Editor's Desk

Life insurance sector growth normalizing + Valuation

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The growth of Indian private life insurers normalised to 14% YoY (-33% MoM) in January 2010, post December 2009, when growth had jumped to 59% YoY, ahead of the withdrawal of noncompliant products from January 2010. The industry APE growth was up 3% YoY (-27% MoM).

ICICI’s market share gains sustained (11.1% currently – up 190 bp over the last six months), whereas Bajaj and HDFC witnessed a sharp rise in this month (+127 bp and +94 bp MoM). SBI continued to be the strongest performer, with 27% YTD APE growth, whereas Kotak was the weakest performer (-21% YTD).

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India Term – Fixed Deposit Rates Rising

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HDFC Bank, over the weekend, raised deposit rates by a sharp 50-150 bp, which follows the 25-50 bp rate hike by ICICI Bank and IDBI earlier this month. Notably, this deposit rate action has come, even as system liquidity currently appears adequate (reverse repo outstanding at about USD 15 bn). As the loan growth (14.8% currently) accelerates and central bank tightens, this liquidity will also dry up soon.

As deposit growth (17%YoY) has fallen to a four-year low, with real deposit rates negative, banks need to raise rates.

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Cement Price hikes in India in H1-2010 – Merrill

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As India is entering the peak season for construction (January to June), the industry reported a surge in cement demand of around +13% in January, Y-o-Y. Cement companies have witnessed strong volume growth on the back of increased government spending on housing, roads, ports & power stations and the momentum is expected to continue.

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Indian Food price inflation – not just a one-off

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There is more to India’s food price inflation – which touched a decade-high 20% YoY in December 2009 – than just the drought. A fundamental tightness in the domestic demand-supply balance of food seems to have emerged over recent years. The spurt in wholesale prices of some food items in 2009 – sugar 35%, pulses 41%, milk 13% and eggs 24% – was the highest in over a decade and that could complicate monetary policy. Global food price trends alone do not explain the acceleration in food price inflation in India.

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Current Fitch Sovereign Rating of India

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Here is what Fitch the international rating agency thinks of India. It said,

The Negative Outlook on the Local?Currency IDR reflects the agency’s judgement that the fiscal deterioration in the year to end?March 2009 (FY09) and FY10 has been partly structural in nature, and that India’s public finances are set to stress comparisons with ‘BBB’ peers beyond breaking point. The agency looks for meaningful fiscal consolidation measures to get India’s public finances onto a path consistent with the current ratings.

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Reliance Globalcom and Broadband revenues Declines

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Rcom’s Q3FY10 results were below expectations on the revenue and EBITDA front on account of a steeper decline in Globalcom and Broadband revenues than anticipated. The EBITDA margin declined sequentially by 128bps due to the drop in revenue and a 15.3% increase in access charges, which was only partly offset by a decline in network … Read more Reliance Globalcom and Broadband revenues Declines