Global - Economy and Market news -Dilip V Dhanaiya

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Global - Economy and Market

• China factories stall; euro zone looks bleak
LONDON/BEIJING - The euro zone economy showed signs of contraction in November and China's factory sector shrank by the most in more than 2-1/2 years, raising the risk the world is headed for a steep downturn.

• "Disastrous" bond sale shakes confidence in Germany
Wall Street falls for sixth day, The euro fell to a six-week low against the yen on Thursday and Asian stocks were subdued after a "disastrous" German bond sale on Wednesday sparked fears that Europe's debt crisis was starting to threaten even Berlin, with the leaders of the euro zone's two biggest economies still at odds over a longer-term structural solution. Oil slides nearly 2 percent on global economic woes. The euro zone is unlikely to survive its sovereign debt crisis in current form, according to a majority of leading economists and former policymakers polled by Reuters.

• Mixed U.S. data raises questions on economic momentum
U.S. consumer spending growth slowed in October and business capital investment plans were weak, raising questions about expectations for solid economic performance in the fourth quarter.
Moody's Investors Service on Wednesday warned that its top credit rating for the United States could be in jeopardy if lawmakers backtrack on $1.2 trillion in deficit cuts planned over 10 years.

India - Economy and Market

• RBI tweaks ECB norms to stem falling rupee
In an effort to stem rupee's downward spiral, the Reserve Bank of India (RBI) on Wednesday, directed Indian companies to bring back offshore funds, raised through external commercial borrowings (ECBs) for the purpose of domestic business expenditure. Those funds need to be parked with Indian banks.
"The proceeds of the ECB raised abroad for rupee expenditure in India, such as, local sourcing of capital goods, on-lending to self-help groups or for micro credit, payment for spectrum allocation etc. should be brought immediately for credit to rupee accounts with AD category I banks in India,” RBI said in a release.
ECB enables companies to borrow at a cheaper rate as domestic interest rates are costlier than international rates. However, RBI sets ceiling of ECB borrowing rates as excessive borrowings through ECBs will lead to drying up of foreign exchange reserve. Companies raising funds through ECBs are required to repay their loans only in foreign currency.

• INR: Structural concerns haven't changed
INR has been one of the weakest currencies globally across time periods. Opinions might vary, but this is likely due to: a) possible further widening of the trade deficit in Oct/Nov over the Sep-11 record; b) muted FII debt and equity flows (no outflows, but India needs strong inflows); and c) falling hedged rate arbitrage as hedging costs have risen.
With a bleak outlook for equities, only debt inflows can fund the widening current account deficit. As Indian corporates access to dollar debt is constrained, portfolio debt flows must rise. A debt supported currency remains fundamentally weak : hedging costs have risen 120bps since early Oct.
With US$20bn of External Commercial Borrowings (incl. Converts) maturing in the next 12 months (Fig 4), the government is relaxing portfolio flow limits: lock-in for infra-bonds was relaxed to 1 year (from 5) for $5bn (out of $25bn) and FII limits in government and corporate bonds raised by $5bn each (auction on 30-Nov).

• Cabinet to discuss FDI in multi-brand retail on Thursday
India's federal cabinet on Thursday will discuss allowing 51 percent foreign direct investment (FDI) in multi-brand retail and 100 percent in single-brand retail, a government spokeswoman said on Wednesday.

• Power investment slows, chronic deficit worsens
Investments into India's power sector are slowing despite a chronic electricity shortage that threatens GDP growth, executives told the Reuters India Investment Summit, due to coal shortages, land hassles and an inability by distribution companies to raise tariffs.
Asia's third-largest economy, where blackouts are common, faces a peak power shortage of 13 percent as rising demand from industry, homes and shopping malls outstrips capacity growth

• RBI removes cap on forex supply via INR swaps
MUMBAI: RBI said it was removing the limit of $100 million placed on net supply of foreign exchange in the market through rupee swaps.
There were no limits on banks for undertaking swaps to facilitate customers to hedge their foreign exchange exposures, but there was a limit of $100 million for net supply of foreign exchange in the market.

• Indian rupee seen near record lows; Indian shares hit 2-year low, banks leads losses; Tata Group firms in focus
Shares in companies that are part of salt-to-software Tata Group will be in focus after the group named insider Cyrus Mistry as the successor to current Chairman Ratan Tata, ending a global search that lasted for more than a year.
The Tata Group includes Tata Motors, owner of the Jaguar Land Rover brands and maker of the Nano, the world's cheapest car, as well as top software firm Tata Consultancy Services, steelmaker Tata Steel and dozens of other companies

Technology News –

• HTC cuts Q4 revenue growth forecast; shares tumble
TAIPEI - Taiwan's HTC Corp cut its revenue forecast for the fourth quarter to no growth over the same period a year earlier from around 20 percent to 30 percent year on year growth previously, surprising the market and sending its shares tumbling 7 percent.

• Nokia Siemens Networks to slash staff by quarter
HELSINKI - Nokia Siemens Networks, the world's second-largest maker of mobile phone network equipment, is axing 17,000 jobs, nearly a quarter of its workforce, to help save about 1 billion euros ($1.35 billion) a year.

• Debt crisis fails to roil Indian IT cos' Europe plans
BANGALORE - Indian IT services exporters are on track to increase Europe's share in their revenue and see only a short-term impact of the paralysing debt crisis, top executives said at the Reuters India Investment Summit.

• Mastek to develop software for US-based Cypress Property & Casualty Insurance Company
The software, developed by Mastek, will significantly reduce the waiting time for customers and the unit cost of the policy, Cypress CEO.

• IBM expands India operations; opens 3 regional offices
Technology giant IBM today said it plans to set up offices in 40 cities across India by 2013. 
It announced the opening of three regional offices in Dehradun, Guwahati and Raipur, taking the total number of branch offices to 18 across India.

• Madhya Pradesh to allocate 100 acres for Infosys centre at Indore
"A go-ahead has been given to allocate 100 acres to Infosys in Indore to set up a centre," Madhya Pradesh Commerce and Industries Minister Kailash Vijayawargiya told reporters here.
The BJP-ruled state is having similar discussions with Tata Consultancy Services (TCS) as well.

Thanks & Regards,
Dilip V Dhanaiya,