Invisible Analysis

EURO BURNS MONEY

2012-01-31T20:18:00.003+05:30

Money is being burnt. Yes, Europe is about to burn money and that for a decade. In my last article I revealed about the propelling Euro debt payment where it will need around 1 trillion euros to be paid by June 2012.Please click the link below to find the PREVIOUS STORY OF EURO DEBThttp://ianalysis.blogspot.in/2012/01/europe-debt-to-explode.html

In my last article I received a couple of queries where I found the readers are perplexed about the mechanism being implemented by euro to fight out the debt. European commission has formed two mechanisms to deal with falling debt burden. European Financial Stability Fund is the fund which has been built by the 27 members of the Eurozone to fight out the sovereign crisis. On 9th March 2010 the 27 euro nations gave birth to EFSF.EFSF was authorized to borrow upto €440 billion. At present out of this €440 billion only €250 billion have remained available after the Irish and Portuguese bailout being executed .EFSF funding mechanism will be based upon issue bonds or other debt instruments backed by the by guarantees given by the euro area member states in proportion to their share in the paid-up capital of the European Central Bank (ECB).In the below chart the paid up capital details of the member states are given clearly. The amounts are based on the European Central Bank capital key weightings.

The next vehicle is called European Financial Stability Mechanism. This is an emergency fund which was built based upon the funds raised on the financial markets guaranteed by the European commission by pledging the budget of the Euro nations as collateral. Now pledging the budget of the Euro nations as a collateral means that the extent to which the euro nations will cut down on budgets depending upon that the funds will be paid by EFSM to Member states. Now cut down on budget expenditures will result to prolonged crisis for the Euro nations in terms of GDP growth. Less government spending is going to result prolonged job losses and cut downs, low consumption and less manufacturing to happen. This will further increase the burden of the Euro member states regarding their income generation from taxes and other government avenues. So, where growth of the Euro economy is being foreseen in the near future is the question in demand. Unemployment benefits numbers are going to increase despite of government cut down in the expenditure. Eurozone unemployment has risen to its highest level since the euro single currency was introduced. Seasonally adjusted unemployment among the 17 countries sharing the euro rose to 10.4pc in December. The number of Europeans out of work has risen to 16.5 million people, with another 20,000 people without a job in December from the month before. Unemployment in Spain reached a new high of 22.9pc in November and December. In Greece, joblessness was 19.2pc for October, the latest data available. Unemployment reached 13.6pc in Portugal in the final month of 2011.

The emerging economies find significant low hope for any revival in the export market of these countries. Low consumption in their own economies will result to reverse flow of goods to other countries. European manufacturing will scout for emerging economies to dump their products. Europe will be able to find out ways to bailout the debt but it will not find the growth. Its asset qualities will be devalued more in coming days resulting huge NPA on the lap of Euro nation. At the same time Dollar will try and trying very hard to replace Euro. Dollar is now being treated more as a safe heaven for investments rather than Euro. Dollar remains highly popular as the refuge currency of choice. With virtually no yields available with short term Treasuries followed with low yields with medium term to long term Treasuries of US dollar still is the most favored currency and it will continue to be.

My concerns are about the emerging economies. As an economist I will find domestic policy changes in the emerging economies will derive the growth. Globalization is no longer the growth vehicle for the next decade. If today Indian government comes out with radical policy changes, even if it comes out with the Bills which are waiting in the Parliament for approval, Indian economy will find significant growth and the government will be able to reduce its fiscal deficit gap. Well we all know the above the truth but where we fail to identify is the matter of quest. Indian cannot depend on export growth. We need policies to replace which will replace the Indian import market to domestic production. Domestic capacity expansion and more consumer centric polices will boost up growth. Increasing tax rates will only reduce consumption and hence less manufacturing opportunities .Interest rates, Taxes are old mechanism to find growth in Indian economy.

GOLD FREE FROM CURRENCY

2012-01-26T14:05:00.011+05:30

Gold the safe heaven investment avenue and the much debated topic of investment in 2011 still continues its journey in 2012.The objective of this article is to find the probable reasons which will support the Gold price and its sources of demand. Top 3 listed global gold mining companies and its prospective outlook for investments in 2012 has also being provided.

PORTFOLIO REBALACING:

Portfolio rebalancing is being aggressively introduced keeping the global economic turmoil and currency fluctuations. The importance of portfolio rebalancing by index, commodity, and hedge funds has now being introducing a new element of gold in their portfolio. Investors needs less volatile return,persistent growth over a long period and less prune to random currency fluctuation.Chinese investor is buying gold and has no intention to go for a selloff in the medium term. We all know that China has been doing extensively invetsments into gold.China has shifted from currency savings to gold savings resulting increased demand of gold. Currency fluctuation and inflation bubbles has increased the demand of gold and in 2012 its being well expected that demand will remain on the higher side as Euro instability makes investors to shift form currency to Gold savings.

This is one the reason why not only People Bank of China but all the major central banks of the world are doing investments into Gold. A lot of nations are running deficits which are not sustainable in the long run. Doing investments in cross border assets has increased the threat of collateral damages resulting less option for doing investments. Here comes a point where people just don't believe in paper currencies and prefer to invest in gold. The ongoing turmoil of Euro and its rising debt payment schedule which will begin by April to June 2012 will increase the demand of gold as a safe investment avenue.

MONETARY POLICY TO SPOOK PRICES.

Low inflation and slow growth of economy is going to inject liquidity into world economy which will further spook up the demand and the price of gold in 2012.India, China, US and Euro liquidity injection policy actions will increase the demand of gold buying.

The answer is simple gold will rule the world economy despite of its higher prices as all other investments avenues are on the peril of currency fluctuations. Currency fluctuation has being so much volatile that its quite difficult to hold an assets for a long term. Gold is an asset which is free from the currency fluctuations affects in a long term basis. In an recent note its was found that the weaknesses of the rupee against the U.S. dollar has also negatively affected India's demand of gold. The below chart illustrates the affect of gold due to currency fluctuation across the major economies.

The price of gold in India appreciated by 31% since June which is more than three times the price appreciation denominated Japanese yen. In fact China has already taken over India as the world's largest consumer of gold jewellery in the third quarter of 2011. Chinese value of sales of gold in 2011 rose 61% from the previous yea totaling the Rmb of 11.6bn ($1.8bn). One of the unique thing to be observed that all the Quantitative Easing policies failed to keep the world economy and its equity market to fetch the consistent return as compared to Gold investments.

Well the above context was based upon to find the demand and the price increase one can expect in gold but what about the story of gold manufacturing. Global gold mine production increased by 3.2 percent for the year 2011 to approximately 720 tonnes,production contributed to the majority of the output growth, although Mexico and Argentina also exhibited positive production on an annualized basis. Whereas there was an decline in production from Indonesia, Russia and Peru.

GLOBAL GOLD 3 PICKS

Now a quick look at the investment perspective at the best top 4 gold production companies.

Barrick Gold Corp. (TSE: ABX), miner, operates 26 gold mines, in addition to projects in the pipeline across Australia, North America, South America and Africa. According to a report issued by the company last year, it established 139.8 million ounces of proven, probable gold reserves.

Newmont Mining Corporation (TSE:NMC) (NYSE:NEM) has operations around the globe, within eight countries in five continents including North America, South America, Australia, Asia and Africa. It has significant asset hold in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Till 2011 it had proven and probable gold reserves of 91.8 million equity ounces and an aggregate land position of roughly 39,000 square miles. It has received private placement with Eurasian Minerals Inc. (CVE:

AngloGold Ashanti (NYSE:AU) is a South Africa based top producing gold mining company with a total of 21 operations across four continents and ten countries including the U.S., Tanzania, South Africa, Namibia, Mali, Guinea, Ghana, Brazil, Australia and Argentina the company is doing heavy investments into exploration activity and promises to be one of the leaders of the industry globally.

RBI DONT PLAY T20.....

2012-01-24T21:40:00.005+05:30

WHAT IS THE REAL MEANING?

Today RBI went for a CRR cut which was expected but went expecting suddenly for the market. Well Currently RBI has reduced the CRR from 6% to 5.5% which will lead to inflow of Rs.32000cr in to the banks pockets. Now market speculators will turn out the meaning that RBI has injected money for lending into the system. But I am sorry to make an analysis that RBI has injected the money in order to make Banks adjust their Balance sheet against rising NPA. Further this will help them to manage the tier I capital norms of the banks after the implementation of Basel III.

WILL IT BE INFLATION SUPPORT?

In my research find RBI steps of actions towards monetary balance is very much in line with India’s economic growth. I don’t find any reason why RBI should reduce the repo rates and the reverse repo rates. It is very much premature to roll back the repo rates as inflation is still way above the danger zone. Even I find that this CRR might go for spooking up the inflation devil acting as a steroid. Since the thumb rule` of CRR is that when inflation rises CRR is the common weapon used to control inflation. Reduction of CRR will give Rs 32000 cr to banks to lend but they will not lend and further even if it’s being given for lending Indian corporate still finds its high cost of loans. RBI has made one thing very clear that its policies will depend and will be designed depending upon the policy actions required for the Governments.

The present scenario of the economy does not support for repo rate cuts. Since NPA are increasing and that is backed by lack of policy actions from the governments .Government has borrowed too much and this has spooked the system with funds and resulting increase in inflation. Currently the Government of India will borrow Rs 400 billion more than its revised borrowing target of Rs 4.7 trillion in the bond market by March for the current financial year 2011-12.Hence RBI actions regarding repo rates are next to negligible. India needs policies to draw investments and then only repo rates real action can be found. If currently RBI goes for an repo rate reduction then the liquidity will find ways into the existing business environment and not into new projects. Further RBI has reduced the outlook for india’s GDP growth from 7.6% to 7% which eliminates the scope of repo rate cuts in the near future.

POLICY WHAT WE NEED?

If today the government of India comes up with New land Acquisition Bill, DTC, GST, New Companies bill 2011 then repo rates reduction will not be required to find India’s economic growth. Moreover all these new bills will open up investment opportunities, consumption and savings of the economy resulting a boost to RBI policy actions. This will also help RBI to design new money market instruments.

GFCF THE MOST IMPORTANT INDICATOR

Gross Fixed Capital Formation is one of the most important part where the growth of an economy van be calculated. Historically it’s being found that the Gross capital formation (% of GDP) in India was last reported at 34.77 in 2010, according to a World Bank report released in 2011. The Gross capital formation (% of GDP) in India was 36.48 in 2009, according to a World Bank report, published in 2010. The Gross capital formation (% of GDP) in India was reported at 34.52 in 2008, according to the World Bank .Now this new term might sound quite tough. Hence to put it into simple words Gross Capital Formation means (formerly gross domestic investment) consists of outlays on additions to the fixed assets of the economy plus net changes in the level of inventories. Fixed assets include land improvements (fences, ditches, drains, and so on); plant, machinery, and equipment purchases; and the construction of roads, railways, and the like, including schools, offices, hospitals, private residential dwellings, and commercial and industrial buildings. Inventories are stocks of goods.The chart shows the gross capital formation.

RBI DONT PLAY T20 SO DONT EXPECT.

Moreover the recent global turmoil and rupee depreciation needs to tackle only by RBI hence it needs space for managing those aspects of the economy. Moreover RBI needs more time to watch out the flow of liquidity from FDI and FII. In the last 6 months both the investments avenues has dried up due to global uncertainties as a result injection of liquidity into system by RBI has an long way to go. Present market pressure is nothing compared the envisaged possible impacts the economy might face.RBI has to play a long innings and hence T20 expectation should not be made.RBI is not the real market player. If India needs an GDP growth of 8% policy comes first. India needs theory and not mathematics (Repo rates) for GDP growth of 8%.

MY RECENT INTERACTION WITH AN ECONOMIST

In an my recent interaction with one of the company who is into economic research I find that the Senior economist working over there are only working hard on rate policy reasoning and denies policy discussion is an part or role of the economist work. Well with the blessing of this senior economist I find India is took 20 years to dream GDP growth of 8%.I will not name the company but I pity on their thinking.

OIL REFINERIES....OPPORTUNITY

2012-01-22T20:19:00.000+05:30

Global economic turmoil has resulted huge jump in merger and acquisitions. Huge debt, cash strapped operations, no consumer market products, and decline in government support (incentives, subsidies etc) has increased the asset sales across the globe. The objective of this article is to dig out the scope of cheap properties of oil exploration across the globe.

It has been found that after 2008 debacle their is a significant rise in Quality Bad Assets. Now the term itself will sound new but it means that before 2008 the assets were of best quality but financial crunch has converted them into Bad Assets despite of their Best Quality. Among the several industries oil exploration industry is one of them which turned out to be a mouthwatering opportunity for investments.

Sunoco Inc an oil refinery which produces oils around 175,000-barrel-per-day and another refinery at Philadelphia which produces 330,000-barrel-per-day has been shut down due to weak and unacceptable financial performance over the last few quarters. ConocoPhillips another refinery which remained idled with a capacity of production of 185,000-barrel-per-day was also shut down. The prime reason for shut down being of various pressures from product imports, a decline in demand and the cost of regulatory requirements.

In this week we find another refinery plant Hovensa LLC is planning to shut down its refinery and convert it into an oil storage terminal. Weak demand and competition from foreign refinery has compelled to take these actions.

Why Shut Down?
By now you must have understood why these assets are going for an sale tag. But the main reason is global competition which has turned out be a very competitive. Many refineries in the US and Europe are up for sale or are in financial distress. Despite of all efforts refineries in these countries are losing around more than $800 million in the past three years and significant losses continue to mount in coming years. NASDAQ and the Wall Street Journal reported that refining operations at Bakersfield were suspended for at least a month for economic reasons.

Taking a toll in other parts of the economy we find South Africa was recently hit by sporadic fuel shortages caused by the unplanned shut down of fuel refineries. Apart from financial problems the refineries are getting shut due to environmental issues. Moreover shift in the quality of crude oil that refiners have to process. On average, crude oil production is becoming heavier and sourer (containing more sulphur). Heavy, sour crudes are more difficult to process and yield more heavy products, which need additional processing and reducing the competition with other countries. Earlier the share of light products and middle distillates in global oil consumption has risen from 65% in the early 1980s to 80% today. An uncertainty over ROCE in refinery business has eradicated the growth prospects and sustainability of the refinery plants. For the top five gas companies operating in the United States, their profit margin was 6.65% between 2006 and 2010.Abiding the environmental issues has resulted an outflow of $116 billion in their facilities since 1990. Issue like of obtaining the raw product and refining turns out be one of the biggest hurdles. Raw material which is sensitive to international political climates has kept huge pressure on the operating margins.

Recent Deals

This industry remains silent despite of its eye popping M&A. 1322 oil and gas transactions were announced in 2011, an increase of more than 5% when compared to 2010. The aggregate value of oil and gas transactions in the year totaled US$317b. It has found that the numbers of deals are getting increased with a drop in value per M&A. In 2010, there were 76 oil and gas transactions valued in excess of US$1b; in 2011 this figure had declined to 71.Among the several markets the North America, accounting for 562 deals or 43%, remained the most active market in refinery business M&A.

Opportunity

I find a significant opportunity for emerging economies to invest in these oil refineries and turn them into a gold mine. Moreover the demand of ethanol and inclusion of ethanol into the gasoline stream has taken a sizable chunk out of the petroleum market. In a recent note it has been found that Saudi Arabia is doing extensive investments to build refineries in China and Indonesia of around $200 billion Philippine oil refiner to invest in ExxonMobil’s downstream business in Malaysia. Hence Emerging economies PE can find a significant opportunity to do invetsment5s in this industry.

EUROPE DEBT TO EXPLODE

2012-01-22T16:42:00.001+05:30

The objective of this article is to find out the hidden time bomb of Euro zone be which will derail the world economic growth in 2012. Just three weeks of the new year of 2012 and it seems that the Europe is slowly landing to resolve its debt problems. The world is thinking that words of IMF and ECB have resolved the debt problem of the European economy. In fact this has also lead Euro zone to sell its debt and find investors’ appetite for its bonds. Even the recent downgrade by S&P of the nine states of Euro zone has been shrugged off by the Euro zone. All these are with stark contrast to last month of 2011 where majority of the Euro zone was struggling to meet their debt obligations as the cost of managing the debt climbed higher and even the governments of Athens and Rome went for a tailspin.

A quick glance at the debt executed by the Euro zone nations.

• Portuguese successfully sold euro 2.5 billion of its national debt.

• France easily sold euro9.5 billion, or about $12.2 billion, in bonds at interest rates lower than in previous auctions when the country enjoyed AAA ratings

• Spain raised euro6.6 billion ($8.5 billion), far more than its initial target of euro3.5 billion to euro4.5 billion.

Well it depicts that euro was able to find more stable sell of its bonds after the rating made by S&P. Euro zone found comfort in selling of its bonds since ECB has backed or rather has tempted to carry out the buys. In December ECB said that it will lend unlimited amounts of money to stabilize the Euro Zone.

Sudden Appetite of Bonds

In December, the ECB said it would lend banks unlimited amounts of money to stabilize them. Further it also added that it will also lower the interest rate on the loans to 1%, and even extended the maximum term of the loan period from 1 year to 3 years. Well this was enough to tempt the banks to raise funds and invest the same in the bonds and hence making an internal trade profit. Banks borrowed around euro489 billion ($632.6 billion) at 1% interest rates for a period of 3 years. European banks has used the funds to buy bonds at cheap funds from ECB and buying higher yield carrying sovereign bonds, resulting profit for the banks as an recapitalization mechanisms and that is also at the expense of taxpayers expenses.
The Warning.

That’s, why the world is thinking the debt problem of Euro Zone is solved. But practically it cannot be solved even within a decade even. I would like to make a warning note to all my readers that the first half of 2012 will bring crash for the world market and lot of intense time of testing nerves of investors and every one as Europe is about explode its debt burden.

Euro zone will find a debt maturity of around €770bn in the first 6 months of 2012.To add more pain Euro zone banks will find another €520bn of debt coming due by this June. Just five euro zone countries Italy, Spain, Ireland, Portugal and Greece – have around €200bn of debt maturing between now and April. Well clubbing altogether its stands around €1 trillion repayment schedule to explode by June 2012.

The biggest problem is that banks are reluctant to release their original liabilities positions. Euro zone will begging severely to china, IMF and ECB to funds its debt payment. This also raises questions about the Euro zone banks stress Test reports. Further from 2012 all banks have to abide with the Basel III norms and by now we find many banks and think tanks of the world has started raising questions about the mechanism by which the "tier-one" capital ratios have been calculated. It has been found that Euro zone will need around 1 trillion dollars to solve the debt problems and chances of funding are negligible. More over the European banks depends heavily on traditional ways of raising funds which at present is of no use.

I find outflow of funds from emerging economies is about to begin since requirements of funds will be prime battle. More over who ever goes for buyout and any mechanism of funding will result to outflow of dollar from all the risky assets. Well for the time being the world stock market is riding up again. Stock indexes in Britain, France, Germany, Italy and Spain along the Dow Jones industrial average in the United States has climbed back close to their levels from last August. In my research I have found that historically when ever any economy has been downgraded the market reacts opposite to that negativism. When Moody downgraded Japan in November 1998, for example, Japanese shares surged by more than 26% in the subsequent 12 months. When Canada lost its AAA credit rating in 1992, its equities gained 30% in the next year. And since the United States was taken down a notch by S.& P. last August, the S.& P. 500 has gained more than 9%.

Well for now it might be an opportunity of the investors to exit and make over their losses of 2011 to some extent and press the button of exit for 2012 till Europe gives a clear signal. No other technical chart of astronomic algebraic calculation is required to find the direction of world market. Europe alone is the biggest signal. Emerging economies needs to formulate policies internally to derive growth otherwise prolonged slow growth will kill the world economy. More importantly I will request the financial market product designers to design products for the senior citizens since they are going to be the worst affected. I will not be surprised that in 2012 we will find many times World GDP growth to be sliced off further. Well ECB will offer it’s another credit facility slated for 28th Feb 2012.Till then it’s time to shop out and not shop in.

CHINA INVESTMENTS...OPENS SOUTH KOREA.

2012-01-17T14:22:00.000+05:30

China promised to support the North Koreans in the event of a war against South Korea. The Chinese support created a deep division between the Korean communities. It might sound strange from where did this come off. Well it is the story of the China and the Korea war where china supported North Korea to fight against South Korea in the year of 1950. China is amending its old broken relationships with various nations. It is busy in formulating political strategies of erasing the mistakes crept in the history.

Recently Chinese polices for its economic growth have been focused within the Asian economies. China is now building new relationships with South Korea. SEOUL—Sovereign wealth fund Korea Investment Corp has received final order to diversify their savings and investments into the roads of china. They will purchases Chinese Class A shares and bonds. The Korean investments corp has received its Qualified Foreign Institutional Investor license. It is now waiting only for the Chinese authorities to set its investment quota.

The BOK and the Korean National Pension Service are the ones who will get the license to move ahead with an historic investment which will begin sometime in 2012.The prime reason behind such an investment opportunity being opened by China is to stop the East Asian economies from doing investment into dollar related asset classes. China is moving to allow greater foreign investment in its local capital markets, and attracting longer-term investors such as KIC, the BOK and the NPS—the world's fourth-largest pension fund by assets. China is expected to allow all three Korean institutions to start investing in yuan-denominated bonds and stocks. Mark the point no dollar term investments being allowed reveals that China is moving according to the planned game of making yen an trading currency. I have depicted this story many times in my previous articles that China will make Yen another trading currency apart from dollar.

For the time being KIC, which managed roughly $41.5 billion in assets as at end-2011 has been provide the $200 million quota at the start which is according to the rules of being qualified as an QFII. This limit will increase further going ahead. At the same time china is shifting the focus of East Asian economies from doing investments in Europe and US assets which posse and significant threat to these debt laden economies. It seems that china is going to make the recovery process of Europe and US very difficult and challenging.

In my research I have further drilled out that according to the data from State Administration of Foreign Exchange till late December china has allowed $950 million in new investment quotas to QFII license holders since October. This has put the total amount of foreign capital that can be invested in Chinese markets to $21.64 billion. Well china is going steady with its plans of making Yen and trading currency and other economies are also behind the silent support.

NEW FDI CHINA....CHALLENGE INDIA

2011-12-31T14:35:00.000+05:30

INWARD FDI OF CHINA

China economy has always been in to tough policy decisions and decisions which will bring growth for other economies too. In fact china follows the rule of prosperity where I will not grow along but I will grow along the society. In its latest FDI policy China has opened up new gates where flow of investments will come.

China has added sectors which include high-end manufacturing like textiles and machinery, emerging industries that bring new technologies to China, as well as green businesses like battery recycling. Services industries such as auto charging stations, intellectual property rights service and career training will also be welcome. The below image depicts the GDP growth and the FDI growth of China from 2001 to 2006.I provided this old data since to make an clear understanding of the World Economic Boom Period.

This time their has been a turnaround in the policy framework designed by china. China has included rather removed protection cap from many sectors which were earlier were not allowed for FDI investments.

This removing of cap clearly depicts the change in cultural outlook being envisaged by china towards its economic growth. Overseas investment in medical institutions and financial leasing firms has been including in the new FDI policy of China. At the same time china has capped FDI investments in automobile, poly silicon and coal chemical plants due to its over capacity of production. Under the new policy FDI investments has been encouraged in the circular economy, the collection and treatment of waste electronic appliances and electronic products, mechanical and electrical equipment, and batteries.

Further the policy states attraction of FDI in energy-saving and environmental protection, new-generation information technology, biology, high-end equipment manufacturing, new energy, new materials, and new energy vehicles. The new FDI Catalog includes key component parts for new energy vehicles and next-generation internet system equipment based on IPv6, Along these lines, nine service industries have been added to the encouraged category in the new Catalog, including motor vehicle charging stations, venture capital enterprises, intellectual property rights services, marine oil pollution clean-up technical services, vocational skills training, Hence the new FDI policy is an compact and well designed to attract investments which will rule the world in coming decades.

The guidelines of the new FDI policy will come into effect on January 30, 2012. Further foreign capital in the energy sector involving exploration and development of unconventional sources such as shale gas and deep-sea gas hydrates have been deeply focused under the new guideline of FDI. At the same time foreign investors will possibly be encouraged to form joint ventures or to cooperate with Chinese companies to enter into these sectors.

In the side chart we find the historically china FDI utilization efficiency has only grown.

This new policy will also have the same affects as in the history it has created on the developed economies. This new policy in turn has led to continued loss of manufacturing industries and jobs, further weakening the vitality of these economies. From the pages of history we find many instances about the number of increasing unemployment across the globe due to China’s FDI policies. The extremely low Chinese labor costs lures multinationals to do investments away from other Asian and Latin American to low-cost export platforms created by China. FDI flows from the US dropped by 23.05 per cent year-on-year to USD 2.74 billion in November.

China is holding the No.1 position for nine consecutive years. A rising middle class followed with growing incomes, urban migration & increasing market demand are considered to be the main factors which enables China to attract FDI. Despite of the global economic turmoil, inflows into the Chinese economy came at US$175 billion in 2010, up 1% from last year, which was US$7 billion higher than its foreign investment peak in 2008. FDI in China’s services sector showed the fastest growth from January to May this year, increasing 31.3% compared to the same period in 2010.

There is a growing number of studies on the potential Chinese FDI diversion. In a series of papers, Chantasasawat, Fung, Iizaka and Siu (2003, 2004a, 2004b and 2004c), Eichengreen and Tong (2005) and Zhou and Lall (2005) provided econometric evidence concerning the impact of the rise of China on the FDI inflows to East.

China has again lead such an policy where other economies across the world will have to become more competitive to attract FDI. In fact India is the first one to whom the challenge has been thrown and it’s up to the famous political heads of India that how they will deal with the challenge. Currently India surged to the second place, passing the United States. India’s previous FDI peak was achieved in 2008, when it attracted US$43 billion, while last year the number dropped to US$25 billion. Hence the challenge for Indian FDI is now the biggest game. And in order to attract the FDI in India we need policies like Companies Bill, Land Acquisition Bill and DTC are the few which will help India to attract FDI. Special focus needs to be provided to SEZ which is currently reeling under pressure.SEZ is the one of the prime weapons which will help India to attract FDI.

Well China is poised for another round of growth where as developed economies will find some space for growth but the transfer of human capital is biggest requirement of the time.

China GOLD........Repeat History....

2011-12-26T20:57:00.000+05:30

Gold will be back in action with a bang in 2012.Now many of my fellow friends will acclaim that I am opening up an old wine bottle. But the demand will come from many new emerging nations excluding the BRIC nations. China’s gold imports has spooked to 50 percent in October from September. The most shocking growth number is about the import made by china which soared to 4,000% from October of a year ago, to an all-time single-month record high of 85.7 tons. Now my friends will again claim me as lunatic to express that type of growth numbers. Its the real true number.

China is all set to rule the Gold market of the world. China will very soon soon-to-dominate the New York-London gold cartel. Currently, the majority of China gold reserves have been located in the United States and European countries. And this has lead Europe and US to suppress the real price of gold. Infact suppressed the price of gold from rising. Reason behind such an activity is want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Suppressing the price of gold is very beneficial for the U.S. in order to maintain the U.S. dollar’s to rule the world as an international reserve currency. So does this mean china is slowly planning to replace dollar with renminbi. Well china have been planning and working on this from a long term and it can be taken for believe that one fine morning they will do it just like they hold 60% of the U.S treasuries. Chinese imports of gold is about to hit 470-490 tonnes for the full year, up from last year’s 245 tonnes a near-double spike in volume anticipated at the close of 2011.China has spooked massive advertisements of its gold purchase and asking its citizens to convert their savings into gold from paper currency. As a result 1 billion Chinese consider buying gold as a hedge against inflation and to preserve values in a world where currencies can fall.

Gold Sell & Purchase might Begin.

Italy is having the worlds 4th largest reserves of gold at 2,452 tonnes. This is even more than France, and more than twice as much as China. Hence if Italy’s gold has a value of $123 billion enough to cover this year’s $80 billion budget shortfall. Portugal’s $19 billion in bullion is more to cover its $13 billion deficit. France has $122 billion worth of bullion, enough to make a massive dent in its $150 billion deficit. China might be the biggest buyer as it will try its all means to convert and shifts its $3 trillion dollar reserves into gold. At the moment, the richest Western countries, including the United States, Germany, Italy, and the Netherlands, hold between 60% and 80% of their entire reserves in gold. Where the reserve of Gold being held by China is 2%.Now this is not an misprint. Hence china has an fierce mind of competition which will exploit it to buy gold and increase its reserves.

Repeat of History.Get Ready...

In fact the world is going to witness another repeat of the history. When gold changes hands economic power also shifts. Like the one that happened century ago when plenty of that French, German and British gold ended up in the hands of the United States. We will be the part of the next biggest history which will be crated in this century. On the hand the world is set to dig more gold out of the earth. Now if we look into other emerging nations like Tanzania the land of South Africa. The government has requested mining firms in Tanzania to help in the creation of a gold reserve in the country. Now I am not an Financial Astrologer who will predict the Gold price. As an economist I can say only price will be worth by the purchaser hence all eyes on the Buyer.

INDIAN PE FUNDS CONSOLIDATION...BEGINS

2011-12-24T20:43:00.001+05:30

Quick money and quick return has increased the demand of Private Equity and Venture Capitalist to flood opens the gates of investments. Every one is scouting to find quick gains from investments. Investments in those projects where the government regulations will be low followed with less tax and more income generating avenues. Projects are designed accordingly where mouthwatering returns are being planned to attract the bees called Private Equity and Venture capitalist. We all the know the mechanism of how the Private Equity in Indian economy works out. One of the prominent ways of exit is either through Pre IPO exit or through IPO exit.

If we look historically we will get the proof of the demand of private equity and vc funds that had grown through the number of IPOs those came within the past decade. I will give a simple data of the number of IPOs came from 2001 to 2011.In the this below data you will find that from the period of 2004 to 2007 was the period where the Indian primary market was flooded with IPO. Now this is an separate ball game that majority of the IPO have astronomically returns in the initially days and later on hanged up. One of the prominent reasons is the exit of VC, PE and institutional investors. These institutional investors are the native of any other planet. They are the modified version of investors who reap benefits at the cost of retail investors.

But after ruling for an decade its now being witnessed that the market are flooded with VC and PE and now the numbers have grown up so much that we will find them sitting at every corner of the road. I find that there is going to be a huge turn around in their society in the form of mergers and shut down of ventures. In other words consolidation for the industry is about to begin. I find my community that is Cost Accountants have also come up with similar business model providing funding arrangements for projects. Reason quick money can be earned from being an intermediary between the project and the investor. But after ruling for a decade and when we all know that Indian economy is now being acclaimed as an emerging economy why we are going to witness consolidation.

Prime reasons is quick money formula is now available in the news papers which in the previous ten years remained a secret code. Indian economic situation, policy lags, delay is process of execution due to red tape policies and multiple and high level of greed has opened d the gate of consolidation. Current situation of the industry has resulted dead in IPO exit which is the most important return generating form. VC, PE are not finding the desired return and will falter in delivering back the owners of the original fund with the desired return.

In the year of 2006 I find many PE finding easy ways to raise funds now it has become a tough job. Within the next 12-18 months, many PE firms, mostly the newer ones will be scouting to exit from raising funds. In September 2006, PE firm Everstone Capital raised its first $425 million fund in barely 90 days. But it spent a year closing its second $550 million fund in March this year. They find the difficulty not in the slow process of Indian red tape movements alone. Returns a form value based project has also declined backed by stiff competition after 2008 debacle.PE and VC are scouting for lucrative sectors where govt. regulations are less and wealth can be maximized. Most importantly the exit route of PE and VC needs to be changed. With the decline in Indian stock market performance IPO will find its place very hard to find a proper valuation. Buying quality assets have become an fierce game. But if we look globally we are finding more overseas portfolio of VC and PE are looking forward to Indian markets making the deal tough for domestic PE and VC. At home consolidation is about to begin.

AFRICA CALLING

2011-12-05T15:07:00.000+05:30

After independence we will have to stand on our own and rely on our own resources, the unifying force, the cement…which had hitherto been supplied by the United Kingdom Government will be removed, and will have to be replaced by new virtues of our own which must be capable of keeping all the diverse elements of the country together, in mutual trust and harmony and with a common national purpose."

Excerpt taken from Awo, the Autobiography of Chief Obafemi Awolowo of Nigeria.

After the Second World War people in Africa wanted change. Only Egypt, Liberia and Ethiopia were independent at that point. But it was Indian self-rule which triggered the momentum leading to independence. Everywhere the mood was hopeful as people were inspired by the vision of a new society free of European control. The year 1960 saw independence sweep across much of Africa. Fourteen countries ceased to be French colonies, while the Belgian Congo became Zaire and Somalia and Nigeria broke from British control.

After 50 years of Independence African economy is being declared the economy of growth the birth of 3rd generation of Emerging economies. In the last couple of years African has been on the map of every business house across the world. The country of Black where torture and pains were the emblems for the citizens has some thing interesting to fell about. In an a recent research finding it was found that Africa grew faster than East Asia, including Japan. Even IMF expects Africa to grow by 6% this year and nearly 6% in 2012, about the same as Asia. Nothing has changed except the perception of the world looking towards the growth and scare resources which Africa possesses. We all know that Africa is famous for Diamond a mine which is mostly smuggled to Europe and other parts of the world. Africa has felt the air of development and Technology. Technology is fast rooming and bridging the hurdles of poor infrastructure of Africa(which is yet to pick up. According to my research I find that Africa is still struggling with meeting its food supply demand in accordance to its population growth.

The three factors that will contribute in Africa to future increase in food supply are expansion of land under cultivation, irrigation intensive projects, and biotechnological increase in yield. Technology will play the pivotal role in upgrading the agriculture segment. But technology alone will not be sufficient to increase the output of African foods items. . The size of land currently under cultivation in Africa for all agricultural crops is about 76.1 million hectares. The agriculture sector accounts for 35 percent of the continents GDP and corresponds to 40 percent of its exports. About 72 percent of the people live in the rural areas and the sector supplies 70 percent of the employment opportunities We find vast amount of land which is not suitable for agriculture in Africa.

The first responsibility of technology will be to transform the barren land into productive and to stop Desertification. It has been found that Potential land for crop production under rain-fed but not in agricultural use, is more than twice the current harvested land. Hence use of hybrid seeds, modern irrigation facility are all in the dream run until the soil becomes fertile to produce. Hence Africa is being found as an immense potential country for development of agriculture giving a way out to the struggling developed economies to survive the de-growth phase. Irrigations stand to be another hurdle for African economy. Africa needs recycle use of water since the cost associated with developing irrigation infrastructure in Africa will increase the cost of production of agricultural output. Biotechnological food supply increase would not be sustainable in African countries without building systematic multidisciplinary strong institutions. Africa needs proper food storage facilities along with strong R&D built in-house to support the African agricultural growth. Moreover proper system needs to be developed for bridging the gap between the farmer and the end user of agri products. Reduction in the gap will enable improvement of farmer’s quality of living. We must not forget that only growth of companies from exploiting the growth of Africa will lead to development. Africa’s development lies within the citizens of Africa. This simple principal is often ignored and ruled out.

My research finding depicts that Africa will surpass Asian economies in the next decade in terms of agricultural growth. Reasons are simple lack of opportunities of growth in Developed nations and Emerging nations will lead all their resources to find growth in Africa. Cumulative technology transfer will improve the growth speed faster than these countries individual R&D. A simple example to prove my saying is that it has more than 600m mobile-phone users—more than America or Europe. Since roads are generally dreadful, advances in communications, with mobile banking and telephonic agro-info, have been a huge boon. Africa did not spend any amount on R&D in technology but cumulative transfer of technology has lead faster growth of Africa. In the same way I find through my research that Africa will be the next emerging nation propelling faster than Asia. Vocational and other agricultural technical education will further instigate and bring more stable growth in the macro levels of African development.

Africa needs to take out of communal ownership and title handed over to individual farmers so that they can get credit and expand. Developed nations are opening up the trade gates with Africa. America’s African Growth and Opportunity Act, which lowered tariff barriers for many goods, is a good start, but it needs to be widened and copied by other nations.

FDI will find its way to Africa and according to my finding I find 25% of Europe, US, China and India respectively are finding growth avenues and to built their foreign exchange and to diversify the change the too in Africa.

US Real Unemployment@8.6%

2011-12-05T11:21:00.002+05:30

US unemployment came down to 8.6%.This news will bring smile on everyone’s face particularly on the face of speculators of the sock market. A question might come in your mind why I did not take the name of American people who have got job since I don’t trust the data. US political elections are going to be held in less that a year time and hence we will find many surprise numbers supporting to boost the economy and start of borrow and spend. America's employment report is based upon two type of survey reports: one of employer payrolls, which yielded the 120,000 gain; and a separate one of households, according to which employment rose 278,000.

It's the latter survey that's used to determine the unemployment rate. Unemployment drooped as more people are giving up looking for work, there’s the potential for rapid shrinkage in the pool of available employees. The number of people looking for a job fell by 315,000 and the number of people counted as not in the labor force (a different measure) swelled by 487,000 to a record 86.5 million. 120,000 jobs creation is not enough to uplift the growing unemployment in US. US are having an average of about 114,000 jobs a month for the last 6 months. Hence the recent data should be analyzed in a different way to find out the real growth of the US economy. After remaining obsolete for more than 3 years since 2008 most of the work forces of US have lost their skills of jobs.

From the below figures of the chart we can find about the movement in PMI (manufacturing production) which is just plummeting as months progress. Of the emerging world, only India and South Africa are growing and it seems that these tow countries are also going to loose the steam.

What we should Discount?

Hence drop in numbers is not to be taken in a big way. Consumer surplus and increase in manufacturing will be key data to be watched in 1st quarter of 2012 not for the 4th quarter of 2011.Since we all should discount the all the economic numbers of 2011 4th quarter since festive season will spook employment and consumption and manufacturing will also grow. But once the season of festive is over growth will slowdown. What we need to understand is that growth of economy of US should not be seasonal affair. We speculators are turning the economic data’s for a seasonal upside in the market. We economists need to look beyond the seasonal affairs. Further unemployment decrease is not the prime factor to be watched. Wage reduction has increased with the unemployment as demand for jobs are higher. The government reports that real average hourly earnings fell 1.6% from October 2010 to this October. Hence 8.6% unemployment from 9% should not be taken as a big improvement of US economy.

INDIAN INFRASTRUCTURE ...FINANCING MODELS????

2011-12-03T09:38:00.000+05:30

For many years India’s lack of infrastructure has been identified as one of the major constraints on sustaining a high growth rate. India is reeling under the low GDP growth due to improper infrastructure. For example if one Glass Factory plans to supply glasses by container traveling via road to a buyer who is located in an village then the buyer will get broken glasses at his end. Since the roads connecting the inner part of rural areas are still underdeveloped. Road infrastructure is so poor that we find medical facility in rural areas are improper and inadequate.

Since emergency supply remains unreachable due to lack of proper roads. Lack of infrastructure has also resulted many operation s to be localized in some particular states. This is partiality was gained since from time to time majority of Parliament members representing from those particular states. This has resulted too much dependency on particular state resulting imbalances from financial development to society development and finally ending up with ecological development.

But what takes to develop the infrastructure of India. Does its requires new generation of young bloods for reforms or policies for development. It needs land and capital the two prime wheels of any economic development. We all know that the 117-year-old Land Acquisition Bill, 1894 is still ruling India despite of its independence achieved over 65 years. Until the bill gets changed Indian roads and its infrastructure will not grow. But, what about capital? Do India have enough funds to finance its infra development.

One another reason for the gap is that private-sector participation has been lower than expected. All infrastructure projects have an element of risk, but in India structural impediments create additional dangers. The single largest factor in project delays is the difficulty in acquiring land along with regulatory delay has increased the burden of working capital financing and its cost of project. Banks has always played a critical role to Indian infrastructure but with the recent slow down in project execution has deterred them from investment to the sector. The below chart depicts the active participation of banks to infrastructure segment

This has also widened the gap of funding for infrastructure projects. The government can take and design many policies to stimulate capital flows into infrastructure like allowing banks to raise resources through long term bonds exempt from statutory requirements and easing norms for insurance companies and pension funds to investment in infra projects.

Allowing debt funds to buy loans from the banks for projects that have completed construction and entered into commercial operation. To protect investors from default, the funds would be backed by a government guarantee. Apart from this financiers also need to structure their business models to build high return business. NBFC should be allowed to partner up with banks for develop various financial models which will lead to provide financing infrastructure projects in India. Global banks with strong and healthy condition can develop a synergy with Indian banks to provide financing by developing new models for investment. To date debt financing for infrastructure projects has largely been confined to commercial banks. But with the increase in demand of infrastructure projects and opening upon the gates of investments banks became costly source of funding of the projects we need to come up with new models of financing.The below graph is related to ECBs/FCCBs/NBFC and other forms of capital contribution to infrastructure.

This will invite many other investors to invest. Foreign investors can diversify their risk by holding a portfolio of projects. The recent participation of FII’s investment in bond market, Credit Default Swaps & derivatives has been very impressive. The side graph depicts the growth and participation of FII investment in securities.

Where as domestic insurers and pension funds which have stayed away from infrastructure can take advantage of projects’ steady cash flows without being exposed to construction risk or default risk. Life insurance companies, which have access to long term money and should invest in this pace, are quite passive on it as they are averse to taking on project risk.

At the same time this will allow the banks to free up their balance-sheets to lend to new projects. Directly the government can allow banks to provide refinance support to lending by commercial banks by increasing the credit enhancement for infrastructure instruments or through direct investment in hybrid or equity issue by infrastructure companies through an Asset Management Company.

Utilization of the foreign reserve is an excellent way to finance the infrastructure growth of India. Take-out financing model this entails a bank transferring its long-term loans for infrastructure projects to term lending institutions after funding projects in the initial years. The government has also approved a take out financing scheme by the India infrastructure Finance Company (IIFCL) to encourage banks to lend more to the sector. The scheme aims to address the asset-liability mismatches faced by banks in financing long-term projects and because some banks were close to hitting the limit of group and single-entity exposure. The below graphs represents India foreign exchange reserves.

Lending institution should play a pivotal role development infrastructure project financing by offering advisory services. They should play a proactive role in terms of providing strategic analysis, evaluation and financial modeling of projects, tax planning making the project commercially viable.

INDIA'S MISTERY SHOPPERS...NEW EXTERNAL AUDIT MECHANISIM

2011-11-28T15:37:00.000+05:30

Stiff competition on the streets among consumers has leaded every business to sales its products under various non festive promotional offers. So many brands and so many choices has lead consumers to choose from a wide variety of choices whereas companies has to face tough competition on the streets to sale their products. Online shopping has also been introduced in those places where it was not imagined once upon a time. Every company has kept no stone unturned for reaching to the doorstep of consumer in order to increase its sale. Business managers sit long hours to develop and find strategies which will push up their bonuses next year and year on year. We find market survey being conducted by companies to find their product values and consumer preferences and choices from time to time. This has helped companies to cut back on less demanded products and to develop new products matching with the consumer demand.

In an recent note it is being observed and practiced by many companies the application of mystery shopping. Now this stands to be an unique proposition in the product market. Mystery shopping is method through which the business owners evaluate the worth of the products or services offered by them. This shopping proposition is being applied in every consumer enjoyed product segments. From retail stores, cafés, shops, hotels, banks, mobile stores or any other business providing product or services mystery shopping is being adopted.

In Mystery shopping a person who acts as a mystery shopper visits a store, survey the product or service they offer, analyze the quality of services provided, their way of dealing with the customer and provides all this information to the company. It helps the management to identify how the practical process of selling is improving the companies product value and its revenue too. This new mechanism has been applied since even despite of giving non festive offers product sales has not picked up for the respective companies dealing in that product segment.

Infact non festive offers are not the real players behind a product sale. Much of the game responsibility lies on the retail outlets or the departmental store and their managers who deal with them. The companies place a checking system on the employees or the departmental stores behind recommendation of products to the consumers. In most cases its being observed that sales people have less knowledge about an new product which finally leads to drop in sales or hindrance behind the growth of the new born product baby.

The query of the consumers is being left unanswered leading to drop out of the product by the consumer. This is way behind the market survey process. This is one of the most advanced mechanisms which help the company to identify its loops and design its strategies from the traditional process of offers. Companies are shifting their focus from prices sensitivity zone to value zone where special orientation and new product launches knowledge’s are being shared with the sales guys. Detail product features are being shared with retail outlets and departmental store fellows since they are the ones who play the main game behind a product success.

Mystery shopping stands to be one of the effective ways of external control system which is a part of the Auditors professions. Management comes to know from these type of external standards the loopholes in the system. Today the profession of Audit is no longer restricted to internal system. We are equally identifying external audit measures for growth of an business.

INTEREST RATES 2012 ASIAN ECONOMIES

2011-11-26T16:41:00.000+05:30

The world is facing the tremors of financial time bombs which are getting blasted from time to time. Europe has covered every country, states, town’s news papers and, TV channels and other media resources left on the globe with their ongoing crisis. Economists around the world are on the debate that does the world is coming to an end in 2012 through the economic disasters or will continue its fragile growth. I have no bets placed on this topic since I am not yet matured enough to comment on this topic. But all I can say is that till December 2012 we have to live and my job role is to write and depict to all of you the path till dead line of 2012.

We are almost come to the end of 2011 with one month left to celebrate Happy New Year. World has witnessed interest imbalances and the student of financial end economic subjects got live examples to understand how interest rates at Low end and Hind end affects every nation. We saw developed nations kept their interest rates to Zero with various strategies to grow inflation. Whereas Emerging economies witnessed the heat of Inflation rays and high interest rate cost. Interest rates and inflation has turned out to be the main problem of every economy. Western economies wanted to have inflation numbers to grow whereas as countries like India & china took measures to cut off inflation.

Interest Rates Asian Economies Excluding India & China Graph

In between all these the currency war also jumped up with yen getting depreciated against dollar. Indian also witnessed the same problem of depreciation against dollar. Fiscal measures of cooling inflation have spooked currency war. We have seen every economy in emerging nations has increased their interest rates at the beginning of 2011 to cool off inflation devil. Now when the slow down is affecting growth engines of the economy interest rates are coming down. Thailand’s Q3 GDP data show that the economy was struggling even before the flood situation worsened in late October. Thailand’s central bank will opt to cut its policy rate next week. Other central banks, including in Malaysia and Singapore, are also likely to loosen soon. It is expected that the Monetary Authority of Singapore (MAS) will loosen its policy settings in April. Philippines is also going to cut interest rates. While the big dragon China is also in the wings to cut down its interest rates since its economic growth has slowed. In the below image I have depicted only the South east Asian Economies since India and China are often read. We need to dig further to find the individual rates of inflation and interest rates which will reflect the whole economic condition of emerging economies.

Inflation Graph

Commodity prices remained on the higher side backed by global uncertainties of natural calamities. The recent flood situation in Thailand has erupted serious problems for the steel sector. The bulk commodity, the raw material for steel and one of the most important global natural resources markets IRON ORE, has leapt 27% in three weeks. Thailand is the largest supplier of the raw material and due to its flood the mines have been shut and in many cases the production has been slashed by beyond 50%. At the same time steel production and other linked products like automobile and others have also slashed their production.

Japanese steelmakers in particular have started shutting down some production. For example, Nippon Steel, Japan’s largest steelmaker, last week reduced its guidance for steel production to 15.25m tones for the October-March period, down 6 per cent from last year. This has also created markets for the greedy market players to hike prices internationally and take opportunity of the time. As metal remain one of the prime contributors to the emerging economies GDP growth, hence we wait for more down turn in inflation rates in the emerging economies and also interest rates are going to climb down. The bugle of interest rates to climb down has already blown. In 2012 we will find growth from low interest rates as GDP decline has started affected growth emerging economies. We need to find what developed nations do regarding inflation.

Where the MONEY & RISK Flows?

2011-11-26T12:47:00.000+05:30

Their was a time when diversification was the prime strategy to alleviate risk. Diversification now stands to be safest bet for investors and a worst game for the financial market players. Diversification has resulted loss in pooling of funds for one single particular segment of financial products. Earlier Stock market was the alone place where all the funds used to get invested. Later on it shifted to fixed deposit offered by banks and by corporate. After this the era of Mutual funds came up where the book of diversification got released. From their journey went to other financial products with the theme of diversification. Distribution of risk is the bottom line of diversification. Rather than placing all the eggs in one basket distribution of the eggs in different basket is the main line of investments in financial markets in today’s world.

Today we have various types of financial avenues through which pone can do his investment planning’s. When mutual funds came into the streets of financial investments diversification was taught to the investors. It was made in order to increase the awareness among investors that through diversification risk can be mitigated and investors can get healthy return over the time.

In a recent study it has been found that today investors are moving away (in fact moved away) from direct equity investment. We find investment in Gold ETF which got an welcome fund inflow. The assets of gold exchange-traded funds in India, the world's largest consumer of the yellow metal, surged nearly three times at the end of October from a year earlier due to strong investment demand and rising prices.

Total assets of gold ETFs jumped to 90.90 billion rupees ($1.8 billion) as at Oct. 31 from 30.97 billion rupees a year earlier, showed data from the Association of Mutual Funds in India. In term of return we find in the one year time frame, all the Gold ETFs schemes have generated a return in the range of 32.62% to 33.76%..With unexpected fluctuations in the market, investors are always keen to park their portfolios in safe havens. Hence, Gold ETFs turn out to be a good investment option for investors to hedge their assets against the uncertain global market scenario. Where as at the end of October, spot gold prices in India were up about 38% (Return from investment in 1 year) at Rs.27,350 per 10 grams from Rs19,840 /10 grams last year.

Small savings has plunged by 66% where as insurance premiums by 15% in volume terms. Diversification of funds has resulted less flow of capital towards equity market. Today we find so many options neither of doing investments that no single product is able to have a monopolistic affects neither on the investors nor of that product itself. But there is one area where investors are still not well educated that is related to Risk management in financial investments. High inflation has compelled investors of various ages to go beyond the danger lines of risk. Over leveraged deals have been executed and still being continued.

Inflation has forced senior citizens to go for high levels of equity investments which is quite opposite of the principal of risk management in investment. Investment in equity should be based upon the age level of an individual. If some one age is 30 then the thumb rule of investment will be 30% in debt and 70% (30 age-100) should be in equity. But with the rising inflation making living cost to go up by many times has forced senior citizens of the age of 60 and also other within the age of 45-55 to do 100% investment in equity. Small savings schemes have failed to beat the hit of inflation over the returns being generated by them. Living till the age of 60 will be very soon a burden if proper financial planning and risk mitigation and management in early ages of life is not being adopted. For this we need quality financial planners and advisors on the streets. Unfortunately what we get now is simply Agents or advisors who are blood hound dogs. SEBI very recently is going to change the qualification for becoming financial advisors & planners. Hence no fools can become advisors for the sake of commission.

Diversification has made every financial product to be competitive and become oligopolistic rather than becoming monopolistic. We are yet to see how the new breed of financial advisors will educate investors for risk mitigation and management.

In my next article I will depict the story of Option strategies for doing Investments.

West Bengal Education needs a Relook.

2011-11-26T09:33:00.001+05:30

It’s a welcome approach by the new West Bengal government to bring a sea change in the state education system after stained marks of exam paper leak out and it quality of education of West Bengal during the era of the old government. After a long time the West Bengal is making radical changes in its education system. Its new policies of educational development brought in the state will be acting as a boost to the youth of West Bengal. But their have been couple of places where the new policy seems to be failing while making a comparison with regard to quality.

I have some couple of reading which will depict that the state students will become less competitive in coming years when compared with other states.

Lottery system of admission is not at all a good initiative. Students should be asked to sit for an preliminary exam to so that the students don’t face any problem while catching up with the education at his own class. If all the students get admission on the basis of lottery then many good quality students may not get the chance of admission in quality schools. West Bengal government should schedule marks to which every school will have to admit students based upon the merit of the students. If say a student fails to get admission due to marks schedule then he will get chance from another school. Moreover if the a common exam system is being made then if a student say Mr. A gets admission test in School XYZ and fails to get admission in that school the same candidate can use the same exam mark sheet for other school. Hence making a uniform exam system for the students. Over here I am not raising any matter related to cast, political party or any such issue. Now the examination being taken by School XYZ will be same and at a fixed duration and at a fixed question (same question just like Common test).This will result that students will not have to read and prepare for multiple schools. One exam and one result & acceptance by any school depending upon the marks schedule. The marks schedule will be provided and graded by the West Bengal Education system. This modification of the policy is only for the quality of education.

Another place where the West Bengal Education new policy will fail in terms of quality is No pass No fail. Where it seems good but if students fail to achieve a certain threshold marks limit then education will be of no use and we will block the future of West Bengal. This will result to less competitiveness of students compared to other states. Students will face tough situations since they will take this for granted that even if I Fail I will get promoted to next class.

Conversion of marking system from grade to marks is another place where I find students will face tough times. In fact I can for see that students suicide rates will pick up in West Bengal through its new policy initiatives. We find students committing suicide in many states due to pressure of marks and intensive pressure of competitiveness in marks. Hence conversion of marks system of West Bengal from Grade to marks will spook problems for the West Bengal.

I find the above area needs to have a relook since we are not going to make frequent changes in the West Bengal Education system in coming days. West Bengal should focus for education with quality and as well as for every one. What the new policy suggests is lack of quality generation in coming days resulting students from West Bengal to be less competitive. The ministers of West Bengal and Shri.Mamta Banerjee needs to have re-look towards the ‘New Education’ policy of West Bengal. Policies should be designed keep the most worst to happen in future in mind.

Quality of Syllabus should be focused so that the students become more competitive from the initial days. Now quality doesn’t means here too much syllabus and too many books. Education has turned to be a business and also a tough challenge for the students. Shri.Mamta Banerjee should keep in mind that every policy should lead to quality improvement and not just a revolution.

Technology and Production Series1

2011-11-26T08:08:00.000+05:30

The primitive old two prime factors of production (labor and nature) have taken a loud change with the blessings of technology.

Modernization of the industry was made to increase the productivity. Productivity not only of the quantity being produced but quality of product & labor force. But the prime reason for modernization and introduction of technology was to improve the quality of human labor has just turned opposite for the intended purpose. Standing in front of 2012 and starring back to the world it can be well seen that neither the problems of production was solved neither human labor quality has improved. Quality of products has improved by wide height backed by extensive use of upgraded technology applied and improved day after day. But the intended purpose for the application of technology for human labor improvement has ditoriated.

We have replaced heavy machines with chips and those chaps are cheaper that you don’t count while throwing them away instantly. Chips have replaced human labor force and also reduced the quality. Technology has now replaced the thought of doing production with less manpower or no human labor. Industrial revolution has forgotten the prime economic theory that is to improve the quality of production and society (which is the producer and consumer) should benefit and upgrade the human labor.

Economic situation of any country cannot grow without the growth of human labor and society. Technology up gradation has violated the rules of nature and now we are counting the punishment. This has happened due to conceiving the principle that Technology is the replacement of human labor. Technology will reduce manpower requirement and will enhance the productivity and process of production. My question stands that did Technology every tried to keep humans as the first person for the development.

I am not claiming that technology up gradation is bad and against mankind but its innovations have rules out the thought of human labor resulting growth of unemployment across the world. I am not discussing any thing related to any specific country I am talking on the global front. Did we ever thought that every day unemployment is increasing and politicians and industrialist all are finding hard to absorb the increasing manpower as well as absorbing the replaced manpower. What we will keep for the 3rd generation in this earth.

Technology was able to replace human man power due to treating the latter as an income generating force and not as a capital. Now a question will come how labor can be income and capital. Income is the product being generated and used from rigorous cycling and capital is a preserved and applied with cautious planning. I am not against of Technology. What I mean to express here that technology should be used to increase the productivity of every aspect of manufacturing and not to eliminate the main factors of production. Chips have replaced place of storage and has increased the speed of manufacturing. If any one ask what is the size of knowledge it might sound like a Lunatic question. Knowledge cannot be measured. Technology has replaced this thought line. Knowledge has taken the form of Chips resulting minuscule size of knowledge.

Today we are all scouting for coal and oil blocks. In fact we have been doing this and consuming too for the past 2 centuries. Energy demand is growing 3 times more than the birth of single child on the earth every moment. So we the increase in demand we are in quest of coal and oil reserves under the earth. Do we ever gave any thought that due to geographic reasons if all the coal and oil blocks come to an end suddenly then how we will run our earth. No need to think as long as we get. We are using these blocks of oil and coal as an income and not as a capital.

Technology has taught us that treat nature as an income and not as a capital. You exploit nature and make golden goose but one time the goose will not fetch any price since no one will be their to buy them. We must understand that the recent huge crisis of Unemployment being faced by the world is just in the initial days of the biggest crisis waiting to come. It may come soon may be in the next decade but its is bound to come. We need to solve the problem of manufacturing. Technology has made us believed that the problems of manufacturing has been resolved but it has just began the journey of end of nature.

China the Question of Necessity and Not Choices.

2011-11-01T14:18:00.000+05:30

All set to go with the EFSF proposal of surviving the Euro banks and economy. But the biggest question within the proposal is who will buy the bonds and how the process will be executed. Europe need bond buyers and its domestic natives don’t have money to buy them hence its needs global buyers. Russia, Brazil and India are against purchasing ESFS bonds. Hence these countries have washed their hands from any burden of buying the bonds.

Japan has made promise of buying the bonds of EFSF giving relief to Klaus Regling, head of the European Financial Stability Facility. Japan till date has purchased around 20% of the debt issued by the continent's bailout fund. China is one of the best friends of Europe in terms of investments. The depth of the friendship is so strong that Europe will issue bonds in Chinese currency. China will invest in EFSF bond buying since china is an leading exporter of Europe and its recent slow down of economic growth will force china to head for investments making rooms for its own shipments.

Its not a Choice but Necessity

Persistent turmoil in US and Europe has slowed the economic growth engine of china. The country's exports grew 17.1 percent year-on-year (all figures on a YoY basis unless otherwise specified) in September, easing significantly from the 24.5 percent growth in August and 20.4 percent in July. In the first nine months, exports to the US rose 14.7 percent, down from 15.1 percent in the first eight months, while exports to the European Union grew 17.4 percent after rising 18.5 percent in the first eight months.

At home China is facing slowdown from domestic demand end. Manufacturing schedules and new plants are getting slowed up in China due to fall in export. This is very much visible form the import segment where it is found that imports of mechanical and electrical products and high-tech products also experienced some growth deceleration, from 18.9 percent and 16 percent in the first half of the year to 16.3 percent and 13.7 percent in the first nine months.

In order to keep the new factory orders to increase china needs to keep European economy alive and for that it needs to invest in EFSF bonds. China has already holds one-third of its total foreign currency reserves in euros. Further the recent turmoil situation of Europe will enable china to expand its investment in Southern and Central Europe. At the same time Europe will be looking for a healthy export market from China under the tag Made in Europe.

Europe is looking for cooperation on issues such as business licensing and legal transparency from china in order to promote and expand its Made in Europe goods. To me its stands out to be the best deal the two nations can work upon since Dollar and US economy both will be under pressure from the Chinese and Euro relationship. China will scout for infrastructure and transportation projects in Europe through the bond purchase avenue resulting economic growth for the former economy. Moreover Germany remains the heart of China in whole Europe in terms of export.

Last but not the least the success of the Cannes meeting and the forthcoming summit of Europe and China will depend on whether EU will be able to keep its promises made in Brussels recently. Moreover china needs the backup hand of euro for making Renminbi the trading currency in the near future. At the same time one should bear in mind that China alone will not be the savior of Europe crisis. The whole in the ;pocket is so deep that China will not take so much risks in name of diversifications of its huge foreign exchange reserves around &3.2 trillion.

EUROPEAN BANKS STILL NEEDS RESCUE.....

2011-11-01T10:45:00.000+05:30

Shock Absorber to begin:
World market is happy with the recent funding mechanisms declared and agreed for the troubled European economies. Banks have been asked to absorb 50% of the pains of trouble assets. Another part of the funding will be provided by EFSF which will create a set of special-purpose vehicles financed by other investors, including sovereign-wealth funds & funds being raised via bonds. Together, these schemes are supposed to extend the value of the EFSF to €1 trillion ($1.4 trillion) or more. But this might look like an easy way out but in real terms it’s a tough game and more of expectation rather than granted game to win ahead

EFSF is betting on big game since it’s predict that banks will be free enough to dispose their assets and abide the road map of the rescue plan. ESFS depends partly on France for its rating as France finances the rescue fund and any rating below AAA of France will damage the EFSF ratings too making its bond programme to face stiff difficulties. The EFSF will issue bonds which will be backed by the credit ratings of the 17-member nations of the euro zone hence bonds credit worthiness will depend on these nations fragile credit ratings.

Who buys At what?

Selling the assets will be tough for banks as supply of assets are more and purchasers will go for optimum level of bargaining. Troubled banks across Europe have already started sell of to meet earlier regulatory requirements and funding issues. Franco-Belgian bank Dexia SA recently sold its Belgian unit to the country's government for EUR4 billion, is selling its Turkish unit DenizBank. Societe Generale SA and French rival BNP Paribas SA are both looking to sell their large aviation-financing businesses, and U.K. banks Royal Bank of Scotland Group and Lloyds Banking Group PLC are continuing to sell both non-core assets and non-performing loan portfolios, including packages of real-estate, aviation and shipping loans. So many assets are stock piled for disposition and buyers are aggressively bargaining to buy them out.

Banks are getting value for its assets around 50% to 70% of its original value due to extensive bargaining. Asian banks are already keeping an eagle eye on non-central assets being sold by European banks--for example, South Korean government-owned KDB Financial Group is in talks to buy HSBC Holdings PLC's Korean retail business, and Australia's QBE Insurance Group Ltd. and Japanese insurer MSIG are among potential buyers of the bank's Asia-based general insurance businesses.

No Lending No Growth

Moreover the banks have decided that they will eliminate dividends, retention of earnings & reductions in loans. But all these measures will fail miserably since few of the banks are on profitable ladders hence ruling out the factor of dividends and retained earnings. Reduction of loans is going to create double impact less support to GDP growth via loans and secondly banks don’t have enough position in their balance sheet extend loans further. Along with this we should be clear to understand that GDP growth of Europe will be less and consumption will take a major hit affecting US, India and other Asian economies.

Focus lies at 9%

Moreover the banks have been asked to maintain that by the end of June 2012, banks are expected to establish a core-capital ratio of 9%. Banks are already focusing on meeting the limit of 9% rather than focusing on how to deal with the 50% absorption of debt pile. Implementation of Basel III norms will create further pressure on the lending to the European economy EU leaders already are pressing banks to restrain payments to employees and shareholders until they meet the capital target. Well this will further accelerate the slow down process of the European economy since banks will be lending Zero to the economy resulting negative growth for Europe. Hence we should not expect any numbers of growths from Europe. And even if we get any number it should be taken for cooked numbers derived from political amour. There is no relief from pains only consolation and regret is yet to begin. What every one is trying and dreaming to do is that wipe out all the pains and start playing the old game in anew fashion. Borrow and live without knowing who pays.

EUROPEAN BANKS THE REPEAT OF HISTORY.

2011-10-27T10:18:00.001+05:30

By the time this article is being read by you the European deal makers will be meeting another obstacle in reducing the debt pains of Euro. In the last meeting it was agreed that the banks of Europe having exposure to the ballooning debt of Euro nations will be required to cut of 21% of its debts from the Balance sheet of the banks. But the real fact was kept hidden that the hole in the pocket was beyond 21% and even 70% cut consumed by the banks from its internal sources will not be sufficient.

Banks in France, Greece, Belgium and Germany are the most exposed to Greek sovereign debt. If Greece suddenly defaults on its debt, investors will demand their deposits from major European banks all at once. Since many of these banks are undercapitalized, they could run out of cash and declare bankruptcy -- prompting investors to cash their deposits at other banks at the same time, causing borrowing rates to spike and spurring more bank bankruptcies. Hence the conclusion is this that Euro banks are on the verge of bankruptcies and Lehman Brothers is on the way of repeating its history.

Europe accounts for about one-fifth of global economic output hence the world economy is just poised for the biggest recession phase to come up. Moreover the already passed austerity measures have created ripple affects for not only Europe but for also for the world economy. In response to budget cuts, the Greek unemployment rate has spiked to 16.5%, and Greece's deficit has grown 15% as a deeper-than-expected recession.

The biggest fall is about to begin:

Moreover it has fewer avenues for revenue collection and balances the payment structures and its economic growth wheel. Moreover many of the banks of Europe are undercapitalized and any further cut of debt around 60% to 70% will force many banks to open the gates of bankruptcies. After the Greek banks, the hardest hit would be those from France and the 11 German banks with stakes in the Europe. The below list will make you very clear that the type of crisis Europe will face the dept of banking crisis waiting in the sidelines to propel up. The list clear depicts the original stories much ahead of what is being cooked and presented to the world financial forums.

Without new development, without new jobs, without growth, the Greek economy will keep going down. All is needed to focus on new areas of growth rather than cutting and slashing budget and debts figures. Revenue earning should be one of the prime focus. Tax evasion needs to looped since its Greece alone loses as much as $30 billion per year to tax evasion. Just imagine what will be the figure the entire European economy in tax evasion.The biggest threat is the fall of the European banks and how they will be saved so that dooms day doesnt becomes real day.

Last Chance Mr.Obama……

2011-09-03T11:24:00.000+05:30

When I was reading in class 7 in my moral science class I read a story where Zero became the hero. After so many years again zero in real life has become hero. Zero employment is the figure that stands for the U.S. economy. Zero is also the hero even the interest rate of US banking system. Next Thursday Mr.Obama will get his last chance before the presidential election November 2012 to revive and bring faith into his supporters. This is his last chance.

For the world US unemployment stands at 9.1%-a simple number but for the US economy its stands out 14million people sitting at home. In fact the number is more reduced so that the world can sleep peacefully and speculators could carry on the show. Mr. Obama stayed silent after the job numbers came up. For the man Republicans quickly dubbed “President Zero. Its well clear that US is going to face and fight one of the toughest election any American has ever fought. Mr.Obama has made host of new initiatives like clean energy, tougher regulations, industrial policy and higher taxes on the rich. But he failed in implementation. One of his prominent initiatives which failed to attract and build the economic growth of US is the clean energy segment.

According to me US can find its growth in clean energy and can really build a strong economy but a vision alone cannot win. Recently one of the California-based solar power manufacturers Solyndra Inc which received $535-million (U.S.) loan guarantee under Mr. Obama’s 2009 stimulus package filed for bankruptcy.1100 workers ADDS the unemployment numbers. Mr. Obama said in a 2010 speech at Solyndra’s Fremont, Calif. plant. “The future is here.” Those words have come back to haunt the President. In other words republican are haunting the Mr.Obama. Republicans on the House of Representatives energy committee have started investigations to find out whether White House representatives have any connection with Solyndra Inc.

Now it’s well clear that US economy is going to face tough days not only on growth fronts but also on the political maps. By the time Mr.Obama comes up with his last testimonies for job market he is already accused of wasting time and taxpayer money. So the new policy is already discounted that it will hardly bring any growth in the Next one year. In simple mathematics what could not be achieved in 3 years cannot be achieved in 1 year in fact for such fragile economic position.

US should stop the R&D on its economy. They are again betting on the housing market which will never revive neither it can run the US economy through the 21st century. America doesn’t dream any more .If you formulate policies you need to make people believe and make them act on those visions to become realistic. His speech on Next Thursday will make Dow Jones rise by another 500 points but where the growth lies is not even know to the God. Well next weeks announcements will spook the investor’s sentiments and speculators gets more time to speculate and create bubbles.

EUROPE….CAB DRIVER

2011-08-27T18:37:00.002+05:30

Last week I went to a part of a European country where I found the lifestyle being lived over their after 2008.I remember that in 2009 January I came here and after that I am back again exactly after 2 and half years later. I wanted to travel to conference on Last week and hence I took a cab to travel around 80 km for attaining the conference. While travelling on the way I was having words with the cab driver and form their I am conveying the story prevailing over their. This story is hardly being covered by any media or print publication since stories of life are only heard and less recorded.

5 years earlier the cab driver was not cab driver. He was working and was drawing health amount to meet his expenses. He had lover who later on turned to be his wife. His wives also used to work in a company and were married very happily. They bought an residential apartment at 300000 euros and met the expenditures very easily. In other words life was really rocking for this 29 years old chap. The apartment was quite big and big enough to have the 3 children's under one roof with couples enjoying their happily married life. What a person can expect from his life other than having a peaceful life with a peaceful family. According to me it was a one of the best in fact ideal family in Europe.

Life changed dramatically within last one year. Wife lost her jobs and stayed at home. She is buys taking care of the children's. The residential apartment which he brought at 300000 euros is now juts 120000 euros and not a worth to live any more as all the residential property prices of that place has come to half. Banks have already asked to clear the payments and he is only having half the price to pay of the present value. He himself is struggling to run the medical expenses and other stuffs and whispers in his own eras how he will manage later on once the government goes for abolishment of the taxes on medical expenses and other stuffs. He calls himself I am on the way to become lunatic.

He cries often and curses himself for getting married. More he curses for having the twin's child and the other one so early. He cries for his good old happy days. The country of where I am narrating this story stands with this note that if you have lost your job you become cab driver. Now the city has too many cab drivers and less to travel. I requested the banks that I can't pay but all my words went in vain. He cries and only weeps with thousand of people across Europe.

What the hell you will do with knowing the name of state. It's a place on the world that's enough. Oh before I leave I forget to tell the identity of the cab driver. He was financial banker with whom I attained my last conference 2 and half years ago. No need of name since no real life stories comes to media for publication. I remembered my old days along with my cab driver.

the real story of the real growth of the European economy.I hope my story needs no furtehr analysis of the pains and the crsis being lived by the people of the europe.This is only one story their are thousands and thousands like this more painful and more torchruing.Who covers them what speculators has to say and what the government can say in Europe and US.Is this economic growth or growth of END OF THE WORLD.

MASSIVE DEATH ...GIFTED BY SPECULATORS

2011-08-26T22:10:00.000+05:30

Mr. Ben S. Bernanke declares......

It’s a big day for Federal Reserve Chairman Ben S. Bernanke. In a much-anticipated speech in Jackson Hole, Wyoming the world expects that the US FED will come up with another round of QE3. The main hope of the world is that quantitative easing 3 Fed would either buy more government bonds or shift existing holdings toward longer-term securities.

It has been found that any Quantitative easing is supposed to help the economy three ways:

By weakening the currency (dollar), it makes. exports more competitive (U.S)
By lowering interest rates,
It boosts the housing market and allows owners to cut mortgage payments or borrow more; and by pushing investors into riskier assets such as stocks,
It prompts a rise in the stock market that puts consumers in a mood to spend more.

But I am very sorry to say hat even if Mr. Ben S. Bernanke declares QE3 there is negligible chances that it will see the daylight of the world. We have bailout that US economy is no longer having a monopolistic economy of Mr.Obama. Its belong to Republicans too where decision making is simply not tough but its WAR. Hence the probability of declaring cheap money on the streets is far away despite of having announcement from the FED chief. Even if the cheap money is being floated on the streets, investors will find other avenues of investments just like the previous utilization of QE1 and QE2.

Investments will find its way into commodities as international prices remain on the higher side, with more savings and less consumption as exploitation of Borrowed Spending is now a threat for every one.

The biggest question that’s stands in front of the world economy is that:

Does the Fed really want exploit borrowing and consumption and take more risk when they’re still struggling with too much debt?

And does the Fed really want to keep older Americans under punishment by keeping yielding close to zero for two years since they depend on safe, fixed-income investments . US economy needs policies to create jobs and no cheap money. Since cheap money will further pump the bubble of commodity prices and making inflation unbearable for emerging and other nations. Various financial assets will soar like any thing along with GOLD making new historic highs since dollar valuations will decline with QE3.

WHAT IS BEING AWAITED......

The World economy and its speculators are eagerly awaiting and already I the process of spooking stories that another flood of cheap moneys will sail US economy out of the woods of recession. This time its not going to be so easy game for the world economy. Short term speculations will kill the world markets more in the coming weeks and by the time my readers read the article the action might have been acted. Borrowing and Lending are no longer easy. Indian markets along with other Asian markets might be ready for another collapse which is being disguised by the market speculators.

US Real Growth Wheels.

2011-08-16T11:34:00.000+05:30

What a Performance:

Companies across the United States have a record amount of cash that they have accumulated since the recession ended. They have increased their cash reserves every quarter for more than two years, and businesses in the S&P 500 index had a total of $963.3 billion at the end of March, according to the most recent data from Standard & Poor's. The growing cash hoard has been the result of stronger profits.

Companies have kept costs low by being slow to hire. Revenue, meanwhile, is growing, particularly from overseas customers. For the 460 companies in the S&P 500 that have reported second-quarter results, total earnings are up 12 percent from a year ago. Hence cost cutting measures have resulted profitability of US manufacturing. It’s well clear that US corporate are not inclined to hire manpower and also not inclined to increase productivity. Keeping all these factors how US economy expects that its unemployment rates will come down to below 9% when profitability growth of 12% for the 2nd quarter of US economy is derived on the wheel of less hiring and increased job cuts. The profitability earned via these routes is being deployed to investments avenues other than the real investments which will bring growth to the ailing US economy.

Game Awaited by Analysts:

At the same time US is expected to recover a little bit but that should not be taken that the US economy is growing and its back to pre recession levels. US economy doesn’t need any easy money to be flooded on the streets. They needs job creation. They need money to be generated and flowed from one to another and not getting it accumulated at one corner. They need to have circulation of funds which will finally lead to economic growth and will bring the wheel of US economy to move.

Wall Street Analyst is waiting for the following cues which will again help them to speculate the number games. Slow growth of US economy leads to drop in crude prices. Lower crude prices leads to more savings and less consumption expenditure. Hence consumption numbers will grow in coming weeks hence analysts will use this map as a growth picture. This is not the original economic growth mechanisms. Commodity prices will also come down resulting more savings and more dreaming of consumption. Lower oil prices will also help businesses at every level from manufacturers to transportation companies to electric utilities. But this savings will remain in the pockets and will not be utilized for capacity expansion neither for reduction of unemployment numbers. But yes my dear Wall Street analyst will be able to cook the game of numbers and scale Dow Jones to 12000 levels. Key commodities, such as copper, aluminum, cotton, wheat, corn, soybeans, oats and rye, has fallen; hence more savings in the hands of US consumers and exploitation of expenditure will be spooked so that consumption picks up.

The below image reflects the Exploitation of Borrow and Consume:

But over all these positives speculations one prime thing have been missed off that is the mind set of the US consumers,. The recent doldrums activity of US economy has shaken the faith of the US citizens .This will lead further to less consumption. And the old policy of US economy that is Borrow and Consume is no longer going to work for the growth of the US economy.

Once upon a time in US Economy:

Manufacturing has always been the bedrock of American economic might. Thirty years ago 20 million Americans worked in the sector. Today only 12 million do, and that number is falling by 50,000 a month. As manufacturing has declined, its place has been taken by new ''knowledge'' industries such as finance and IT. But these industries do not create the vast numbers of well-paid jobs that once provided the bedrock of American society. Instead they provide very high paying jobs for relatively few people. This produces the second big long-term change in America's economy - the stagnation in average incomes. US is loosing I term of technical know-how and knowledge. Their quality has dropped and the proof is that China gas emerged as a leader. One cannot blame China if their person has become more knowledgeable and more inclined towards development. US have died due its ego of being the ruler of the world economy. It never thought of the ways of how to repay back the borrowings. While I am writing there are series of questions coming into the mind of me and also of my readers.

• Can America's post-industrial knowledge economy support its global power?

• Can it create millions of well-paid jobs to replace those lost in manufacturing?

• How can the US maintain a high-wage economy without rebuilding manufacturing?

The below image reflect the Industrial production of US economy which is very much clear that growth was hardly striking in the past decade.

WHERE THE SHOE PINCHES?

But knowledge is free hence one cannot be stooped from procuring the know-how and building world class genius. They only way US can rebuild US manufacturing would be to drive American wages down to the point that they meet Chinese wages as they rise. Man-power resources need to be utilized efficiently by US in order to compete with the emerging nations. What other nations like India China are having is that they are having a huge uninterrupted flow of talents and qualified young manpower. US are lagging very much behind this and no monetary system can fill up this gap of the US economy. US manufacturing has shifted to China taking the advantage of low cost of production but did UD took its own manpower and transplanted them to China .no never. It never happened that way otherwise US unemployment should not have been a nightmare of 9% above. Today US have raised the voice over the valuation of the Yen over the dollar saying yen is manipulating currency. But did any one calculate the dollar over valuation over the yen. US needs to improve its quality of manpower. The door of globalization has increased the competition and its no longer feasible for US economy to dream that’s its manpower is undefeatable.What US needs is to competet and rebuild its manpower quality otherwise it will be too late to amend any thing for US economy.

COMING NUMBERS OF US AND EURO ECONOMIES.

2011-08-15T13:52:00.000+05:30

Bad days for US Treasuries

$1.6 trillion US treasuries are being held by China alone making the world’s leader in holding the neck of UD dollar. But after the rating of US economy the treasuries have taken a set back in its value. Some of the recent facts findings make its well clear that in the coming days US treasuries will no longer be as precious investments avenue as it used to be earlier. Arab economy has healthy investments in US treasuries as it’s the prime exporter of US crude.

In a very recent note the Chairman of the Arab Banks Federation and Executive President of the Al-Baraka Banking Group (ABG) Adnan Yousif have commented that redistribution of risk will be accepted and followed in the coming days. Arab holdings of US Treasury bonds is at about $470 billion. They did not call for withdrawing the funds but that necessarily did not mean that the holdings are in safe heavens for US economy. US is the most powerful economy in the world and all countries depending on its currency (dollar) would meet the same fate.

China in a very recent note expressed their concerns that it will go for diversification of its foreign currency a holding which means that the US treasuries are no longer able to draw investors across the globe. Its true that if there is any doubt about the US treasuries then their will be a global collapse of the safe holdings.

Coming Data Outlook:

Regarding the outlook of US economic data it can be well predicated that manufacturing is will get slower as government will no longer be able to provide much stimulus to the system. Consumer numbers are going to drop to negative in the coming weeks as skeptical nature of the consumer mind is going to change consumption patterns. Consumers will be more reluctant to spend and more inclined to save for the bad days of US economy. In the other way round US savings rate have picked up from -12% to some comfortable zone. Hence savings are more and consupmtion will be less resulting slow growth of US GDP. So dont expect any growth mnumbers from the economy and if they come with a surprise they should be taken with a surprise.

Unemployment numbers are going to remain on the higher side as US industry will be inclined to save more and spend less and making cuts at their end. In fact I will not be surprised to see unemployment numbers takes a higher toll since industries across the Atlantic will going for massive cuts as government’s cuts are going to affect their demand generation.

Deeper problems exist for Europe as there are more cuts on spending leading to less growth and expectation for growth numbers from the economy.

WHAT WE FAIL TO UNDERSTAND?

Economies grow via three interconnected phenomena, (1) the division of labor, specialization, and exchange; (2) saving and the accumulation of capital for investment; and, (3) efficient allocation of scarce resources via a system of prices and profit-and-loss.US economy and Europe both are lagging in the 3 segments mentioned above. Its biggest factor of manpower is getting ruined due to delay in Job creation.US economy is loosing its real capital the human capital. Growth consumption and all other factors depends on the utilization of human capital.US has only exploited borrowing capacity of consumers and lead to rule the world economy.US must understands that its no longer capable enough to control and rule the world economy.US needs to focus on its next generation where it will designs its economic growth bringing in world leaders in every sector from technology to even shoe making.

No monetary system can build US economy neither US will gets back its old good days. Exploitation of capital and human resources needs to rule out and US politicians and Wall Street Analyst needs to understand this simple fact.US needs to wait for its next generation to GROW UP AND LEAD THE ECONOMY. Printing money will only spook short term gains and not a stable growth for the US and Europe economy.

The question?

Can any of the Wall Street Analyst, Bankers, and Politicians can declare that what legacy they are keeping for the next generation of US and European economy. Just find the answer.

BANKS CRY,MORTAGAGE RATING,Q3&Q4

2011-08-13T18:06:00.000+05:30

The World financial market lost around 4.40 trillion Dollars in 10 days.

What a cry was for the loss across the globe, but did we ever hear the cry of the banks across Europe and US. We never placed our ears to them. With the blessing of globalization the world economic system has become so much convoluted that a single pinch at any of the global footstep.

The Cry of Banks.With recent fraught of Europe the US banks are very much on the verge of peril. Three US banks are having great numbers of exposure in European debts. Citigroup ,JPMorgan Chase and Bank of America are having have billions of dollars exposed to European banks and debt. U.S. banks are most at risk in Europe because of the gyrations of the overseas debt markets and potential inability to undertake fixed-income underwriting securities from European economy.The respective exposures being taken by the 3 banks of US are as follows:

• Citi's exposure to Greece, Ireland, Italy, Portugal,Spain as well as other financial institutions and corporations located in Europe sit at roughly $13 billion.

• Citi has the most overseas exposure of anyone in our group, with roughly 50% to 60% of revenues non-U.S. based, both on the corporate and consumer side.

• JPMorgan Chase's aggregate net exposure to Greece, Portugal, Spain and Italy currently stands at about $14 billion, with the bank's total credit exposure sitting at $121 billion.

• Sovereign exposure in all five countries represented approximately 26% of the aggregate net exposure, with the majority of the sovereign exposure in Spain.

What ever might be the position or exposure of US banks into the European debts that amount is being owned by the US citizens and not of the Financial Players of the Wall Street. It will be a contagion fall for the US and rest of Atlantic.

Mortgaging Ratings:Borrowing.

France is one the verge of collapse due to having maximum exposure in Italian and Greek government debt which especially vulnerable. Using data from European Union stress tests on 91 European banks, Fitch Ratings said losses of 50 percent on Greek bonds and 25 percent on Portuguese and Irish bonds wouldn't have made any of four big French banks flunk the test. Moreover the prime reason why Europe don’t want its rating of France to be below AAA credit rating since by mortgaging the rating of France Europe will raise funds to save the other nations.

US will not be taking any guarantee or backing the any European economy as they have lost faith on the European banks. Now the difficult phase comes for Europe regarding whom they will mortgage and who will lend them. U.S. money market funds have been slashing their exposure to banks in the Euro zone. Their holdings of Euro zone bonds declined about 10 percent in July, to $340 billion from $378 billion, according to research from J.P. Morgan Securities LLC.

More than the question of who will lend the question of political stability is very much on debate side. Political unrest was not visible during 2008 recession which is very much present now in the atmosphere of global economy. You might get G-20 and G-7 nations meeting on an emergency basis but the questions come who will bailout whom. The nations will come up with another round of printing money but no mechanisms for how to repay the lender.

Q3 and Later on Q4.
Every nation is actively planning to keep the inflation moving like a pendulum with borrowed capital. But even if this time Q3 (Quantitative Easing) comes for a rescue that will again come to an end at some of time. Within that time all the Presidential elections across the Atlantic will get over and another round of Q4 will be ready as a promotional political Measure. But what we economist has forgotten is the physiological behavior of the citizens of these Atlantic countries.

The riot of Europe is a prominent example of the change happening in the nature and outlook towards the future Course of Actions adopted by these ‘Fragmented Economies’. Cutting down spending and finding no way to increase income is one of the worst and toll of weakening an economy further making its recovery difficult for a prolonged period. We need to understand that we are not dealing with numbers or bailouts we are dealing with humans and their human labor which is the real back bone of any economy across the planet.

EUROPE...WHO IS NEXT......

2011-08-13T10:02:00.000+05:30

My Best Child S&P.

If some one has done mistake in early then it does not make sense that every time it will repeat the mistake. S&P has done the perfect thing that this time it has went ahead and declared the most vulnerable danger awaiting for the world market. In other words what the 12000 Dow Jones and Mr.Obama administration was trying to hide was reveled by S&P.

This time the rating agency deserves an honor that it did not get influenced by any powerful authority on the earth. I will not make my easy to be prolonged to boar my readers but I will rather cut short and request my readers across the world ACCEPT THE BRUTAL FACTS. Easy days for the world market and US is over. It time for some hard work and cut short your appetite and focus on basic growth strategy rather than focusing deeply on how fast we beat each other in economic growth competition. Can any one explain how the Dow Jones climbed the ladder of 12000 when real growth was not happening in US economy. And if growth was their then a meager of 1% in GDP drags Dowjones to 12000 mark then 3% GDP growth will make Dowjones climb 20000.Sounds funny, extremely funny.

No clothes for my Emperor.

This time we have something more to dig out. Europe is not the volcano of financial collapse. Greece after that its was Spain and now Italy has come out with its naked body. It reveals that the Emperor has no clothes to wear and not even in the wardrobe.

Rating agencies in the last couple of weeks have been battered like anything for declaring the original crisis figures and situations to the world economy. Thanks to the world leaders in hiding their fragmented economic situation. If we make quick look towards the Italian economy we find it is standing one the verge of collapse. Italy’s average quarterly growth rate since 2000 has been just 1%,meanwhile, its debt-to-GDP ratio is 120%.What an economic performance maintained by one of the largest economy of Euro zone. You will surprise to know that is Italy is the third-largest economy in the euro zone. It's also the third-largest bond market in the world, behind the US and Japan.

So when a call will raise over its economic payment structures the world will go for hip hop dance. Spain's 10-year borrowing costs rose above 6% yesterday, while Italy's hit 5.7% and are still rising. If there is panic in the market that European economies are all plummeting then borrowing cost will increase and bonds will bear the heat. Already the gap between the yield on Italian government bonds and German government bonds is at a euro-era record. (In other words, investors are lending to Italy at much higher rates than to Germany. Banks of Italy are under the biggest threat since Italian banks hold so much Italian government debt that any Panic bell will make the life difficult for Italian Banks.

Money Makers

Among these entire debacles the biggest Money Makers of these situations is those who are lending easy money at high cost to these fragile fragmented economies.The biggest problem apart from providing easy money and Austery measures is the political condition prevailing over these fragile US and European economies. The biggest hard work is that to bring growth in these economies which were ailing for decade under low economic growth. In act these economies were dead a long ago, Euro might have kept them alive. It very astonishing to find that US and Europe lived and ruled the world economy on ‘Borrowed Capital’ without thinking when they have to be returned. Cutting down expenditures will only result less jobs and no consumption and Zero economic growth. I find next year also many economies of Europe will use the German Credit card and Austerity cards for mounting debts.

Another Feather: France

France has already proved the theory that cutting down expenses internally leads to Zero economic growth. Despite of delivery a Zero GDP growth France government insisted that French economic fundamentals remained "solid" and that the country was still on course to reach its official target of 2.0 percent growth for the year. Now tell me whom you will believe and where you will plan your safe investments. Now if S&P grades France economy to a negative marking will it is Big Crime or is not the word expected from rating agency as loyal voices raised their voice when S&P downgraded US treasuries. Some economic data of the Eurozone economies will really make one to think where the world is heading for:

• Production in the 17-nation euro area slipped 0.7 percent from May, when it rose 0.2 percent.

• Output of capital goods slumped 1.5 percent in June from the previous month, when it rose 1.1 percent.

• Energy production slipped 0.4 percent and output of intermediate goods decreased 0.6 percent.

• Production of durable consumer goods declined 2.5 percent from May.

What might happen if France is downgraded?

If France, the euro zone’s second-largest economy, lost its AAA rating the effect would stretch far beyond its borders.

France provides the second-largest contribution, after Germany, to the euro zone’s temporary rescue fund, the European Financial Stability Facility, which enjoys an AAA rating to borrow at low rates and lend to states under bailout programmes.

By this time France, Belgium, Spain and Italy, are all under intense pressure from the financial markets, hence from Friday onwards a ban on the speculative practice of short-selling bank stocks to combat "false rumors" that destabilized them have been imposed.

Hence I rating agencies have done their ratings correct this time its their Duty to inform and cautious the global citizens about the hidden deeds of the greatest world Leaders and Financial Heads.

Who is Next?

In fact this is one of the hardest questions but still it needs its reply. Turkey is the next economic going to face slow down in growth as it is already over heated and Belgium might be the next tag line of every economic news paper.

US EMPLOYMENT........ DOWJONES BUBBLE

2011-08-05T22:22:00.000+05:30

Another round cooked number were presented to keep the face of DOWJONES above 12000 marks. Obama administration has again and will try in future to keep the face of Wall Street to be promising when in real terms it has no words to make any promise. The community of financial analyst should try to avoid and cut US economy from the map of investments and prospects or any type of clue which will guide the world market. Since cooked numbers will only give birth to bubble of speculation, where the future becomes quite dark.

In my last article I mentioned that US will try to cook numbers since Republican and Democrats are not street fight for the 2012 elections.

Companies in the private sector hired 154,000 workers, but governments at all levels continued to trim jobs, putting the overall gain at the critical headline figure of 117,000. Payrolls rose by 117,000 workers after a 46,000 increase in June Their is nothing to jump with joy that the number has come down to 9.1% since as per the New Policy of budget cuts governments are going to shed jobs in coming days. When the government jobs numbers are going to decline in coming days the unemployment numbers are not going to come down. So its can be easily estimated and not speculated that US unemployment will come down in coming days. According to the budget cuts government job creation will be less or negligible and the entire dependency will come on private sector.

The below image shows the payroll statistics.

This time the biggest increases occurred in health care (31,000), retail (26,000) and manufacturing (24,000). Government shed 37,000 jobs, marking the ninth consecutive decline in unemployment numbers. Now the real pictures come out like this that as government will not be able to create jobs, hence inflation which is backed upon consumption will not pick up as a result economic growth numbers will be less in coming days.

Now the interesting part is this that US private sector is not expanding or neither interested to hire as per the pre recession levels this will also add to the decline numbers of unemployment and GDP growth numbers of US. By this time Wall Street itself has went for shedding of jobs. The finance sector saw 4,000 jobs disappear last month, according to the Bureau of Labor Statistics, continuing the trend begun last month when the sector lost 15,000 jobs. If I drill down further I find Credit intermediation and related activities lost 3,000 jobs, while real estate, rental and leasing lost 900 jobs. Securities, commodity contracts and investments gained 700 jobs, while commercial banking saw an increase of 200.according to the estimations it is being expected that wall street to loose further jobs in coming months,.

Final part of the show will be that how US administration will cook its forth coming numbers to Bubble the Dow Jones.

Now get ready for the cooked numbers and BUBBLE DOW JONES.

US ECONOMIC ARMAGEDDON

2011-08-02T18:00:00.003+05:30

Happy ending but pains way ahead:

Finally the debt ceiling was increased by $2.1 trillion resulting new limit for US debt to $16.1 trillion. It has been taken by the world media as a high voltage of drama being played between the Democrats and the Republican. In fact according to me this drama was the beginning of the bigger picture which will be released in the due course of the time. The 2012 presidential and congressional elections which will be held will be fought over spending cuts and job creation. It seems that the US economy will be now on the political game rather on economic revival game which the required to be played at the moment. Both the Democrats and the Republicans are internally divided and radicalized, with centrists in both parties increasingly isolated hence the high voltage game is yet to begin for US economy along the world economy.

Politics beyond Economics

Now one question in mind will expenditure cut and taxes increase will lead to US economic growth. We get the answer in history of US economy. In 1980, Ronald Reagan won power by promising to cut taxes and increase defence spending — a combination that meant he would have to borrow billions. And by the time he left office, the U.S. had gone from being the world’s biggest creditor to the world’s biggest debtor, its total debt having surged from $997billion to $2.85trillion.

The downgrading of the US bonds and other money market instruments has already created huge damage to the fragile economy of US. He downgrading will lead to a further capital outflow from US money markets, which are an important source of short-term funding for many businesses and financial institutions around the world. Increasing the debt limit will only increase more hard days for the US economy to come out of the crisis.

What’s is found till now from the new debt increase policy being adopted is that the debt ceiling will rise by about US$2.1 trillion, in two stages until 2013, so beyond the 2012 presidential campaign - key Democrat demands that In exchange for these concessions, Republicans have successfully pressed for spending cuts amounting to at least US$2.5 trillion over 10 years, of which about US$1 trillion are agreed. The remaining US$1.5 trillion will be the subject of a new bipartisan Congressional committee.

Failure by that committee to agree later this year would trigger automatic cuts in programme defended by Democrats and Republicans respectively - social security and military expenditure. Under the framework negotiated by Congress, approximately half of those cuts would be in defence spending and the other half in domestic programmes such as farm subsidies or discretionary spending (including Medicare).Cutting down expenditures was required since Us have been active in defence spending from the time of Mr.Bush who increased the debt limit of US to $11 trillion before quitting his office.

After that another round of Disaster control plans were run which included a $700 billion bank bailout, a $700 billion stimulus program, a couple of trillion in “quantitative easing,” that is, in debt monetization. It was not debt monetizing, its was printing dollar to pay the bill of US economy. Federal Reserve’s balance sheet had expanded by trillions of dollars as the Fed purchased troubled mortgage bonds and derivatives in its effort to keep the financial system solvent and functioning. According to the Government Accountability Office’s audit of the Federal Reserve released by Senator Bernie Sanders, the Federal Reserve provided secret loans to US and foreign banks totaling $16.1 trillion, a sum larger than US Gross Domestic Product (GDP).

The cooked numbers:

The

economies have cooked the estimations number for its economy. For example its has hiked its GDP growth numbers spooking speculation around the world economy about its growth where as the real growth remains subdued. Even while calculating the unemployment number, US economy was propagating that the unemployment numbers stood at 9.2% where its has overlooked the number being created by Discouraged Labors. A discouraged worker is a person who has ceased looking for a job, because there are no jobs to be found. A discouraged worker is not considered to be in the work force and is not counted among the U.3 unemployed. The U3 is today’s official unemployment rate. It represents those people in the total civilian work force who are unemployed and still seeking to be employed. It is a number that is less than half as high as the unemployment number that was used until after President Clinton took office, and it woefully under reports the serious problem in the present U.S. job market. It may surprise you to learn that these are not the actual unemployment numbers though. In fact, when unemployment is measured according to the formula that was used when President Bill Clinton took office, it is actually around 20% Today’s formula only counts a narrow segment of the non working population as unemployed.

More over the new tension of Republican and Democrats are going to make the policy decisions of US more critical and more difficult in the coming days. The world economy should now try to make itself very much clear that US economy is not going to provide any easy steps for the speculators to breed their thoughts.

Now what we have way ahead?

The tussles between policy frame work in

economy will remain as a high voltage Multiplex Movie. The debt will keep on increasing despite of spending cuts since the real engines of US economy that is manufacturing is sitting idle. It is not focusing or neither having intention to expand or start up its manufacturing in US .Rather they are more inclined to open shops in emerging economies. Can any one figure out what will be the utility of cutting down expenditures when the US corporate is having a stock pile of cash to the tune of more than $2 trillion. But where is the money heading if manufacturing is not happening in US. Manufacturing is taking place but Its being drifted towards emerging economies where shops are being opened like India, China and Indonesia.

Upcoming numbers and any positive cues from Us will be hard to be taken as now is teems that 2012 presidential elections will drive cooked numbers from the US economy leading to a catastrophic speculation fault from the world economic speculators.

Some questions for my readers?

I have some astonishing number to be provide to you to think in gamut to finish my article.
A U.S. Treasury Department reported that U.S. debt will rise to $19.6 trillion by 2015 and if the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
Will this hike of Debt limit will suffice in the future.

While all these are highly demanded question in the mind and also highly un-answered across the world since US economy mind set have been changed to skip hard work and look for shortcuts to make any thing overnight. One should not forget that from the time of late 1970 US economy has learnt to live on debt and borrowed capital without the thought of how to repay back. Since this repayment mind set needs no economist it needs physiologist to change the mind of America.

EURO PRIVITIZATION

2011-05-28T12:05:00.000+05:30

Castle built of Sand:
Saving the Euro or saving the nations which one comes first is the question of debate. European economies are struggling to survive the Euro and not the nations. They want bailout but to that extent to which the political image of financial management is not shattered keeping the upcoming elections in the Euro nations. When Greece was bailed out last time various measures were decided to be implemented to for the coming years starting from 2011.After the first anniversary of collapse the conditions remains the same. In fact government representatives fooled the citizens and the world market by portraying false and lucrative and even reduced figures of Defaults. The whole share of the blame cannot be passed to European leaders but a part of it goes to financial media too. The financial media was buys in hiding the reason for collapse and were busy to design bailout plans rather than bringing the real truth.

The debacle of Europe was not created by European leaders alone. The political war of Euro and Dollar formulated the cool minded long term disaster planning by some US and European leaders. In my last article a year back I depicted the story.

The Lethargic Governments Deeds: Privatization

Today Greece is planning to go for real execution of stake sales in its public owned companies. . In other words it can be termed as Disinvestments. This debacle of today should not have risen if GREECE had acted in real terms towards the earlier privatization programme of 50 billion euros. Today the world markets are rattled due to lethargic government in Greece. Among these assets sales some prominent and lucrative ones are stakes in the telecoms firm OTE, state-owned Postbank and the ports of Athens and Thessaloniki. The Greek government controls a 74% stake in each of those companies. It’s quite hard to say about the quality of assets after the debacle of Euro but it will be a good long term bet to invest in these companies. The government now hopes to rise up to 5.5bn euros through asset sales by the end of 2011, up from an initial target of between 2bn euros and 4bn euros that it had been aiming for just a few weeks ago. But is quite very hard to say till now that how much real execution will be implied. Their is a strong protest among the citizens of these nations about disinvestments.Political rivals of the current government of these nations are intensifying the protest.

No other Revenue Earnings Avenues:

Greece is having no other way than going for a disinvestment since its other government revenue earning mechanism are already to much high as compared to any other nation. Payroll tax of Greece for employees stands at 28% and workers stands at 16% taking the total to 44% tax rate in Greece. Greece is having a VAT rate of 19%.Hernce any hike of rate from these levels will only create more problem on the long term recovery of consumption and GDP growth. One of the hardest fact is this that we all know that Greece is having a deficit number of 150% of the GDP where as in real terms it stands at 875% of the GDP.I did not write any thing wrong neither you read any thing wrong. Taking the pension liabilities and future unfunded other liabilities the deficits climbs to 875% of the GDP.

Small questions for readers:

Now 3 questions for my readers what the government representatives did to bring this debt and what they will do in future and where Greece stands. I will leave the answer for my readers to give.

I find the decision of not providing immediate funds to Greece for payment is an ideal step. IMF and ECB steps are realistic to reduce the fats of the Greece governments. IMF and ECB has made it clear that it will not release new funds or buyouts of bonds for Greece without a comprehensive European support package to cover future years. Easy money will only keep on flowing and debts will be climbing the hills of burden. No one is having any plan of how the funds will be paid back later on. Today US came up with so many Quantitative measures, flooded the streets with easy money but no mechanisms of recovery of the debt raised on its face. Infact the government and other financial heads of these economies get fever, thinking upon the recovery measures of easy money. Greece is having an unemployment rate of 21% followed with an average rate of around 24% in Euro nations.

Greece is not the last to fall or go for disinvestments’ will not be surprised to see a similar thing coming from US. And if they delay more easy money more assets bubbles and more speculators money in the bank accounts and end of the world in real terms. Infact the speed at which we are travelling towards financial disasters we may not have to wait till 2012.Moreover I find only one prominent buyer and investors moving around every street of every nation China.

Quality of Sale and Buy:

The biggest disinvestment with which the Greece will open up the doors is Balkans telecom giant OTE. stake sale. In June Greece will sell 16% stake of OTE. It has called up Germany's Deutsche Telekom. The company currently controls 30% of OTE, the largest telecom operator in the Balkans which employs some 30,000 people in Albania, Bulgaria, Romania and Serbia. OTE this month reported a net profit of 30.2 million euros ($42.5 million) in the first quarter of the year, a fall of 54.1% from 2010. In February, OTE announced cost cuts worth some 32 million euros but managed to raise 500 million euros in a three-year bond sale. Hence as I repeat again quality of assets which will be displayed for sales needs more attentions.

Be ready for some cross border news of new deals. But gain all these deals will be financial leveraged deals rising further spread out collapse and erosion of capitals and savings of shareholders.

Very soon Italy's government is planning to bring forward 35bn-40bn euros (£30bn-£35bn; $49bn-$56bn) of austerity measures to this June in response. So party is not yet over.Infcat EURO PRIVITIZATION begins.....

SILVER ALERT

2011-05-07T14:58:00.000+05:30

In Ancient Egypt and Medieval Europe, it was often more valuable than gold. Till today the same theory is followed. But last week the world market of metals were rattled with the fall of silver and gold. Silver made the steepest decline compared to 1983 levels of fall in the last week.

Margin Crash Ride

Silver prices plunged across the world market keeping every one on the table of quest of what made the fall. Base metal prices were very much over leveraged or over brought in the past couple of months on a continuous basis. Silver is expected to have another correction from the last weeks closing by another 5% to 10%.

Silver will correcting is not only die to over bought ad over stretched valuations but also due to as New York Comex exchange have hiked the margin requirements to 84% making the requirements to raise up from $11,745 to $21,600. The margin requirements for hedgers are increased from $8,700 to $16,000.

Two days prior to this, the COMEX had also raised margin requirements. On April 27th, margin for initial contracts were increased from $11,745 to $12,825 and margin for maintenance contracts was increased from $8,700 to $9,500. As margin prices increases, this forces the market players to come up with more margins for playing in silver.

The collapse in silver prices on Thursday May 5th, triggered by the COMEX margin increases, indicates that many players were forced to liquidate positions to match the margin requirements going to hit floor from 9th of May. Before the increases, margins were about 5% of the value of a futures contract, which is for 5,000 ounces. After the plunge in prices, the cost after May 9 would be about 12% of a contract, using today’s settlement. The last two margin increases by the COMEX, after silver had already declined by over 17%.To add fuel to the fire liquidation of silver holdings by a hedge fund run by George Soros was also executed at that point of time.

Your Demand and My Silver Investments.

In my last article I depicted the story of the upcoming growth of demand of silver which played according to its vomited words in the article. Silver is not only a being treated a as a substitute of Gold but also being extensively used in alternative energy segment. The industrial applications of silver, increased by almost 21% to 487.4 million ounces.

In 2010 we find the demand for silver coming from global investment and fabrication demand. According to World Silver Survey demand of silver during 2010 increased despite of a 38% average increase in the price of silver to $20.19. The increase in silver prices during 2010 was the largest price gain since 1980.Silver investments demand increased by 40% in 2010 to 279.3 million ounces, double of 2009.

When we sneak into the ETF growth of silver globally we find a staggering growth to 582.6 million ounces during 2010, an increase of 114.9 million ounces over 2009. When we dig into the global use of silver in primary components we find some interesting growth demand:

• Silver used in coin and medal production rose by 28% to 101.3 million ounces.

• Sales of U.S. Silver Eagles reached 34.6 million, far ahead of the previous record of 29 million reached in 2009.

• Sales of bullion coins by mints in Australia and Canada also hit new highs.

• Investors also purchased 55.6 million ounces of silver in the form of bullion bars during 2010.

• Silver fabrication demand hit a ten year high of 878.8 million ounces, an increase of almost 13% over 2010.

• Jewelry increased by 5%, showing the biggest increase in demand since 2003.

Silver is going to make new records not only in 2011 but also in the next 3 years. We made an extensive research where we found that new demand for silver consumption is increasing.

• New industrial applications using silver are expected to account for an additional 40 million ounces of demand by 2015.

• Silver's unique chemical properties are constantly leading to new industrial demand, one example being the development of products using silver as an antibacterial agent.

But with the increase of the demand of silver we need to keep in mind that procurement of silver form mines needs higher attention. silver production increased by a very modest 2.5% during 2010 to 753.9 million ounces. We need to keep an eye on the explorations being carried out by the largest silver producer in 2010 was Mexico, followed by Peru, China, Australia and Chile.

So by now my investors my research colleges and other layman of the industry might be clear about the upcoming demand of the Gold Substitute .This demand will make the price of silver to touch new heights in the coming days. The recent crash of silver price is an buying opportunity and it should be used accordingly. I have come across few investors who are fighting with anxiety of the recent fall as they have purchased at higher levels. A simple advice for them is that silver is a long term assets and not like short term. Its a commodity and should not be entangled with other asset classes.

Silver should be bought at lower levels as they long term demand makes the price of silver to shine more than the original shine of silver. Silver should be brought and regarding these margin hikes and other activities one needs to treat them as a buying opportunity. Invest in silver for long term withering out the short term hiccups.

INDIAN REAL ESTATE-ROSE OF GROWTH WITH PAINS OF COST

2011-04-21T17:55:00.000+05:30

In 2010 we witnessed one of the strongest and also the sluggish market of Indian real estate. The crash in the second half of 2008 and after that the revival and strong growth numbers posted by the sector made the Indian real estate one of the most favored destination of investments both domestically and overseas.

Valuations of residential and commercial properties, especially in Mumbai, Bengaluru and the Delhi-NCR region, rose abnormally from 2009 to 2010. Real-estate activity in many cities reached a frenetic pace. More and more hoardings showcasing new residential projects are once again dotting the landscape across various metros, like they were in 2007-08. The media also joined the race of the rally with high marginal prices at which transactions are being done as proof of a rising market .Properties prices swelled from 30% to 40% in most of states in 2010.Prices were

The weighted average rate of the unsold stock (as of December-end 2009) was 61% higher than the weighted average rate of the properties sold in 2008-09 (in Mumbai Metropolitan Region), according to a study by Liases Foras.

Developers and project investors are working hand-in-hand to block some part of the inventory, artificially jacking up prices for their properties. In 2010 we witnessed one of the worst second half for the Indian real estate sector due to jacked up prices and resulting fall of sales in properties.

Property prices were bound to have correction after the skyscraper price rise in the first half of 2010.Their was a wide gap between the affordability of housing and the price The below chart indicates the risk spread between consumer affordability and prices.

According the chart the real estate sector needed 25%-30% correction in prices which infact it has materialized to the tune of 30-40% till date in various parts of India.

THE CURRENT SPACE:

Indian real estate sector is facing the heat of the much blessings of RBI. In 2010 RBI have hiked the interest rates 6 times where as in 2011 it has already hiked 2 times resulting higher borrowing cost. Apart form manufacturing and infrastructure, real estate sector is facing one of the hardest times of its business cycles. It is worth noting that every 0.5% increase in interest rate reduces home loan eligibility by approximately 7% (by making home loans costlier and also by reducing the eligibility of the lower-income segment). Further the sector is blessed with scandals comprising from some big shot industry players.

• We finished the year 2010 with LIC housing scam, which made one of the strongest attack for the real estate sector making investors and buyers to defer their plans of buying taking jacked up prices by fraud intermediaries.

• Shahid Balwa, founder of a real-estate company DB Realty, was arrested in relation to a wide-ranging investigation into the government's 2008 sale of mobile-telephone spectrum.

• A Mumbai housing project that was meant for war widows was, instead, auctioned off, drawing attention to corruption in the industry.

DUAL BLESSINGS OF INFLATION & RBI:

The list might become long but it is better to keep it short since all industries across the globe are entangled with one or their scandals at one point of time. The rising borrowing costs have affected the fund raising problems for the real estate sector.

• The costs of controlling inflation by RBI have affected this sector to its extremes. According to the Confederation of Real Estate Developers' Associations of India (Credai), the average cost of funding rose to 20% after the Reserve Bank of India restrained banks from lending to the sector .

• One of the prime reason for banks to run away from lending to this sector is the risky and rising bad loans. Along with this the sector is being turned down by banks even. They are less inclined to provide Blood to the real estate business.

• According to some industry head the sector is at its worst. The borrowing cost have been so high that it will affect the margins of the real estate sector in 2011-2012.

• Bank credit to commercial real estate (CRE) grew by 17.8% for the year till February, as compared with 0.9 per cent growth during the same period last year.

• On a financial year basis, credit to CRE grew 17.1% as against a decline of 0.9 per cent during the corresponding previous period. But this growth number is not enough for the real estate sector.

• Rising cost of higher inputs due to rising inflation, long gestation period for completion and clearance of payments makes the sector highly demanding for funding .

• Large firms such as DLF Ltd and Unitech Ltd are likely to miss their sales targets for the year to 31 March. If you measure the depth of the struggle being aced by real estate sector then we measure it with the stock market.

• The Bombay Stock Exchange realty index has dropped about 30.47% over the past year, compared with a 10.52% increase in the benchmark Sensex.

INDUSTRY COMMENTS.

Pujit Aggarwal, managing director of real-estate firm Orbit Corp., says banks have withdrawn their support for the industry. Almost everyone is paying higher interest rates, anywhere from 1% to 7% on the total cost of a project," Mr. Aggarwal said. For instance, on its borrowing of nearly $175 million, Orbit is paying an additional 1.5 percentage points on top of the 12.5% rate it initially received, which translates to $260,000 annually. With domestic findings being with drawn, he foreign inflow of funds have also dried up resulting more burden and pressure to keep the sector rolling on.

The other major factor contributing to higher housing prices is the various taxes imposed on these projects, accounting for 30%-36% of the project cost. At the same time the sector faces the problems from high prices or in other words exorbitant prices to the end user.

We have witnessed in 2010 that where the prices real estate went to an exorbitant levels.

INFLOW OF FUNDS.

Currently, up to 100% FDI is allowed in real estate projects in India via the automatic route with conditions including a three-year lock-in on investments. The investor is also expected to bring in at least $5 million in the project, which is required to be of built-up size of at least 50,000 square metre, or 10 acres, of land in a plotted scheme.

DEMAND v/s GROWTH:

The demand for the sector is promising investments and growth for the coming days.

• While residential sales were subdued, the commercial space segment put up a stronger showing as lease rentals stabilized and leasing activity remained strong in information technology (IT) centres such as Bangalore, Chennai and NCR.

• With new expansions coming up in Indian corporate houses the demand for commercial properties is making the real estate to survive in turbulent times of finance. Companies in the legal sector, consumer durables, banking and manufacturing sectors are acquiring commercial spaces in newly launched and to-be launched projects.

• Demand is coming primarily form Mumbai and Delhi. There is a huge demand from the information technology (IT) sector. The total demand for office space all over India is 35 million square feet; of that, the IT sector alone accounts for 80%. The second sector from which there is a good demand is the financial services sector.

• Also, in Hyderabad, Chennai, Kochi and Bengaluru, builders are developing IT parks within as well as outside the city limits and many developers are creating residential complexes surrounding the IT parks.

• Some 150 malls will come up in the next one year – one almost every alternate day. There are 15 different types of malls – ranging from FEC (family entertainment centres) to discount-store malls.

• Organized retail in this country, a few years ago, was 2%; now, it has gone up to 4% and next year it will touch 6%.This 65 growth wll bring up more malls and more shopping plazas

• The biggest financial hub in India is coming up in Ahmedabad - it is a 70 million square feet area being built by IL&FS, called Gujarat International Finance Tec-City.

One question might come up in our minds about is that is the Indian real estate sector is poised for a bubble to burst. In simple words it is not.

On the other hand the Confederation of Real Estate Developers' Associations of India (Credai) is bringing radical changes into the real estate sector which will give new direction and Shape to industry.

• Credai is preparing a comprehensive check list of required approvals for real estate projects, and this would be submitted to the Union Urban Development minister Kamal Nath this month-end. The industry body wants the government to reduce the time for issuing approvals to three weeks.

• Credai is also coming up with host of other changes like making mandatory for all members to disclose the carpet area in their brochures and sale agreement, aiming to bring in transparency in the sector .Currently it as 10000 members under its belt. Credai is identifying growth for the real estate sector. It has taken responsibility of getting 5 lakhs people under its umbrella.

• It will also widen its membership base, and get members from eastern and central India.

• In the overall development these new emerging markets are all set to be the centre of attraction and key driving force in the real estate market.

• CREDAI will be setting up consumer redressal cells in every state to address consumer disputes. The objective is to resolve disputes amicably in quickest turnaround time of approx. 60 days.

The real estate sector is strongly supported with a prolonged gestation period due to getting clearance form start of the construction plan to execution. Till date around 40 approvals are required like environment / high rise / airport authority / police etc across many cities. This makes the gestation period a burden some and eats away much of the capital. Credai have formulated polices and will submit to the government where all these pains of the sector will get reduced but not eliminated.

CLEAN ENERGY AND EQUIPMENT INVESTMENT GROWTH

2011-04-18T16:10:00.000+05:30

Burning GDP.

Burning crude prices are burning the pockets of the every economy. From US to India from west to east every corner of the world is feeling the heat of higher crude prices. Higher crude prices are swelling up the food prices and affecting the industrial production. Rising cost of input is reducing the margin of profit for the companies and results to lowered growth for shareholders returns.

In china we find that monthly crude demand of China picked up to 10% as compared to last year and 15% higher year-to-date pushing the figure to 9.5 million barrels daily.

The biggest twist in the tale is that more Chinese officials have tried to cool of the rising GDP growth from unprecedented levels to 7% the more demand of crude have gone up from 1 million extra barrels of oil per day. So it well clear that a slowdown in the Chinese GDP will not affect the demand fro crude and hence pressure of crude prices with increasing demand will play their roles in the coming years.

China to Cut Back Carbon Emission and Opportunities.

In between all these China is focusing to shift from a high bracket of Carbon Emission tagged country to a lower one. For its high carbon emission scores china went for an extreme level of merger of old industries with new ones and even close down of some manufacturing plants. Very recently China announced at the Copenhagen Climate Change Conference in 2010 that its carbon emissions per unit of gross domestic product (GDP) would decrease by 40% to 45% in 2020 from the 2005 levels. China is also in search of extensive coal blocks across the world and its rate of scouting have soared up to such levels where in every week we find new coal blocks coming up on the ladder of Chinese search.

Main reasons for such a mad chase of coal locks is that first china needs coal for running the GDP (Steel Manufacturing) of growth and secondly for its huge electricity demand.

China's electricity consumption rose 13.41% over the previous year in March to 388.8 billion kWh, increasing the first quarter power consumption to 1.09 trillion kWh, up 12.72% from last year, according to the National Energy Administration (NEA).

According to the NEA's statistics, power use by the secondary or industrial sector, rose 12.31% to 802.5 billion kWh, or about 73.5% of the country's total electricity consumption during the period.

Industrial Growth of India in Emission Equipments the Bottle Necks.

We find demand of industrial investments into goods related to carbon emission reduction equipments. Engineering and light as well as heavy industrial equipments will find high demand of sell as well as manufacturing in China. China is very poor in terms of manufacturing of these products.

Where as in the world we find US is having adequate technical as well as production knowledge about reduction in emission standards.

India is basically into carbon trading which is also at its nascent stage. India presence in to Carbon Emission Equipment manufacturing is also negligible but it has huge growth. But if Indian industries go out for export of Emission Reduction Equipments then it will face some strong hardships.

The following are the glimpses of the hardships with which Indian manufacturing of Carbon Emission is surrounded:

• Higher cost of input

• Fluctuating Exchange Rate

• Higher import bill of Inputs imported by India

• Red Tape policies in duties and Subsidies offerings for promotion of exports.

• Lack of manpower and Technical schools for generating man power

• Price increase pay backs to sub suppliers and not able to clear from the end consumer the higher price hikes.

On the other hand we find operational issues and low government interest in boosting up the growth of these companies. Octrio, land permit, road permit and tax structure are the other operational problems. These problems make the growth as well as the ROI less attractive as compared to china and US investments.

Where India finds opportunities?

If Indian companies goes to china and opens shops their we find lot of support for opening up new ventures in China. China have been a favored destination for new open ups and also for its lucid structural changes. Moreover manpower and technical skilled labor gap is less in china and other operational and taxation structures are lucid and favoring to growth. India is getting flooded with finance in clean energy. India attracted $4 billion in private investments, ranking 10th among the G-20 countries. If Indian companies open up the shops in china then these hardships will be negligible, resulting this number of $4 billion PE investments swelling to $16billion within next 5 years.

The new model that has emerged is a Hybrid Model where among venture capital, hedge funds, and private equity funds coming together to fund ad reap the long term growth. This will derive the growth of Indian clean energy equipment market. Higher global energy demand growth will continue to drive return on investment (ROI) higher in the clean-tech space. Emissions reductions, renewable energy credits, and energy efficiency are three prime areas where an investment of hybrid nature is focusing. Investment interest is now more focused on how to invest in new technologies and gain investment streams that encompass two or three of these environmental benefits and should benefit from multiple credit streams .India lags in these advance stages where as China is way ahead. This is the reason why China is best destination for doubling the returns on Investments.

If we look at some of the new opportunities of clean energy Business we find the demand of equipments going to come up in the coming years.

Classification of the Clean Energy Business Opportunity

Type of Opportunity Type of Opportunity

Alternative energy

Solar

Wind

Hydro, tidal, and wave

Geothermal

Bioenergy and biofuels

Distributed energy

Combined heat and power

Microturbines

Fuel cells

Hydrogen generation

Flywheels

Energy efficiency

Lighting

Buildings

Transportation engines Energy recycling

Waste-to-energy

Battery technology/energy storage

Medical and biological crossovers

Environmental technologies

Water and wastewater treatment

Clean coal gasification

Emissions mitigation

Desalination of water

Information technology

Net metering and real-time pricing

Demand response (energy efficiency)

Energy management systems

Remote sensing

What Indian needs for having a stupendous growth in good venture projects for the clean technology space are (1)Technical support and infrastructure, (2) a seasoned management team to grow the business, and (3) a defined exit strategy (usually by an initial public offering, trade sale, or roll up).India lags in all the three. More interesting are the second-stage investments in clean technology and alternative energy that do have revenue and can make money for investors. Several venture funds are focused on these later-stage investments, and the investment space is beginning to get crowded. There is a great need for viable later-stage companies. Higher global energy demand growth will continue to drive return on investment (ROI) higher in the clean-tech space.

According to a report from the Pew Charitable Trusts last month, global clean energy finance and investment surged to $243 billion in 2010, a 30% increase over 2009. Excluding research and development (R&D), worldwide investments in clean energy are 630% higher than they were seven years ago.

Chinese Investments

The wealthy G-20 countries dominated last year's clean energy funding, with 90% of clean energy investments in 2010 directed to companies and projects based in the G-20. Minus R&D funding, clean energy finance and investment last year grew by 33% to $198 billion among the G-20.

China has made huge investments into clean energy. When we break the figures of the Chinese investments we find investment rose 39% from $39.1 billion in 2009 to $54.1 billion, setting a world record. Hence If India goes to china for then its cheap manpower and super red tape policies will make the ROI on investments to grow by manifolds.

Indian Mutual Funds.

If we come into the Indian mutual fund space we don’t find any dedicated funds for alternative energy or related to carbon emission or carbon trading related. We should have a starting point of new ventures rather than flocking with old Infrastructure name tagged mutual funds.

In addition to venture capital, both private equity and hedge funds will supply additional billions more as new technology is rapidly commercialized and deployed globally. The need is that great. Demand pull of global financial markets is accelerating. We have entered the world of Kyoto Protocol implementation in 2008 in 174 countries, and that already has impacted environmental project finance.

INFLATION BURNS

2011-03-21T10:46:00.001+05:30

INFLATION BURNINGS:

The RBI came up with another round of old fashioned rate hike to control inflation. We have already witnessed 7 rate hikes within 2010-2011 to control the food inflation. Every time we find RBI using words related to control the devil of inflation by compensating growth, but this time their was a twist in the tale. This is the first time RBI is more concentrated about the slowing growth of emerging economies including the Home country.

The emerging economies are facing the heat of paying more import bill due to rising oil prices. Everything cannot be blamed on tension among Middle East about rising crude prices. When the emerging economies are going to bring new GDP figures for their economies like India being projected to bring 10% GDP growth, demand of crude is bound to increase along with the price increase. India is grappling with the problem of poor and low crops cultivation. That’s one of the biggest reasons for higher food inflation. Despite of having a good monsoon in 2010-2011 India enjoyed the flavor of 18% food inflation. Keeping this in mind this year the Union Budget proposed to set up and spend funds on building food storage infrastructure and also in order to promote agriculture activities refined the loan rate structures.

Non food items have dropped under the production ladder reflected through index of industrial production (IIP). India's factory output rose 3.7% in January. The biggest blow of the game to capital goods segment. Capital goods output contracted 18.6 % in January in a sign that higher cost of credit and rising input cost pressures may have forced companies to defer planned investments.
REELING EXPORTERS:

If we look towards the exporters we find that they are also reeling under the pressure of higher cost of exports. Micro small and medium enterprises (MSMEs) which contribute to 45% of the countries export are the one who are worst hit. FIEO Chief however expressed his concern that the IIP has shrunk from 16.8% a year ago to 12.10% a quarter ago and is only 3.7% currently. The high cost of credit has dampened plans of expansion and capital expenditure and would hit Profit After Tax (PAT) of most companies in Q4.

If we club all the punches we find that export, industrial growth and purchasing parity all went into a tailspin in order to control food inflation. The prices of protein sources such as milk and ‘eggs, meat and fish’ continued to remain high reflecting structural demand-supply imbalances and poor infrastructure facilities of storage.

WRONG TREATMENTS:

It seems that the problem was some where else and we were doing the treatment at some other place. After making a wrong treatment RBI is now under the threat of slowing growth due to the rising cost of loans. India is still about to witness in the coming two quarters the slow down in corporate earnings. Their will be significant drop in margins of profitability and rising cost of operation followed with higher interest cost, eating up much of the dividend of the financial year 2011-12.

In the third quarter RBI has projected the WPI to be around 7%.Indian government is going to face some tough situations due to the increasing fiscal deficit due to the rising import bill of crude. The planned expenditure of Indian government will take a hit from the rising crude bill. Moreover companies are eagerly passing out the higher cost of loans to the consumer and hence monthly expenditure are now double and savings of Indian citizens are now running half of what it was in 2009.The financial yardsticks of India like direct and indirect tax collections, merchandise exports and bank credit, suggest that the growth momentum persists, giving some great signs of Not Too Much Bad but the damage is happening to some other corner of the same room.
STEROIDS OF LIQUIDITY.

As interest rates have been hiked to suck out the excess liquidity from the market to control food inflation, but at the same time the Indian market was injected with a Steroid of liquidity. Net liquidity injection through LAF declined from an average of around ` 93,000 crore in January to ` 79,000 crore in February 2011, and further to ` 68,000 crore in March (up to March 16) due mainly to increase in government spending and consequent decline in government cash balances with the Reserve Bank.

In between these times of low interest rate to high rate companies who took off the projects for expansion are the worst hit and struggling to scout for easy liquidity. This very particular factor is one of the prime factor why china is providing easy funding (funds at low interest rate) to the Indian corporate. This same factor can spook off another round of unauthorized improper quality of loan disbursement. Since banks will be busy to win the race of higher loan disbursement. Quality of loans and quality of expenditure are going to be the prime agenda of Indian financial streets.
SOME GOOD NEWS

One good news among all these hiccups is that the area sown under the Rabi crop is higher than in last year which augurs well for agricultural production. This will provide healthy foods for the financial year 2011-2012.

At last I would like to accentuate the thoughtful minds of my readers.RBI rate hike, higher cost of interest rates and consumers paying more for their purchase where one finds financial inclusion of India. When Budget comes we raise voices of financial inclusion. But with rising inflation financial inclusion disappears. Without being inclusive, financial and economic stability cannot be sustainable. India needs to identify the areas of where we can control and cut off the interest rates. Financial inclusion is about credible access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. If Indian financial regulators concentrate on this, India can avoid fiscal imbalance and will be able to control food inflation by focusing on higher production of crops. Urbanization should be seized and should not be allowed further to expand where it destroys agriculture land to a Multi Complex.
THE REAL AFFECTS.

Emerging economies are rattle with inflation and Indian economy is not only inflated but also facing the probe of high petrol and diesel prices which are passed on to the end consumer. Indian must quest for alternative energy resources so that inflation can be controlled. We are focusing on infrastructure to a much greater extent. But we are not aware that this infrastructure will be of no use if inflation keeps on climbing since all infrastructure projects will be at a high price and less profit and less dividend for the share holders.

Indian industries needs to focus on the composition of funding. A prudent mixture of equity and debt needs to be arranged so that cost of high interest does not affect in the course of delayed execution of projects. This is one of the most important aspects we need to keep in mind when planning or executing cash flow structures of a project. We should not forget that all projects in India are completed with a delay tag where cost of the project goes up substantially by a around 30%-40% of the initial cost of the projects. We need to keep an eye on this.

JAPAN FINANCIAL SHOCKS

2011-03-13T20:39:00.001+05:30

JAPAN no words are required to describe even to a 4 years child since he also heard and saw the name many times on Television and Newspaper. On Monday morning every one will be having an eye on what will be the affects of the crisis of Japan. Now I don’t call myself as a financial guru or speculator but rather prefer to mark myself as an analyst.

THE CRUDE AFFECTS:
The crude prices have taken a U turn after the debacle of Japan. Over here I would like to accentuate my readers that Japan is one of the biggest importers of crude oil. So prices are bound to fall but prices will rise more high in the coming days as Japan had shutdown refineries which were having a combined oil-processing capacity of 1.2 million barrels a day, roughly a quarter of Japan's total refining capacity. Hence the good news of low crude prices are meant for short term. Moreover fires broke out at two Japanese refineries while others closed down automatically when the earthquake hit. This will also add losses for the Japanese oil refineries

FINANCIAL SHOCKS:

Japanese losses will be borne and shared maximum by the Insurance companies. Already Shares in some of the world's biggest reinsurance companies took a pounding on fears that the earthquake in Japan and the subsequent tsunami will cost them dearly.For rebuilding Japan the government have to come out with a new budget policies on 1st April 2011. For now, officials will use about 200 billion yen ($2.4 billion) left over from the budget for the fiscal year ending March 31.The bill will bear the cost of long term and short term funds planning for expenditure. The northern Tohoku region most affected by the disaster makes up about 8% of gross domestic product, and is host to factories making products from cars to beer. The Ministry of Finance projected in January that government debt will increase 5.8 percent to a record 997.7 trillion yen ($12.2 trillion) in the year starting April 1.

US treasuries are also under severing threat form calculating the losses of Japan. Since when Japan will go for rebuilding its states then it might press the button of selling foreign holdings. Japan is the second-largest holder of Treasury securities, with $882 billion at the end of 2010, following China's $1.16 trillion, according to U.S. Treasury data. This sell of will create global sell of for the world financial markets. Dollar will be worst affected with correction in many asset classes due to pull out of Japanese funds. Japan is the second-largest holder of Treasury securities, with $882 billion at the end of 2010, following China's $1.16 trillion, according to U.S. Treasury data. Moreover the insurance companies will have to sell their holding across various asset classes which will further initiate a correction for all assets classes. Japan’s sovereign debt was recently downgraded, financial markets may become more wary of even an incremental increase in government borrowing and bond issuance

Japanese investments in India were on the rising steps. the India Brand Equity Foundation has released a report "Proven Strategies: Japanese Companies in India" which records that about 71% of surveyed Japanese companies in India planned to raise their investments in India. The report surveyed 25 Japanese companies in India and profiles 17 Japanese companies in India. After the crisis all these investment planning will get stopped affecting the long term strategic growth of the Indian economy. Information technology sector will also a take hit from the collapse of Japan. Japanese firms are setting up software development centre’s in Bangalore, India. Factory shutdowns, power cuts and the impact on consumer confidence may hurt Japan’s GDP for a period of months, while contributing to growth later as reconstruction occurs.

These include electronics industry giants such as Sony, Matsushita, Fujitsu, Toshiba, among others. All these are now uncertain for quite some time.

Recently the Japanese investors were flocking for growth from investments .Japanese investors were hungry for yield in a low-interest environment. India was their favored destination followed with Europe and other nations.

JAPAN@U.S

I read somewhere that many are whispering that rebuilding Japan will proposer the global economy particularly the struggling ones. I repeat here that again that every economy survives at the cost of another economy. Japan rebuilding will bring growth but with a high cost. It is hardly important to any one what financial crisis Japan will face but every one is eager to know what crisis the other economies will face from Japan earth quake. Japan will make it difficult for US treasuries and other nations as redemption of investments will triggered off. Gold and other precious metals may see some selling pressure from the Japanese earthquake and tsunami.Preliminary estimates reckon the disaster could knock around 1% off Japanese GDP.

Among all these this disaster can bee a boon for the other nations as rebuilding of infrastructure and other segments will bring investment opportunities and job opportunities for those nations who will come forward towards Japan. In this case Indian infrastructure migh face some hardships since capital requirements will be the deciding factor for the growth of Japan and Indian infrastructure. In other words the growth of Japan economy will fetch more return to investing nations as compared to investments into Indian infrastructure. This may sound like some thing strange but think for a moment where you will invest your money where growth rate will be high with return more guaranteed. Don’t forget Indian markets are fighting with corruption boons. Japan in fact stays away from all these for the next 3 years.

Indian economy will face some tightness in foreign investments into the country. Time will be the best speaker so wait and watch.

CRUDE PRICES & BLESSINGS FOR U.S.

2011-03-13T16:18:00.000+05:30

Every Economy is having discussion regarding finding ways of managing the fiscal surplus or deficit with respect to rising crude prices. Its know to every one even the 5 years child that due to the tension of Libya the crude prices are set to climb high. What we are busy in finding is the level to which the crude prices will climb and how long the tension of Libya will fill the pockets of Sovereign funds. In my previous articles I have depicted that one economy makes growth at the cost of another economy. In pure economic terms every economy cannot prosper at the same time. History stands for the proof.

NEW SOVEREIGN FUNDSThe high crude has brought smiles on the Middle East companies. Once again their pockets of Sovereign funds will swell like Elephant Size egg. Thank god we don’t find elephant eggs otherwise that should have fell short of the original size of the Sovereign Funds size. The aggregate assets under management increased from $3,590bn in 2010 to $3,980bn or 4 trillion approximately, at the start of 2011.So now one can imagine how hard it is to describe the size of the fund.

The difference between the benchmark price and the prevailing price of oil is usually paid into the Excess Crude Account. This amount is being kept and transferred to another account for deployment or investments purpose. Very recently the African Government is coming out with a policy for creating and doing investments through sovereign funds. It is expected to cease soon, as the Senate has joined their House of Representatives counterparts to record a significant progress on the passage of the Sovereign Investment Authority bill.

The bill seeks to invest a portion of the excess profit made from crude oil sales in the Sovereign Wealth Fund to be held and managed by the Nigerian Sovereign Investment Authority. The authority is expected to invest the funds in a diversified portfolio of medium and long term investments "for the benefit of future generations of Nigerian citizens.

UAE INVESTMENTSAs we all know that UAE is the biggest sovereign wealth reserve and also one of the biggest investor of the world. Very recently UAE is going to invest a huge block of sovereign wealth fund into Chinese agriculture segment. The UAE and other Gulf states in collaboration with Singapore companies are entering the Chinese agriculture market to ensure food security. There has been a considerable increase in the number of Singapore food companies, showing interest in expanding their presence in the UAE and Middle East. He said the number of Singapore companies in Gulfood almost doubled from 24 companies last year to 40 companies in 2011.

US AT THREAT FROM SOVEREIGN

Large U.S. banks went to sovereign wealth funds with hat in hand during the crisis. From 2007 to 2009, Wall Street sought tens of billions of dollars from Saudi Arabia, Abu Dhabi and Kuwait - as well as China and South Korea - hoping to shore up their balance sheets with those cash infusions. These investments have been unable to generate the return as dreamt while doing the same. The US is now of great concern about the return being generated on these funds since if they don’t proposer the sovereign funds might press the button of pull back. Another concern is that rising fiscal deficit might force the sovereign inventors to transfer their funds into other economies and resulting a tide for the dollar.

Overall the credit rating of US is at very much risk. The fiscial deficit of 14 trillion dollars is now turning out to be a night mare for the US government. The US government needs to improve and find solution to manage the fiscal deficit other wise foreign investments from US will flow to some other economies.

One will be surprised that high crude prices are turning out to be blessing for US economy. U.S. remains a popular investment for sovereign funds and other major foreign investors. This is due to its relative investment safety and stability when compared to Europe, which is suffering through a debt crisis, and more volatile emerging markets. This is the reason why US is going to advantageous when crude prices will be back to the level of 2008.One must understand that US needs funds for its economic life. It has no room for further Quantitative Easing measures. All its free money is on the way of exit.

U.S. policy makers are designing polices to become more open to foreign investments and specifically in offering tax breaks and loan guarantees to get funds like the China Investment Corp. and the Government of Singapore Investment Corp. with some $4 trillion in assets investing in U.S. infrastructure.

The $71 billion Australian sovereign wealth fund has also entered a joint venture with US pension fund/financial services group TIAA-CREF (Teachers Insurance and Annuity Association, College Retirement Equities Fund) to pursue further US investment opportunities over the next two years.

The US government will face a very hard time in drawing funds for its economy. This is one of the reasons why many financial institutions who were having investments into US treasuries are taking an exit button in the present market conditions. PIMCO's Total Return Fund (PTTRX) have exited all its holding from the treasuries. In January 2011 it was holding 125 of the portfolio into US Treasuries and in the month of February its holding is simply ZERO. The prime reason for this is that once the $600 billion QE2 comes to an end the interest rates are bound to go up form US Fed. Since government debt competes with corporate debt for bond investors' money, corporations will also soon need to pay higher interest rates to raise cash. Hence dollar is getting liquidated for the time being.US in under deep nightmare about the fear of loosing investments from the recent and old sovereign funds inflow.

US is busy in making arrangement to attract the high crude prices profits where as the rest of the world struggles to tame inflation and rising food prices.

CHINA THE BIRTH OF NEW ECONOMY.

2011-03-13T12:53:00.001+05:30

The year 2011 started with a bang of flow of economic data and budget cuts across many nations. We know that as the time progress the flow of capital will take new shapes and new meanings for different nations. We are already witnessing imbalances of currency valuation, much of the credit of this goes to the uneven fiscal deficit of struggling economies. The economic data’s might paint a rosy picture of the state of the economies but in real terms one itself knows the proof of the pudding.

Among all these the Forbes released the prestigious data of the Billionaires list. In the year of 2009 when the Forbes Billionaire list was released we found new billionaires being born from China and Asian countries mostly replacing the western economies. This year also in 2010 we find that 49 new billionaires have taken birth. It seems that Chinese economy is developing new growth opportunities for the People of China.

TRANSITION OF EXPORT TO DOMESTIC GROWTH:

Among all these china posted a negative fiscal position. The trade deficit of china grew to4.5 billion yuan/ $7.3 billion (dollars).Exports were of china grew 2.4% where as imports grew 20%.The sudden upward push in import is due to the new economic policies which are being adopted by china is the coming days. China in its 12th Plan starting from 2011-2015 will focus on domestic growth of the economic. It will focus on developing the Tier 2 and Tier 3 class of living standards and bringing growth within its own development. This shift of economic policy will act as a Tectonic Plates shifting below the economic lands of the world. Although this shift will be a gradual process but tremors of the quake will be felt across the world financial markets.

In the past couple of sessions china have been acting as one of the biggest buyer of coal, iron ore, copper to fuel the growth of its domestic manufacturing and construction growth. If we combine all the figures of Chinese’s trade we find the exports are having a growth 21% where as imports stands at 36%.Now a question might come up in the mind that is china going to put brakes on its growth wheel which is running on the pedal of export. I am sorry to disappoint that no china is entering into a new phase of the growth where domestic economic growth will bring the double digit of Chinese GDP growth. Another advantage of higher imports and lower exports is that it will help the yen to be free from any debates of valuation. More over the sudden price increase in the crude will exert pressure on Chinese economic much more as compared to any other economy. The prime reason behind this is that a $1dollar increase in price of crude results to cut of 41.9 billion trade surplus of china, resulting to negative fiscal position.

In between china is attracting huge investments in various sectors primarily in energy efficiency, environmental issues an social investments. Its quest for alternative energy is stupendous and moving much faster as comparison to any nation on the planet. Chinese clean energy companies are coming out with IPO in 2011 to raise capital for the meeting the demands for alternative energy. Total amount of 1.1 billion amounts IPO will hit Chinese markets in 2011 from this segment alone.

FINANCIAL OF CHINA:

Chinese policies are bringing floods of FDI investments into china mainland.FDI investments in china swelled up to 2243 foreign funded enterprises. This growth is of 20.2% (YOY) and the amount of flow is 1.3billion dollars with a growth rate of 23.4% (YOY).In 2011 china is bringing reforms in its exchange rate and interest rate policies. The new policies of interest rates of china will help to fight inflation and asset bubble creation.

The below image shows the growth of China FDI in 2009-2010.

Below is the image of FDI investments in 2010

As I said earlier the picture of the economies are not always rosy as painted by the economic data. China is also having sever problems of debts too. The debts of Chinese government stand at $1.03 trillion equal to 17% of the Chinese GDP. But the strange fact is more brutal that Chinese is sharing half of the bad debts of US treasuries which is held by China. China have already taken steps in reduction of the debt and treasuries of the US. China is now a good friend of Europe. China is doing huge investments in to the European Sovereign Debts and infrastructure investments. Their are two prime reasons behind such an act is that China does not want euro to be diminished as its acts challenger of US Dollar and last but not the least china is backed at the G summits when currency manipulator voice is raised against China. Europe is now the 2nd largest trading partner of Europe.

Chinese pension funds and other instruments are scouting for investments across the globe. Among them few funds are coming to for Indian infrastructure too. Korea's 324 trillion won ($287 billion) National Pension Fund and China's $116 billion National Social Security Fund are both planning international expansions of their investments portfolios.

In China, more than 90% of the social security fund's total assets are invested domestically, mostly exposed to fixed income, equities and private equity. Overseas investments only account for about 7%.The fund is expected to grow to 20% in the 12th plan of Chinese economy. The fund is expected to grow to $300 billion by 2015, with a potential increase of about $50 billion in overseas investments.

Chinese investments into fixed assets have also swelled up showing indication that its 12th year plan is on its way of journey. Fixed-asset investment in China rose 24.9% year-on-year to 1.74 trillion yuan during the first two months of 2011, according to the National Bureau of Statistics. The central government recorded a 6.3% year-on-year increase in fixed-asset investment to 138.5 billion yuan during the first two months while investments by local governments rose 26.95 to 1.61 trillion yuan. When we dig further we find China invested 67.4 billion yuan on the production and supply of electricity and heat during the first two months, an increase of 1.3% year-on-year.

The oil and natural gas sector saw a 7.8% year-on-year rise in fixed-asset investment to 10.8 billion yuan. The railway sector attracted total investments of 58.6 billion yuan, up 45.3% (YOY).

CHINA RUSSIA CELEBRATION-THE NEW INVESTMENT GROWTH

In the past we have discussed a lot about the Chinese investments into the Africa but now china is spreading its diversification into other economies also. Very recently China and Russia celebrated the 10th anniversary of their signing the China-Russia treaty on good neighborliness, friendship and cooperation, as well as the 15th year anniversary of the establishment of mutual partnership. Over the past five years, Sino-Russia trade has nearly tripled in value.

• Trade has been mainly composed of natural resources: in 2010, crude oil and natural resources made up 48.5% of overall bilateral trade (something which will likely remain consistent as China continues demand energy inputs to fuel its rapid growth). China has then used those inputs, and then sent low to medium-value equipment back to Russia. Machinery and electronic products accounted for 68 percent China’s exports to Russia in 2010.

• In November both the nations dropped the use of Dollar as currency for trade practices. They both opted to use local currencies. That same month, a 866 kilometer-long railway opened, connecting Russia’s largest port city on the Pacific Ocean, Vladivostok, with Northeast China. In January, an oil pipeline linking Daqing in China’s Heilongjiang Province and Skovorodino, a Russian city, officially began production, and is expected to transport 15 million tons of crude oil per year, with a 30 million ton per year benchmark set for the immediate future.

• In February, EuroSibEnergo PLC (Russia’s largest independent power company) and China Yangtze International (China’s largest listed hydropower producer) announced an official JV—YES Energo Ltd—to develop hydro and thermal power projects in Russian Siberia.

How big is Russia?

Now question might come up in the mind that How big is the Russian economy on the map of Financial Market. By nominal value, Russia’s economy is the 10th largest in the world. By geography, Russia is the world’s largest country. According to UNESCO, it also has the world’s largest supply of energy and mineral resources (e.g., natural gas, oil, coal, precious metals, arable land). Growth rates have been fairly impressive since the Soviet Union’s collapse in 1991. Under Putin, Russia’s GDP doubled, and rose from being the 22nd largest economy in the world to the 11th. The size of Russia’s middle class has grown from 8 million to 55 million people during those same years. However, Russia’s massive geography, untapped natural resources, and relatively low position on the global value chain indicates a huge potential for growth that is still yet to come. I hope this was enough to make my readers understand how big is Russia on the map of Financial Market.

In the year 2011 Russia and China will become the Best Trading partners.

• Foreign trade turnover of Russia with China increased by 43.1% and has reached US$55.44 billion, according to the both Federal State Statistic Service (Roskomstat) and Chinese customs authority data.

• Chinese exports to Russia increased by 69% and amounted to US$29.61 billion compared with 2009 (US$17.496 billion), while Russian exports to China increased by 21.7% to US$25.84 billion.

• Trade in crude oil and natural-resource products accounted for 48.5 % of the overall bilateral trade volume, compared with 50% in 2008.

• In 2008, Russian-Chinese trade turnover grew by 38.7% to US$55.9 billion compared to 2007, with Russian exports to China having grown by 33% and imports from China by 42.3% . Some 74% of Russian exports to the PRC then was natural resources, and 50% of overall bilateral trade, while 68% of Chinese imports to Russia were machinery and technical equipment.

• China’s outbound direct investment in Russia was US$2 billion in first half of 2010 and is expected to hit US$12 billion by 2020.

So the new relation of trade practices by china will make the Chinese economy less dependent on US shopping floors. China is developing internally as well as extending and developing new trading partners across the globe. China will create little bit of tension when the process of shifting resources from export to domestic growth will take place. Volatility and trail and error will be their in the shifting process. We will witness a new economy birth for China. It is the world's fastest-growing major economy, with average growth rates of 10%for the past 30 years. After 30 years its going to change and take a new birth of its economy. We will have to wait and watch the New Baby and its acts.

STOCK PICKS@DIWALI.

2011-02-21T11:44:00.001+05:30

Dear All,

These are the stock picks of mine where one will find mixed portfolio of mid-caps and large caps. The pure large cap will come to you by this week. But if one desires to rake little risk and but take huge potentiality of the upward growth of these companies in the time frame of Diwali then invest in them.T he price at which one will invest will come to you very soon.Infact i did not provide the prices since i wanted you to have some homework at your end to find out and discuss are these picks of mine are worthwhile.

I have kept one thing in my mind when selecting the stock picks is that these companies have an immense potentiality to move new heights in the coming decade. The companies are well running in this highly expensive (INFLATION) competitive market. The companies have immense growth and fund capabilities with well established operating margins and Balance sheet. They have adequate cost control in comparison to its peers. So check out and discuss and work on the home work. Very Soon the price of buy levels will come up with varying sensex levels.

1. Thermax Ltd.

2. Godrej Consumer Products Ltd

3. Polaris Software

4. GAIL India

5. Bharti Airtel

6. Reliance

7. GVK Power and Infrastructure Ltd

8. GMR Group----

9. Eros International Media

10. IL&FS Transportation Networks (India) Ltd (ITNL)

11. IRB Infrastructure Developers (IRB Infra)

12. Mahindra & Mahindra.

13. Maruti

HAPPY INVESTING FOR CASH MARKET AND NOT FOR FUTURES.

CHINA FOGETS EUROPEAN HUMILATION-JOINS FOR A NEW START.

2011-02-05T13:21:00.001+05:30

After the Debacle:

Europe has covered the attention of the financial media in the past 6 months. One after the other the financial crisis have triggered fear and fought among the investors across the globe. The stock markets around the world were rattled and sleeps of the European nations went for a vacation due to rising unemployment. The government debt of Europe swelled like an Elephantiasis leg. But with the blessings of Greek Gods and other European Nations God the Europe was able to come out of the drowning session.

The Debt of European nations is quite big and is half of the US deficit. Ireland, Greece and Portugal consist of euro 620 billion. This is 6.8% of the European GDP. China, Japan, and Russia bought Spanish Bonds.

Europe Opened the Gates:

Europe have decide to double the investments into Renewable Energy to the tune of euro 70 billion. Resources are being shifted across Europe to expedite the work of renewable energy. European leaders launched Friday a trillion-euro bid to slash dependency on Middle East oil and Russian gas, clearing the way to place nuclear power at the centre of 21st century needs.

Germany Hungary and Sweden have been able to meet their 2010 targets for electricity and transport. Hence one can claim the business and development is happening in some parts of Europe. China is doing massive expansion and investment activity in Europe. China is busy in opening up new branches. Industrial & Commercial Bank of China Ltd., this month is opening branches in Paris, Brussels, Amsterdam, Milan and Madrid

Scouting for new business deals and exploring every business opportunity. Chinese banks are gearing up for final lap of closing deals of acquisition of European banks. One of the prime reasons for China to come forward to do investment is that its kitty bag has swollen to $ 2.85 trillion, where as 60% of the treasuries belong to US. China is shifting its assets to other nations to diversify and reduce the risk of US exposure. Today Chinese companies are extending beyond their own territory of business limitations. They are actively scouting for investments avenues from India to US. The EU and China are working on a possible treaty to increase bilateral investment and end trade disputes.

Chinese leaders have won praise from European officials for their pledges to support and invest in struggling euro-zone countries such as Greece, Portugal and Spain. Beijing is already a major investor in Greece and in talks with Ireland for investment opportunities. China has already bought nearly 50 billion of Spain's government debt; Chinese Vice Premier Li Keqiang has just concluded a visit to Spain, Germany and Britain with over 100 prominent Chinese businessmen.

So till now the journey of trade cooperation seems to be taking new shape I the New Decade of International Trade.

China@2020

China have triggered the journey of the new decade with some dramatic policies and steps where by the year of 2020 china will be in such a place where every nation will sets it as a Benchmark. China is focusing on up gradation of every aspect of its economy to become unbeatable. If we look at the R&D part of investments being adopted by china US and Japan we find clearly china is way ahead and trying to move beyond any tracing point.

China has increased R&D investment by 10% each year for the last 10 years, sustaining this rapid growth rate through the global recession. Battelle estimates that China will invest $154 billion in R&D in 2011, passing Japan's $144 billion. If we going with the ranking position of R&D investments being made in past and will be made in future we find quite surprising facts and figures.

The United States is now sixth place in R&D investment as a percentage of GDP, falling behind nations like Japan, South Korea, and Israel. R&D investments in emerging economies like China, Brazil and India are expanding at rates far higher than the United States. China, for instance, will increase its share of global R&D from 11% in 2009 to 13%in 2011.China wants to take advantage of the struggling economies since they will not be able to make a higher allocation for R&D activities. There are budget cut backs by the struggling economies and hence allocation to R&D will be hit. China wants to capitalize over here. In other words every nation will try to play the same act.

China Overseas Finance Dragon.

China non bond investments had taken new shapes and growth in 2010.Last year we find that there was a growth of 12% in non- bond investments. If we look at the below chart we don’t have to waist time for reading further lines. It will save my time and your time to read such long description. In the below chart you will find country specific non bond investments being made by China in 2010.

The above chart makes one thing clear that there was a flood of money being lined up behind the doors of China which was realized through non bond avenues to reap the ROI. In order to make my readers more clear about the historical facts about which sector attracted how much I would bring you.

Chinese outward investment is steadily and unavoidably expanding and one must feel jealous about this country and its economic factors.

CHINA COMES TO RESCUE

2011-02-04T13:15:00.000+05:30

Last year the financial media was busy in covering the growth strategies and the asset bubbles being spooked by the Chinese government over the various asset classes. The world markets was suspecting another round asset bubble burst out which will bring out the Recession dinosaur .But thanks to the government of the china that they identified this growth and acted well before they assets were going to burst out the recession dinosaur was about to take to birth. This article will try to bring out the invisible investments being made by china despite being awarded with “Manipulated Mark”.

CHINA THE STRATEGIST

China is well known for its strategic growth- strategies being developed during 2009 when it torn out the recession skin from the Asian markets. The Indian market should thank China for showing the early recovery way out the recession dark nights. In 2010 china was under the top ladder of currency manipulation and we well portrayed as a villain for destroying domestic markets of the world. But looking in a different angle we find out that china currency was never undervalued or manipulated. In fact other currencies were overvalued leading the CPI to increase in those countries. China has a huge mass of population where the present living cost is still unbearable for the Chinese citizens living in china. Looking at the tall skyscrapers its is quite hard to find out the real living cost of China. Over here I would like to quote from William Shakespeare Gilded tombs do worms enfold.

CHINA COMES TO RESCUE:

With global currency imbalances due to large imbalanced fiscal debts among the various nations have resulted volatile currency valuations. This further has spooked commodity prices to rise up and eradicate the middle class living from the earth. The middle class is the worst suffers of the rising commodity prices resulting cut backs on normal living standards. The interest rates GOD have been awakened to control the devil of Inflation. The blessing so the GOD of Interest rates is that cost of borrowing is going up and resulting further increase in the cost of production and commodity prices.

India has started feeling the heat of rising cost of interest rate in the winter season. These heats have forced the Indian corporate to look for cheap overseas funds. Over here again China have come for the rescue. Yes China the much debated, the much adducted economic country of the world.

Currently India needs 100000 megawatt power projects by 2017.For this alone the Indian banks have raised their hands helplessly that they will not be able to meet the desired projects funding. $45 billion dollars will be required for the power plants equipments alone. India is looking forward to china for investments into Information & Technology sector. India needs around $1.5 trillion investments in Indian infrastructure for the next 10 years to keep the GDP growth around 10%. The ongoing five-year plan called for $500 billion of infrastructure investment. The next, which runs until 2017, will argue for $1 trillion. With India's public debt at over 60% of GDP, and a current account deficit touching 4% hence funding is going to be quite a hard stuff.By the time you read this data you have already found the FDI investments into India have dropped to levels of March 2003.

CHINA DESPITE BEING THE VILLIAN

We find the China who was being blamed in front of the media by the Wall Street heavy weights have silently entered in to joint ventures and corporate tie ups with Chinese investments. You might be shocked but that is the hard core fact that when the bugle of manipulated china was being blown, corporate tie-ups were happening at that point of time. Last year Chinese investments into Us was around the mark of $6billion.A small number but bigger that $100 million in 2005.

China have made investments in US business primarily into manufacturing plants, solar plants, and automotive. Total size of the trade among China and US last year was hanging around to the figure of $400 billion. China is attracted towards US solar sector for investments. Venture capitalist investments in US solar industry was to the tune of $1.67billion, an increase of 18% over the 2009 figure. At home china did an investment of $34billion in solar sector.

According to latest data released by the World Bank, China has extended loans to the tune of $110 billion to the emerging economies. This simply reveals that China is busy in shifting its resources from its own home to other nations. Development Bank and Import & Export Bank of China are the main leaders in the loans to emerging economies.

1377 Chinese companies have found investments avenues and growth areas in North America. The group of the companies primarily consist of small and medium enterprise.495 of this class of corporate have found investments avenues in North American manufacturing where as 14% in hospitality,14% in wholesale market and 13% in financial sector and last but not the least 56% wants to setup distribution channel in Canada.

Now if we look into the mirror of China and US we find from the other angle that is US investments in china is on the upward trend. US is shifting its operation jobs to China low cost based units. Over here I would like to draw the attention of the US government that what steps are being taken to reduce the unemployment. In fact if the manpower doesn’t shifts and only jobs then unemployment in US will be around 10%+ in 2011-2012.Jobs shifting results higher unemployment and burden of government debts.

In a recent report by the American Chamber of Commerce 79% of the business community wants to invest in Beijing alone. Now please explain yourself and ask questions to the US government what makes Dow Jones 11100 mark and what polices are being made in real and true sense to control the unemployment and why US is not having investments opportunities at home. Well when all these questions comes into the mind its time to move further ahead to find some cheese of cross border investments being made by china in my next article.

TURN AROUND BUDGET

Well if India needs funding to the tune of $1.5 trillion the Indian Banking System needs a radical change followed with Foreign banks givens adequate instruments in hands to finance the and meets the demand of $1.5 trillion. Securitisations and credit default swaps followed with insurance industry being allowed to invest more in infrastructure will reduce the burden to a certain mark up. Even FDI investments will not be suffice enough to support. At the same time India needs to solve the problems related to the Indian legal system of Environments, land acquisition, red tape and other infrastructure bottle necks. Since we all know that India is renowned for delay in execution of projects .If these bottlenecks are not removed the fund requirement unofficially will peg around $2.5trillion.Budget 2011 will be a path breaking if the government formulates policies keeping the above factors in mind.2011 Budget can be a “Turn Around Budget” for Indian economy

GOLD INTO BASKET ETF

2010-12-27T10:50:00.000+05:30

THE AWARD GOES TO……..

The “BEST INVESTMENT PRODUCT” award for the year 2010 does not go to Indian or china stock market neither to any particular economy. The award goes to Gold and Silver. Yes gold and silver have been the best investment and most favored and choice investment product for the year 2010.

In this year we found the price and demand of gold coming out aggressively as well as from all economies. As the emerging economies are having a higher savings rate and global imbalances are exerting pressure on the currency, the demand for gold will rise constantly. According to the Reuters Global Banking Summit Report gold is being used as an income and alternative savings instruments. This means the paper currency is replaced by Gold.

CONVERSION INTO ETF DEMAND

Moreover the more tight belts are being developed the more demand of gold will rise. The People's Bank of China said in August it would let its banks export and import more gold in a program to drive the development of the country's market in the precious metal. China is having a savings rate of 40% and hence its promotes among its citizens to save under gold.

China is doing massive advertisements through TV, Radio, SMs and other communication means to invest and convert the savings into Gold. Inflation is another blessing for the gold price. Uncertainty among investors forces them to turn to Gold as a hedge against unforeseen disasters. Whether it’s a recession or inflation Gold will act as the only way to survive any crisis among all situations.

In 2007, Mumbai-based Benchmark Mutual Fund became the first financial institution to offer a gold ETF . Since then, gold-based ETFs have drawn more and more Indian investors away from equity mutual funds. We have found in the recent figures that Equity Mutual funds schemes are reflecting outflow of cash. That outflow is the inflow in ETF made of gold. In India more raw gold prices and jewelry prices will increase the demand for gold ETF will increase taking this as an alternative investments avenue.

THE NEW BASKET

Once gold becomes more expensive, investors will start their quest for a search of a new metal. At that point of time we find silver making a similar rally like gold. Silver is being held by mankind about 250 million ounces to up to 650 million ounces of silver (These numbers don’t include silver jewelry).Hence the silver has more opportunities of further mining.

Once the gold mining comes to some stagnate level the price of gold will zoom up like any thing. This will make the yellow metal more expensive where as silver has yet to go a long way to catch up gold mining levels.

Moreover gold is only being used as an investment avenue from central banks to the one sitting next you doing trading in gold commodity. Where as silver are electronics, photographs, and jewelry. Now all these will exert pressure from various corners on the gold and silver price in the new decade.

As gold will become a scare resource in the coming year’s silver and platinum will see new decade of growth. All these will force the global and Indian market to come up with a Basket of ETF. In other words we will need Metal ETF. Already in this year 2010 we find the first metal ETF got to see the light. The strangest part is this that more gold and silver is being consumed industrially and investment wise, other metals are coming out to replace and balance the expensive price at retail level.

Silver and Platinum and basket of ETF will be the next phase of tremendous growth. Very recently first ever precious metals basket ETF which consist of Gold, Silver, palladium and platinum, launched allowing investors to have ownership of each share equal to about 0.03 troy ounces of gold, 1.1 ounces of silver, 0.006 ounces of palladium, and 0.004 ounces of platinum.

As gold and silver is becoming more expensive for retail investors across the world ETF is becoming the most favored investment choice. Silver, palladium and platinum are used in a wide range of industrial applications and hence the demand is increasing more than the Gold.

Below is the Chart of all Metal Basket ETF

PALL - Palladium Metal ETF (holds physical metal)

GLD - Gold ETF (holds physical metal)

SPY - S&P 500 Benchmark Index

JJT - Tin ETF

JJC - Copper ETF

FXF - Swiss Franc

PPLT - Platinum ETF (holds physical metal)

GDXJ - Junior Gold Miner ETF

SLV - Silver ETF (holds physical metal)

PAAS - Pan American Silver Corp - Silver miner

It’s nice to note that the trend call was a good one. Especially the pick of Tin and metals with an industrial double use like Silver and Palladium as an alternative to gold.

WHAT WE NEED?

The Indian markets have only witnessed the growth of Gold ETF. We don’t need any data to justify or bring the growth of Gold ETF in India. But we must understand and design products where apart from Gold ETF basket of ETF is required to bring consistent growth for Indian investors. We should not focus on particular product based ETF. We should look for long term growth where basket of ETF will give consistency in growth and not the risk of a particular focused product/metal. For example if today a gold price goes for a toss and there is a correction in the price Gold ETF will loose the sheen. Investors will face tremors of the crash. But if we do investments in Basket of Metal we will not face the tremors similar to Gold or any particular metal based ETF.

The new decade starting from 2011 needs products more focused to give maximum risk management and protection in consistency in generating return to the investor. In the year 2011 investors needs and preference of investments is getting shifted from the conventional investments theory to more higher levels more ranged bound products. The Indian financial gurus need to capitalize on this part of investment products. The composition of basket of metal ETF should consist all the metals which are expected to become expensive like Platinum, Palladium, Aluminum, Copper, Zinc, along with Gold and Silver. All these metals will keep on giving return to an investment irrespective of any time any recession any boom phase of the world economy.

Indian financial market is still far off from the innovative products cycle. What we have seen in the past decade was the first baby steps of product information and investments. It can be called as the Stone Age. Since it was the age of experimenting and not the age of Wheel Invention. The next decade belongs to the Wheel decade where an innovative product needs to be invented. Now its time to see whether Indian financial market enters into the Wheel Age or not and how well the Wheel spins.

CURRENCY ETF-THE NEW DIVERSIFICATION

2010-12-25T20:41:00.007+05:30

CALL OF THE HOUR.

With Global imbalances on the never ending rise and huge budget deficits of the Developed economies currency fluctuation is the new tremor of the quakes being felt. With the recent debacle of European nations we find

In other words in the coming year of 2011 we will find Europe and US going for massive budget cuts and imposition of higher rate of taxes. This will create burden and slower growth opportunities to the tune of 100% .Since budget cuts will lead to slower growth and imposition of higher taxes will result to less savings for the consumer. All these will exert pressure on the Euro, Pound and US dollar. Their will be a huge reflection of fluctuation in all these currencies. Moreover when we look towards the Asian and Developing economies we find interest rates pull back from post recession levels to pre-recession levels will exert further pressure on Yen, Rupee primarily.

In the past couple of months many economist across the world have raised their voices on currency war and many such subjects. Well say as diplomat one should make money from any war. Hence these currency wars need to be exploited and money needs to make from the war. Currencies are driven by the macro environment which is it a hot topic, and because currencies are valued relative to other currencies, if one goes up then the other one is going down. Thus an investor is always able to profit through currencies, regardless of the market direction.

GLOBAL ETF:

If we look globally we find that their have been huge demand and financial products related to Currency ETF. In the developed economies currency ETF have made investments and currency fluctuation a profit making game of the financial streets. If we make a quick look towards the probable currency ETF we find on the ladder of Developed economies then one will find the proof of the pudding.

Broad Currency ETFs

• AYT – Barclays Global Emerging Markets Strategy (GEMS) Asia 8 Index ETN

• ICI – Barclay’s iPath Optimized Currency Carry ETN

• DBV – PowerShares DB G10 Currency Harvest ETF

• CCX - WisdomTree Dreyfus Commodity Currency Fund

• CEW – WisdomTree Dreyfus Emerging Currency ETF

• JEM - Barclays GEMS Index ETN

• PGD - Barclays Asian & Gulf Currency Reval ETN

ETFs that Track a Single Currency

United States Dollar ETFs

• UUP - PowerShares US Dollar Bullish ETF

• UDN - PowerShares US Dollar Bearish ETF

United States Dollar / Foreign Currency ETFs

• GBB – iPath GBP / USD Exchange Rate ETN

• CNY – Market Vectors Chinese Renminbi / USD ETN

• ERO – iPath EUR / USD Exchange Rate ETN

• INR – Market Vectors Indian Rupee / USD ETN

• JYN – iPath JPY / USD Exchange Rate ETN

• ADE - ELEMENTS Australian Dollar / USD Exchange Rate ETN

• EGB - ELEMENTS British Pound /USD Exchange Rate ETN

• ERE - ELEMENTS Euro / USD Exchange Rate ETN

• CUD - ELEMENTS USD / Canadian Dollar Exchange Rate ETN

• SZE - ELEMENTS USD / Swiss Franc Exchange Rate ETN

Euro ETFs

• FXE - CurrencyShares Euro Trust

• ERO – iPath EUR / USD Exchange Rate ETN

• EU – WisdomTree Dreyfus Euro ETF

• ULE – ProShares Ultra Euro ETF

• EUO – ProShares UltraShort Euro ETF

• URR – Market Vectors Double Long Euro ETN

• DRR - Market Vectors Double Short Euro ETN

• ERE - ELEMENTS Euro / USD Exchange Rate ETN

British Pound ETFs

• FXB – CurrencyShares British Pound Sterling Trust

• GBB – iPath GBP/USD Exchange Rate ETN

• EGB - ELEMENTS British Pound /USD Exchange Rate ETN

Even when we look into the pockets of Developing economies and Asian economies we will not find such numbert of ETF as compared to Developed Economies.

Japanese Yen ETFs

• FXY – CurrencyShares Japanese Yen Trust

• JYN – iPath JPY / USD Exchange Rate ETN

• JYF – WisdomTree Dreyfus Japanese Yen ETF

• YCL – ProShares Ultra Yen ETF

• YCS – ProShares UltraShort Yen ETF

Australian and New Zealand Dollar ETFs

• FXA - CurrencyShares Australian Dollar Trust

• BNZ – WisdomTree Dreyfus New Zealand Dollar ETF

• ADE - ELEMENTS Australian Dollar / USD Exchange Rate ETN

Broad and Sector China ETFs

• CHIB - Global X China Technology ETF

• CHIE - Global X China Energy ETF

• CHII - Global X China Industrials ETF

• CHIM - Global X China Materials ETF

• CHIQ - Global X China Consumer ETF

• CHIX - Global X China Financials ETF

• CHXX - China Infrastructure Index ETF

• CQQQ - Claymore China Technology ETF

• CZI - Dixerion Daily China Bear 3x Shares ETF

• CZM - Dixerion Daily China Bull 3x Shares ETF

• ECNS - iShares MSCI China Small-Cap Index Fund

• EWGC - Rydex Russell Greater China Large Cap Equal Weight ETF

• EWH - iShares MSCI Hong Kong Index ETF

• FXI - iShares FTSE/Xinhua China 25 Index ETF

• FXP - UltraShort FTSE/Xinhua China25 Proshares ETF

• GXC - STRK SPDR S&P China ETF

• HAO - Claymore/AlphaShares China Small Cap ETF

• PEK - Market Vectors China ETF

• PGJ - PowerShares Golden Dragon Halter USX China ETF

• SNO - NETS Hang Seng Index ETF

• TAO - Claymore/AlphaShares China Real Estate ETF

• YAO - Claymore/AlphaShares China All-Cap ETF

• YXI - Proshares Short FTSE / Xinhua China 25 ETF

Chinese Currency ETFs

• CYB - WisdomTree Dreyfus Chinese Yuan ETF

• CNY - Market Vectors Renminbi/USD ETN

Broad Currency ETFs that include China Currency

• AYT - Barclays GEMS Asia-8 ETN

• CEW - WisdomTree Dreyfus Emerging Currency ETF

• PGO - Barclays Asian & Gulf Currency Reval ETN

This clearly indicates that Asian economies and developing economies are becoming new island of new financial products. The last several years have seen tremendous innovation on the product development front in the ETF industry. As a result, investors now have more options than ever before, including increasingly targeted products and access to increasingly complex asset classes and investment strategies. The industry remains very top-heavy, with a handful of funds accounting for the bulk of assets and trading volume. “The last several years have seen tremendous innovation on the product development front in the ETF industry. As a result, investors now have more options than ever before, including increasingly targeted products and access to increasingly complex asset classes and investment strategies. The industry remains very top-heavy, with a handful of funds accounting for the bulk of assets and trading volume. The economies are coming up with new currency products since earlier this type of global currency imbalance was not their. As the word of globalization has spreads the more demand to protect the downside risk of currency fluctuation have been developed.

MECHANISIM OF CURRENCY ETF GROWTH.

Investors are shifting from traditional financial products to new globalised products. Earlier financial products used to remain with the wall of a particular country where as now with the wind of globalization in trade practices currency ETF is picking up in the Developing economies. While designing investment portfolio Currency ETF is now becoming a new trend of demand. We will find currency ETF demand coming primarily from IT industry. Since they are prune to the highest degree to currency fluctuation. Global cross border investments needs currency ETF and this demand of trade is picking up each day in the Asian as well as developing economies.

Earlier currency ETF was acclaimed as risky product since it was quite hard to predict and speculate the movement of the currency. But after recession and further blast of financial time bombs across the world have rattled the currency market and hence brought imbalances as the new guest. Currency fluctuation is the new child which will keep on growing as long as Developed economies will not bring down fiscal deficit and GDP and other economic wheels don’t pick up the pre-recession growth numbers. Until then we will find money being printed from currency ETF. Interest rate fluctuation across the global market is another boon for the currency ETF market.

In the developed economies we can foresight a prolonged lower rate of interest rates and no near future of rise in rates. Where as in developing nation we have witnessed interest rates hike followed with more hikes to come up in 2011.Infaltion is one of the most important game players behind currency ETF. When ever inflation goes up as incase of India and China monetary measures are applied resulting surge in currency ETF gains. When ever inflation don’t come up as in case of US printing of money brings gains for currency ETF. So in either of the both ways currency ETF will bring growth for the investments.

GLOBAL CURRENCY ETF GROWTH/RETURN.

SIMPLICITY ADVANTAGES .

Currency ETF is not like the derivative products where complexity is the other name of its identity. Currency ETF are much safe as compared to them. Indian economy is yet to witness products of currency ETF particularly from the mutual fund industry. The mutual fund industry can find lot of opportunities from Currency ETF products. As less people are interested to keep their savings under any currency form as its quite impossible to predict which currency will devalue the savings, in that case currency ETF will give them a balanced position to and risk control over fluctuating currency.

Currency ETF favors an investment opportunity in many ways. Shedding away the unnecessary part of the advantages of currency ETF and just finding out the prime growth drivers of the product we find:

Foreign Exposure

If you feel there are some foreign regions that are potential growth areas or emerging markets, a country ETF may be the perfect asset to increase your international exposure.

Diversification

If your portfolio is heavy on domestic investments, some foreign exposure may help balance your overall stratagem. Adding a country or region ETF to your portfolio can expand your investment horizon.

Risk Management

If your portfolio or business has exposure to a certain region, investing in a foreign ETF may be a good way to reduce that risk and protect you against negative developments in certain countries.

INDIAN MUTUAL CURRENCY ETF :

Indian mutual fund industry needs to bring currency ETF into the market so as investors in this segment are not from only HNI or retail. We will find Indian corporate doing parking of funds to rep the profits of currency fluctuation. Apart from profit one makes diversification and risk management will be the key driver of Indian Currency ETF products. I will not be surprised to find debt funds loosing sheen and surge in currency ETF investment avenues.

The Indian mutual fund industry is yet to grow in product specification. We have developed a number of funds of same nature but less new diversified products matching the global risk management have been developed. We need products where domestic as well as global investments in Indian mutual funds will take new shape and size. We might see many new mutual funds in India in the new decade. But we need to design them accordingly.

ALTERNATIVE ENERGY-THE QUEST

2010-12-14T11:21:00.000+05:30

Search of Alternative Energy.

The day of Oil and Coal is going to come to an end. Don’t get shocked by hearing what I said. Coal and Oil is not going to get depleted neither not going to get evaporated from the earth. We know that when the crude price was floating around $147/barrel the world economic condition was under severe pressure .Prices of commodity became expensive and inflation stated picking up followed with application monetary restriction polices. Apart from oil price affects on commodity and cost living, coal imposed further pressure on the cost of production and operation of the industries globally. The industrial sector uses more energy globally than any other end-use sector, currently consuming about 50% of the world’s total delivered energy. Energy is consumed in the industrial sector by a diverse group of industries—including manufacturing, agriculture, mining, and construction—and for a wide range of activities, such as processing and assembly, space conditioning, and lighting. The below images shows the world emery consumption and its future growth.

The global economic recession that began in 2008 and continued into 2009 has had a profound impact on world energy demand in the near term. Total world marketed energy consumption contracted by 1.2 percent in 2008 and by an estimated 2.2% in 2009, as manufacturing and consumer demand for goods and services declined.

As more development and economic prosperity is going to happen in the world the dependence on coal and oil will increase. But one must bear in mind that coal and oil reserves are on the way of depletion and environmental protection and cut back on emission is the need of the decade. Every country globally is busy in formulating industrial policies to reduced emission and abide the standards of emission. All these clubbing together have made to quest for alternative energy segment. When we look around the world we find immense potentiality and growth of alternative energy. In this regard in this article we will bring you the facts related to alternative energy investments and growth opportunities across the globe.

US Alternative Energy-The survivor

The US Alternative energy particularly the one in Wind and Solar is scouting for policy changes to promote and unleash the growth of the sector. According to the latest report from the solar and wind energy associations of US the Treasury Grant Program has supported 1,179 solar projects with total investments of over $1.3 billion in 42 states and 211 wind projects with total investments of over $15 billion in 38 states. These sectors will act as survivors to the US economy from the climbing unemployment rate of 9.8%. This alone will create job opportunities for the reeling US economy to the tune of 43,000 jobs by the end of the year, along with it will enable 4,250 megawatts of renewable power projects to come online. According to AWEA's research, there are over 15,000 jobs in the wind industry manufacturing pipeline alone. Very recently the Berkeley report has estimated that wind energy segment will bring 55000 new jobs in the coming days. The new capacity addition will reduce the burden of rising import bill of US due to the rising global crude prices. This programme further allows the owner of commercial solar or wind property to receive a 30% grant.

Overall employment has reached 85,000 in the American wind industry, as installed capacity has grown 40 % in each of the past two years. Wind now generates 20% of the electricity in Iowa. High winds pushed wind power to 25% of the electrical generation in Texas, according to AWEA.

Europe-Alternative ways of growth

Along with US, Europe is also finding new avenues to propel up the growth of the alternative renewable energy segment. Germany is focusing very strongly for the alternative energy segment. In Germany, solar cell prices fell and demands increased because the government decided to subsidize anyone who produces solar power. Now, solar power produces up to a tenth of Germany's electricity on sunny days. The three leading manufacturers on the German market for wind turbines were Enercon, Vestas, and Repower Systems.

About 90,000 people in Germany were employed in the wind power sector. In 2009, Germany had a total of 21,164 wind turbines installed with an output of 25,777 MW (compared with 23,902 MW at the end of 2008.

This clearly point out the probable investment being focused and ROI being generated from this sector. Germany has made clear plans of its alternative investments till 2020. It will produce 18% of its overall energy requirements from renewable sources.

One of the mains reason for such a turnaround for Germany faster recession was the amendment of the Renewable Energy Sources Act (Erneuerbare- Energien- Gesetz, EEG). This came in to force in January 2009. It turns out to be the main stimulation for the German wind market and it especially will accelerate offshore development in Germany.

Its not only Germany but other European nations have joined in exploring the immense growth of alternative energy segment. Very recently the European Investment Bank (EIB) and Enel Green Power (EPG) have signed the first €440m installment of a €600m loan that will provide finance for the company’s three-year investment programme in Italy. Ten European countries, including Norway, have agreed to develop an offshore electricity grid via alternative energy at the North Sea, in a bold move that promoters say will give Europe the possibility of tapping into an even bigger source of energy. Sweden, Denmark, Germany, the Netherlands, Luxemburg, France, the United Kingdom, Ireland, Norway and Belgium will now work together according to a precise schedule, in order to coordinate investments that will be made for developing these interconnections. French bank BNP Paribas's has raised €437 million ($581 million) for a renewable energy-focused fund that invests in European green power infrastructure. One can just imagine the growth and investment opportunities that take birth from the womb of alternative energy. In this decade alternative energy will save and help the US and Europe to come out from the burden of unemployment and fiscal deficit. The below image shows the demand trend and probable foresight of demand of various fuels.

Future Alternative Energy of India.

When we look into the Indian alternative energy sector we find mouth watering growth opportunities more than US and Europe. I would like to present only the opportunities of investments in Indian alternative energy and no analysis will be required to justify further to identify the growth over investments. India will nudge ahead of the UK into third place by 2020. $1.7 trillion would be invested globally into renewable resources like solar and wind, biomass and other low-carbon forms if business continued as usual.

• Engineering export promotion body, EEPC India have declared that India could witness fund inflows to the tune USD 5 billion over next three to five years in the renewable energy segment.

• US government agency Overseas Private Investment Corporation (OPIC) is planning to invest around $300 million in new private equity investment funds focused on renewable technologies in emerging markets.

• The investment in solar energy grew from $18 million in 2007 to $347 million in 2008. The investment in small hydro projects grew about four-fold to $543 million in 2008. The growth in biofuels fell by 80% from $251 million in 2007 to $49 million in 2008.

• This comes soon after OPIC invested $100 million in Global Environment Fund's $300-million South Asia Clean Energy Fund.

• Manila-based Asian Development Bank (ADB) is stepping up its investment in the clean energy space by putting $40 million in two India-focused private equity funds investing in this sector.

• India now has the capacity to generate just over 11,000 megawatts of wind power, but, with the right investment, that could increase to almost 48,000 megawatts.

• the Suzlon wind farm in Dhule, India, which when completed in 2010 will be the world's largest wind farm (already, its installed capacity is 650 MW, and its final capacity is slated to be 1000 MW) and the Acme Solar Thermal Power Plant in Haryana, India, which will be completed in 2019, and have an installed capacity of 1000 MW.

• Renewables (including hydro) already account for 34% of India's current Installed Power Capacity (if nuclear power is included, then 37% of India's current Installed Power Capacity is "clean"). India is currently ranked fifth in the world in terms of its wind power generation.

• A report launched this week by the United Nations Environment Program (UNEP) indicates very impressive trends for India's renewable energy sector. According to the report, 'Global Trends in Sustainable Energy Investment 2009', India's renewable energy investment grew by 12% in 2008. With an investment of $3.7 billion in just a single year, India's renewable energy sector appears well on its way to meeting the ambitious target set by the Indian Government in the 11th Five Year Plan.

• Indian Solar Investment Signals Greater World Bank Support for Renewable Energy – The first commercial utility solar project in India by Azure Power received a $10 million investment from IFC, a World Bank affiliate as the international lending agency steps up its support of renewable energy in emerging economies.

· At the same time, small hydropower has the potential to generate about 15,000 megawatts of power and, what's more, is often the best way of providing electricity to low-income households in remote areas. The below image shows the energy consumption pattern of India.

As more rural development will happen more power and alternative energy demand will start picking up. Venture and capitalist and corporate finance have immense investment opportunities in Indian alternative energy segment. A quick look at the trends of investments in India.India's Power Sector will Require Hundreds of Billions Over Next Decade – India could require about $250 billion investments over the next eight-nine years if it wants to grow at a moderate 7.5-8 % compound annual rate, according to a CII report. Private equity players such as IDFC have also come up with new models in 2009 by setting up IPPs themselves; Green Infra, a company that develops and operates power generation projects across wind, solar, hydro and bio-mass segments being a case in point. Independent Power Producers (IPPs) in this sector appears to provide attractive investment opportunity for private equity funds as a result of policy and regulatory developments such as generation-based tariffs, renewable energy tariffs and the national solar mission.

• PE investment in SMEs took a sharp dip by almost 68% and stagnated at US$ 580 million in 2009.

• Private equity investment in renewable energy sector picked up pace in the country from 2004, with Citigroup Venture Capital's $22.5 million investment in Suzlon Energy being a noteworthy deal.

• Wind energy sector grew at 17% from $2.2 billion to $2.6 billion

• Investments in solar grew an impressive 1800% to $ 347 million over 2007,

• The total number of PE deals signed by SMEs in 2009 stood at 81, while in 2008, it was 187

• Overall, PE deals in India during 2009 numbered 287 amounting to $4.3 billion as against 502 amounting to $ 11.9 billion in 2008. The total value and volume of PE deals reduced by 50% and 40% respectively as compared to 2008.

• According to VCCEdge, the first seven months of 2010 have seen private equity deals valued at $5.1 billion, as compared to $4.3 billion in entire 2009.

• According to the report, from a private equity investment of $851 million in 2005, inflows into the renewable sector in India soared to $2,136 million in 2008.

• The below chart indicates the growth of the Private Equity and Venture Capitalist in Indian alternative energy segment.

Growth of PE/VC in India.

The India Infrastructure report focuses on infrastructure development in a low carbon economy and covers legal, regulatory, institutional and financial issues needed to facilitate low carbon technologies.

Hence private equity and corporate finance will find immense growth in alternative energy investments in India.

CHINA@INEVESTMENTS 2011.....

2010-12-05T15:32:00.002+05:30

Investments around the world are ready to rock the 2011.

From the struggling economy of US to the emerging economies every one is ready with their investment ideas and strategies. In this series of article we will present a host of economies where inside investments as well as cross border investment will be discussed. In my first issue we are glad to present you investments “In China”.

Foxconn Electronics (Hon Hai Precision Industry) will invest an additional US$349 million in its component manufacturing subsidiaries in China. The investments in China will cover subsidiaries that manufacture products such as tablet PCs, handsets, cables, connectors, handset components, routers and printed circuit boards (PCBs).

Prior to the US$349 million investments, Foxconn also announced investments of US$260 million to its China subsidiaries in October.

China has open up the gates of investments towards medical sector. New policies to encourage private funds, including overseas capital, will be channeled to the medical sector. China wants to increase the quality of its health for the citizens. Investments will flow into reforming government medical facilities.

Disinvestments will executed by the Chinese governments in health sector. The government-backed hospitals will be converted into non-governmental institutions to reduce the ratio of public hospitals. This year China has made some outstanding attraction of investments if we do number crunching.

Investment in central government projects rose 10% year on year to 1.48 trillion yuan, while investment in local government projects was also up 25.9% to reach 17.27 trillion yuan, China's urban fixed asset investment rose 24.4% in the first 10 months year on year to hit 18.76 trillion yuan (2.83 trillion U.S. dollars).

These figures makes one thing clear that the policies and the various investment opportunities of China are immense and even despite of lending curbs and interest rate hikes funds will never dry up.

We all know that china have already increased investments in gold. Its per-capita savings is being deployed in purchasing gold and converting the paper based currency savings into gold.

Now china has opened up the gates of doing investments in gold via ETF. Lion Fund Management Co has opened up the first ETF of gold in China. According to the firm it plans to raise up to $500 million in China to invest in overseas exchange-traded funds (ETFs) backed by gold bullion. Lion Fund Management has received approval from the China Securities Regulatory Commission and the State Administration of Foreign Exchange.Hence we should be ready to witness more upsurges in price and demand of physical gold and ETF in the 2011.

China is busy in designing plans to invest $1.5 trillion in next five years, in the development of strategic industries. According to reports, China’s State Council is planning to invest 2 trillion Yuan ($300 billion) in the development of strategic industries each year over the next five years. Among these strategic industries we find seven sectors where the flow of capital will find its room in 2011 China.

ALTERNATIVE FUEL CARS

Due to environmental issues and to reduce the carbon emission this model of Fuel is demand. Ethanol is very hard to be produced keeping the food market demand of China. China's government is keen to ensure supplies of corn and other grains reach the food market, which is already stretched by fast growing demand.

ENERGY-SAVING TECHNOLOGIES.

China is bringing a tide of strategic investment in energy savings tools. With total power capacity set to reach 1,430 gigawatt by 2015 from 874 gigawatt at the start of 2010, China has to figure out how to bring trillions of kilowatt hours of power to more than a billion customers, sometimes over very long distances.

ALTERNATIVE ENERGY

China is busy in reducing dependency on foreign oil and also wants to put a tab on cola consumption. This has forced china to open up investment opportunities scouting for energy saving technologies. China have already launched a major drive into hydro power and wind, gas and nuclear. This will supplement the coal sector that provides about 70% of its electricity. The investments in wind gas and nuclear is very low and huge investments is about to pick up in 2011.China is reducing coal consumption in order to meet emission reduction norms.

HIGH-END MANUFACTURING

China plans to build 13,000 km (8,078 miles) of high-speed rail lines by 2012.This will draw huge flow of investments in China in high speed trains. Bombardier Inc., Siemens, Kawasaki Heavy Industries Ltd and Alstom SA are the prime investors in this high speed rail projects.

ADVANCED MATERIALS

China is also one of the world's top miners of lithium, a metal used in batteries, metal alloys, ceramics and nuclear weapons. These materials needs high amount of mining investments. Exploration and mining business is going to pick up new trends and growth in china. China invited foreign investments for gold exploration to the tune of 300 metric tones of gold.

NEW-GENERATION IT

China is also investing heavily in cutting-edge science, from nanotechnology to an array of 35 satellites that will provide a navigation alternative to the U.S. Global Positioning System by 2020. Countries like, Russia, China, and Brazil are emerging on the global map as the next-generation nanotechnology development regions. China is going to be the emerging new investor in nanotechnology.

AGRO-BIO TECHNOLOGY

China is focusing huge on agro-bio technology. To improve crop yields, since demand is rising quickly but supply is constrained by a lack of available water resources and land area new technological initiatives needs to identified and developed. Technology is used to produce more on the same land and agricultural policy to be designed to give more incentive to the farmers to grow more to increase their productivity.

Hence all these strategic investment opportunities will bring growth for the China in 2011.Currently we find that the strategic industries contribution towards the GDP is 2%.Its being planned to make this number climb to 8% of GDP by 2015 and to 15% by 2020. China is now pioneer in gold consumption. China's growing gold consumption came from all factors, including jewelry sales, private investment, as well as industrial and central bank demand. In 2009, gold consumption in China reached 462 tones in all sectors. And China's demand for gold has increased an average of 13% annually over the past five years, making China the world's second largest consumer market for gold after India.

Chinese investments opportunities are going to provide growth for the world economy alike the first nation coming out of recession. China is going to enter a new decade of internal growth of its economy. Its changing its focus from export oriented economy to a domestically driven economy.

We have to be ready to be a part of this investment opportunity.

US BUDGET v/s OTHERS

2010-12-02T16:26:00.000+05:30

The US economy is very much rattled with the new Republicans policy planning’s. White house is busy in extending the tax proposal followed with a host of new regulations to be extended and implemented. After deploying trillion dollar of funds now the US economy have went for cut backs in its budget for the coming few years. It simply points out that US economic policy of pumping and printing funds will not increase the GDP growth of US. This year in 2010 the US economy is already running with budget deficit of 1.3 trillion dollars totaling up the figure to 13.3 trillion dollars.

POLICY WAR

The recent tug of war between policy frame work between Democrats and Republican have propelled up new set of dilemma for the world economy.

he President has decided to propose a freeze in civilian pay for federal employees for two years, 2011 and 2012.

• This two-year pay freeze will save $2 billion for the remainder of FY 2011, $28 billion over the next five years, and more than $60 billion over the next 10 years.

• It will apply to all civilian federal employees, including those in various alternative pay plans and those working at the Department of Defense – but not military personnel.

The below image is of US Budget:

This move also is another step in what the Administration has done as part of its Accountable Government Initiative to cut costs, save taxpayer dollars and do more with less in the federal government: These steps were taken when the New President of US took his chair:

• The President froze salaries for all senior White House officials; in last year’s budget, he proposed to extend this freeze to other top political appointees; and he eliminated bonuses for all political appointees.

• The President directed agencies to dispose of excess real estate to save $8 billion over the next two years.

• The President set an aggressive goal of reducing improper payments by $50 billion by the end of 2012.

• In each of his budgets, the President put forward approximately $20 billion in terminations and reductions, encompassing more than 120 programs all of which have strong supporters.

• The President put forward more than $1 trillion in deficit reduction in his 2011 budget, including a three-year freeze in non-security spending – which will bring non-security discretionary spending to its lowest level as a share of the economy in 50 years.

What is proposed?

The Republican made different set of policies. Under this they framed these policies:

Jobs

o Stop job-killing tax hikes

o Allow small businesses to take a tax deduction equal to 20 percent of their income

o Require congressional approval for any new federal regulation that would add to the deficit

o Repeal small business mandates in the new health care law.

• Cutting Spending:

o Repeal and Replace health care

o Roll back non-discretionary spending to 2008 levels before TARP and stimulus (will save $100 billion in first year alone)

o Establish strict budget caps to limit federal spending going forward

o Cancel all future TARP payments and reform Fannie Mae and Freddie Mac

• Reforming Congress:

o Will require that every bill have a citation of constitutional authority

o Give members at least 3 days to read bills before a vote

• Defense:

o Provide resources to troops

o Fund missile defense

o Enforce sanctions in Iran.

• The above testimony was given

Above are the main parts of the Republican pledge received by CBS news and on all news stations throughout the United States.

So one is now clear that if TARP comes to a sudden end or the Health Care Bill is replaced with a Medical Bill, the world economy is just poised for sudden tremors in fund pull outs from world economies. There is no point of dreaming easy liquid flow of liquidity in to the markets. Flow will remain but restrictions and measures. This is not for the holiday season which will begin at the end of December. Its call for the upcoming new year.

One of the biggest expenses comes for the US is the US military and over their we will witness in the month of February when the US will present its budget, a huge set of cut backs. The U.S. armed forces comprise 23% of the overall national budget and account for the largest chunk of the world's military spending. Obama's commission has already tagged a number of big-ticket items for 100 billion U.S. dollars of military cutbacks in a draft of its budget recommendations. Most surprising part is that education of US is going to face cut backs in budgets when an economy needs to breed quality manpower.

2011 BUDGET WAR

In other words in the coming year of 2011 we will find Europe and US going for massive budget cuts and imposition of higher rate of taxes. This will create burden and slower growth opportunities to the tune of 100% .Since budget cuts will lead to slower growth and imposition of higher taxes will result to less savings for the consumer. These economies will be able to reduce and bring down the fiscal deficit to little comfort zone but that might result to prolonged slow growth of these economies. The chairmen of President Obama debt-reduction commission have been unable to win support from any of the panel’s elected officials for their proposed spending cuts and tax increases. The chairmen released their final package of proposals for trimming nearly $4 trillion from projected deficits through 2020.

Mr. Obama and senior Democratic Congressional leaders want to let the tax cuts expire on annual income above $250,000 for couples and $200,000 for individuals, while continuing the lower rates on income below those amounts. The Democrats’ plan would add roughly $3 trillion to the deficit over the next 10 years. The Republicans want to extend all of the lower rates, which would add about $4 trillion to the deficit over the next decade. This is just the begging of policy war. By the time the Budget of US gets finalized we will find new host of surprises which might attack the world market as “Tremors of Earthquake”.

The coming days will be very important to watch out the strategies of growth as well reduction is being adopted by US and Europe. For the Asian economies we find huge investment opportunities but with restriction of creation of any bubble. India alone has huge expansion and internal demand of expansion. The entire focus is now being built on rural India. We find new projects coming in Cement, Steel, Power, Infrastructure and New Banks.

In china we find already measures of control of funds. These have been designed to control asset bubble formation. China's 12th Five-Year Plan signifies a new phase in growth. China is now focusing on balanced economy and not on export oriented economy. The next phase in economic growth in china will be by storing wealth among its people and allowing the public share the fruits of reform and development. One of the biggest focusing areas of China is to reduce the income gap between urban and rural Chinese. The below image shows the growth of Chinese Budget:

This will be made by shifting resources out of the metropolitans and creating opportunities in rural. For example, large universities and research centers can be moved out of those big cities, so that not everything is concentrated in these areas. As a result, the migrant population will not always flow to big cities. So we find another huge opportunity of investments and growth coming from domestic China. Hence we may not be complaining about forced export of goods from China.

Budget war is on and we need to wait and identify the hidden opportunities of growth and investments in the various economies.

INDIA SCAM OPPORTUNITIES

2010-12-02T14:36:00.000+05:30

Scandals give birth to opportunities and shows avenues of growth with development. Sounds funny, but that the bottom line that the top line . In the past we have seen how the Indian corporate sectors have been rattled by various scams which hit the market from time to time. Every time we find scams every time we rise for better control irrespective of internal or external governance. We throw seminars on strategies on how to strengthen the corporate governance and bring new areas under the vigilance. Every time we also pop up with new strategies to challenge the existing code of corporate governance and come out with a new dimension of scams.

Scam: NPA.

The recent case related to loans scams has rattled the Indian political and bureaucratic more as compared to stock market correction in the past couple of sessions.NPA is a nightmare chasing not only in the night but also in the day. When business growth happens at an electrifying speed and new business opportunities opens up and materialize within a short span of time NPA are bound to increase.NPA control mechanisms have been designed and modified from time to time but if Indian follows the rules of the US mortgage collapse then imagine the strength of the NPA guidelines. One can design guidelines for the paper work but what guidelines will be created for Greedy mind. The greedy mind can change or originate from anywhere but no regulation can be created to control the greed.

Banks have been roaring that we are having less exposure to the real estate sector or to any such scam related sector. The NPA are under control is the phrase being heard mostly now. I am sorry to say and bring you all the fact the type of involvement the Banks and Indian financial system have with the real estate and such sectors where NPA will breed like Bacteria.

• The exposure of most of the banks to the sector rose to 11-24% of total advances at the end of March compared with 3-7% at the end of fiscal 2006, according to data compiled from the annual reports of banks.

• The exposure of new private sector banks in these sectors was as high as 31% of their total loan book in fiscal 2010 while that of public sector banks was 16%. The exposure of foreign banks was as high as 32.4%

• Real estate advances comprised 22.44% of the bank’s total as of 31 March.

• SBI had the largest exposure to real estate at Rs.87,125.16 core as of 31 March, followed by ICICI Bank’s Rs.63,870.73 core.

Blessing of Squeeze.

From the above data its well clears that how banks and Indian financial system have stretched its hands towards the most controversial sector of India. Now before you start cursing try to figure out that when banks have posted growth numbers of loan disbursement and other growth numbers how many times your stock price jumped up and you made your wallet swell like a dead cat. We made money on that day on the basis of the NPA. Banks and Indian financial system made loan easily available to the sector and often without proper documentation or made unethical restructuring of loans.

After this scam we will find liquidity squeeze and other preventive measures. One of the blessing of this squeeze will be Inflation will come down like a rolling ball to lower levels and “AM ADMI" will get space to breathe will low food prices etc. We will should be ready to wittiness very low inflation numbers coming out within a months’ time from now. Yes the ripple effect of the liquidity squeeze will hitting hard on the Indian corporate as cost of borrowing will pick up but one should understand that if a country dreams to have a GDP growth of 10% then one should build that growth on strong fundamental grounds. If you follow the pattern of growth model designed by the Subprime leaders India will be worst than US recession dark nights. One can achieve the 10% GDP growth following the path of US subprime, but after that it might take another 30 years to get that GDP climb to the previous levels. Stop exploiting of resources and misuse of liquidity since at the end the ball will come back to the place of its origin.

Touching the sky.

If we make quick look towards the India real estate sector we will find that in the past 1 years time frame the sector was too much overvalued and that valuation momentum was kept on high with the supply of the credit provide under the scam.

 The rise of the middle class (500 million), Non Resident Indians investing in Indian realty, Foreign Direct Investment entering the market, expansion of MNCs and Indian multinationals, proliferation of educational institutions, growth of IT, BPO, food processing & health care - all these are the factors responsible for the growth of Indian realty.

 Chandigarh, Gurgaon, Vizag, Coimbatore, Kochi, Jaipur, Nagpur are some Tier II cities witnessing unprecedented boom.

 Indian realty is growing at 30%, particularly in Tier II and Tier III cities. The $15 billion realty market is expected to reach $ 90 billion within the next 8 years.

 Recently their have been reverse affects of the higher property valuations and prices.

 Sales of residential properties in Mumbai have fallen by 40% since the peak in May 2009, says Edelweiss Securities, mainly due to higher prices which have increased by 15%-20% over the past six months.

 The real-estate industry in Hyderabad is replicating the same scenario of lackluster sales as of the Mumbai market during the fourth quarter ended in March 2010.

 The most astonishing fact is there is no movement in Ressex (Real-Estate Sensitivity Index) sales index in Q4FY09-10 compared to Q3FY09-10.

 We find stagnation in Mumbai real-estate prices to flagging demand from consumers due to the abnormal rates that were being charged by builders. Prices are not allowed to drop.

 Builders are not selling property at the prices which they are quoting. They are selling at discounted prices behind closed doors. Also, the funds the builders have been able to generate from multiple sources have enabled them to hold prices high, which is (again not) sustainable.

 The real-estate market experienced an alarming rise of about 30% in certain Mumbai micro-markets during the first quarter of this year, resulting in a decline in sales by 50%-60%.

 Real-estate market focused more on higher valuations and raising funds through the capital market than on end-user sales.

 Buyers have already started much before not to go for buy of property and increase the greedy appetite of Builders.

Scam Alert

One of the biggest hit is going to hot the inventory sector. Building up of inventory has resulted to consumption and pick up of demand in the steel, cement and other raw materials. We will find drop out in demand from the sudden catastrophic levels to zero. Indian real estate sector needs very tights hands to control the unhealthy prodigal type movements and growth.

What we will find in the Indian economy in the coming days is that again set of new guidelines and principles will come up to strengthen the Indian corporate sector which will at another point of time will fail. The problem is that no Bullet proof jacket can be made for the protecting corporate scams. One must understand the symptoms and take adequate measures. One needs guidelines to understand the symptoms. In the next series of corporate magazines and corporate Bodies meet we will find discussion on strengthening rules of the corporate sector. Make guidelines to understand the symptoms and not cure of the disease once it happens.

Global Car Indian Market

2010-11-24T15:18:00.001+05:30

My Big India My small Car

The rupee one lakh car is now very much on the streets and as well as in the garage of many thousand Indians. The small car market was discovered by TATA motors. It was discovered by Maruti. Yes that company made the first mark on the Indian consumer mind that one can be an owner of a small car. The Indian stock market took the hit that Volkswagen AG’s Polo and Ford Motor Co.’s Figo — the new kids on the block — have found more buyers than both companies initially expected. Nissan Motor Co. and Toyota Motor Corp. have also lined up their own small car markets. This will reduce or eradicate maruti from the market. Sorry to say and disappoint all my speculator friends that still now maruti holds 50% of the small car market .

The following crunching of numbers will make it more clearly about the Maruti small car market position currently held by it:

• The Delhi-based automaker’s bestselling model Alto clocks sales of 17,000 to 18,000 units per month on average.

• Compare those five-digit figures with Ford’s April sales of 7,509 vehicles, a record monthly figure boosted nearly threefold by strong sales of the Figo, its maiden small car in India. Volkswagen is not far behind with its Polo model receiving bookings of 7,300 units in the two months after its launch. Both are still a good way below Maruti’s numbers.

The Indian automobile market is now the most favored detonation of doing sales as well establishing manufacturing house in India. Every company wants to take advantage of the Idnian consumer market.

Indian Consumer mind have taken major changes in making India to dream the GDP growth of 10%.The urban population in India is India is currently 30% urbanised, while 70% of consumers are still in rural India. As far as consumption goes, 404 Million are either consuming or are aspiring consumers. One of the prime reasons for a one way growth in consumer product market is higher percentage of savings. Indian currently have savings a rate of 36.8% as compared to 28.4%.This high savings rate is making the one way growth of consumer product market. Higher per capita income, radical changes in the salary and business income growth opportunities are making the Indian consumer market to propel like mango groove.

So its well clear than India will be a pool of funds in the automobile sector and the competition in the coming days will not bring smile on the face of the companies. Domestic companies have to find and compete with innovative ideas and concept to deal with the overseas competition.

One thing is granted that Indian consumers will have new tastes and new demands as they have an never ending income generating force. In other words India possess the highest number of young generation of income holders whose taste and preference are enough to be tempted. What the automobile companies needs to understand is the way of luring that temptation. Just imagine Maruti the company which enjoyed the premium by simply changing the mindset of the consumers and asking them to dream and convert the dream of having a Car in front of their house.

Today the competition is fierce and in the coming days it will be very hard to say by gazing at the crystal ball about the future of the domestic car companies in India. Small is the only concept being produced in factories and companies are just feeling impossible to increase their market share at a rocket speed. But all these will be sound of good music till the crude price remains under the mark of $100.Once this start climbing along with the India petroleum prices the sales of automobiles will take a major hit. This sector growth will increase the demand of steel and auto ancillaries market. But one should be very careful taking a short term outlook of growth for this sector.

2011 Investments Strategies.

According to the Investment Commission of India, India is among the most competitive manufacturers of auto components in the world. India is turning into a global hub for research and development (R&D). Companies like Daimler Chrysler, Bosch, Suzuki and Johnson Controls have set up development centres in India. Many international auto-component majors including Delphi, Visteon, Bosch and Meritor have set up operations in India. Auto manufacturers including GM, Ford, Toyota, etc. as well as auto component manufacturers have set up International Purchasing Offices (IPOs) in India to source their global operations. Apart from all these there are number of new plans of investments standing at the door. A few glimpses of all those are here given below:

• German automotive components company, Wallstabe & Schneider, has established its Indian presence by signing a joint venture (JV) agreement with Thane-based Mecnam Products and Mumbai-based Deshmukh Rubber Works Pvt Ltd.

• The world's largest automotive component manufacturer, Bosch, plans to invest US$ 433.5 million in India over the next three years. "India will be an important market for the company in the immediate future," said Bernd Bohr, Chairman of the Stuttgart-based Bosch Automative Group.

• Tyre manufacturer, Apollo Tyres Ltd, is set to make Chennai its manufacturing and research and development (R&D) hub and is establishing a US$ 433.6 million manufacturing facility, which is likely to see an additional investment of US$ 130.09 million.

• Now one might say that these investments might take some time as global liquidity and other factors might be a cause. I would like to clear one thing Indian market consumer resources are now the life Blood of the Entire Global Consumer and corporate market. So even if there is a short term hiccup the long rider is very sweet and will be memorable for the Indian automobile market History.

Policy Initiatives

The government has taken many initiatives to promote foreign direct investment (FDI) in the industry.

• Automatic approval for foreign equity investment up to 100% of manufacture of automobiles and components is permitted

• The automobile industry is delicensed

• Import of components is freely allowed

The Ministry of Heavy Industries and Public Enterprises has envisaged the Automotive Mission Plan 2006-2016 to promote growth in the sector. It targets to:

• Increase turnover to US$ 122 billion – US$ 159 billion by 2016 from US$ 34 billion in 2006

• Increase export revenue to US$ 35 billion by 2016

• Provide employment to additional 25 million people by 2016

• The automotive sector is expected to contribute 10 per cent of the country's GDP by 2016

According to ACMA,

• Overseas auto-component manufacturers, especially small and medium enterprises (SMEs) should invest more in capacity enhancements and Greenfield manufacturing in India to meet growing domestic demand for auto-components

• Investments in Auto-IT sector is a high potential area

• To encourage new wave of partnerships at the Tier 2/3 level covering the entire automotive supply chain to address not only product technology, but also "Process Technology"

DTC/GST---BOON

The introduction of new taxation laws like GST and DTC will spur the market growth of these sectors. Automobile will find growth equivalent to other sectors but with little hiccups in between. A higher margin of disposal surplus due to New Direct Tax code will enable consumption demand of Indian economy to take new shape and size. GST will add up in bringing in better pricing and margins to the automobile industry. GST is expected to bring down cost for the industry, which is currently marred by endless taxes charged at different state levels. If experts are to be believed, the cost savings will run into double-digits for the sector. GST will eradicate those small tax windows and lead to seamless travel of products from one state to the other. It would remove multiple taxes and bring forth the right value of the products. This will also increase the growth of the sector in the coming quarters and specially after April 2011.

The international crude price affect on the Indian consumer minds remain on high alert. Investors across all corners will find growth form the industrial investments as well as stock market. Small car market companies along with new diversified products and new market products will be flavor of Indian automobile company.Crude prices are to be taken as short term hiccups and there is no sign of immediate reach of it to the mark of 100 dollar/barell. So plan your car and your investments and ride it for long.