London, September 16
Investors dumped equities, oil and emerging market assets on Tuesday, unleashing a panic rush to secure short-term cash as the financial turmoil escalated a day after Lehman Brothers collapsed.

A global exodus from risky assets extended into the second day after Lehman filed for bankruptcy protection and Bank of America agreed to buy Merrill Lynch on Monday, driving up the low-yielding yen and safe-haven government bonds.

Acute stress was building up in the interbank money markets, where the cost of borrowing dollars overnight shot up to several times the benchmark US interest rate of 2 per cent.

Liquidity injections from Asian and European central banks, to the tune of billions of dollars, did little to calm investor nerves in a market where world stocks hit their lowest since December 2005.

Third-quarter earnings results from Goldman Sachs and an interest rate decision from the Federal Reserve top the day's agenda with concerns growing American International Group (AIG) could be the next financial giant to tumble.

Interest rate futures were fully pricing in a chance that the Fed would cut rates to 1.75 per cent later with some analysts talking about a bigger half point reduction.

"The market seems to be fairly convinced ... that the Fed will offer some form of monetary stimulus," said Andre de Silva, global deputy head of bond strategy at HSBC.

The MSCI main world equity index fell 1.6 per cent, its lowest since December 2005, after a 3.6 per cent tumble on Monday. In September alone, the index has so far lost more than 10 per cent of its value and is on track for the worst monthly performance since September 2002.

The FTSEurofirst 300 index fell 2.7 per cent while Asian stocks fell more than 4 per cent.

AIG, thrown a $20 billion lifeline by New York state, came under renewed pressure as ratings agencies downgraded the insurer's debt.

US stock futures were down as much as 1.3 per cent after Wall Street suffered on Monday its worst performance since markets reopened after the September 11 attacks.

Meanwhile, there were signs that the deepening financial crisis is freezing up activity in the interbank money market. At one stage, overnight dollar deposit rates rose to 11.6 per cent, according to Reuters data, nearly six times the benchmark Fed rate.

In the London interbank market, overnight dollar rates were fixed at 6.4375 per cent.

The low-yielding yen extended its steep rise, with the currency hitting a four-month high of 103.62 per dollar. On Monday, the dollar suffered its biggest one-day drop against the yen in nine years.

The yen hit a two-year high of 147.42 per euro while the dollar also fell against a basket of major currencies.

Safe-haven government bonds surged around the world, with the December bund future rising more than 100 ticks to a five-month high.

Emerging stocks fell 4 per cent to their lowest since October 2006.

Oil, gold falls

US light crude extended losses, falling 3.4 per cent to $92.44 a barrel as investors extended across-the-board deleveraging, taking oil more than $50 off its record high set in July. Gold fell to $781 an ounce. — Reuters

New Delhi, September 16
Taking a pot shot at the US financial sector, which is facing one of the worst turmoils ever, commerce and industry minister Kamal Nath on Tuesday said those “preaching”others have not kept their own house in order.

Nath said the amount of exposure of the banks going down was small in Asia. “A very small fraction of that US economic turmoil is in Asia. This shows that best practices have been adhered to in Asia,” he said.

India's second-largest bank, ICICI Bank, said on Tuesday it had exposure to $81 million of Lehman Brothers Senior Bonds, adding the potential losses were not material.

On the commodities front, crude oil futures continued its slide and dropped to $92 a barrel on Multi Commodity Exchange in Mumbai . Crude, for futures for December contract, tumbled by 5.77 per cent to Rs 4,330 per barrel at the MCX counter.

Similarly, November contract fell sharply by four per cent to Rs 4,332 per barrel in a business volume of 289 barrels, while October contract moved down 3.86 per cent to Rs 4,304 per barrel in a business volume of 5,288 barrels.

Analysts said the weakness in crude oil futures prices was mostly attributed to a fall of over $4, or four per cent to $91.79 a barrel, a seven-month low in the global markets after Lehman Brothers Holdings collapsed, raising concerns of deepening global financial crisis.

On Dalal Street, uncertainity continued as many brokers, who were working on behalf of Lehman Brothers and Merrill Lynch, continued to sell and wind up their long position. Lehman Brothers was seen on a major selling spree, selling shares worth Rs 400 crore in nearly 10 companies, including NIIT, Cranes Software, Amtek Auto, Amtek India, Fedders Lloyd, Northgate, Mastek, Triveni Engg and Praj Engineering.

Prior to this sell-off, Lehman's Indian equity portfolio was estimated to have been worth more than Rs 1,000 crore, which has now nearly halved to about Rs 500 crore.

Besides the 10 companies where Lehman has offloaded its shares, it had equity holding in about 24 firms at the end of June quarter. These firms include Spice Communications, Spice Mobile, Anant Raj, Edelweiss Cap, IVRCL Infra, Tulip Telecom, Consolidated Construction, PSL, Orbit Corp, Development Credit Bank, Champagne Indage, Godawari Power, KPIT Cummins, West Coast Paper, IOL Netcom, Dhampur Sugar, Prithvi Info, Golden Tobacco, Emkay Global, Vijay Shanti Builders and Pioneer Embroidery. Abroad, International Monetary Fund said the financial crisis might continue at least in the short run.

“The speed and scale of these events have added to short-term uncertainties and further significant financial strains cannot be ruled out,” IMF's first deputy managing director John Lipsky said, responding to media inquiries.

“The present consolidation is necessary for restoring the efficacy of the sector. The weekend’s developments should be seen in the context of a financial sector restructuring and consolidation. This is a necessary condition for restoring the sector's effectiveness,” Lipsky said. 

Mumbai, September 16
Nearly 2,200 employees of the bankrupt Lehman Brothers employed at its offices in Powai in North Central Mumbai have been abruptly sacked as the organisation declared bankruptcy.

While employees were asked to clear their desk on Monday, they were being issued termination letters from this afternoon. The mood outside the company's offices remained sombre with several employees hanging around in the rain and police personnel present to prevent untoward incidents.

The former employees were not talking to the media though some of them said they were worried about being sacked without being given any compensation. Some employees said they were to be paid three months' salary as per the contract issued to them, but they were told informally that Lehman Brothers didn't have the funds to pay the agreed compensation to the employees.

Some of the senior employees of the company have already joined brokerages elsewhere in the city, according to sources.

However, those employed at lower levels as agents of its call centre would be the most affected. According to the buzz in the industry, captive call centres of several US-based companies are thinking of retrenching staff and LB's former Indian employees may find it difficult to find new well-paying jobs.

Meanwhile, Lehman Brothers have issued a media release from its head offices regarding its Asian operations.

"Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited and Lehman Brothers Futures Asia Limited have suspended its operations with immediate effect. This includes ceasing to trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice. Our asset management company, Lehman Brothers Asset Management Limited will continue to operate on a business as usual basis," the statement said.

New Delhi, September 16
As the process for the auction of spectrum for the third generation (3G) services is all set to kick off later this month, it has emerged that the environment is not very conducive for the foreign telecom players looking to gain entry into the huge Indian market.

While on the one hand, the pricing would turn out to be inhibitive for those looking to gain a foothold, on the other, it has come to light that the limit of spectrum, for which a company can bid and which has been stipulated by the Department of Telecom (DoT), would not be appropriate for new (foreign) players to operate.

Experts point out that starting 3G services for a foreign player would be very cost prohibitive and would not make economic sense. The new players would have to invest anywhere upwards of Rs 17,000 crore to support a measly customer base of 50 lakh.

While the DoT has kept the base price for the auction of the spectrum at Rs 2,300 crore, the foreign players would first have to acquire a mandatory universal access service licence (UASL). A pan-India UASL costs Rs 1,651 crore.

According to industry estimates, the bid for the spectrum would be around Rs 7,500-8,000 crore. Therefore, these players would have to pay around Rs 9,651 crore for licence and spectrum alone.

A minimum subscriber base of 50 lakh would be required for an operator to reach the break-even point. To create the base, the operator would have to put up a network line capacity of one crore, which would cost around Rs 7,500 crore, with around Rs 3,500 crore going towards equipment costs and the balance towards transmission and infrastructure cost.

It would mean that any new player would have to spend upwards of around Rs 17,000 crore in setting up a network for 3G.

Besides that, it has now emerged that it would not be possible for foreign telcos to launch 3G services with a mere 5 MHz of spectrum. However, the 3G policy announced by telecom minister Raja in August states that a telco can bid for a maximum of 5 MHz of 3G radio frequencies. However, according to DoT itself, 10 MHz shall be needed for practical purposes to start the 3G services. It admits that 15 MHz in 2.1 GHz band is ideally required for 3G services.

This would mean that foreign telcos have three options: First, wait in line for 2G spectrum after acquiring a UASL licence. Second, foreign telcos can acquire up to 74 per cent in any of the existing 2G licence holders and third, they could merge with an existing player. 

Chandigarh, September 16
Shimla-based Altruist Technology will soon be bringing social networking from the sole net-domain to your mobile phones. The value-added service (VAS) provider is presently working on the technology that will allow social networking on mobile without being online.

The chief executive officer of the company, Dheeraj Aggarwal, said they had already created the technology for mobile-based social networking at their research and technical development centre in Shimla. “We are fine-tuning the technology that will be offered to mobile users by December. In fact, this is a step up from the mobile-based chat service that we had launched last year. We are in talks with Airtel, Idea Cellular, Tata Teleservices and Reliance Communications for starting this service on their networks,” he said.

Aggarwal said a rapid increase in mobile penetration vis-à-vis an increase in the computer penetration, has prodded VAS providers to create services that were so far restricted only to the net users.

“Presently, there are about 50,000 VAS available and innovation in this area would propel further growth not just for VAS providers but also in mobile penetration and usage,” he said.

The VAS provider also hopes to clog a turnover of Rs 155 crore this year - an increase of almost 300 per cent. “By expanding our product portfolio and increase in mobile penetration will help us achieve this turnover,” said Aggarwal. 

Chandigarh, September 16
Petrol pump dealers in Patiala and Sangrur districts have accused the oil marketing company, Hindustan Petroleum Corporation Limited (HPCL), of forcing them to sell lubricants. The oil company has, however, refuted the allegation and said petrol pump dealers were only being asked to sell the volume of lubricants they had committed to sell.

Dealers in Patiala and Sangrur districts informed TNS that they have been asked to make indents for lubricants worth Rs 50,000, failing which their dealership could be cancelled. “The sale of lubricants at the petrol pumps is much less as compared to the sale at authorised lubricant dealerships. Since the lubricants are supplied to the authorised dealers in bulk quantities, they get a hefty discount, which is passed on to the consumer. We do not get this discount and lubricants sold through us are expensive, which affects our sale,” said a Samana-based dealer.

HPCL officials, however, say that the dealers have signed an agreement with the company for selling a fixed quantity of lubricants. “Only in those cases where the dealers have refused to pick up the stock, the area sales officers are asking the dealers to lift their stock of lubricants. The only reason that the petrol pump dealers are cribbing is that they will not be able to lift lubricants at discounted prices from the authorised dealers,” said a senior company official here.

The petrol pump dealers were supposed to sell all products being manufactured and marketed by the oil marketing company, he added. 

New Delhi, September 16
Prompted by ongoing global financial turmoil, Asian Development Bank (ADB) today lowered India's economic growth forecast for the current financial year to 7.4 per cent from earlier projection of 8 per cent.

“The change in the global economic environment and the policy adjustments needed to maintain macro-economic stability prompt a downward revision of growth forecast to 7.4 per cent in financial year 2008 and to 7 per cent in FY 2009,” the multilateral lending agency said in its update of Asian Development Outlook 2008.

The economic downturn and falling commodity prices has led to many rating agencies relooking at rating developing econo-mies like India, Russia, Brazil and China.

The revision in growth forecast ‘stems’ from a weakened investment outlook, the bank said, adding that the inflation during the year would average 11.5 per cent, as against the 4.5 per cent projected in April.

Giving a justification for downward revision of GDP forecast for India, the report said, the baselines assumptions “now suggest a much less conducive environment for growth and price stability”. Moreover, it added, the extent and duration of the global credit market turmoil and its impact on India's access to external finance were not foreseen in April when the ADB had forecast 8 per cent growth rate. 

New York, September 16
In the continuing meltdown in the US financial market, World's largest insurer, American International Group (AIG) was on Tuesday downgraded by credit rating agencies and was racing against time to find a multi billion dollar infusion to stay afloat.

Federal reserve officials and two leading banks, JPMorgan Chase and Goldman Sachs, were negotiating to put together $75 billion package to save the insurance giant to stave off crisis.

AIG has sought $40 billion in bridge loan to stave off the crisis. But the Feds rebuffed the request and the Wall Street Journal reported that unless funds were forthcoming AIG too might follow Lehman Brothers in declaring bankruptcy which could add to the meltdown of the markets.

AIG's ills came to fore, when three leading credit rating agencies — Standard and Poor's Moody's and Fitch — lowered the company's credit scores. — PTI

BRIEFLY

Mumbai
R-Cap’s plan for insurance biz: Anil Ambani on Tuesday said Reliance Capital (R-Cap) will invest Rs 2,000 crore in its insurance business over the next three to five years. This was disclosed by Anil Ambani at the AGM of Reliance Capital. — PTI

Emami’s offer for Zandu: FMCG major Emami Ltd on Monday said it has revised the open offer price to Rs 15,000 per share for purchasing 20 per cent stake in Zandu Pharmaceutical. Emami had initially bid Rs 7,315 per share of Zandu Pharmaceutical. — PTI

Welspun’s demerger plan: Welspun India on Tuesday said it would demerge its distribution and marketing business and investment division into two separate entities. The distribution and marketing company will hold international businesses and Welspun Retail Limited will be known as Welspun Global Brands. The investment company will be called Welspun Investment. — PTI

Chandigarh
BSNL offers ‘free’ Internet: In order to popularise the use of Internet, BSNL has allowed free Internet access for its landline customers up to October 31. For use of Internet service, the customer should have a dial-up modem and configure his computer for dialing up Internet access. Customers can access Internet from their landline telephone by dial access code 172222. Customers will not be charged for using Internet service, except for the telephone usage charges. Chandigarh

Dubai
IndusInd plans $1-bn fund: Hindujas-promoted IndusInd Bank has said it is looking to float a $1 billion fund (about Rs 4,500 crore) for investments in India. "We are going to partner with Indian firms that are known in the capital market space and are in the process of floating funds of their own. It is going to be the Hinduja brand name alongside local firms," promoter of the bank and Group chairman S.P. Hinduja said. — PTI