New Delhi, January 1
Combating the economic slowdown and arresting the rupee's fall will remain the main priorities for the government and the Reserve Bank in the New Year, though inflation, which remained a major problem throughout 2011, may cease to be an important issue in the months ahead.

As the economic woes, driven mainly by global factors, spill over to 2012, the government will also have to deal with the spectre of policy paralysis by promoting economic reforms and boosting the investor sentiment.

Although 2011 began on a positive note, with the economy recording a growth of 7.8 per cent in the quarter ending March, 2011, and the Economic Survey (February, 2011) projecting an acceleration in growth to about 9 per cent in 2011-12, the euphoria was short-lived.

The growth rate slipped to 7.7 per cent in the quarter ending June, 2011, and 6.9 per cent during July-September from 8.8 per cent and 8.4 per cent, respectively, in the corresponding periods last fiscal. The figures for the October-December quarter are not yet out, but indications are that they would be no better.

Worried over slowing growth, a group of industry leaders, including HDFC Chairman Deepak Parekh, wrote open letters to the government expressing concern over a "policy paralysis" and underlined the need for firm action to deal with the situation.

Their repeated outbursts, however, evoked a sharp reaction from Prime Minister Manmohan Singh, who blamed industry head honchos for spreading despondency by criticising the government.

However, the fact of the matter was that both the Finance Ministry and RBI lowered the growth projection for the current fiscal to around 7.5 per cent from 8.5 per cent in 2010-11.

While the RBI had earlier projected a growth rate of 8 per cent, the Finance Ministry in its Economic Survey had pegged growth at around 9 per cent.

Industrial growth, as measured by the Index of Industrial Production (IIP), turned negative in October, experienced a decline of over 5 per cent. These signals do not augur well for economic growth in the coming months.

The Finance Ministry had attributed the slowdown to "global factors like the slowdown in the world economy, exacerbation of the euro zone crisis, hardening of crude oil prices in the international market, as well as domestic factors such as the decision to battle inflation by tightening monetary policy and cutting back fiscal stimulus".

With regard to the global factors, the sovereign debt crisis in euro zone countries continues to pose a threat to the global recovery, which has been described by several experts as being in a fragile state.

Despite the efforts of the G-20 to contain the crisis, it has spilt over into 2012 and there will be no respite for global leaders grappling to find a workable solution to the sovereign debt problems of euro zone nations. — PTI

New Delhi, January 1
Ratan Tata’s pet project, the Tata Nano, billed as India’s Rs 1 lakh wonder car, has had a bumpy ride but Tata Motors is putting its muscle behind it to shore up volumes.

Almost four years after it was unveiled in January 2008 and more than two years after being launched in April 2009, the Nano has not been able to show big volumes although efforts are being made to strengthen its marketing, advertising, distribution and financing.

The car was launched and the hype around it was that consumers would get a Rs 1 lakh car. It was seen as a killer product which would transform mobility not just in India but globally also.

So why has the Nano not been a blockbuster? There are several reasons for it, some extraneous like the unrest in Singur, West Bengal, which led to the shifting of the plant to Sanand in Gujarat.

Says Yaresh Kothari, auto analyst at Angel Broking, “Lower Nano volumes can be attributed to 1) being tagged as “World’s cheapest car” 2) safety concerns after reported fire incidents 3) production delays related to relocation of the plant from West Bengal to Gujarat and 4) heat and sound caused by the engine.

In response to a questionnaire from The Tribune, a Tata Motors spokesperson said after the company extended open sales of the Nano from January 2011, there has been a dip in sales after the petrol price hikes since May.

An industry expert said the Nano would have got a huge unexplored market at the Rs 1 lakh price point. However, he says as the price went up and with some of the variants on road coming at around Rs 1.90 lakh, it has started getting compared to other cars in the Rs 2-3 lakh range and that’s where the appeal is fading.

The company has offered a 4-year/60,000-km manufacturer’s warranty - the highest tenure in India. On financing, it says in addition to the captive finance arm, Tata Motors Finance, it has set up financing arrangements with about 28 public sector banks and NBFCs.

The company is also in the process of establishing exclusive dealerships for the Nano in towns with less than 200,000 population.

New Delhi, January 1
Chinese manufacturers are increasingly "faking" popular Indian products of consumer goods giants such as Dabur and ITC, undermining the legitimacy of brands and causing losses worth as much as $5 billion annually, officials said.

"A lot of counterfeit Dabur products are made in China. We have conducted at least 20 raids in China but no proper action has been taken by the Chinese," said Ashok Jain, general manager of finance at Dabur India, the country's fourth largest FMCG firm.

He said such fake products manufactured in China with "Made-in-India" tag are supplied across the world, mostly in India and African countries.

"It causes huge damage to the brand. Those fake products are obviously not up to our standards and supplied at very low prices," Jain told IANS.

Dabur, which has nearly $4 billion market capitalisation, operates in key consumer product categories like healthcare, skin care, hair care and oral care. The company's revenue last fiscal was $910 million.

Pradeep Dixit, a senior official of ITC, a $33-billion conglomerate, said the popular FMCG brands of the company were counterfeited by unscrupulous firms and supplied in domestic as well as foreign markets.

"Our popular cigarette brand is faked and supplied widely in the states like Chhattisgarh, Bihar and Uttar Pradesh," he said.

"China is a big problem everybody is facing," said SK Goel, chairman of the Central Board of Excise and Customs, told IANS.

Goel said the big international brands like Nokia, Adidas, Reebok and Nivea were also widely counterfeited in China and supplied in India and other parts of the world.

Chinese manufacturers are also faking drugs, endangering lives of patients. Fake drugs, carrying "Made in India" tags, supplied from China were recently detained in Nigeria and other African countries.

KK Vyas, Delhi's DCP (crime), said the police have seized and confiscated a lot of fake and counterfeited products of popular brands in the national capital recently. — IANS

New Delhi, January 1
The New Year may bring in loads of happiness for job-seekers, as experts are expecting the companies to hire more than five lakh new employees during 2012 despite the uncertainties prevailing about the overall economic scenario.

Adding to the cheer, the employees could expect double-digit salary hikes during 2012. “If all goes well, and depending on policies of the government and market situation, more than 5 lakh jobs will be created across all segments,” executive search firm GlobalHunt's Director Sunil Goel said.

The Indian job market in 2011, felt the ripple effects of the global economic uncertainty, but emerged out of it rather strong, as companies adopted a "cautiously optimistic" approach and experts believe in the new year jobs will continue to be added, albeit at a slower pace.

As per Monika Tripathi, Vice President (Heading the IT, ITeS, Telecom and Research practices) at recruitment process outsourcing firm Elixir Consulting, "The IT/ITeS sector alone will generate as many as around 3 lakh jobs in 2012." Elixir expects the hiring activities to increase by 7-8 per cent in 2012, from the levels seen in 2011.

As the companies would increase their technology investments and entities from abroad look at India-based service providers or development centres, there is a bright prospect for both domestic as well as multinational companies based in India, in the IT/ITES segment.— PTI

Debt Funds typically invest in coupon bearing bonds/money market instruments issued by banks/corporates/financial institutions.

The coupon rate on the bond is a market-determined rate where the key determining variables are the tenor and rating of the bond. Generally, the coupon of the bond is higher for longer tenor papers. The rating of the bond is also a very important variable in determining the coupon on the bond.

The most critical factor to understand is that as interest rates fall, returns from Bond Funds (longer duration debt funds) go up due to capital appreciation. During times when interest rates rise, low duration funds are likely to do well.

Typically, Debt Funds can be differentiated on the basis of the tenor or maturity of the securities that they invest in and or the credit quality of the underlying portfolio.

Debt Funds can be categorised as follows:

Liquid/Money Market Funds: They can only invest in securities which have a residual maturity not exceeding 91 days. These funds typically invest in money market instruments (Commercial papers/Certificate of Deposits) thus having low duration risk. They are very good alternative to the banks’ savings rate deposit in terms of post-tax returns.

Ultra short-term funds: They are similar to the liquid funds except for the fact that they have the flexibility to invest in securities with a residual maturity of more than 91 days. They are a very good alternative to the banks’ fixed deposit in terms of both returns and liquidity.

Short-term Income Funds: These funds keep the average maturity of their underlying portfolio slightly higher ranging from 6 months to 2 years. These funds are ideally suited for those investors who have investable surplus for 1-2 years.

Bond/Gilt Funds: These funds invest in long duration bonds and gilts and tend to gain when interest rates fall, typical invest horizon should be two years and above.

Investors depending upon their risk appetite and investment horizon can choose to invest in these funds. Generally the investment in Debt Funds is compared with banks savings deposits and fixed deposits.

Historically, the investment in Debt Funds has given better returns than bank saving instruments considering post-tax returns and the liquidity offered. The investor should consider his risk appetite, investment horizon and tax implication while investing in debt funds.

The year 2011 ended with the stock markets putting up a dismal performance. It was not only the stock markets, but the Indian Rupee, economy, inflation, politics, the plight of the common man; almost everything was in a sorry state of affairs. The Sensex lost 5,054.17 points or 24.64% to close at 15,454.92 points. The NSE Nifty lost 1,510.20 points or 24.62% to close at 4,624.30. All sectoral indices closed with losses except the FMCG which gained 8.7%.

The Indian markets were the worst performing markets globally and this was their second worst performance in the last decade. The Rupee, which has been hovering between Rs 44-46 to the dollar for a substantial period of time depreciated sharply in September and has closed at Rs 53.10 losing roughly 20% for the year. Interest rates have gone through the roof and there were 11 consecutive rate hikes by RBI before the pause on the last occasion. It is widely believed that there may be a rate cut going forward in January when RBI meets for its mid-quarter review.

IIP numbers were at their lowest for the month of October and the slowdown has hit India is a certainty; probably the extent is a matter of debate. The global crisis particularly the Euro Zone is a matter of concern and is hurting everybody. Corporate performance has been affected and advance tax numbers for the December quarter surely indicated the slowdown.

The fiscal front is also alarming with subsidies on account of food, petro products and fertilisers going through the roof. Revenues have fallen with the global slowdown while expenditure has gone up substantially. The scenario is bleak and the background of the year gone by not one of optimism or one which exudes confidence. What should one expect from 2012? The situation for the immediate first quarter of 2012 is not bright or optimist. Corporate results for quarter ending December 2011 will be poor leading to downgrading of earnings for FY2012 and also for FY2013. The GDP growth which began at around 9% is now likely to be below 7%. FIIs which have been the mainstay of fresh investments in our markets were net sellers in the year gone by with net sales of half a billion dollars against net purchase of over $31 billion in the year 2010.

Almost every stock in the BSE Sensex 30 with the exception of Hindustan Lever and ITC were big losers in the year gone by. Hindustan Lever gained 30% while ITC closed 15% higher. TCS was virtually flat while IT major Infosys lost close to 20%, L&T down 50%, BHEL about 49% and Reliance Industries down 35%. With big performers not delivering, the mood of investors is bound to be depressed and down. To add to the uncertainty, the quality of issues entering the primary market has been sub-standard and the recent SEBI order against seven companies is a proof of the above. All of this does not augur well for the investor.

The Union Budget is likely to get delayed by about a fortnight because of the elections being held in five states to be held between January-end and the first week of March. With elections out of the way, one hopes that the FM uses the opportunity to address the issues and concerns affecting the economy and presents a reformist budget. This would be a great opportunity for him as nobody has any expectations from him. December quarter results will be poor and would see downgrades post the result declaration. One should, therefore, expect the markets to bottom out somewhere in the next quarter and the fall from closing levels could be in the region of 12-15%.

Post the fall, one should see markets bottoming out and improving as time passes. The markets had peaked out around Diwali 2010 and assuming that they bottom out in March 2012, it would be a bearish trend for about 17-18 months. Such a prolonged period of a bearish trend would ensure that the revival would be slow and gradual and there would be plenty of opportunity and time to look into the market and pick stocks for investment. This period would also allow the market to discount all the bad news and become ready for a period of sustained improvement post consolidation.

The sectors which would give returns to investors would be more company specific rather than sector specific.

Reality, infrastructure, banking, capital goods are all sectors which have been big losers in the year just getting over. These sectors leaving aside Reality are likely to improve in the coming year. The banking sector has fallen sharply and if industry has to do well, there is no way that the banking sector will not do well. This is a good sector to look at and invest on dips. Shares from the PSU and private banks are expected to do well and post the correction in the quarter on account of quality of assets would become attractive. The IT sector should do well in the coming year and the depreciating rupee would help the sector. It would be unfair to assume that the sector would benefit to the extent of the rupee depreciation as these companies have dollar denominated expenses which would have to be paid at higher rates. Companies involved in infrastructure like road builders and infrastructure would also gain.

A level of 17,300 to 17,800 on the Sensex at year-end levels or the high of the year is a decent level to expect in the coming year. Wishing all readers a happy and prosperous New Year 2012.

The writer is founder of KRIS, an investment advisory firm. The views expressed are his own.