U.S GDP Stunner: 3.5% Growth in Third Quarter

http://www.bloomberg.com/apps/news?pid=20601068&sid=aKMkAFoNNzlM

The U.S. economy returned to growth in the third quarter after a yearlong contraction as government incentives spurred consumers to spend more on homes and cars. The world’s largest economy expanded at a 3.5% pace from July through September, figures from the Commerce Department showed in Washington. Household purchases climbed 3.4 percent, the most in two years.

America's economy-A joyless recovery

Oct 29th 2009 | WASHINGTON, DC
From The Economist print edition

New figures suggest that America has at last moved out of recession

http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=14754738&source=features_box_main   New figures suggest that America has at last moved out of recession

THE American government reported on Thursday October 29th that gross domestic product rose at an annualised rate of 3.5% in the third quarter compared with the second. This was the first increase since the second quarter of 2008. It backs up other evidence that the recession ended in the third quarter or just before, though the official decision, by the National Bureau of Economic Research, a group of academic economists, is still some way off. Robert Gordon, a member of this group, is confident that the recession, which began in December 2007, ended in June. But at 18 months that would still make it the longest since 1933.

Consumers are sceptical. Their confidence fell in October, according to the Conference Board, a research group. A poll for The Economist by YouGov found that 35% of respondents think the economy is getting worse; just 28% think it is getting better. Unemployment is still rising, and even a White House adviser, Christina Romer, predicts it will remain “severely elevated” throughout next year.

http://www.thestreet.com/story/10618752/1/gdp-stunner-35-growth-in-third-quarter.html 

GDP Stunner: 3.5% Growth in Third Quarter

The U.S. gross domestic product grew by a faster-than-expected 3.5% in the third quarter, the best reading in two years and the first time the economy has shown growth in four quarters. Expansion was expected in the three-month period that ended in September, though analysts had forecast 3.2% growth. In the second quarter, GDP decreased by 0.7%.

http://online.wsj.com/article/SB125681479289215647.html

Stocks posted their biggest gain in more than two months Thursday, as a bigger-than-expected expansion in the U.S. economy sent the Dow Jones Industrial Average back within sight of the 10000 level.

http://in.reuters.com/article/usMktRpt/idINN2937163220091029

* GDP turns positive in Q3, fuels recovery hopes

* P&G and Colgate beat profit views, Exxon misses

* Dow up 2.1 pct; S&P 500 up 2.3 pct, Nasdaq up 1.8 pct

Caution Advised in BANKING/REALTY stocks

Bank profits likely to take a knock

http://www.business-standard.com/india/news/bank-profits-likely-to-takeknock/374503/ (Source: Business Standard)

Bank profits could take a knock over the next four quarters, with the Reserve Bank of India (RBI) today mandating a loan-loss coverage ratio of 70 per cent.

This means banks will have to set aside money from the profits they earn over the next four quarters. RBI Governor D Subbarao told Business Standard in an interview that the coverage was around 51 per cent at present.
According to a Kotak Securities estimate, lenders such as State Bank of India, ICICI Bank and Canara Bank will need to step up provisioning, while HDFC Bank, Allahabad Bank, Bank of Baroda, Punjab National Bank, Indian Bank and Corporation and Union Bank of India already have a coverage ratio of over 70 per cent.
 

WHO NEEDS TO MAKE MORE PROVISIONS
Bank	Coverage ratio (%)
Canara Bank	27.8
Dena Bank	37.8
SBI	45.1
Indian Overseas Bank	48.6
ICICI Bank	51.9
Bank of India	55.7
Axis Bank	63.2
Note: Data for SBI, ICICI Bank, BoI, IOB pertains to April-June 2009 Source: Kotak Securities

The study said SBI would have to provide Rs 3,800 crore over the next four quarters to meet the stipulated 70 per cent coverage ratio, while ICICI Bank would need to provide Rs 1,758 crore, taking into account these banks’ first-quarter earnings.
Similarly, Canara Bank needs Rs 989 crore additional provisioning, while Indian Overseas Bank will have to set aside an additional Rs 500 crore to comply with the new norms.
Observing a wide heterogenity and variance in the level of provisioning coverage ratio across different banks, RBI has asked the banks to augment their provisioning cushions, consisting of specific provisions against non-performing loans, as well as floating provisions.
Banks have to comply with the new norms by the end of September 2010.
“Our provision requirements according to RBI norms are 40-42 per cent, which means we have a higher percentage of NPAs in the recoverable class.
Over the past four-five ,years we have seen that a large portion of our assets slide into the sub-standard category and slide back into the standard category,” said State Bank of India Chairman O P Bhatt.
“When you execute a write-off, your provision coverage drops drastically, whereas if you don’t write it off and continue to provide for the asset your provision, te coverage remains high,” he added.
Stipulation of higher provisioning would result in 20 basis point reduction in the capital adequacy ratio of SCBs. The ratio stood at 13.2 per cent as of the end of March, rating agency Credit Analysis & Research said.

Real Estate stocks fell on higher provisioning norms :-
Funds just got costlier for builders - The RBI’s credit policy announced on Tuesday appears intended to rein in an incipient bubble in the real estate sector. http://economictimes.indiatimes.com/news/economy/finance/Funds-just-got-costlier-for-builders/articleshow/5170684.cms
Realty loans tighter
Among one of the discernible decisions that the RBI took in its review, it increased the provisioning requirement for advances to the commercial real estate sector classified as ‘standard assets’ from the present level of 0.40% to 1%, a move that makes lending to the sector tougher. “In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets,” the RBI said.

Be an Informed Investor check more data before you take decision

Information flow has been very high in recent times and this has plugged the advantage few investors have been having for past so many years and now it is for investor to use all available data to take informed decision than to rely on tipsters, media, analyst and insiders for news and views as always there will be vested interest. Today there is so much information on the net and even exchanges provide host of information and every company has own website and most of the brokering firms give Corporate Database. Many sites provide stock screeners which investors can use to filter out scrips according to their own technical / fundamental criteria (check links below)

http://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx "BSE Plus" - An Initiative from BSE to make investors "informed"

http://money.livemint.com/LiveMarket/Default.aspx Corporate database

Many Brokering house take Power of Attorney from clients Know more 

http://www.nseindia.com/content/press/total_poa.pdf

http://indiaearnings.moneycontrol.com Good website to see results

http://www.angelbroking.com/share-market.aspx

http://www.indiainfoline.com/Markets

http://www.religaresecurities.com/stockprices/summary.asp

http://www.firstglobal.in

http://www.kotaksecurities.com/jsp/EquitySearch.jsp

http://www.edelcap.com

http://www.sbicapsec.com/index.asp

http://content.icicidirect.com/Research/Research.asp

http://www.hdfcsec.com/Research/

http://www.equitymaster.com/research-it/company-info/search/internal.asp

http://www.investopedia.com/

http://www.wikinvest.com/

Good News links please do read

http://businessworld.in/bw/2009_10_24_High_Prices_Pull_Down_Sales.html#

High Prices Pull Down Sales

Belying expectations, Diwali did not cheer up the property market

Builders, wanting to make a killing during the Dussehra-Diwali festival period, upped prices and killed an opportunity. Buyer inquiry was mistaken for the return of good times. But unrealistic prices has put off consumers.

During Diwali, realty pundits had expected a flurry of buying on the back of lower prices, freebies and special festival offers. “The expected discounts during Diwali did not happen,” says Pankaj Kapoor, CEO of realty tracking agency Liases Foras. “We did not see much movement because of higher prices.”

http://businessworld.in/bw/2009_10_23_Spinning_Out_Of_Control.html#

LABOUR RELATIONS   24 Oct 2009

Spinning Out Of Control

The worsening labour situation may force HMSI out of the Manesar auto belt

http://ftalphaville.ft.com/blog/2009/10/23/79346/the-us-stock-market-is-overvalued-by-40/  The US stock market is overvalued by 40%

http://businesstoday.intoday.in/index.php?option=com_content&task=view&id=13037&sectionid=4&issueid=68&Itemid=1    The government on Saturday said foreign firms would be allowed to bid for spectrum for third generation mobile services and will start auctioning the radio waves from January 14, 2010.

Global trade flows slipped in August after rising for the two previous months, an indication that the economic recovery is more fragile and anemic than previous data have hinted. The Netherlands Bureau for Economic Policy Analysis said trade volumes fell 2% from July, according to an algorithm based on customs data from 23 developed countries and 60 emerging markets, accounting for 95% of global trade.   http://online.wsj.com/article/SB125634292388104937.html?mod=rss_whats_news_us

President Obama has declared H1N1 swine flu a national emergency, clearing the way for his health chief to give hospitals wider leeway in how they handle a possible surge of new patients, administration officials said Saturday.

http://www.washingtonpost.com/wp-dyn/content/article/2009/10/24/AR2009102401061.html

U.S Bank Failure hits 105 for the year 2009 closing 1992 record

Note: U.S Unemployment is 10% and it would take 2-3years for the situation to improve increasing the risk of more loan default, so more Banks are likely to fail in next few year creating more pressure on FDIC which has already asked Banks to prepay three years of insurance premiums which will be very high for big banks.

http://www.marketwatch.com/story/bank-failures-hit-100-for-year-2009-10-23

Bank failures hit 105 in U.S for the year 2009, Credit Sights, which tracks the dismal data, predicts that in the current cycle, from 2008 through 2011, as many as 1,100 banks will fail. That would wipe out 13.4% of all U.S. banks, representing 7% of U.S. banking assets.

http://www.fdic.gov/index.html

The last year in which the FDIC had that many banks to deal with was in 1992, at the tail end of the last real estate crisis. The FDIC rescued 122 in 1992, according to Keefe, Bruyette & Woods researchers. The increasing stream of bank failures is likely to run through 2011 according to some industry experts, as the fallout from the credit crisis continues.

FDIC-insured institutions have set aside just over $338 billion in provisions for loan losses during the past six quarters, an amount that is about four times larger than their provisions during the prior six quarter period, FDIC data show.

"While banks and thrifts are now well along in the process of loss recognition and balance sheet repair, the process will continue well into next year, especially for commercial real estate," FDIC chief Sheila Bair told Congress last week.

As a result, she said, the number of problem institutions increased significantly, to more than 400 during the second quarter.

Now, with unemployment near 10% and credit card default rates about the same, prime mortgage delinquencies are rising, stoking worries among the nation's banks that despite rising stock markets, fundamental banking industry health remains elusive.

The FDIC is facing its own money issues, as its Deposit Insurance Fund, which it uses to pay depositors' claims, fell to just $10.4 billion at the end of the second quarter. The FDIC estimates that its total cost for the 98 bank closings through Friday at $26.44 billion. the agency's board approved a proposal to have the nation's banks prepay 3 three years of insurance premiums, but that too is unlikely to fill the gap the fund faces under CreditSights worst-case scenario.

10% of U.S. banks could fail

Before Friday's bank failures, the year-to-date total assets of the failed banks was $107.14 billion.  By comparison, the nation's four largest banks, Goldman Sachs, Bank of America  J.P. Morgan, Citigroup  and Wells Fargo  have average annual revenue of about $100 billion.

Sectoral Indices, Ratios As On Oct 21, 2009

Just to get an idea of where valuations are in each sector according to sectoral indices:-

BSE INDICES

Index	Value	P/E ratio*	P/B ratio^	Yield
SENSEX	17229.72	22.05	4.11	1.12%
MIDCAP	6664.69	19.80	2.98	1.18%
SMLCAP	7806.02	18.01	2.07	1.42%
BSE-100	9056.52	23.39	4.11	1.00%
BSE-200	2135.68	22.46	3.76	1.02%
BSE-500	6688.97	22.45	3.76	1.02%
AUTO	6656.59	25.07	4.39	1.11%
BANKEX	10472.82	14.34	2.50	1.01%
CD	3771.60	18.14	2.00	0.79%
CG	14074.54	28.30	6.65	0.64%
FMCG	2767.49	29.31	10.75	1.84%
HC	4434.96	42.18	5.09	1.05%
IT	4412.99	21.98	6.55	1.23%
METAL	15790.18	22.48	4.26	0.93%
OIL & GAS	10518.87	20.28	3.18	1.19%
POWER	3191.55	32.16	3.90	0.80%
PSU	9219.85	17.79	3.23	1.32%
REALTY	4718.15	43.00	4.98	0.95%
TECk	2980.87	21.66	4.57	0.89%

NSE INDICES

Index	Value	P/E ratio*	P/B ratio^	Yield
S&P CNX Nifty	5114.45	22.71	3.75	1.00%
CNX Nifty Junior	9991.50	17.34	2.79	0.97%
CNX IT	5014.10	22.08	6.64	0.99%
Bank Nifty	9476.40	14.92	2.36	1.26%
CNX Midcap	7171.45	16.68	2.42	1.20%
CNX 100	5015.30	21.68	3.57	1.00%
CNX PSU Bank	3479.50	9.99	1.84	1.77%
NIFTY MIDCAP 50	2644.10	17.54	2.39	1.06%
S&P CNX 500	4193.20	21.11	3.27	1.07%
S&P CNX Nifty Shariah	1187.56	24.25	5.08	0.90%
S&P CNX 500 Shariah	1208.56	24.12	4.89	0.93%

(Source: BSE/NSE Websites)

*P/E ratio: Price earning ratio

^P/B ratio: Price book value ratio
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