Tuesday, January 22, 2008

Rs 18,000,000,000,000 lost in 7 days

On Wednesday morning, the Indian stock market may have opened high on the back of a 0.75% rate cut by the US Fed, giving some respite to market players. But investors on Dalal Street have lost a whopping Rs 18.05 trillion in the last seven days of market mayhem that included a fall of more than 4,000 points in the benchmark 30-share Sensitive Index or Sensex.

The Bombay Stock Exchange, which opened on a weak note Tuesday morning, managed to rebound from the day's low but finally ended the day at 16,729.94, a fall of 875.41 points. On Wednesday it has risen smartly, with major index stocks ruling high.

However, on Tuesday, within minutes of the market opening, investors had lost over Rs 6 trillion. Trading was immediately suspended for an hour after the 30-share barometer hit the circuit limit of 10 per cent.

On Tuesday alone investors lost over Rs 6 trillion. Add to it the over Rs 12 trillion loss suffered by investors on Dalal Street in the last six days.

"Retail investors should stay away from markets for the next few days. If they intend to invest they should go for mutual funds. Investors with a long-term perspective should however go for a stock specific approach," R K Gupta, managing director, Taurus Asset Management Co said.

Sensex, Nifty up; HDFC soars 9%

The Sensex pared gains as it touched a low of 17,179. The index is now up 500 points at 17,230.

The NSE Nifty has gained 133 points at 5,033.

HDFC [Get Quote] has zoomed 9% to Rs 2,705.

Bajaj Auto [Get Quote], SBI [Get Quote] and Hindalco [Get Quote] have soared over 6% each to Rs 2,190, Rs 2,292 and Rs 160, respectively.

NTPC and Grasim [Get Quote] have surged over 5.5% each to Rs 208 and Rs 3,019, respectively.

ICICI Bank [Get Quote], Reliance Communications [Get Quote] and BHEL have rallied around 5% each to Rs 1,184, Rs 603 and Rs 2,080, respectively.

Monday, January 21, 2008

Tough to keep the Nano at Rs 1 lakh

Three years ago, I visited the Taj Hotels IndiOne (now called Ginger) budget hotel property in Bangalore. I didn't actually stay there. I wanted to understand how a hotel room could retail at Rs 1,000 a day and yet offer some pretty decent amenities.

The 101-room property located at Whitefield was small, yet smart and modern in appearance. You walked in and were greeted with a reception on one side and a tastefully laid-out caf�. Every room had an LCD television and a coffee maker. There was no room service or house keeping.The entire place was spotless clean.

For a budget business traveller, this made a lot of sense since most people only need a room to sleep. Since then, the Ginger chain, the Tatas' first conscious go at the "bottom of the pyramid", has grown to 11 properties, somewhat quietly. Incidentally, C K Prahalad, the author of the concept, was present at the IndiOne launch along with Ratan Tata in June 2004. Tata made one of his early mentions of the Rs 1 lakh car then.

After having browsed around, I asked an Indian Hotels official the secret behind the sub-Rs 1,000 a room-night. "There are several reasons but one is our capital cost per room, which is between a fifth to a tenth, depending on who you compare us with. And second is that there are only 25 people running it," he said. There are no porters, either.

As I understood, the project managers on the Ginger had done an exhaustive job of researching costs and materials before putting together a combination of product and service that was affordable to a larger populace while remaining faithful in form to the parent brand.

A few days ago, I checked what the Ginger rates were. Well, the single room that went for Rs 900 in late 2004 when I visited is now going at Rs 1,999, a more than 100 per cent increase. The double room, which went at Rs 950, now quotes at Rs 2,499. Quite possibly, there are more amenities being offered for the same price.

The Tata Nano project has scored some amazing firsts in terms of technologies and material costs. The Rs 100,000 question everyone is asking for the past few two weeks and will ask in coming months is how long it will stay that way.

There is, unfortunately, a growing dichotomy between the cost of development in India (drifting lower) and the cost of running and operations, which is high or going higher. The producers and the innovators understand this but consumers tend to mix up the two, leading to disappointments, at least perceptionally. Most companies (including no-frills airlines) have failed to hold prices post launch. For various reasons including some beyond their control.

Prices don't stay down unless there is strong competition and scale production to keep it that way. At Rs 1,999, a night at the Ginger is still good value for money. But the launch promise (maybe not so overt as the Nano) was for a sub-Rs 1,000 room. So while there may not be street protests on the matter, the only way that price will come back is if a competitor launches a chain with similar features at lower prices.

Will that happen with the Nano? Several global auto majors have announced small car projects but it's unlikely that anyone will really take on Tata Motors [Get Quote] in this department. So what could well happen is that the Nano's price will drift upwards to a more comfortable equilibrium. Which might well be forced by inflationary pressures as well.

The challenge, to my mind, is to apply the same R&D and cost rigour to operations and continuing development as was done while developing the original product or service. Will Tata Motors put the same R&D rupees into the project figuring how to keep the car at Rs 100,000 (or thereabouts) in 2010 as they did while creating it in 2008. Possibly, but it won't be easy.

Markets like North America have a lot to teach in this regard. Prices of most consumer products have either remained static or have been drifted lower as corporations have outsourced en masse. Billions might have been spent designing the iPod in Cupertino. But the price of the iPod has been falling since launch. Yes, it's made in China. Competition and cost-cutting endeavours in the west created an entire outsourcing industry which created an Indian IT services industry.

The bottom line is that few markets in India witness the bitter competition that is required to keep running costs low. Would Indian companies have done what companies in America do to hold costs? Perhaps yes, but they may not be forced to. So will the Nano continue to cost Rs 100,000 or the Ginger sell rooms at Rs 1,000 per night. That would depend on how much continuing R&D the Tatas do into holding and reducing costs. Which typically would depend on how much competition they are truly exposed to.

Trading begins, markets recover slightly

The stock market re-opened after trading was suspended for one hour at the Bombay Stock Exchange after the benchmark Sensex fell to the low of 15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent.

The Sensex is currently trading at 17,068, down 536 points from the previous close. Nifty is at 5017, down 191 points. NSE advance-decline ratio is at 1:12.

There was some stability seen in the markets upon re-opening. The Sensex and the NSE Nifty were still down 4% and 5% respectively, but the recovery has brought some semblance of sanity to the stock markets.

Early shock

On Monday, the 30-share barometer tumbled by 1,408 points on concerns regarding the American economy going into recession.

The market opened at 16,884.09 points. At the time suspension, the Sensex was quoted at 15,576.30 points, plunging 11.53 per cent from Monday's close.

A similar trend was witnessed at the National Stock Exchange, whose barometer Nifty opened at 5,203.35, and later spiralled downward to a low of 4,569.50, a slide of 12.1 per cent. It was last trading at 4,578.35 points.

If the Nifty falls another 306.93 points and the Sensex another 1,326.63 after the market opens at 10.55AM, then trading will be halted for another two hours, reported NDTV Profit.

This is the fourth instance that the market has hit 10% lower circuit, said a CNBC-TV18 report. The first time was during the Harshad Mehta scam in 1992, then in 2004, when the NDA lost to the Congress and in October 2007, when the P-Note issue was on. The Sensex is down 25%, Nifty, down 28% and CNX Midcap is down 31% from its life-time highs.

Don't panic, says FM

Finance Minsiter P Chidambaram said that investors should not panic as the fundamentals of the Indian economy are still strong. The woes of the Western economies should not be taken as an indication of a weak Indian economy, he said.

The finance minister has said he is hopeful "that there would be a new beginning for the markets."

Thursday, January 17, 2008

Now you can swipe your mobile phone to purchase things, much like a credit card, with a Mumbai-based company rolling out a technology to enable this

Boys elbowed aside mothers and old men, drawing their cellphone cameras as though they had spotted Britney Spears, rather than the toaster on training wheels that the Nano more nearly resembles.

"It is a revolution," one said. "It is a real achievement," added another. To all, it was proof in gleaming steel that India's engineers could do what was thought impossible: design a $2,500 car that does not require home assembly or a giant windup key.

Also amid the throng was Mohammed Yameen. Unlike the others, he had no designer zip-up sweater or polished shoes. He had a dirty chest-length beard, a blue jacket turned brown by dust, and is missing a few teeth. Yet he also had a smile that lasted minutes. In broken English, he exclaimed: "I want this car."

The miracle of the Nano is that, when it becomes available to the public this autumn, he might be able to have it.

In a country still emerging from the notion of caste, where status is keenly felt and now often defined by one's possessions, the car has become one of the ultimate measuring sticks dividing the haves from the have-nots. The Nano suggests that might no longer be the case.

"It is a giant symbol," says Dipankar Gupta, a sociologist at Jawaharlal Nehru University here. "The wannabe motorcar owners have become gotta-be motorcar owners."

Is it safe? Compared with a Volvo S80, probably not. Is it reliable? Who knows, but it probably won't take any J.D. Power awards from Honda. Yet for tens of millions of Indians, the question is: "Is it better than the scooter that I have had for eight years and fixed so many times that I am now using spare parts from my ceiling fan to hold it together?"

The answer, it would seem, is a categorical "Yes."

Indian roads are circuses of elephants, death-defying traffic maneuvers, and attempts to wedge as many cars across a three-lane road as Newtonian physics will permit. At the center of this carnival is the consummate Cirque du Soleil act: a family of four on a scooter. As Tata's chairman, Ratan Tata, pointed out while unveiling the Nano, it is a ubiquitous sight: a young child standing in the footwell holding the handlebars, a father driving, and a mother behind (riding sidesaddle in her flowing sari, of course), holding an infant.

By this measure, the Nano could be a quantum leap forward in safety and reliability. Despite the much touted economic boom, only 0.8 percent of Indians own a car. And of all the vehicles sold in India from April to November of last year, 77 percent were two-wheelers – motorcycles, mopeds, or scooters.

Mr. Yameen says he came to the Auto Expo on a two-wheeler, and as he looks at the Nano, he says, breathlessly wide-eyed: "Very beautiful."

Even among those more well heeled than Yameen, the Nano draws raves.

"This is beyond expectation. It is going to make a revolution," says Pratishtha Dipathi, a well-dressed young woman.

Economists, however, question whether such a car can be profitable with such low profit margins: The day Tata unveiled the Nano, for example, its stock fell 6 percent.

In principle, though, Mr. Tata is attempting to do something akin to what Henry Ford did with his Model T. Rather than waiting for more of the population to rise economically to the point where they can buy a car, he has used his company's engineering know-how to reinvent what a car can be. He hopes to turn a profit by sheer volume, tapping into those untapped, poorer reaches of the Indian market.

It is a quintessentially Indian idea. For decades, Indian technology has been focused more on practicality than pomp, hoping its use will help the country's poor. The country's space program, for example, has long concerned itself only with helping farmers and schools through weather and communications satellites.

Now, the country has a car to carry on the tradition, and its people below the famous-but-still-small upper-middle class are cheering. Says Professor Gupta: "These are the people who are really excited by it."

Now, swipe your mobile to pay bills

Now you can swipe your mobile phone to purchase things, much like a credit card, with a Mumbai-based company rolling out a technology to enable this.

The company has already roped in Axis Bank for the service and is in the advanced stages of beta testing, while the commercial launch is just three months away.

The company behind this innovation is Atom Technologies, a subsidiary of the BSE-listed Financial Technologies (India) Ltd, which runs the Multi Commodity Exchange of India.

According to FTIL director (Technology), Dewang Neralla, Atom Technologies' product -- Atom Card -- and software can burn the user's credit card data to a mobile phone, that too over-the-air (like making a call or sending an SMS).

The data would be stored in a 2-D bar code format and cannot be read even by the user, assuring security in case the handset is lost or stolen. However for making a purchase an authentication -- providing the PIN -- has to be made.

After the credit card data is burned on the mobile phone (irrespective of the operator, but in collaboration with the card-issuing bank), the handset can be used instead of credit cards.

The swiping model, which the company terms as optical payment, can be done at any merchant establishment that has the requisite software. The company will upload a 2-D barcode on the phone that can be read by a simple webcam with the necessary software.

Neralla claims that a Rs 200-webcam is all that is required for reading the 2-D barcode. The company has also received a patent for this payment mode in the US.

The second method is remote location, or over-the-air authentication, by which the user can use the cards sitting at home or office. In this case, the merchant establishment and the bank are connected over the air and the user will have to approve the purchase. Hitherto, the user will have to authenticate the deal.

However, the system will work only on Java-enabled phones (a high-end graphic suite), and at present, the lowest Java handset available in the market is priced at around Rs 3,000, said Niranjan Gosavi, chief marketing officer, Atom.

Atom would provide the software free-of-cost to banks, merchant establishments and customers, but will levy a percentage of the transactions as its fee, he said.

The company, which is already doing a pilot study with 500 customers of Axis Bank, is in the advanced stages of tying with other banks in the country. Atom is also planning to provide the solution to overseas market and is in talks with international banking majors, he added.

Companies like Bharti Airtel [Get Quote], Reliance Communications [Get Quote] and C-Sam (a firm founded by Sam Pitroda) were also looking at offering mobile commerce solutions.

C-Sam had earlier launched mobile wallet in Japan and Scandinavian countries, while Airtel and RCom are offering certain wallet services like money transfer, mobile remittance, cheque clearance, ticket booking, among others, over mobile.

Value-added service providers like IMImobile and Roamware are into the developing of these kinds of applications.

However, the Reserve Bank of India [Get Quote] is yet to give clearance for mobile wallet services and companies are waiting for the apex bank's approval.

Reliance Industries Q3 PAT at Rs 8,079 crore

Reliance Industries Ltd posted a net profit after tax of Rs 8,079 crore (Rs 80.79 billion) for the third quarter ended December 31, 2007 as compared to Rs 3,081 crore (Rs 30.81 billion) for the corresponding quarter in 2006.

The petrochemicals giant registered a total income of Rs 34,831 crore (Rs 348.31billion) for the third quarter ended December 31, 2007 as against 28,315 crore (Rs 283.15 billion) for the same quarter in 2006.