Reliance Petroleum may start exports from its new 580,000 bpd refinery in April although the plant is likely to begin trial runs near to its end-December target, analysts and trade sources said. The export-focused refinery is entitled to a five-year tax holiday, but if commercial production were to start in December or January, the firms would only receive tax breaks for three months in the first year. India's fiscal years run from April to March. Analysts say the new refinery may be started and stabilised in phases over the first quarter of 2009. Reliance Chairman Mukesh Ambani in June told shareholders revenue from the new refinery would begin from this year. But since then, slowing demand has hit the outlook for refineries, prompting firms like Total and Petroplus to consider cutting back runs on unprofitable products like gasoline. Refinery margins for complex Asian refiners in October were about $6.34 a barrel while those for simple refiners were about $2.29 a barrel. Reliance commissioned its existing 660,000 barrels per day (bpd) refinery six months ahead of schedule but only announced commercial operations six to eight months after trial runs. Earlier this year, Reliance sold several cargoes of diesel under term contracts to various trading houses, including its first ever advance term sale of 0.005 percent sulphur diesel, which will be produced at the new refinery. The sales were an attempt to lock in customers before the plant comes online. A trade source, who could not be named, said Reliance had not yet signalled when supplies of ultra-low sulphur diesel would begin.
Mobile phone group Vodafone cut its full-year revenue outlook for the second time in four months on Tuesday but said it would maintain profits and boost free cash flow by cutting 1 billion pounds ($1.6 billion) of costs. Investors and analysts welcomed the focus on cost controls and on improving performance, instead of on growth by expansion, pushing shares in the world's largest mobile phone group up 9.5 percent to 118.6 pence by 1125 GMT in a falling wider market. Vodafone Group Plc, reporting its first set of figures under new Chief Executive Vittorio Colao, also reported first-half results that met expectations, but said conditions would be challenging. Vodafone is rated A- by both Standard & Poor's and Fitch Ratings and Baa1 by Moody's Investors Service. Vodafone said it had reviewed its strategy due to the more difficult economic environment and said it would focus on growing mobile data and on its execution in emerging markets. It will also focus on driving operational performance and strengthening capital discipline. "We are already represented in most of the key emerging markets, where significant growth is expected in the coming years," it said. "Our principal focus now will be on execution in these markets." Analysts at Cazenove said the new strategy made sense and others welcomed the suggestion that Vodafone would focus on its current markets rather than chase further acquisitions. But Society Generale said investors should sell into strength and said the results benefited from favourable currency movements. "This is a large downgrade pre-currency and highlights the cyclicality of Vodafone," it said in a note. Telecoms groups had previously been seen as resilient to a downturn, but so far this year the European telecoms shares have not done any better than the wider market.
Barack Obamaand John McCain will be carefully watching Virginia early tonight. Television viewers should, too. The state is in the first wave to close polling places, at 7 p.m. Washington time. The results will be telling. Obama has pushed hard to flip the state, which hasn't backed a Democratic presidential candidate since 1964, and he led in pre-election polls. ``An Obama win in Virginia would be a sign the race is over,'' said John Fortier, a research fellow at Washington's American Enterprise Institute who wrote a book about the U.S. Electoral College. ``If he wins Virginia, he is likely to be doing well elsewhere.'' Virginia's results may signal a tidal wave of states turning Democratic after backing Republican President George W. Bush in 2004. Another on the watch list at 7 p.m. is Indiana, which also hasn't backed a Democrat sinceLyndon Johnson won in a nationwide landslide 44 years ago. Ohio follows Virginia and Indiana with a scheduled poll closing time of 7:30 p.m. Washington time. In 2004, the state and its 20 electoral votes remained too close to call until the next day, when Democrat John Kerryconceded. For McCain, the state is critical: No Republican has ever won the White House without claiming Ohio. Red States Close North Carolina and West Virginia, two other states Obama is contesting that went Republican in the last two elections, close at the same time as Ohio. Half an hour later, at 8 p.m., the biggest of the battleground states, Florida, is slated to close all its polls, along with those in Michigan, Missouri, New Hampshire and Pennsylvania. ``It is nearly impossible for McCain to win without winning Ohio, Virginia, and Florida,'' Fortier said. Bush won all three in 2004, ending up with 286 Electoral College votes. A candidate needs 270 to get to the White House. The first poll closings may also offer early clues on Senate and House races. Kentucky's balloting is due to finish by 7 p.m. and attention will be on Senate Minority Leader Mitch McConnell's efforts to hold his seat. A loss for the Republican would bolster Senate Democrats' chances of getting to the 60 seats they need to block a filibuster.
Oil prices fell below $63 a barrel in Asia Tuesday after more evidence of a U.S. recession piled up and hopes China will prop demand waned. Light, sweet crude for December delivery fell $1.24 to $62.62 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore. After rising above $69 per barrel in Asian trade Monday, light, sweet crude for December delivery tumbled $3.87 to settle at $63.91 overnight. Monday's rally in crude oil futures proved short-lived after U.S. manufacturers reported lethargic activity numbers for October. The Institute for Supply Management said its manufacturing index fell to 38.9, the worst reading in more than a quarter century. Any reading below 50 signals contraction. The manufacturing data along with weak U.S. auto sales "poured cold water" on the oil market, said Victor Shum, energy analyst at consultancy Purvin & Gertz in Singapore. "The overriding concern is the economy in the U.S.," Shum said. "For 2008 there is unlikely to be any demand growth for oil and in 2009 there may be some modest growth but much less than we would have seen otherwise." Adding to the gloomy outlook for the oil market, Credit Suisse cut its forecast for growth in China's oil demand next year to near zero from 4 percent on the back of lower economic growth forecasts. "The latest set of economic data out of China suggests a much more severe economic slowdown is under way there. Hopes of even a slightly decoupled China in 2009 are fading fast," the investment bank said in a report. Oil industry analysts had believed that the booming economies of India and China would pick up any slackening of demand if Western nations went into recession. That view has weakened in recent months, as the economic crisis in the United States spread across the globe. Stock markets, often a barometer of the economy for oil traders, were mixed in Asia. Japan's Nikkei 225 stock average jumped 6.3 percent as investors played catchup to Asia's rally Monday following a long weekend. Hong Kong's marked edged up 0.3 percent, but markets in China and Singapore fell. Shum said he expects oil to continue trading within its recent $60 to $70 band. Prices have tumbled since spiking to nearly $150 a barrel in July. The recent output cut by the Organization of Petroleum Exporting Countries is likely to achieve a "fairly good level" of compliance from member nations, creating a floor for the oil price, he said. But a second cut at OPEC's next meeting in December seems unlikely and would be difficult to implement, Shum said. To keep prices from falling further, Venezuela's Oil Minister Rafael Ramirez has said OPEC, which controls about 40 percent of world crude oil production, will need to cut production by at least 1 million barrels daily on top of the already announced cut of 1.5 million barrels a day. In other Nymex trading, gasoline futures fell 2.17 cents to $1.3408 a gallon, adding to a steep fall overnight. Heating oil fell 2.17 cents to $1.9611 a gallon while natural gas for December delivery fell 0.1 cent to fetch $6.837 per 1,000 cubic feet. In London, December Brent crude fell $1.51 to $58.94 on the ICE Futures exchange after plummeting $4.84 overnight.
With the Reserve Bank of India taking a number of steps to shield the economy from the spillover effects of the global financial crisis, bankers on Saturday said that the steps would induce banks to cut lending rates like commercial, home, auto loans as well as deposit rates. Soon after the RBI's announcement, IDBI Bank reduced its home and educational loan rates by 50 basis points with immediate effect. The rate cut would be applicable to both existing and new customers, the bank said. Following the revision, home loans would now be available at an interest rate of 11 per cent against 11.50 per cent earlier. Simultaneously, the margin on housing loans has been enhanced from 15 per cent to 20 per cent for loans of up to Rs 30 lakh and to 25 per cent for loans over Rs 30 lakh, the bank said. Punjab National Bank which had cut home and personal loan rates last week, had reduced prime lending rate (PLR) on Friday. Other banks are expected to come out with a rate revision in the coming weeks. Reeling under pressure of costly borrowing, corporates will surely heave a sigh of relief as the cut in CRR, statutory liquidity ratio (SLR) and repo rate by RBI will ease liquidity in the system thereby lowering interest rates. ICICI Bank joint MD Chanda Kochhar said that the steps taken by the banking regulator will bring down interest rates. "It shows the mindset of the regulator that is continuously monitoring the situation and coming up with measures on dynamic basis," she said. However, there could be a time lag for the interest rates to come down. As Bank of India chairman and managing director T S Narayanasami said, "Ideally speaking, liquidity should bring down interest rates, but this may take a month or two because banks have a lot of sanctions in the pipeline, which are yet to crystallise into disbursements." IDBI chairman Yogesh Agarwal said, "By using the repo rate, the RBI is signalling that the overnight rates must fall in the corridor within the reverse repo and the repo rate. All these are strong growth signals," he said. Inter-bank call money rate closed at 17.50-18 per cent during the weekend. Bankers say that the steps would bring relief to the entire banking system and ease lending and deposit rates. "I would say the system would need some more liquidity for the whole economic cycle to go back to active levels. One will still have to see reduction in market rates. Deposit rates and lending rates have not come down," Kochhar said. Narayanasami said there is pressure on deposits, liquidity alone cannot solve the issue of certain banks, which are currently operating on a high credit-deposit ratio. Banks, which had been on an advertisement spree asking consumers to park their savings in fixed deposits, now say that rates are expected to fall to single digits. "We see single digit deposit rates soon," Punjab National Bank CMD K C Chakrabarty said. As banks are unanimous that the interest rates will come down over the month, Bank of Baroda CMD MD Mallya said his bank may take a call on reducing interest rates early next week.
n a bid to popularise the Securities Lending and Borrowing (SLB) framework, the Securities and Exchange Board of India (Sebi) has reviewed the system and instructed the exchanges and depositories to extend the tenure from the present seven days to 30 days. Addressing another grievance of the trading community, the Sebi has extended the SLB timing to the normal trading hours of 9:55 am to 3:30 pm. Currently, the trading window for SLB activity is open only for one hour from 10 am to 11 am. The SLB system was introduced after the Sebi allowed short sales by all participants earlier this year. The regulator also set guidelines on corporate actions like dividend declaration, bonus issues and stock splits, which could take place when the stock is lent out. In case of a dividend declaration, Sebi says, "The dividend amount would be worked out and recovered form the borrower at the time of reverse leg and passed on to the lender." And when there is a stock split, the positions of the borrower would be proportionately adjusted so that the lender receives the revised quantity of shares. In case of other corporate actions like bonus issues and amalgamation and open offer, the broad guideline states, "The transactions would be foreclosed from the day prior to the ex-date. The lending fee would be recovered on a pro-rata basis from the lender and returned to the borrower." Sebi had earlier expressed its disapproval to the foreign institutional investors (FIIs) lending shares for short sales purpose in the overseas markets. The regulator had also mentioned that they would be working on strengthening the domestic SLB scenario. It was in April this year that the new SLB framework became operational, but there were few takers for this. This was also one of the reasons why overseas investors preferred to have short sales transactions in the over-the-counter (OTC) market overseas. The lack of popularity to the SLB was due to various reasons. Prime amongst them was that the lending mechanism was only for seven days, hence somebody who wanted to go short on particular scrip, had to return the borrowed shares in seven days. Regulations do not allow for 'naked short sales' wherein speculators can sell shares that they don't own. In naked short selling, they could take a short position in the market and on the day of delivery, pay the difference to settle the trade of carry the position forward, as was in the earlier badla days. However, it is the margining involved in short sales that was a sore point for many participants. Unlike the cash market where there are three margins and futures and options where there is a fixed margin, there are five types of margins levied on trades in the SLB segment. The problems • Lending mechanism was only for 7 days. Going short on a scrip, meant returning borrowed shares in that period • Regulations did not allow for 'naked short sales' where speculators can sell shares they don't own • Unlike cash market (three margins) and futures and options (fixed margin), there are 5 types of margins levied on trades in SLB segment The alterations • Exchanges and depositories to extend tenure to 30 days • SLB timing extended to normal trading hours of 9:55 am to 3:30 pm from the present trading window of just one hour from 10 am to 11 am • New guidelines on corporate actions like dividend declaration, bonus issues and stock splits, which could take place when the stock is lent out • When there is a stock split, position of the borrower would be proportionately adjusted so that the lender receives the revised quantity of shares
