,354 for the same month last year. Mahindra & Mahindra's sales too dropped 19 per cent to 20,282 units last month when compared to 24,679 units during the year-ago period. The funds crunch and high interest rates have forcing customers to postpone purchase plans.

Indian Banks Association has opened a facilitation counter to enable mutual funds to borrow from banks under the Reserve Bank of India's liquidity support scheme for MFs. The IBA will help mutual funds to locate banks which have "headroom" under the RBI scheme, as each bank has a lending limit depending on the size of its deposits. The IBA will collect data on the position of its member banks on a daily basis so that it will know which bank has funds to lend under the scheme

The RBI on Saturday cut the Repo rate, Cash Reserve Ratio and Statutory Liquidity Ratio, besides announcing a host of other measures, unlocking more than Rs 1,80,000 crore in additional funds for banks. In cutting the key rate for the second time in less than a fortnight, RBI joins other apex banks across the world taking similar measurers to ease the liquidity crunch in their respective economies and improve availability of credit. RBI reduced the repo rate by 50 basis points to 7.5 per cent, CRR by 100 basis points to 5.5 per cent and SLR by hundred basis points to 24 per cent.

The annual WPI-based inflation rose 10.72 per cent during the week ended October 25, marginally above the previous week's annual rise of 10.68 per cent, Government data showed on Thursday. Inflation in the same period in the previous year at 3.11 per cent, was significantly lower. The official WPI for `All Commodities' for the latest reported week rose by 0.1 per cent to 238.5 points, from 238.3 points for the previous week. In the Primary Articles group, the annual point-to-point inflation increased to 11.41 per cent, as compared with 10.92 per cent reported last week.

Compiled by M.J. Madhavan
Podcast by S. Vasudevan