Planning commission cut India’s XI plan (FY08-12) core Infra capex (ex-Telecom) by 5% led by slippages at Railways, port and roads, while maintaining overall doubling of capex to Rs20.5tr, in a mid-term review. This reinforced our view of a 10 year extended cycle for E&C companies apart from allaying the fear of slowdown in their earnings on a higher base (8th year of this cycle). Govt. reiterated XII plan (FY13-17E) Infra capex of Rs40tr / US$880bn, taking total (FY08-17E) to Rs60tr / US$1.3tr. This creates a macro framework for robust sustainable growth & has potential to drive E&C cos into a higher orbit of size & value.
business
Is China Blowing Bubbles?
We have seen lot of talk on the Chinese Bubble. But it is for real since Citi’s Chief Economists Willem Buiter [UK] and Minggao Shen [HK] just a while ago published a joint Report in the same. The main highlights of the report are,
- China avoided a prolonged downturn by aggressively expanding credit growth since the end of 2008.
- Higher reserve requirements and selective quantitative credit controls have not dampened credit growth sufficiently.
- Higher interest rates and Yuan appreciation are necessary to prevent further overheating in the real economy.
- Additional macroprudential controls are required to prevent booms and bubbles from developing in the land, property and stock markets.
India Pre-Policy Rate action – Impact Analysis
Reserve Bank of India’s surprise Rate hike (25bps each for repo and reverse repo) caught the market off-guard, even as the past week’s buying in government bonds indicated a distinct comfort on the part of market participants most of whom anticipated the action at the time of the April policy – scheduled on April 20, 2010. We would expect the impact on the respective fixed income segments as below.
Sovereign bonds – with most of the action concentrated in the 2016 and the benchmark 2020 bonds, we would expect the belly of the curve to steepen and the 2s10s spread to harden as market prices in the distinctly emerging hawkishness on interest rates from the central bank.
L&T SPV signs concession pact with NHAI
L&T Samakhiali Gandhidham Tollway, a Special Purpose Vehicle (SPV) incorporated by Larsen & Toubro (L&T) has entered into a concession agreement with National Highways Authority of India (NHAI) for six laning of the 56 km stretch of NH-8A.
The project will be executed on a BOT Design Build Finance and Operate (DBFO) basis, with a concession period of 24 years. The estimated cost of project is about Rs 1,400 crore and is scheduled to be completed within a period of 30 months. The concessionaire is
Bharti Airtel plans to mop up dollar loan for Zain acquisition
Bharti Airtel, the country’s largest telecom operator by revenue, is looking to mop up $8.5 billion worth of offshore loan to fund the acquisition of Zain’s African mobile operations, as mentioned in some media reports.
The report further added that the telecom major has also issued a term sheet to lenders for the same. The offshore facility is likely to consist of four phases and it will be for a period six years.
Read moreBharti Airtel plans to mop up dollar loan for Zain acquisition
Nifty ends flat amidst tumbling Asian Indices
The benchmark indices pared early losses and shut shop on a flat note on Monday. The markets were trading deep in the red during the initial hour of trade on apprehensions of a double-digit inflation figure. But the indices remained quiet for a while after the inflation data was announced, which stood at 9.89% for February against 8.56% in January. The rate hikes during RBI’s upcoming monetary policy review in April is almost certain, albeit the magnitude of such a hike remains a subject for debate.