INDIAN BANK
HO/INTERNATIONAL DIVISION
66 Rajaji Salai, Chennai - 600 001
Website : www.indian-bank.com
FOREX NEWSLETTER
(FORTNIGHTLY)

MARKET OUTLOOK FOR THE NEXT FORTNIGHT

(01/02/07 - 15/02/07)

 

Third Quarter Review of Annual Statement on Monetary Policy

for 2006-07 announced by RBI

>· Repo Rate increased to 7.50 per cent from 7.25 per cent.
>· Reverse Repo Rate, Bank Rate and Cash Reserve Ratio (CRR) kept unchanged.
>· GDP growth forecast at 8.5-9.0 per cent during 2006-07.
>· Inflation to be brought down as close as possible to 5.0-5.5 per cent at the earliest, while continuing to pursue the medium-term goal of a ceiling on inflation at 5.0 per cent.
>· Provisioning requirement increased to two per cent for standard assets in the real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure and personal loans (excluding residential housing loans).
>· Provisioning requirement increased to two per cent for the banks' exposures in the standard assets category to the non-deposit taking systemically important non-banking financial companies (NBFCs).
>· Interest rate ceiling on NRE deposits reduced from 100 basis points to 50 basis points above LIBOR/SWAP rates for US dollar of corresponding maturity.
>· Interest rate ceiling on FCNR(B) deposits reduced from LIBOR/SWAP rates to 25 basis points below LIBOR/SWAP rates for respective currency/ maturities.
>· Banks restrained from granting fresh loans, in excess of Rs. 20 lakh, against NRE and FCNR(B) deposits and being advised not to undertake artificial slicing of the loan amount to circumvent the ceiling.

(Source: RBI release)

Other News Items

In the biggest overseas acquisition by an Indian company, Tata Steel snapped up UK -based steel maker Corus at 608 pence a share in an all-cash deal costing $ 12.1 billion (Rs: 53,361 crore). In a closely contested eight-hour closed-door auction, Tata Steel outbid CSN of Brazil in the ninth and last round, to become the fifth largest steel producer in the world.

Mr Ratan Tata, Chariman of Tata Steel, said that it was a moment of great fulfillment for all Indians as an Indian company bid for a European company much larger than itself and has acquired a global dimension with a footprint in Europe.

Tata Steel's exposure would be $ 4.1 billion through a mix of debt and equity. The balance of around $ 8 billion would be through loans and rising finance by the special purpose vehicle created for the acquisition, Tata Steel UK, which would be serviced from the cash flow of Corus.

(Courtesy: The Businessline)

With an estimated domestic demand of about 85-90 million handsets this year, including 18 per cent through the replacement market, the country could potentially produce about 30 million handsets this year itself as against initial estimates of this target by 2009. Production has begun in several manufacturing units in the country, which include LG, Nokia, Flextronics and Samsung. Motorola is to join soon. Industry sources feel that India has reached an inflection point and has emerged as the fastest growing cellular market in the world.

From a market which had about 85-90 percent of handsets from the grey market, it has turned exactly opposite with 90 percent legal, limiting the grey channel to 10 per cent. The category of business phones, now estimated at about 0.5 per cent of the total market, is poised for growth driven by increased adoption in enterprises to empower their field force.

(Courtesy: The Businessline)

S & P RAISES INDIA CURRENCY RATING TO INVESTMENT GRADE

Standard & Poor Rating Services raised India's sovereign local currency credit rating to investment grade BBB-/A-3 from a speculative grade BB+/B and kept its outlook stable. S & P has cited the country's strong economic prospects and external balance sheet, deep capital market and an improving fiscal situation in raising the rating. This was good news for the rupee and would lift the country's profile as an investment destination.

(Courtesy: The Businessline )

EUR = EUR to trade weaker and the range expected during this fortnight is 1.2750 - 1.3050. EUR INR to remain within Rs: 56.35 - 57.50.

GBP = GBP to trade downwards within a range of 1.9450 to 1.9760. GBP INR to remain within the band of Rs: 85.50 to 86.95.

JPY = JPY to trade weaker during the next fortnight between 119.80 to 122.30. Against INR, it might trade within Rs: 35.80 - 36.90

INR = INR to reamin range bound within Rs: 43.90 - 44.50. More inflows helping INR to strengthen in spite of regular RBI support at around Rs: 44.10 levels.

 

DISCLAIMER: Views expressed here are only indications and the Bank or any of it's officials will not be responsible for any consequences of any decisions taken on the basis of these indications.

FCNRD(w.e.f. 01.02.2007)						NRE(w.e.f. 01.02.2007)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE
1 Year & above but less than 2 years	5.18	5.62	3.84	4.11	6.31	5.93
2 Years & above but less than 3 years	5.10	5.56	3.97	4.11	6.25	5.85
3 Years & above but less than 4 years	5.05	5.51	3.98	4.11	6.24	5.80
4 Years & above but less than 5 years	5.05	5.47	3.98	4.14	6.28	5.80
5 years only	5.06	5.41	3.99	4.18	6.26	5.80
SB NRE - 3.50 % at par with domestic savings deposit

 

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