Mumbai Picture As on 30/11/2008

• What World Paid: 183 dead, 327 injured
• What They Paid: 9 Killed, 1 Arrested
• What Govt Says It Averted: 5000 deaths

Law relating to dishonor of Cheques in India

The Negotiable Instruments Act, 1881 is an Act to define the law relating to promissory notes, bills of exchange and cheques.

This Act has been amended several times commencing from 1885 till 2002. The most important amendment is by Act 66 of 1988 and by virtue of chapter XVII was introduced by the Banking, Public Financial Institutions and Negotiable Instruments laws (amendment) Act, which came into force from 01-04-1989.

The introduction of Chapter XVII i.e., sections 138 to 142 of the Negotiable Instruments Act, for the prosecutions relating to the offences of dishonor of cheques.

The dishonor of cheques became popular and frequent in courts of law and the law relating to the same developed in such a rapid pace covering almost several aspects which may arise in the day to day disposal of such cases by the courts.

Chapter XVII of Negotiable Instruments Act has been lastly amended by Negotiable Instruments (Amendment and Miscellaneous provisions) Act 55 of 2002 and the same has been came into force w.e.f., 06-02-2003.As per the latest amendments the imprisonment has been extended to 2 years.

The issuing of notice within 30 days after the receipt from the bank regarding return of cheque as unpaid and further after amendment to Sec.142 of N.I. Act, the cognizance of complaint may be taken by the court after the prescribed period i.e., beyond 30 days after receipt of notice by drawer, that the complainants to satisfy the court that he had sufficient cause for not making a complaint within such period.Sec.138 to 142 of N.I. Act deals with:

i) Sec.138 deals with the offence of dishonour of cheque and the punishment there for.

ii) (a) Sec.139, deals with presumption that the holder of a cheque in discharge in whole or in part of any debt or liability.

(b) Sec. 140, the defense which may not be allowed in any prosecution under Sec.138.

The drawer that he had no reason to believe when he issued the cheque that it may be dishonored on its presentation.

(c) Sec.141, deals with offence by a company prescribing different burden and onus of proof between persons in-charge of and responsible to the company for the conduct of its business and persons, with whose consent or connivance or due to neglect on his part, the offence had been committed, may be stated to fall under ‘evidence aspect’.

iii) Sec.142, deals with the cognizance of an offence prescribing the method or mode of preferring a complaint and the forum before which the complaint has to be preferred, besides prescribing the period, with in which the complaint is to be preferred from the time of accrual of the cause of action, not withstanding anything contained in the code may be stated to fall under ‘procedural’ and ‘limitation’ aspects.

The amendment made to N.I. Act in 2002 also includes the insertion of new sections 143 to 147. The new sections deals with power of court to try cases summarily, mode of service of summons, evidence of affidavit, bank slip as prima-facie evidence and offences to be compoundable under N.I. Act.

I. Cheque

Under the N.I. Act, a cheque is an instrument which is negotiable by delivery. The drawer is discharged when payment is made in due course. In simple terms, this means that when cheque is tendered there is a presumption that payment would be realized in due course, and hence the date of payment is considered to be the date on which the cheque is delivered, regardless of when the cheque is actually presented for payment.

The origin of cheque can be traced even from 17th century onwards in England. In the case of Stedman vs. Gooch, it is observed that payment by negotiable instrument is a conditional payment, which means that if the negotiable instrument is dishonored on presentation the creditor may consider it as wastepaper and resort to its original demand.

It has been observed in “Benjamen on Sale”, 8th edition, it was stated that payment takes effect from the delivery of the bill, but might get defeated by the happening of the condition of nonpayment at maturity.

In “Byles on Bills”, 20th edition the position was summarized as ‘A cheque, unless dishonored is payment’. Under the Common Law of England, the rule is to the effect that the sending of a cheque in payment of debt is subject to the condition subsequent that the cheque must be met on presentation.

 In the High Authority of Royal Bank of Scotland Vs. Tottenham, 1894 LXXI Law Times Report 168, it was held that a cheque is contract between the parties, and it is for a judge at the trial to construe that contract by reading what is written upon it.

II. POST-DATED CHEQUE

The post-dated cheque becomes a cheque under the Act on the date written on it and the six months period has to be reckoned for the purpose of sec.138 of N.I. Act from the said date.

A post-dated cheque cannot be presented before the bank and as such the question of its return could not arise. It is only when the post-dated cheque become a cheque with effect from date shown on the date of cheque.

A post-dated cheque carries with it an implied notice to the effect that for the present there are no deposits, but at the same time assuring that the funds will be available by the date it becomes due (1956 (1) Madras Law Journal 471).

Post-dating of bills of exchange is allowed both in English and American Law.

There is no prohibition in the Indian Acts against post-dating and promissory note which is post-dated is thus an effective negotiable instrument through it cannot be sued upon till after that date passes.

III. STOP PAYMENT OF A CHEQUE

In spite of the civil remedy, Sec.138 is primarily meant to prevent dishonesty on the part of a drawer.

Sec.138 draws presumption that one commits the offence if he issues the cheque dishonestly and cheque has been drawn and issued to the payee and the payee as the presenter of cheque and thereafter, if any instructions are issued to the bank for non-payment and the cheque is return to payee with an endorsement ‘payment stopped by drawer’, it amounts to dishonor of cheque (1996 (2) SCC 739) =AIR 1996 SC 2339.

Even if a cheque is dishonored because of ‘stop payment’ instruction to the bank, Sec. 138 would get attracted (1998 (3) SCC 249).

The luxury of “stop payment” instructions by the drawer to cover-up real insufficiency funds would no longer be available to drawer as per the law of the land.

IV. RE-VALIDATION OF A CHEQUE

There is no provision in the Negotiable Instruments Act or in any other law which stipulates that a drawer of a negotiable instrument cannot re-validate it.

It is always open to a drawer to voluntarily re-validate a negotiable Instrument, including a cheque (AIR 2002 SC 38).

V. LEGALLY ENFORCEABLE DEBT

It is clear from the explanation to Sec.138 of the Act, that the cheque covered by the said section must be relatable to enforceable or debt which must be existing as on the date of issuing of the cheque. For the purposes of this section, “debt or other liability” means a legally enforceable debt or other liability.

In 1997 Crl. Law Journal 1942 A.P., it was held that on the date of issuing of cheque material was not supplied by complainant and the goods was found not of agreed quality.

The cheque was presented third time after accused intimated about rejection of material. It was held that there was no infirmity in the reasoning of trial court that on the date of cheque there was no existing debt or liability and as such no offence was constituted u/s. 138 of N.I Act. 

Where cheque issued as security, on dishonor of such cheque, not offence under Sec.138 of the Act (2001 (2) RCR (Crl.) 75 MP) also see 2002 (3) Crimes 145 (Raj).

CONDITIONS TO INITIATE CRIMINAL. ACTION U/S.138 OF N.I. ACT

a) A cheque must have been drawn by a person on an account maintained by him for payment of any sum of money to another person from out of the account.

b) The cheque must have been issued for the discharge, either in whole or in part, of any debt or other liability, though, in the absence of proof to the contrary, it shall be presumed that it was issued for the same.

c) The cheque shall be returned by the bank unpaid –

i) Either because of the reason insufficient funds to honor the cheque; or

ii) Because it exceeds the amount arranged to be paid from the account by an agreement with that bank.

Thus, the dishonor of the cheque by the bank under the above mentioned circumstances shall constitute an offence and the offender is liable to be punished u/s.138 of N.I.

Act with imprisonment, which may extend to 2 years or with fine, which may extend to twice the amount of cheque, or with both.

CASE LAW ON DISHONOUR OF CHEQUES

1. Account closed: Account closed was held to be the offence u/s.138 of N.I. Act (AIR 1999 SC 1952). The cheque returned on the ground of close of account is an offence (1998 (2) Law Summary 461). Where the cheque was dishonored on ground of account closed, the accused cannot escape from liability of the offence (1998 (2) ALD (Crl.) 286 Kar).

2. Issuance of post-dated cheque and closing account: Where the accused issued the post-dated cheque and had also closed his account in the bank, in such a case he is liable to be prosecuted under Sec.138 (1998 (2) ALD (Crl.) 177 Bom).

3. Incomplete Signature: Dishonor of cheque because of incomplete signature on cheque of drawer. Held: did not attract sec. 138 - (2002 (7) SCC 531).

4. Cheque issued by partner: Complaint u/s.138 of N.I. Act against firm and its partners. No allegation in the complaint that the partner was in-charge of and was responsible to the affairs of the firm – held: not maintainable against the partner (2002 (7) SCC 655).

5. Offences committed by a company: Where an offence is committed by a company, either company can be prosecuted or the person-in-charge of the company can be prosecuted or both of them can be prosecuted (1998 (2) Crimes 409).

6. Discharge of father’s debt: Father of the accused, but not the accused owes debt to complainant. Complainant obtained cheque from the accused by force. Cheque was not issued in discharge of father’s debt. Accused cannot be prosecuted (2003 (6) ALD (NOC) 64).

7. Cause of Action: Once notice is issued under Sec.138, failure to initiate prosecution would forfeit the right to prosecute (1998 (7) Supreme 20).

8. Object of issuing notice : The object and purpose of issuing notice to the drawer is to give information to the person who had issued the cheque that it was dishonored and give him an opportunity to make good the amount within 15 days of the receipt of the information (1997 (88) Company cases 433).

9. Notice once issued, Chq. cannot be presented for collection: It is settled that the payee is free to present the cheque repeatedly within its period of validity any number of times, but once notice has been issued the drawee to avail the cause of action arising thereupon and file the complaint within the stipulated period (2002 (1) ALD (Crl.) 397 (AP) (1998 SCC (Crl.) 1471 followed).

10. Notice by fax and Regd. post: Notice can be sent by fax and mode of sending notice not to be restricted to post or messenger (AIR 1999 SC 1609).

11. Omission of Chq. No. in notice: The number on the cheque has no relevance in a proceeding u/s.138 of N.I. Act. Sec.5 and Sec.6 of the Act does not specify that, the cheque or bill of exchange should bear a number. There is also nothing in Sec.138 of the Act to show that the number of the dishonored cheque also should be mentioned in statutory notice or in complaint (2004 Cr. LJ 712 AP).

12. Advocate did not sign notice: The mere fact that the advocate for complainant did not sign the notice, may not make it invalid 1996 Crl. LJ 2264 Kar).

13. Issue of second notice: Cheque issued by the respondent was dishonored – presented again – again dishonored. The notice issued by the complainant at the time of first dishonor was not served on respondent/accused, but the fact remains that the notice has been issued for second time. Therefore, cause of action stood terminated (2003 (117) Company Cases (Madras).

14. Accused refused to receive notice : Where accused have refused to receive notice, even then complaint to be filed after expiry of 15 days from the date of receipt of notice (1997 (3) crimes 445). In case of refusal to receive the notice, it amounts to acceptance of notice and date of refusal to receive such notice shall be treated as the date of receipt of such notice. In such case the period of fifteen days has to be computed from the date of refusal (AIR 1996 SC 330; AIR 1989 SC 630).

15. Evading notice: Where accused had evaded service of notice relating to dishonor, it will amount to constructive notice (2001 (2) ALD (Crl.) (Mad) 137).

16. Postal endorsement ‘not found’: Notice was duly given but the same was returned unserved with postal endorsement ‘not found’. If a registered letter addressed to a person at his residential address does not get served in the normal course and is returned it can only be attributed to the addressee’s own conduct (1998 (1) CCR 111).

Once the letter is delivered to the post office he has no control over it. It is then presumed to have been delivered to the addressee under Sec.27 of the General Clauses Act (AIR 1989 SC 630).

17. Civil Suit & Criminal Complaint: Filing of civil suit and filing of criminal complaint are not alternative remedies and they are different types of rights (1994 Criminal Law Journal 887). The mere pendency of a civil dispute will not oust the jurisdiction of a Criminal Court from taking cognizance of an offence on a complaint under Sec.138 of N.I. Act (1998 Crl. LJ 559 = 1998 (2) ALD (Crl.) 300 Guj).

18. Stay of suits: Pending of criminal matters would not be an impediment to proceed with the civil suits. On the other hand, the courts are rarely stay the criminal cases on only when the compelling circumstances require the exercise of power (1996 SCC (Crl.) 466) = 1996 (3) SCC 87).

19. Sec. 138 of N.I. Act & Sec. 420 of I.P.C.: When the cheque was dishonoured for insufficient funds, such person issuing a cheque is liable for offence of Sec. 138 of N.I. Act but not u/s. 420 of IPC (1989 Cuttack Law Times 719).

20. Time barred debt: Where cheque itself was issued for a time barred debt, there cannot be conviction under provisions (1997 (2) Crimes 658). Where the loan was taken in 1985 and cheque was issued in 1990 and the loan is barred by limitation, drawer of cheque cannot be prosecuted (1997 (1) ALT (Cri.) 509.

21. Payment after receipt of notice: Where accused made tender of amount after receiving notice, cannot be visited with any consequences for non-payment (1994 Crl. Law Journal 2768).

22. Refer to drawer: The bank endorsement “refer to drawer” also may fall within the ambit of the provisions of Sec. 138 of N.I. Act. - 1994 Crl. LJ 2874; 1995 Crl. LJ 3828; 1994 (1) Crimes 606; 1995 Crl. LJ 3098.

23. Request not to present the cheque: When after issuance of a cheque and before presentation for encashment, a request was made by the husband of the accused not to present the cheque. 

In spite of the same it was presented and a return. Complaint is not maintainable (1997 (1) Crimes 55); 1996 (3) Crimes 385 (Mad) = 1996 (4) CCR 92 (Mad).

24. Dismissal of complaint for default: Dismissal of complaint not proper (2002 (7) SCC 726).

25. Dismissal of complaint for default and restoration: Where the complaint is dismissed for default, in restoration application, the complainant must assign a valid reason as to what prevented him from coming to the court by the time when the case was called (1998 BC 63 (AP).

For securing the ends of justice, the Magistrate is empowered to restore the complaint filed under Sec.138 of the Act (2001 Crl. LJ 2821 Kant). However, contrary view prevails.

The order of dismissal of a complaint by a criminal court due to the absence of the complainant is a proper order (AIR 1986 SC 1440). A second complaint is permissible in law if it could be brought within the limitation imposed by the Supreme Court in the case reported in AIR 1962 SC 876.

26. Dismissal of complaint and appeal thereof: Dismissing complaint due to non-appearance of complainant resulting in acquittal of accused. Revision is not maintainable and only appeal lies to High Court u/s.378 (4) of Cr. P.C. (II 2003 CCR 387 HP).

27. Default of fine u/s.138 of N.I. Act. : Sentence of imprisonment in default of payment of fine – Imposition of imprisonment and challenge thereof. Sec.138 does not provide for such sentence. Hence, sentence in default of fine set aside (2006 (9) SCC 784.

Note-I tried to write this article with lot of outside references as I am not a lawman. However, readers are requested to notify if there are any mistake/wrong information they found. This blog will not be held responsible if anyone take legal steps based upon the fact stated in this article. You are kindly requested to consult with your lawyer for this.

Courtsy:ramanamurty9967@yahoo.co.in

Sebi spikes ICICI charge

The capital market regulator has rejected ICICI Bank’s charge that a cabal of market manipulators had hammered its stock recently. The Securities and Exchange Board of India (Sebi), which trawled data on stock trades between September 8 and October 8, said there was no evidence of manipulative trading. On September 17, K.V. Kamath, managing director and CEO of ICICI Bank, had complained to the regulator that certain vested interests had mauled the stock after spreading rumours that the bank was in trouble. The private sector bank had also filed a first information report with the Economic Offences Wing of the Mumbai police against a bear cartel of brokers. Although it did not name anyone, the bank said it had conducted investigations to identify the source of misleading statements. “None of the major sellers were observed to be placing orders successively at lower price. There was no pattern observed regarding placement of successive orders at lower price by sellers to hammer down the price. There was no pattern of booking intra-day profits by major clients or brokers during this period,’’ Sebi said today. It added that the trading patterns in the stock were consistent with the shareholding of ICICI — where FIIs are in a majority — the general buying and selling behaviour by FIIs and the broad movements of the market during this period. A spokesperson for ICICI Bank did not wish to comment on Sebi’s observations. The regulator said the share prices of several leading financial services companies had suffered declines against the backdrop of a global crisis in the financial sector and liquidity fears. ICICI Bank had alleged that a malicious rumour had been spread to the effect that some of the top management were selling their stock in the bank. The ICICI Bank stock fell 12.5 per cent from Rs 640 on September 15 to Rs 560.30 on September 17. According to Sebi, the shareholding pattern of ICICI Bank for the quarter ended June 30 showed that around 68 per cent of the shares were held by FIIs/foreign entities. Similarly, figures for the next quarter that ended on September 30, 2008, showed that around 65 per cent of the shares of ICICI Bank were held by FIIs/ foreign entities (ADR), while the rest was with the Indian public, including institutions.

Some views & Facts over Investments

The crisis which started from US sub prime mortgage market has ultimately grown into a full-blown global credit, liquidity & confidence crisis. The risk has moved from an individual level to mortgage lenders to corporates to investment banks to overall financial system and even countries. India has surely not remained untouched by the unprecedented global financial crisis. Globally, equity markets have witnessed heavy correction & Indian Equity Market is no exception. Sensex has corrected by over 57% so far in 2008. Due to liquidity crunch, FIIs have withdrawn $12bn from the Indian markets (CYTD) after infusing a record $17.4 bn in calendar year 2007. Being one of the best performing markets in 2007, Indian equities have seen one of the sharpest corrections. On the macro front, however, India is on a better footing compared to the start of the fiscal year. With crude correcting by over 55% from its peak of $147/bbl and other commodities also correcting (by 40-50% FYTD), inflationary expectations have fallen sharply. Inflation has fallen from peak of 12.9% in August to ~11% & given current scenario, it is expected to fall to single digit by end of December, to 6.5-7.5% by end of FY09 and further to 5% by first quarter of FY10. India's Current Account & Fiscal Deficit will also improve with fall in crude oil. With inflation cooling off, RBI seems to have rightly shifted its focus from price stability to economic growth. It has aggressively cut Repo Rate by 100bps and CRR by 250bps in a very short span. It has further relaxed ECB norms, made NRI deposits more attractive and announced quasi-cut in SLR. Globally, Central Banks are aggressively fighting the crisis. However, despite best efforts, the global economic situation will still deteriorate with US entering a phase of recession. India, though not completely decoupled, but is adequately insulated and is in a better position to cope with the crisis. India is a domestic-driven economy with relatively low leverage and low export dependence. Indian corporates are in good shape, having enjoyed a number of years of high profits and this coupled with low leverage, would allow them to weather a slowdown. The infrastructure boom in India is likely to continue, although at a slower pace led by near-term funding issues. Consumption comprises two-thirds of India's GDP and is likely to sustain its average growth rate led by increasing exemption limits for personal income tax, rising of tax slabs, farm loan waiver and the he 6th Pay Commission. India's GDP growth may moderate to 7-7.5% in FY09, however, what one needs to understand is that even with a 7% growth rate, Indian will remain one of the fastest growing economies globally. Policymakers have also indicated their willingness to support economic growth. The stage is set for monetary easing which has, in the past (FY01-03), led to growth revival, though with a lag. Given the rapidly changing dynamics in global financial markets, we expect RBI to be more explicit in its analysis of the domestic scenario and give its near-to-medium term guidance and outlook on economic growth, inflation, exchange rate stability & measures to ensure longer-term stability of the Indian financial sector. Indian market valuations have become attractive at 10xFY09E. It is much below its historic average of 18 times. Indian market has been commanding premium over valuations of other Emerging markets due to a more diversified earning base, higher Returns on Equity (RoE), consumption driven growth story & low reliance on exports. Recently, Indian valuation premium viz-a-viz other emerging markets have narrowed, thereby making India more attractive. Current times are surely tough for all of us, however, it is important to maintain our calm in these times & strategize our investments with long term horizon. If we analyze Sensex return for the last 15 years & keep a 10 year investment horizon, then Sensex has always delivered positive returns. We being long-term investors in the market, we should not be too much concerned about short-term market movements since despite the current correct, Sensex has still delivered an attractive 21% CAGR growth (FY03- 24th Oct'08). BSLI laid adequate emphasis on the quality & liquidity of it’s investment assets & you can be rest assured that your money is in safe hands and are invested in good quality assets. Every investment/productive assets needs time to deliver positive results. It is like planting a seed & watching the tree grow & yield fruits or watching an infant grow into an adult. Finally, a good investment strategy and timely execution of the strategy are important for achievement of goals. It is up to the investors to ensure that they develop the right strategy & execute it in a timely manner to reap maximum gains. That's what professional fund managers, are here to help you with.

Demat demand dries up

The market meltdown has spooked investors who were sitting on the fence, waiting for the right time to invest. Stocks have tumbled nearly 55 per cent from its peak in January this year and new investors are wary of entering the market. The growth in the number of new demat accounts, a must for stock trading and a measure of retail participation, has significantly slowed down after June and particularly in the last couple of months. The total number of demat accounts with the country’s two depository service providers, National Securities Depository Services Ltd (NSDL) and Central Depository Services Ltd (CDSL), grew from 1.20 crore at the end of December 2007 to 1.47 crore at the end of June this year. This means 27 lakh new accounts were opened during the six-month period. Investors’ demat accounts with NSDL and CDSL together stood close to 1.5 crore as of November 8. That is, an addition of less than 3 lakh new accounts since July. “First-time investors come in droves when there are high-profile initial public offerings (IPOs). This happened early this year during the public offering of Reliance Power,” said Prithvi Haldea of Prime Database, a Delhi-based firm that tracks the primary capital markets. In January, more than 13 lakh demat accounts were opened. “But since the price crash in the secondary markets in the second half of January, a number of big IPOs were withdrawn. The primary market has almost dried up with no big companies planning to float an initial or follow-on public issue till the conditions stabilise,” Haldea said. The number of demat accounts opened in the first three months of the current calendar year was 21.1 lakh. It was 5.3 lakh between April and June, and only 1.95 lakh between July and September. According to figures available with CDSL, the depository service provider could open only 3,000 demat accounts in October. Total number of investors’ account with CDSL was 53.92 lakh at the end of September and it went up to 53.95 lakh at the end of October.Data for NSDL is not available. The total number of investors’ account with NSDL as of November 8 stood at 95.82 lakh against 95.03 lakh in September — an addition of 79,000 accounts in two months

Doha Bank Signs Agreement with Birla Sunlife for Financial Products

Doha Bank today signed an agreement with Birla Sunlife Insurance Company of India to offer various personal financial products to non-resident Indians living in Qatar. Birla Sunlife Insurance is a joint venture company between Aditya Birla group of India and Sunlife Insurance of Canada. Under the agreement, Doha Bank shall provide necessary information about the various long term investments cum protection products being offered by Birla Sunlife to the non-resident Indians residing in Qatar and facilitate movement of documents and funds if they wish to purchase such financial products. There shall be three products initially on offer namely Child Education Plan, Retirement or Pension Plan and Growth Plan. Child Education Plan is a savings cum investment product under which parents shall be able to invest small sums of money on a monthly or yearly basis for their children’s future and get the same back with assured returns after the pre-determined period. Normally, the plan matures when the child attains the age of 18 and the entire return thus can be used for his/her studies in the best universities anywhere in the world. The parents have the flexibility to decide the length of the plan and the amount which they want at maturity and accordingly monthly or yearly installment can be fixed. Mr. R. Seetharaman, Deputy Chief Executive of Doha bank said that with the spiraling cost of quality education at higher levels, it is the commitment of Doha Bank to provide financial products and services to our customers who will help them in their personal financial planning to secure the future of themselves and their families. “We partnered with Birla Sunlife because it is one of the most reputed insurance company in India and has some really good financial planning products for individuals. This is also in line with Doha Bank’s commitment to offer the best financial products and services available in the market to its customers”, Mr. Seetharaman further said. Mr. Manoj Kumar, Head of Bancassurance said that the Retirement or Pension Plan is for the people who wish to plan their own future and retire from active work after certain number of years. Here, they can invest on yearly or monthly basis or can put in a lump sum amount to take care of their future. Upon maturity, the money can be fully encashed or can be converted into annuities. Similarly, Growth or Savings Plan is for the people who are looking for higher but secured returns on a short to medium term basis. “All the schemes have an additional layer of protection as the nominee gets the pre-determined sum of money in addition to the invested amounts in the unfortunate event of the death or disability of the investor”, Kumar further said. Mr. Nani Javeri, CEO of Birla Sunlife who signed the agreement with Mr. Seetharaman said that Indians can subscribe to any of the schemes directly from Qatar through Doha Bank and can still get serviced in India if they return home before the maturity of the policy. The policies can be serviced from any of the branches of Birla Sunlife spread across India. He further said that the maturity amount is fully repatriable and can be received here, if they continue to live in Qatar. Customers just have to call our Bancassurance Division directly on 4357313 or 4352161 and set up an appointment with one of our financial advisors. Our financial advisors shall visit them at their office or residence as per the customer’s convenience and shall help them in analyzing their financial requirements and helping them decide on the maturity amount and installments. Ms Simple Vaswani, Product Manager and Varij Pujara from Birla Sunlife were also present on the occasion.

Birla Sun Life Insurance ties with banks across India to increase penetration

Friends recently during a visit to a client’s home regarding life insurance product selling I have been asked a very nice question. “Which Banks do sell BSLI Product through Bancassurance in India? Birla Sun Life Insurance (BSLI), after having made its mark in the life insurance industry as a pioneer in the Bancassurance channel of distribution, has moved into the next phase in its Bancassurance model. It has announced a tie up with five cooperative banks across India. BSLI has one of the largest numbers of bank tie-ups in the life insurance industry. Seven of the most prominent banks in India sell BSLI's plans from more than 300 locations. In the initial phase BSLI has entered into a tie up with five cooperative banks in the different regions of the country. These banks will be the model setup for the region and the experience will be replicated with other cooperative banks in the region. BSLI has set up a dedicated team within the organization to drive this initiative. The company is evaluating possible tie-ups with several other cooperative banks in the country BSLI is looking at leveraging the strong relationship banking strengths of the cooperative bank partners. The strategy will be to sell simple products from its suite initially and move up the value chain with increasing awareness levels amongst customers and the staff of the banks. The tie-ups are expected to increase BSLI's reach across the various regions in India. In the North India, BSLI has tied up with Indian Mercantile Cooperative Bank, Lucknow, which has 11 branches across the state. This was the first cooperative bank to commence sales of BSLI's plans in the month of January 2006. In Bhopal the company has entered into a tie-up with Krishna Mercantile Cooperative Bank which has a strong and loyal base of customers in the city of Bhopal. In the west BSLI has entered into a tie-up with the 'Thane Bharat Sahakari Bank', Mumbai that has 12 branches and has received the license to operate 10 more branches in the state. To increase its reach in eastern India BSLI has tied with the Nagaland State Cooperative Bank, Dimapur, which has a network of 25 branches and the Jamshedpur Urban Cooperative Bank, Jamshedpur with two branches in the city of Jamshedpur. Apart from that I would like to share some information About Sun Life Financial Inc. Sun Life Financial Inc. is a leading international financial services organization providing a diverse range of wealth accumulation and protection products and services to individuals and corporate customers. Tracing its roots back to 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of 31 December 2004, the Sun Life Financial group of companies had total assets under management of USD 298 billion. Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock exchanges under ticker symbol "SLF". Additional information can be found at: www.sunlife.com. *Facts have been used in this article are old. That could have been changed significantly today, as on 14/11/2008.

Birla Sun Life

Source:-New Delhi, Delhi, IND, 2008-05-06 15:19:37 (IndiaPRwire.com) Birla Sun Life Insurance Company Ltd. (BSLI), the individual life business has a market share of 6.6 % amongst private life insurance players, while the group business has a market share of 7.8% amongst private life insurance players in India as on March 2008. The increase in market share is reflected in both its individual life & group businesses. Mr.Vikram Mehmi, President & CEO, Birla Sun Life Insurance remarked “ Birla Sun life Insurance has regained momentum during 2007-08. For the year ended March 2008, we have achieved APE (Annualized Premium Equivalent) of Rs. 2,204 crores, showing a growth rate of 131% resulting in the company being amongst the fastest growing life insurance companies in India”. This increase in market share & growth rate during fiscal 2008 has been realized on the back of an aggressive distribution expansion strategy & introduction of a range of innovative new plans & funds, which have provided the company unique opportunities to tap new market segments. The distribution expansion during the year recorded a phenomenal increase. This has happened across channels & on a national foot print. The branch network increased from 137 to 339; with a further 261 branches under implementation by May 2008. This expansion was national in nature across all the states & across various town classes. The bank assurance channel reflected high growth through in depth penetration of customer segments within its banking relationships. The corporate agency & broker channel witnessed phenomenal growth as a result of developing a large number of new relationships. During 2007-08, BSLI revamped its product portfolio – Launching 4 Products for Individual Segment, 3 products for Group and 7 Funds launched ( 4 Group + 3 Individual) New products have made a significant contribution to APE. The investment performance for BSLI has been strong & consistent, resulting in increased confidence of policyholders. The AUM for Birla Sun Life Insurance is about Rs.6,900 crores as on 31st March, 2008. Its Outstanding Claims Ratio is 0.41%. BSLI has a pan-India branch presence of 339 branches with over 1,00,000 advisors nationally, out of which over 500 advisors are members of the prestigious Million Dollar Round Table (MDRT). BSLI has insured over 2 million lives since inception, comprising over 1.5 million through its individual business and the rest through its Group business. About Birla Sun Life Insurance Birla Sun Life Insurance Company Limited is a joint venture between The Aditya Birla Group, one of the largest business houses in India and Sun Life Financial Inc., a leading international financial services organisation. The local knowledge of the Aditya Birla Group combined with the expertise of Sun Life Financial Inc., offers a formidable protection for your future. Birla Sun Life Insurance (BSLI) has completed 7 successful years of operations & has contributed significantly to the growth and development of the life insurance industry in India. It pioneered the launch of Unit Linked Life Insurance plans amongst the private players in India. It was the first player in the industry to sell its policies through the Bancassurance route and through the Internet. It was the first private sector player to introduce a pure Term plan in the Indian market. This was supported by sales practices, which brought a degree of transparency that was entirely new to the market. The process of getting sales illustrations signed by customers, offering a free look period on all policies, which are now industry standards were introduced by BSLI. Being a customer centric company, BSLI has invested heavily in technology to build world class processing capabilities. BSLI has covered more than 2 million lives since inception and its customer base is spread across more than 1500 towns and cities in India. All this has assisted the company in cementing its place amongst the leaders in the industry in terms of new business premium income. Additional information is available at www.birlasunlife.com About Aditya Birla Group The Aditya Birla Group is a US $24 billion conglomerate with a market capitalization of US $31.5 billion (as on 31st December 2007) and is one of the largest business houses in India. It enjoys a leadership position in all the sectors in which it operates. It is anchored by a force of 100,000 employees, belonging to 25 nationalities. Its operations span 20 countries across six continents and is reckoned as India's first multinational corporation. Headquartered in Mumbai, India, over 50 per cent of the Group’s revenues flow from its overseas operations. The Group nurtures a work culture where success is built on learning and innovation. The Aditya Birla Group was recently been adjudged “The Best Employer in India and among the top 20 in Asia” by the Hewitt, Economic Times and Wall Street Journal Study 2007. Additional information is available at www.adityabirla.com About Sun Life Financial Inc. Sun Life Financial Inc. is a leading international financial services organization providing a diverse range of wealth accumulation and protection products and services to individuals and corporate customers. Tracing its roots back to 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of March 31st, 2007, the Sun Life Financial group of companies had total assets under management of US$386.82 billion. Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock exchanges under ticker symbol "SLF". Additional information can be found at: www.sunlife.com

Foreign Exchange as on 03/11/2008

US $1 Rs. 49.38 UK £1 Rs. 79.92 AUS $1 Rs. 33.30 EURO Rs. 63.32 HKG $1 Rs. 6.37 YEN Rs. 0.50 SINGAPORE $1 Rs. 33.43 SW FR1 Rs. 42.85 As on Nov 3 2008

ICICI retires Rs 24k crore high-cost deposits

Contrary to belief that it was under withdrawal pressure, India's top private sector lender ICICI Bank on Sunday said that it has retired about Rs 24,000 crore expensive deposits to reduce cost and improve its bottomline. Pooh-poohing suggestions that it was under withdrawal pressures, ICICI Bank's Joint Managing Director Chanda Kochhar said, "We have retired wholesale deposits of Rs 24,000 crore in the last six months. At the same time, we have increased the Current and Savings Account (CASA) by Rs 3,000 crore in this period." "It is our conscious decision since last year to reduce our reliance on bulk deposits and shift our focus on retail deposits to reduce our costs of carrying money," she added. CASA as percentage of total deposits had increased from 25 per cent in last September to 30 per cent this September and it was something that one should go by in terms of customer confidence and low-cost deposits, she added. On reports that the bank, which fell prey to a spate of rumors casting doubts about its financial health, Kochhar told PTI in a telephonic interview from Chennai that "on the contrary, the financial health of the bank is only improving". "We have shifted our focus on retail deposits and they are on the rise. During the one year ending September, retail deposits have surged to over 52 per cent of the total deposits from less than 50 per cent and bulk deposits have come down to 48 per cent from over 50 per cent," Kochhar, who is also Chief Financial Officer of the Bank, said. As a result of slew of measures, ICICI Bank has increased its Capital Adequacy Ratio to 14.2 per cent from 13.2 per cent, she said claiming that "we have probably the highest CAR among banks in the country". Coutrsy:2 Nov, 2008, 1420 hrs IST, PTI

The Present Scinario

You may have never bought the bonds of Lehman Brothers or the shares of AIG, but your stocks get battered when these hallowed US financial institutions failed. Your investments, be it in equities or mutual funds or even gold, are getting eroded every time there is some bad news in the US. This is the irony of being part of a global financial system. Post liberalisation, world economies are more intricately connected, which means any development, good or bad, in one country will directly or indirectly affect your investments. The sub-prime mortgage crisis in the US has snowballed into a global credit crunch. The result: asset prices across categories and countries are biting the dust, and so is your personal wealth. However, there is a lesson to learn from the financial debacle in the US, which is a fallout of economic mismanagement at an individual level. It is, therefore, important to understand the genesis of the crisis so that you can manage your personal finances better. Crisis begins Let us first understand what happened in the US and why it took such a bad turn? Between 1953 and 2003, the US faced 10 big and small economic recessions. The recession intensified since 1970 after a steep hike in crude prices by the Organisation of the Petroleum Exporting Countries and the Vietnam war. The 85-month period between 1974 and 1981 in the US economic history is known as “stagflation” — a period of high inflation and stagnation in production — caused primarily because of high crude oil prices. To decrease the money supply and put a check on inflation, the US Federal Reserve increased interest rates steeply between 1979 and 1983. Many savings and loan associations took advantage of high interest rates and lent far in excess of prudent limits. The tight monetary policy in early 1980s inflicted a recession in the US real estate market and by the end of the decade, 2,412 out of 3,600 savings and loan associations became insolvent. The economic recession cooled inflation. After coming to power in 1982, US president Ronald Reagan followed an easy money policy, known as Reaganomics, characterised by sharp cuts in personal and other taxes, to boost domestic consumption and production to overcome stagflation. Though these measure improved GDP and employment growth, the Cold War led to a massive budgetary deficit. In the 1980s, the US government became the world’s largest international borrower. Around this time, the savings and loan associations started declaring themselves insolvent one after the other (Savings and Loan crisis), resulting in the great stock market crash in 1987. Problem deepens Throughout the 1990s, the US government followed an easy monetary policy and the Federal Reserve brought down its benchmark lending rate to 1 per cent in June 2000 — the lowest in 45 years — from 8 per cent in June 1990. With thinning spreads between their lending and deposit rates, banks and financial institutions resorted heavily to mortgage and other forms of lending ignoring the credit worthiness of consumers. Cheap availability of credit lured every US citizen to take a housing loan. This led to sub-prime (low or no credit worthiness) mortgage in the US. According to US census data, per capita disposable personal income (net of taxes) was $30,418 in 2005 but average annual expenditure rose to $46,409 in the same year. This means, people in the US borrowed more than what they earned to foot their consumption bills. From companies to investment banks, all drew up big expenditure plans on borrowed funds. In October 2004, the US securities market regulator suspended the restriction of net capital requirement to borrowed capital for Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley. Freed from restriction on debt, these five investment bankers borrowed as much as 40 times of their net owned capital. Dollar started flowing freely into securities and real estate markets of developing countries from investment bankers, asset management companies and hedge funds. Meanwhile, to disown the risks associated with their “unsound” mortgage and consumer lending, banks and mortgage lending institutions innovated debt securitisation and debt swaps that could be traded. These securitised debts and swaps were also insured by mortgage and credit insurance companies for the satisfaction of buyers. Seeds of a potential catastrophe were sown then and and the crisis deepened when the Federal Reserve kept on raising its benchmark fund rate from 2004 onwards to 5.25 per cent by June 2006. With rising interest rates, sub-prime borrowers started defaulting on loan repayments. Buyers of securitised mortgage debts suffered huge losses and some big investment bankers went bust while others had to be bailed out. Insurance companies also went belly up. Banks began to distrust each other with loans. The credit crisis followed. Taking stock So, what is there for the common man to learn from the whole credit saga. Excessive borrowing is a curse. Understand the interest rate risk first before borrowing money. Don’t just consider the EMI amount while taking a loan. When the interest rate goes up, your EMI will also rise, reducing your disposable income to the extent that you may be forced to use credit cards more often to meet your other expenditures. Use credit cards only in emergency and pay the bill during the free-credit period. Don’t roll over the credit or you will be caught in a debt trap. Don’t buy exotic investment products that you don’t understand clearly. Even debt and bond investments are not safe. In a crisis situation, debt and bond papers become very illiquid and you may not be able to sell those. Bond and debt investment requires a well-developed corporate bond market, which is absent in India. When it comes to investments, don’t follow the herd. Determine a return rate that will help you reach your financial goals. Once your investments generate the desired return, sell that investment and put the proceeds in some other instruments. Stock prices may surge further after you sell your holdings. But you won’t lose money when the stocks crash. Instead, you can buy some other good stocks at a much cheaper price. The current crisis may have come as a rude shock for many investors, but it will also help them to stay away from future financial misadventures.

Astrology

Ganesha had predicted on October 06, 2008 that circuit prices may prevail in the market. Relying on this prediction, those who finalized the deals accordingly must be rejoicing. This is the benefit of taking the astrologer's prediction into consideration before taking any action in the stock market. Till the last day of October the opening of Nifty will not be favorable, views Ganesha. Do not take any action till the day on which the opening of Nifty is positive. Mail me at dharmesh.joshi@ganeshaspeaks.com and order your reading now. Ganesha views firing crackers from the opening till 10:08. So do not be hasty and just wait and watch. Selling price may be around the circuit price. From 10:08 to 12:45 if Nifty is at the down fall then it may rise during this phase. From 12:45 to 14:45, in comparison to the previous phase, Nifty may fall. From 14:45 to 15:30, profit booking in heavy weight scrips is envisaged.

Depositers Pull out RS.17K from ICICI since march

ICICI Bank is shifting focus away from wooing bulk deposits as part of a strategy to reduce its cost of resources. Over the last six months, the bank saw an exodus in deposits following a cut in the lending costs. In the first quarter ended June 30, ICICI Bank saw deposit outflow of Rs 10,000 crore. From March till October 10, deposits fell by nearly Rs 17,000 crore. At the end of March 2008, ICICI Bank had deposits aggregating Rs 2,44,431 crore, compared with Rs 2,34,461 crore at the end of the first quarter in the same financial year. The bank’s deposit base stood at Rs 2,27,384 crore as on October 10. The largest private lender in the country has been reportedly looking at cutting down its dependence on bulk deposits since March last year, given the rise in interest rates. The proportion of retail deposits, which was 43% in March’07, rose to 46.5% in March’08 and is currently close to 50%. The bank did not make any special efforts to renew its bulk deposits. Over the past few months, the bank has cut down its lending activity in retail banking and is focussing on current and savings accounts. When contacted, ICICI Bank officials declined to comment. On a sequential basis, the bank reported a marginal decline in advances in the first quarter. The advances at the end of June were Rs 2,24,146 crore, compared to Rs 2,25,616 crore at the end of March. But other big banks have registered a rise in deposits and advances portfolio in the first six months. HDFC Bank saw a deposit growth of nearly Rs 30,981 crore from March 31 to October 10 this year. Courtsy: 25 Oct, 2008, 1112 hrs IST, ET Bureau

US govt stake in insurance

After purchasing shares of leading banks, the US government is considering buying equity stakes in insurance companies using the $700-billion rescue package approved by Congress,

The Wall Street Journal reported today. The newspaper said insurance firms were offering their shares themselves, feeling they could benefit from the government’s money pool amid the financial turmoil.

Citing people familiar with the matter, the journal said MetLife, Prudential Financial and New York Life Insurance were keen to sell equity stakes to the government. 

Yesterday, PNC Financial Services Group Inc said the treasury department would buy $7.7 billion worth of preferred stock and warrants.


Alpha Bank collapses In another sign of deepening financial crisis, Stearns Bank will acquire the failed Georgia-based Alpha Bank and Trust, making it the 16th American bank to fall this year.

On Friday, the US authorities seized the operations of Alpha Bank and the Federal Deposit Insurance Corporation (FDIC) was named receiver. “To protect depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St Cloud, Minnesota, to assume the insured deposits of Alpha Bank & Trust,” the FDIC said in a statement.

 In a separate statement, Stearns Bank’s chief executive Norman C. Skalicky said the current capital position of the bank is about $250 million. “We have over 23 per cent capital in our banking system today.

This is three times the average capital of all commercial banks in the US and four times what is considered being well capitalised,” Skalicky said. “We are pleased to bring the safety and soundness of Stearns Bank to the former depositors of Alpha Bank & Trust,” he added.

Courtesy-AFP

Global Economic Outlook For the year 2009

As the global economic crisis unravels, many people are asking questions about future. Some are claiming that worst is already over while others forecasting the far worse conditions to set in. This article is an effort to look at global economic outlook from astrological perspective. The series of Bank failures and liquidity crunch was caused by the Saturn in Purva Falguni Nakshatra. Now thankfully, Saturn is going to move out into Uttar Falguni Nakshatra during November end. This will certainly result into improving liquidity scenario across the world. However, the trine aspect of Jupiter on Purva Falguni will also end and with that the government's focus will move away from strengthening the banking system, as other serious issues will begin to crop up. However, the overall effect of both these movements is likely to be positive and will result in easing out of liquidity situation. Trine formation between Saturn and Jupiter in November end, may cause events providing the boost to the sagging morals of the financial markets. As Jupiter transits into Capricorn during mid December, it will begin to give rise to inflationary conditions especially with respect to industrial commodities. It will present a serious inflationary threat to the global economy. In recent times, there has been a lot of talk of deflationary threat among economists worldwide and to some extent, it has been the supportive factor for the interest rates to come down heavily in pat few weeks. However, astrological positions show that inflation and not the deflation is the serious threat. As Rahu is currently positioned in Capricorn and now Jupiter will also enter the same sign and they together will build serious conditions for upsurge in commodity prices, which may assume serious dimensions during mid Feb 2009, as Jupiter and Rahu gets exactly conjunct. Meanwhile, Saturn in Uttar Falguni Nakshatra will force the governments worldwide to take care of issues related with general masses. Till now, governments have only tried to handle the situations related with asset deflation and banking stability. Now the focus will shift to handling public grievances and new packages will be designed worldwide to provide solace to masses. Such plans will also cost lots of money to the exchequers. As the government funds worldwide have almost disappeared in the recent rescue acts, this new funding has to come by way of printing fresh currency, which will cause serious inflationary pressures. Positioning of Ketu in Cancer has already caused serious agricultural inflation and hence transit of Saturn in Uttar Falguni will further add fuel to the fire. Hence it seems that a major inflationary scenario is building up at this stage. As Saturn enters Purva Falguni again in the beginning of February, serious inflationary pressure may cause the interest rates to rise. Saturn will be in Purva Falguni till mid of August and it will force the central bankers to go on a series of interest rates hikes to quench the fiery inflationary scenario. Rahu along with Jupiter will continue to be in Capricorn till first half of November. This astrological combination combined with Saturn in Purva Falguni will force the series of interest rates hike till November 2009. Jupiter will move out of Capricorn in between in the period of May–July and hence it will be placed in exact opposition to the Zodiac sign of Leo. Hence, this may be the time for temporary bottoming of asset prices, even though a meaningful bottom will be established only after Jupiter finally moves into Aquarius during December end. As Saturn enters Uttar Falguni again in the period of Mid August, new financial regulations will come in place, in response to the huge public outcry. Since Pluto is also placed in Mula nakshatra, there will be serious rethink about the extent to which speculations should be allowed in the economy. This will lead to very tight norms and even banning of speculation in next few years to come (till Pluto remains in Mula nakshatra, which is ruled by Ketu). As Saturn moves into Virgo by mid September, the serious depressionary conditions would begin to engulf the masses into serious bouts of unemployment, food riots, social conflicts and other such issues. Ketu in Cancer will also be aiding such a scenario. This situation will only begin to ease out, once Ketu moves out of Cancer in the beginning of Nov. To sum up the whole scenario, it seems that the crisis has just begun and year 2009 will bring serious repercussions, as the crisis begins to spread from financial sector to real economy. It seems that by September, the recessionary conditions will worsen into depressionary conditions. As central banks are forced to print currency to fund their rescue packages, the inflationary pressures will begin to take its toll. There will also be serious upward pressures on commodity prices fueled by speculation and aided by series of rate cuts, which will force the banks to reverse the cuts and go on a series of interest rate hikes. There will be norms to curb the speculation and the so called sophisticated financial instruments will face serious restrictions or even phase out. Crisis will enter the public domain and will lead to social conflicts during last quarter of year 2009. Asset prices will only begin to stabilize during the year 2010 and that lead the economic bottoming out process. Banks will have to sell the holding of gold and hence its price will also crash, in spite of the inflation and dollar weakening scenario. Stock markets will continue to witness the downward spiral, even though at the slower pace. Commodity prices will witness sharp up moves. Dollar may collapse, which may provide a helping hand to the falling crude oil prices. Even though the Indian economy is quite robust, it will still yield to the global pressures and we may witness serious slowdown and strong inflationary scenario. It appears that Indian stock markets along with other emerging markets will bottom out before the developed markets. There is a likelihood of striking the bottom around May-August 2009. Weakening dollar will put exert extra pressure on the price of gold and hence there can be a substantial crash of gold prices in Rupee terms. courtsy- Playful Mystic Shivo

Rupee vs Doller

The rupee tumbled to a historic low of 50.15 to the dollar before scuttling back above the psychological barrier on a day of skittish trading. The fall in the exchange rate coincided with the meltdown in the stock markets and the sharp appreciation of the US unit against other currencies. However, the Indian currency managed to erase some of its losses and ended the day at 49.96 per dollar after the Reserve Bank of India (RBI) intervened heavily by selling dollars. Some estimates said the central bank sold more than $3 billion today. Dealers said the tide was against the rupee right from the word go, and it resumed lower at 50.01 a dollar from its last close of 49.82. Pressure on the rupee built as foreign institutional investors (FIIs) continued to take their money off the table and sent it home. Foreign banks were aggressively buying dollars as the greenback hit new highs on world markets. Analysts, however, feel that the Indian currency may remain under pressure in the days ahead though its movement will also depend on intervention from the central bank. Urvi Gandhi, analyst at Mecklai Financial Services, said the near-term prospects for the rupee appeared to be bleak as the sentiment was bearish on account of the liquidity crunch and the global economic slowdown. Gandhi said the rupee had taken a dive because the FIIs were no longer bringing dollars into the country. These investors have so far sold more than $11 billion of domestic stocks this year. The RBI has added to the gloom by scaling down domestic growth estimates from 8 per cent to a range between 7.5 per cent and 8 per cent.

World Picture

Wall Street joined a global market rout on Friday that kicked off in Japan, led Russia to suspend trading and sent oil and other commodities tumbling on fears of a deep worldwide recession. The US stock indices fell around 4 per cent. News of a contraction in Britain’s economy fuelled fears of a worldwide recession stemming from the worst financial crisis in 80 years. China warned the outlook was grim. Foreign exchange markets saw extreme volatility with the yen rocketing to multi-year heights against the dollar and euro. The euro/yen rate fell 10 per cent at one point. Britain’s economy shrank 0.5 per cent in the third quarter, and analysts said euro zone figures showed the 15-nation currency bloc was already in recession. The pace of existing home sales in the US rose sharply in September, but a Reuters poll of economists suggested battered US home prices would decline next year and a possible recovery in 2010 would be meek at best. Stock markets went into a freefall around the world as panicked investors moved to liquidate risky positions. Japan’s Nikkei index ended down 9.6 per cent and European shares dropped 6.5 per cent. The Dow, the S&P 500, and the Nasdaq dropped around 4 per cent each. The price of US government bonds rose as investors exited stocks. “I would characterise this as a shell-shocked mentality out there,” said Thomas di Galoma, head of government bond trading at Jefferies & Co. in New York. “It’s all the deleveraging of equities ... It’s causing an issue for everyone.” Russia suspended trading on its stock market until at least Tuesday after the market lost more than a tenth of its value on Friday, hitting its lowest levels since late 2004. “The global financial crisis has been constantly spreading and worsening, creating a severe shock to global economic growth,” Chinese Premier Wen Jiabao said at a meeting of 27 member states of the European Union and 16 Asian nations.

Gold Story

Gold prices tumbled both at home and abroad, making a mockery of the status of the yellow metal as a safe haven. According to the World Gold Council, when the financial crisis had started and stock prices fell, investors had scrambled to buy gold. However, now that the crisis has deepened, investors have lost confidence in all assets, including gold. The price of the yellow metal in the international market today fell below the $700-mark to $695.10 a troy ounce — its lowest in the last 13 months. In domestic markets, the price of gold (24-carat) slipped to Rs 11,825 per 10 gram in Calcutta from a peak of Rs 14,565 on October 10. The returns from gold exchange traded funds, another vehicle to invest in gold, also fell over 18 per cent in the last fortnight and 11 per cent in the last one month. Besides, anybody keen to sell jewellery will find few takers among gold retailers. “We’re buying gold jewellery till October 28 (that is Diwali),” said a spokesperson at P.C. Chandra Jewellers’ Bowbazar branch. An official at Anjali Jewellers said it was buying jewellery made only by them. We are not buying jewellery made by other jewellers”. An official of the West Bengal Bullion Merchants & Jewellers Association said the jewellers were sitting on a large inventory.

Experts Openion Over Market

Raamdeo Agrawal of Motilal Oswal feels that it could take two years for the market to come back to normal. He said investors must exercise control and not go into panic mode. Agrawal added that it is difficult to say at what levels prices will stabilise. Typically, two years after the bull runs are worse, he said. He feels one and a half year of further pain is still left. He said that the bear market is expected to last for 12–18 months. Agrawal said that there has been massive increase in corporate profits in the current bull run compared to the phase in the 2000s. Here is a verbatim transcript of the exclusive interview with Raamdeo Agrawal. Also watch the accompanying video. Q: What is your take on what is going on in the market today? A: I have never seen anything like this. I have seen three cycles––1985, 1987 and then 2000, and now this. Every time the feeling is different, the story is different, complexity is different. This time is absolutely stunning. No parallels can be drawn in terms of valuations. One can get companies at one-third of the book overnight. So, these are unusual times. I cannot even structurally think how to think about it except that one needs to control their behaviour at this point, and let the storm pass. Q: Where will it stop? We went out from 3,000 to 21,000, and we have already gone back to sub-9,000. How much will the clock be turning back? Do you think by the time this is done? A: If one looks back at the last 12–15 years, one of the things that comes out is that these are boom and bust kind of markets. Every seven years we have a cycle–1985, ’92, 2000, and 2007. If one does the market capitalisation to GDP calculation, on the last two occasions, the market went to about 55–60% kind of market to GDP at the top and the bottom was formed at about 25% to GDP. This time, thanks to global participation, low cost of money and F&O, the market expanded to 180% of GDP. The expansion went from Rs 8 lakh crore to 75 lakh crore in five years. So, that is the size of the party we had. Even till yesterday the valuations were at about Rs 31 lakh crore. Today, it must be more like Rs 27–28 lakh crore, which is still about 60% to GDP. So, we are still in that kind of broad valuations, which is more than 50% below the peak we saw. I would not like to predict where it will really stabilise, but I am just giving you a perspective. Q: How long would it take after this kind of damage? We had damage in the last bear market as well but this time it seems the damage is far more widespread. How long would it take for the market to finally get back on its feet? A: Typically, in the first year post the bull run, we saw the peak around January 15, is a non-negotiable kind of thing. Looking at the spread and diversity and intensity of the whole problem, it could be two years and post the dotcom bust it took three years. Literally, from 2000 to 2003 we lived in a bear market, which was unprecedented. So, the pain was very deep and prolonged. However, two years is a good period to think about at this juncture. We are not even a year right now into this. So, at least one to one and a half years of painful journey is ahead of us. Q: From the past bear markets that you have seen in 1992–2000 and some of the past bear markets that you have read about, do you sense that this one is pretty much in line with those severe bear markets or does it give you any reason or sense that this may be actually a little more abnormal. Do you feel that there may be further weakness and that it won’t pan out the way most bear markets have panned out in about 7–8 year cycle? A: One of the differences this time is that earlier bull market followed by the bear market were not associated with very strong earnings in the corporate as is in India. This time if one looks at the P/E side it never went into crazy levels, it remained at 18–19–20 times. So, the whole thing was filled up. Corporate profits in 2002–2003 were more like Rs 40,000 crore. This year in 2007–08 full numbers we have is about Rs 3 lakh crore. So, there is a massive expansion of corporate profits in 2002–2003 and 2007, so that is the difference at this point of time. I think P/E wise, corrections are more or less are at a very comfortable level. The biggest challenge is how the profits shape up for the corporates going forward from here, that is a different thing. I think the pace of decline is absolutely breath taking, you are coming down 50% but 50% in five days and 50% in 150 days, I think there is a difference. Q: Has the correlation of equity markets across the globe increased in comparison to the bear markets you have seen in the past and perhaps that is why there is so much mayhem and confusion? A: It looks like businesses have become much more integrated globally and capital has clearly flown from one part of the world to another. What is happening in the US is not my business kind of a situation here. So, if Lehman or some global major falls, I think there is a kind of related thing here or if the emerging market equity volatility index goes up there and the papers have downgraded, I think there is clearly an impact here in terms of cost of equity or debt out here in the local markets. So, I think the whole world has become much more integrated and globalised and hence one has to take all the flak. We might emerge much stronger at the end of it as a country. However, I think the way, the psychological damage of fear cannot be escaped. Q: There is this old adage that when blood is running on the street or fear is at its highest levels. Would this be a great time to buy? In the long-term, would you make some bit of money? A: The problem right now is what earnings we have for the last four quarters­­––that is the real thing. But, what we are going to see in next quarter and the quarter after that is going to be very different most likely. So, earnings to bond yield right now is holding at 1.35–1 in the regulation I did 3–4 days back. The worst in 2002–03 was about 1.7–1.8, so we are very rapidly reaching there and after reaching there it takes another 1–1.5 years to bottom out. So, one is reaching the under valuations and then staying there, so that all the people who are hurt psychologically have to get out and make a way for completely new corporate culture, new earnings culture, new interest rate, new commodity cycle. There will be lot of things changing this time. The story is different this time but it goes on in equity market.

Madhusudhan Kela, Head-Equity Investments, Reliance Mutual Fund feels this sell-off looks like a final capitulation. However, he said this could not be termed as a bottom for the market yet. He does not see any redemption pressure in mutual fund and said that they are sitting on around Rs 5000 crores. Kela advises investors with a 3-4 year perspective to buy into this market as some companies are now available at one third of their cash balance on their books. Sudarshan Sukhani of Technical Trends believes the markets have seen the worst of all damages today and does not expect it to go lower today. He expects a bounce bank and said there would be a tradable rally in the Nifty. However, he is unsure about when that would happen. Sukhani does not recommend short selling in the market and advices investor to either stay away or muster up the courage to go long. Technical Technical Analyst Ashwani Gujral said, “We have strong support between 2,600–2,650 levels. So, probably the market will stop out there but one will not get as meaningful a bounce as is there on most support levels. However, finally, the market will go through 2,600 and may sort of test those 2,000–2,200 levels on the Nifty which was a significant break out level. That was a previous market high.” Gujral further said that the way Kospi, Nikkei and all other Indices are falling around us these local support levels don’t count for much. He feels that in bear markets, support levels don’t hold. He added, “We have seen how from panic levels, one have panics every week. So, it is time to wait and let this pass.”

Market Summary

It was a crash across global equity markets. It was mayhem on Dalal Street and the bloodiest day ever, a black Friday. Sensex closed at 8639, down 1131 points (provisional) and Nifty at 2557, down 385 points (provisional) from the previous close. CNX Midcap index was down 8.31% and BSE Smallcap index was down 7.76%. The market breadth was negative with advances at 108 against declines of 1172 on the NSE. It was a global meltdown today as markets across the world crashed - Germany down 11%, France down 10% and UK down 9% (technically UK is under recession as its GDP was down 0.5%). The Dow futures hit unit down and saw single massive sell off. Hong Kong slid to four-year lows. The pain was across Asia as well. For the Indian market it was the lowest closing for the Sensex and Nifty since 2005. Sensex shut shop at 8701, down 1070 points and Nifty at 2584, down 359 points from the previous close. CNX Midcap index was down 8.11% and BSE Smallcap index was down 7.66%. The market breadth was negative with advances at 87 against declines of 1196 on the NSE A lot of tears to be shaded it seems in very near future.