Wishing U All A Very Happy & Prosperous Diwali !!!!!!!!!!!!!!!

May the festival of light encircle your life with Joy and Happiness. Success comes at your doorsteps. With these blessings sending my warm wishes to you on Diwali and always.

New WPI index broad-based, indicative of richer India

After over a decade of India reporting wholesale inflation on the basis of a basket of 435 commodities, the new WPI series will came into effect from September 14. The new series increases the items under coverage by nearly 50% and promises to provide a more accurate index for calculating the inflation rate. The government has also revised the base year for wholesale price index (WPI) inflation to 2004/05 from 1993/94 and increased the number of components by one-third.

The new data series will have about 676 items and about 5,482 price quotations compared to the 435 items and 1918 quotations currently. This means that the headline inflation number derived from this index will be more representative of the state of the economy. The new series is broad based and is expected to smoothen index number. About 200 items have been either dropped, amended or regrouped in the new series.

The government has reduced the weight of primary articles to 20.118% in the wholesale price index from 22.0253% and increased the weight of manufactured products to 64.972 from 63.749, reflecting a broader shift in the economy.

There is a substantial increase in the number of items in the basket of manufactured products. In the new series, there would be 555 items compared with 318 items at present.

Ready-made food, computer stationary, dish antenna, VCDs, crude petroleum and computers would also be part of the new series.

Under primary article group of the new WPI, there would be 102 items as against 98 at present while fuel and power category would remain unchanged with 19 items.

The government is also working on a service price index, which would measures the variation in prices of services. This carries immense importance as the services sector contributes around 57% of the country’s gross domestic product. Work is also going on to provide an index for sectors such as road transport, ports, aviation, telecom, post and telegraph and banking. By this fiscal year end, two indices namely on financial services and trade and transport should be released.

The new index is welcome because it is reflective of new India. It is also more broad based, three times the number of price quotes compared to the previous one. It is also indicative of a slightly richer India. Food is getting less representation, soft drinks, alcohol even gold jewellery is getting more representation so that indicates the country is getting richer. This new index could be a little more volatile. It is more dependant on commodities. We are seeing a bigger weightage for basic chemicals, inorganic or organic chemicals also metallic minerasl all these are commoditized items and they tend to be a little more volatile.

The other change is that a lot of consumer durable goods have come in. Inclusion of such large number of consumer durables also indicates that the line between CPI and WPI is blurring because these are strictly not wholesale items. They should not be there perhaps in a wholesale price index.

The biggest problem with the new index will be that it is a serious break with the old index. 

Basel III eases Asia banks capital raising fears

Global regulators announced new capital rules that weren't as harsh as some had expected. Sentiment toward lenders also improved as the rules, which won't be introduced for years, took away a key element of uncertainty by easing any immediate pressure on banks to sell new shares to raise capital.

On Sunday, global regulators agreed to new capital rules for the sector. The new regulations will require a total common equity ratio of 7% for banks.

The minimum common equity level requirement was lifted to 4.5%, from 2%, and banks will also now be required to hold a capital conservation buffer of 2.5% "to withstand future periods of stress," the group of governors and supervisory heads in the Basel Committee on Banking Supervision announced.

The new rules requiring higher capital levels for lenders are designed to provide a cushion to absorb losses and thus help prevent the kind of problems seen in the recent global financial crisis.

Banks will be required to have a tier 1 capital ratio of 6%, up from the current 4% level. The key element of tier 1 capital is common shareholder funds and disclosed reserves or retained earnings, according to the Basel Committee.

Although the sector's capital requirements have increased, the rise wasn't as bad as some had expected and banks will have time to introduce the new rules, with higher capital levels required to be in place by the start of 2019.

Banks have to reach the minimum tier-1 ratio level of 4.5% by 2015 while the capital conservation buffer has to be fully in place by Jan. 1, 2018.

Most banks across the rest of Asia already have capital levels well above the minimum levels set.

This contrasts with Europe where the new rules are likely to cause more pain. Top German lender Deutsche Bank is seeking a headstart on its rivals by announcing plans to raise almost 10 billion euros to bolster its capital, and more banks in Germany, Spain, France, Japan and elsewhere are likely to follow suit to meet the new standards.

The Basel III agreement was reached in Switzerland by central bank governors and top supervisors from 27 countries, after a year of horse-trading and lobbying that involved banks and governments seeking to protect their national interests.

Along with the capital standards, Basel III includes a range of reforms agreed earlier this year to reduce risk-taking by banks, including rules on how liquid banks' assets must be and how banks must treat tax assets on their books. Some changes were watered down in July after strenuous lobbying by banks.

Still, the new capital regulations which will be presented to the Group of 20 leaders summit in November for approval, remove a key area of investor uncertainty on the sector overall.

Europe released the Results of Stress Test on Friday

The results of the 2010 EU-Wide Stress Testing Exercise have been released on Friday, 23^rd July, 2010. 7 of the 91 banks tested has failed the test, with a necessity of global EUR 3.5 billion extra capital in case of continuing crisis until end of 2011. In case of sovereign shock, the aggregate lost to the whole testing could be of EUR 67.2 billion.

According to the Committee of European Banking Supervisors and national authorities across the European Union, the seven banks that have failed the test are Banca Civica, Unim, Espiga, Diada and Cajasur from Spain, ATEBAN from Greece and German HYPO. French, Portuguese, Italian, Finnish, Swedish and Belgium top banks all passed.

The tests were intended to reassure investors and help ease pressure in bank funding markets as the global financial crisis -- and in particular worries about sovereign debt in many European countries -- undermined confidence in the banking system.

Officials used two sets of macroeconomic scenarios -- benchmark and adverse, in order to stress test the credit risk and simulate profit and losses.

Within the adverse scenario, the exercise also envisages a "sovereign risk shock," reflecting adverse conditions in financial markets.

The benchmark macroeconomic scenario assumes a mild recovery from the severe downturn of 2008-2009, whereas the adverse scenario assumes a "double-dip" recession.

For example, Germany's biggest bank, Deutsche Bank, achieved a Tier 1 capital ratio under the adverse scenario of 10.3%, while under the additional sovereign risk scenario its Tier 1 ratio declined to 9.7%.

The decision to model a sharp drop in the price of sovereign debt has been criticized, but to assume that no country would actually default, which means banks only had to record losses on sovereign bonds they held for trading purposes.

The assumptions taken in the tests were tougher than those used in the U.S. stress tests last year.

CEBS also defended the decision not to assume any sovereign default, saying the €750 billion support package put together by the EU and the International Monetary Fund effectively ruled out a default.

The EU governments will not allow banks to actually fail in the market, thus it is the sovereign bond market that is key in the short term, because there is not anyone who can bail out the governments.

Of the 91 financial institutions tested by the Committee of European Banking Supervisors (CEBS) in the European Union, nearly one third were Spanish. Particular attention was focused on the country's savings banks, known as cajas, which have been hard hit by bad bets on the collapsed construction and property market.

Germany's Hypo Real Estate and Greece's ATE Bank were the only non-Spanish banks that failed the test, which was given to 91 banks in the European Union.

While the big banks largely held by U.S. investors, including Banco Santander and BBVA sailed through the stress tests as expected, four savings banks will require €1.84 billion in additional funding to keep Tier 1 ratios above 6% in the worst-case scenario. The fifth failed bank, Cajasur, which made the headlines last May, has already been taken over, but was counted among those that failed.

Investors seem to be worried that the stress tests still excludes the possibility of a sovereign default of a sovereign default as the data is based mostly on trading portfolios information when much of sovereign debt is held outside those portfolios.

With a disappointing market reaction, is clear the fact that the stress tests could be underestimating possible losses by excluding the risk of a sovereign default and could undermine their credibility as indicators of the financial health of European banks. 

A comparison with the U.S. stress test from last year shows major differences, but suggests that Europe's effort may have been no softer on its big banks.

One controversial move was that European authorities included a possible sovereign debt shock, but only projected losses from such an event on banks' trading books -- not on the assets they hold to maturity.

It is known that the biggest risk to solvency/liquidity that the EU banks face is sovereign risk haircuts and the fact that the stress is only driven into the trading book (which is perhaps 1% of total assets) means little capital will be needed.

Still, the EU test also included potential knock-on effects from a jump in government bond yields, including a significant increase in interest rates for other borrowers like corporations. The U.S. bank stress test didn't consider any sort of sovereign crisis.

Other differences and similarities are listed below.

What banks were tested and where?

In the U.S., 19 of the largest bank holding companies were tested. Three supervisory authorities were involved in one legal jurisdiction.

In Europe, 91 banks were tested, with 27 supervisory authorities involved in 27 jurisdictions.

When was the test done?

The U.S. stress test was done in February 2009 and the results came out in May 2009.

The European test was conducted in recent months and the results were released on Friday. With more than a year having passed, European banks and governments have had longer to respond to the financial crisis. From October 2008 to the end of May this year, EU governments injected 236 billion euros into European banks, helping them boost capital ratios. Indeed, 38 of the 91 banks in the European stress test currently rely on government support.

General approach

U.S. authorities measured how much of an additional capital buffer each institution might need to ensure that it would have enough capital if the economy weakened more than expected.

The EU took a similar approach, but with a twist that included possible losses from another sovereign debt crisis like the one triggered earlier this year by Greece's problems.

What targets were used?

The U.S. stress test focused not only on the amount of capital but also on the composition of capital held by the 19 banks. It assessed the Tier 1 risk-based capital ratio and the proportion of Tier 1 capital that was common equity. Tier 1 Common capital measures common equity, which is the first element of the capital structure to absorb losses, offering protection to more senior parts of the capital structure and lowering the risk of insolvency. The Tier 1 Capital ratio had to be 6%, while the Tier 1 Common ratio had to be 4%.

Europe just focused on the Tier 1 Capital ratio, also having a 6% target. It didn't use a Tier 1 Common benchmark because there's no single definition of what that is in the region, so apples-to-apples comparisons would have been tricky.

Economic scenarios

The U.S. used the following adverse scenario: Real GDP would shrink 3.3% in 2009 and grow 0.5% in 2010; the unemployment rate would hit 8.9% in 2009 and 10.3% in 2010; and house prices would slump 22% in 2009 and fall 7% in 2010.

In Europe, authorities projected that EU real GDP would be on average 3 percentage points lower than currently expected in 2010 and 2011. That implies a recession in those years. Along with that, "significant" increases in interest rates were modeled in 2010 and 2011. A sovereign debt "shock" was also modeled, in which five-year government bond yields jump to 4.6% on average from 2.69% at the end of 2009. Knock-on effects from this were also taken into account -- for instance the possibility that if government yields jump, interest rates for other types of borrowers would rise too, making losses on assets like corporate bonds more likely for banks.

What assets were stressed?

In the U.S. stress test, generally all the banks' assets were evaluated under the adverse economic scenario.

European authorities tested all the assets of the banks under its adverse economic scenario. But the sovereign shock only applied to banks' shorter-term trading books, not the assets they hold to maturity. However, EU authorities noted that massive bailout programs they put in place after Greece's debt crisis have made it highly unlikely that a European country would default. That means banks might have to mark down the value of government bonds in their trading books in the short term. But by the time the debt matures and is paid off, values will have returned to their original levels.

General results

U.S. authorities projected that if the economy were to follow the more adverse scenario, losses at the 19 banks during 2009 and 2010 could be $600 billion. The bulk of the estimated losses -- roughly $455 billion -- would come from losses on the banks' accrual loan portfolios, particularly from residential mortgages and other consumer loans. Estimated losses from trading-related exposures and securities held in investment portfolios totaled $135 billion. U.S. banks needed to raise $75 billion in capital. Most of the shortfall was in Tier 1 Common capital, with virtually no shortfall in Tier 1 capital.

The EU's adverse economic scenario produced projected losses of 473 billion euros in 2010 and 2011 for the 91 banks in the test. All that was from impaired loans on the banks' balance sheets. A sovereign debt shock would trigger another 39 billion euros of losses in banks' trading books, while knock-on effects from such a crisis could add another 28 billion euros in losses over 2010 and 2011. That produced a total of 566 billion euros in losses.

Which banks failed the tests?

In the U.S., 10 out of the 19 banks failed the test and nine passed. Bank of America, Citigroup,Wells Fargo, Fifth Third, GMAC, KeyCorp, Morgan Stanley, PNC Financial Regions Financial, SunTrust all needed to raise capital.

In Europe, seven banks failed in three countries. Germany's Hypo Real Estate and Greece's ATEBank couldn't keep a Tier 1 Capital ratio of more than 6% under the test. Five banks in Spain, including recently merged Cajasur, also didn't make the grade. 

U.S. economic growth revised lower to 2.7% for first quarter

The U.S. economy grew at a 2.7% pace in the first quarter, an annualized rate that came in lower than what government forecasters had previously projected.

More than half of the GDP increase came from inventory rebuilding, a temporary factor.

The revisions to this final reading on first-quarter GDP only highlighted the unbalanced nature of growth as consumer spending was revised lower.

Final sales, which exclude inventories, increased at a 0.8% annual pace, revised down from 1.4%.

First-quarter growth, originally estimated two months ago at a 3.2% annualized rate, was revised down to 3.0% growth in last month's estimate. The revisions come from more complete data than were available at the time of the first and second estimates.

Growth in the first three months of the year decelerated from the 5.6% expansion in the fourth quarter of 2009.

The figures are seasonally adjusted and adjusted for price changes

The revisions to first-quarter GDP were in two major areas: consumer spending and trade.

Gross domestic purchases -- sales to U.S. residents -- rose at a 3.5% annual rate, revised down from 3.6%.

Corporate profits increased a revised $116.9 billion or a 8.0% quarterly rate, in the first quarter. This is up from the initial estimate of a 5.5% gain.

Profits generated by domestic financial corporations increased $11.2 billion, while domestic nonfinancial profits rose $79.6 billion.

U.S. Lawmakers agree on Sweeping Wall Street Overhaul

House and Senate negotiators on Friday approved a bill aimed at increasing oversight and regulation of the U.S. financial system. They brokered last-minute deals on a ban on proprietary trading by banks and oversight of the derivatives market.

Parts of the legislation that could have the biggest impact include derivatives reform, limits on proprietary trading and a potentially potent, new consumer-finance watchdog.

This giant conglomeration of restrictions will be loaded onto an industry that's still struggling to adjust to losses from the financial crisis.

The new rules represent the biggest regulatory changes for banks and brokers since the Glass-Steagall Act was introduced after the Great Depression in 1999.

Congress still needs to vote on the final version of the legislation, but President Barack Obama is expected to sign it into law by July 4.

Banks will be allowed to invest in private-equity and hedge funds, though they will be limited to providing no more than 3 percent of the fund’s capital. Banks also can’t invest more than 3 percent of their Tier 1 capital.

The change alters language in a bill the Senate approved in May, which would have barred banks from sponsoring or investing in private-equity and hedge funds.

The legislation defines proprietary trading as engaging as a principal for a trading account of a bank or non-bank financial company supervised by the Fed “in any transaction to purchase or sell, or otherwise acquire or dispose of, any security, any derivative, any contract of sale of a commodity for future delivery, any option on any such security, derivative or contract, or any other security or financial instrument” that regulators designate through rule-writing.

The ban on propriety trading, in which a company bets its own money, may reduce profits. Goldman Sachs Group Inc., the most profitable firm in Wall Street history, has said proprietary trading generates about 10 percent of its annual revenue. The firm made $1.17 billion in 2009 from “principal investments,” which include stakes in companies and real estate, according to a company filing.

Derivatives:

The new legislation forces institutions to take some of their derivatives operations out of their commercial-banking operations and put them into a new subsidiary or company. These entities will need lots of capital, because customers won't trade with derivatives dealers that are considered financially weak.

The largest banks, such as J.P. Morgan and Citi, will try to keep as much of the derivatives business as they can within their commercial-banking operations. But they will likely have to send the rest into separate subsidiaries.

The new law will likely force standardized derivatives to be traded on exchanges and cleared through clearinghouses. Big derivatives dealers also will have to set aside more collateral to support positions in the market. This may reduce counterparty risk and increase transparency, which is good for customers. But it will likely lower the derivative-trading profits of the big banks.

The banks will be able to maintain their trading operations so long as they are used to hedge risk or trade interest rate or foreign exchange swaps, a victory for banks that were on the verge of losing the desks entirely. The proposal will force a fundamental shift in the industry, giving federally insured banks up to two years to send instruments such as un-cleared credit default swaps off to a separately capitalized subsidiary.

Regulators also will be required to impose heightened capital requirements on companies with large swaps positions, and would be given the authority to limit the number of contracts a single trader can hold.

Selling over-the-counter derivatives is among the most lucrative businesses for the largest financial companies. U.S. commercial banks held derivatives with a notional value of $212.8 trillion in the fourth quarter, according to the Office of the Comptroller of the Currency.JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley hold 97 percent of that total.

While JPMorgan and Citigroup might have to spend billions to re-capitalize their trading desks, the three others might have much smaller costs. Morgan Stanley and Goldman Sachs, which each entered the commercial banking business in 2008 in the midst of the financial crisis, will be less affected. Morgan Stanley kept just over 1 percent of its $86 billion in derivatives holdings in its bank in the first quarter, and Goldman Sachs held 32 percent of its $104 billion. Bank of America, which absorbed broker-dealer Merrill Lynch in 2009, had 33 percent of its $115 billion in its bank.

Consumer Bureau:

A consumer financial-protection bureau will be created at the Federal Reserve to police banks and financial-services businesses for credit-card and mortgage-lending abuses.

The bureau could require credit-card lenders, including JPMorgan Chase & Co. and Citigroup Inc., to reduce interest rates and fees. Mortgage lenders, including Bank of America Corp., may be subject to tougher rules including more upfront disclosures to borrowers about loan terms.

The idea for a new agency grew out of criticism from lawmakers and consumer groups that bank regulators, including the Fed, failed to properly exercise their consumer-protection authority during the housing boom.

Credit, Debit Cards:

The Federal Reserve will get authority to limit interchange, or “swipe” fees, that merchants pay for each debit-card transaction.

Visa Inc. and MasterCard Inc., the world’s biggest payments networks, set interchange rates and pass that money to card- issuers including Bank of America and JPMorgan. Interchange is the largest component of the fees U.S. merchants pay to accept Visa and MasterCard debit cards. The fees totaled $19.7 billion and averaged 1.63 percent of each sale last year.

The amendment directs the Fed to ensure that debit-swipe fees are “reasonable and proportional” to the cost of processing transactions. The provision will take effect a year after enactment.

Oversight Council:

The bill will establish the Financial Stability Oversight Council, a super-regulator that will monitor Wall Street’s largest firms and other market participants to spot and respond to emerging systemic risks. The Treasury Department will lead the panel, which includes regulators from other agencies.

The council can impose higher capital requirements on lenders or place broker-dealers and hedge funds under the authority of the Fed. The council also will have authority to force companies to divest holdings if their structure poses a “grave threat” to U.S. financial stability.

Private Equity:

Large hedge and private equity funds will be forced to register with the SEC, subjecting them to mandatory federal oversight for the first time. Venture capital funds were exempted from the registration rule.

Registration subjects funds to periodic inspections by SEC examiners. Any firm with $150 million or more in assets, such as ESL Investments Inc. and Soros Fund Management, will be covered by the law.

Hedge and private-equity funds will be required to report information to the SEC about their trades and portfolios that is “necessary for the purpose of assessing systemic risk posed by a private fund.”

Unwinding Failed Firms:

The bill gives the FDIC, which already has authority to liquidate failed commercial banks, power to unwind large failing financial firms whose collapse would roil the economy.

Risk Retention:

The legislation will force lenders, with the exception of some mortgage providers, to hold at least a 5 percent stake in debt they package or sell.

The rule will affect credit-card debt, auto loans, mortgages and other securitized debt. Issuers of asset-backed debt and the originators, who supply them with pools of loans, including credit-card companies, will be forced to retain some of the credit risk. The goal is to align the issuers’ interests with those of the investors who buy their financial products.

The legislation could have been worse: The outright ban of some capital-markets businesses, the breakup of systemically important companies and specific, strict capital requirements were avoided. However, the new law casts doubt on the financial industry's growth prospects and its ability to restore profits to more normal levels.

“Financial supermarkets" like Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. will be hit the hardest. Big banks and brokers may be hit hardest by limits on their derivatives business.

Some of the largest banks may shift their focus overseas in search of growth. The commitments of more capital -- even if margins and commissions on trades stay the same -- mean that this capital can't be used elsewhere to make money.

Both industry and economic growth will likely be suppressed for an extended period as banks continue to deleverage and develop a more thorough understanding of the broad-based structural changes likely to affect the industry in the coming years.

India's Index of Industrial production (IIP) grows by 17.6 per cent in April

Industrial output rose 17.6 per cent in April, growing in double digits for the seventh straight month, on good showing by manufacturing, particularly capital and consumer goods.

In comparison, industry grew by 1.1 per cent in April last year. 

Manufacturing, which constitutes around 80 per cent of the index of industrial production (IIP), grew 19.4 per cent in April against 0.4 per cent a year ago. 

Within manufacturing, capital goods production rose by 72.8 per cent in April against a contraction of 5.9 per cent a year ago. 

Consumer durables rose by 37 per cent against 17.6 per cent same period last year. 

The other two sectors--mining and electricity--expanded by 11.4 per cent and 6 per cent in April, respectively against 3.4 per cent and 6.7 per cent in the same period last year. 

According to the data, of the 17 industries, as many as 15 showed positive growth in April. 

Industrial production expanded by 17.7 per cent in December 2009.

This increment in IIP Data, is really a reason to rejoice, but at the same time it signals that now RBI and government may start taking back the funds from the economy, put during the bad times in the economy, to give it a push. Hence, we may expect an announcement in the near term of the increment of interest rates, which will prove the improvement in the economy shown by these IIP Data. 

HUNGARY – THE NEXT COUNTRY IN LINE AFTER FRANCE, GERMANY, ITALY, GREECE, PORTUGAL & SPAIN

Hungary's new government added to sovereign-debt fears on Friday, shaking global financial markets after a spokesman for Prime Minister was quoted as warning that the economy had been left in a "grave situation" and that talk of a default wasn't "an exaggeration."

The remarks put added pressure on European banks with exposure to Hungary, while serving to undercut overall risk sentiment. Hungary is in danger of a Greek-style scenario.

The comments made over on Friday are highly concerning as they not only increase fears in the markets over a possible Hungarian default, but also clearly demonstrate that the Hungarian government has very little understanding of how the financial markets actually work.

The remarks, meanwhile, contributed to a sharp fall by the euro versus major rivals, driving the single currency to a four-year low versus the dollar and an all-time low against the Swiss franc. A disappointing U.S. nonfarm payrolls figure was seen as the primary driver in the euro's fall versus the dollar. 

Both the Bank of England and the European Central Bank to unveil their latest interest-rate decision in the coming week.

The spokesman said the economy's plight was the result of the previous government's (the Socialist Government) having "manipulated" figures and "lied" about the economy. A committee is set to report on the state of the country's finances over the weekend, which will be followed within 72 hours by a government action plan, the spokesman said. In Greece, they also falsified data as they did in Hungary.

The use of the word "default" and the sharp criticism of the previous government for going to the International Monetary Fund will fuel speculation "as to whether the Hungarian government wants to renege on the country's standby agreement with the IMF and EU.

The Hungarian government in 2008 received a 20 billion euro ($24.1 billion) rescue package from the IMF, World Bank and EU.

The remarks unsurprisingly have also stoked fears of a debt default or a restructuring, to the detriment of European banks.

These developments are important because the losses on the Hungarian debt will likely be shouldered by European banks that are already about to be hit [with] a second wave of [write-downs]. This, in turn, means that financial intermediation generally and globally will take another hit.

The cost of insuring Hungarian government debt default jumped in the credit-default swaps market. The CDS spread widened from 314 basis points to 400, which means it would cost $400,000 a year to insure $10 million of Hungarian debt against default. The cost of insuring debt issued by euro-zone countries also jumped.

As mentioned in the earlier post, there are many big problems in line to come and we (all the developing economies) will pay the value of being a part of this Globalization. 

At the end, I would suggest the traders to trade very cautiously in the markets by maintaining Strict Stop Losses and Booking Nominal Profits and the investors to exit their holdings in profit and avoid making fresh investments at this point of time in the markets. Investors should also go only for those stocks for the purpose of investment, which are bottoming out and will outperform the markets.

At the same time, investors and traders should also be prepared for the expected sharp correction in the Markets in the coming couple of weeks.

Amendment to public shareholding requirement

The Ministry of Finance on Friday amended the Minimum Public Shareholding norm for listed companies. The Finance Minister, Mr. Pranab Mukherjee, earlier in his budget speech for 2009-2010, had proposed to raise the threshold for Non-Promoter, Public Share-holding for all listed companies. The amendment has arrived as The Ministry believes that “ A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices. Further, the larger the number of shareholders, the less is the scope for price manipulation.”

The Salient features of the amendments are:

1. The Minimum threshold level of public holding will be 25% for all listed companies. 

2. Existing companies less than 25% public shareholding will have to reach a minimum level of 25% public shareholding by an annual addition of not less than 5% to public holding. 

3. For new listing, a company with post-issue capital (at offer price) of more than Rs. 4000 Crore, may be allowed to go public with 10% public shareholding and later complying with 25% public share-holding norm by adding at least 5% public shareholding per annum. 

4. Every listed company shall maintain public shareholding of at least 25%, and if it falls below that level anytime then company shall bring the public shareholding to 25% Level within a maximum period of 12 months.

THE GREECE SAGA - That spooked the World Financial Markets!!!!!!!!!!!!!

In the Month of April, 2010, Greece announced that this fiscal’s Deficit Gap of the country will be more than expected. After this announcement, US convinced that the increased Budget Deficit can be very well handled by the Greece Government and it would not affect the other world markets, hence there is nothing to worry about. In the last week of April, 2010, The Euro Stats released that the revised Budget Gap of Greece will be more than 14% of its GDP this year, with the release of this fact, Standard & Poors downgraded Greece from an investment economy to a Junk Economy. Ratings agency Moody's also downgraded Greece's credit rating a notch to A3 from A2.

Greece has pledged to cut its deficit by four percentage points of gross domestic product this year.

Fears of a default by Greece mounted late last year after the newly-elected government sharply revised up its estimate of Greece's 2009 deficit to 12.7% of gross domestic product, more than four times the E.U. limit.

The Greek government surrendered to the credit markets, formally requesting the activation of a joint European Union (EU) and International Monetary Fund (IMF) rescue plan after soaring borrowing costs were seen making it virtually impossible for the debt-strapped nation to meet its funding needs on the open market.

Germany's finance minister, asked officials to prepare a plan in time for a summit of EU leaders on 06 May, 2010. The options include either a loan from EU states or some sort of institutional EU response. 

Germany's apparent backing for a bail-out came despite worries that it led to the breakdown of fiscal discipline across the Club Med region. It also raised troubling questions of fairness. Ireland has tackled its own crisis by slashing wages and going far beyond any measure so far offered by Greece, yet Dublin has not received help. 

German exposure to the region amounts to €43bn in Greece, €47bn in Portugal, €193bn in Ireland, and €240bn in Spain. German lenders are already vulnerable, with the world's lowest risk-adjusted capital ratios bar Japan. 

Wealthy Greek citizens have shifted €7bn from banks in Greece to foreign accounts, fearing that capital controls in Athens. The withdrawals have echoes of the Mexico's Tequila Crisis in 1994 when Mexicans set off a spiral by shifting funds to the US. 

The risk is that capital flight will erode the deposit base of Greek banks, forcing them to shrink loan books.

Goldman Sachs has downgraded the National Bank of Greece and GPSB. "Greece faces both a liquidity and, potentially, a solvency problem. While we believe that, individually, Greek banks tend to be well-run, the problems they face are outside their operational control," it said. 

Tensions within the euro zone were highlighted by the reports that Sarkozy last week threatened to pull out of the single currency unless the European Union agreed to support Greece. 

Finally, on 10^th May, 2010, The European Union came out with a bailout package not only for Greece but for whole of the Euro Region of 720 billion Euros, covering Italy, Spain, Portugal and other countries too along with Greece. This announcement was celebrated by whole all around the Globe by posting almost 3 to 10% gains in a day. The French Index (CAC) was almost 10% up on that day. NIFTY also posted an overwhelming gain of 175 points in a day. 

The unprecedented €720bn rescue package agreed by European policy makers this week to combat the sovereign-debt crisis threatening the euro was necessary, because if Greece were to "fall down" this could spread to other countries and lead to "a kind of meltdown". 

Greece is the first country in 11 years of European monetary union to require a political pledge of support as fears over its debt sparked a market attack that has dented the euro. 

Greece has been forced to implement tough austerity measures as a pre-condition for an international bailout, a move that has sparked widespread protests in the southern european country. 

Deutsche Bank’s Chief Mr. Ackermann said that “I would doubt that Greece over time will be in a position to come up with the economic potential” to pay back what it owes. 

Mr Ackermann believes that Italy and Spain will be "strong enough, to service their debt," limiting the probability of so-called contagion, but added that in the case of Portugal things are more "difficult". 

Europe must intensify efforts to turn around Greece's financial situation to avoid a need to restructure its debt, since this would impact German banks. 

German financial companies including Deutsche Bank and Allianz SE will make available €4.8bn in financing to replace Greek government bonds expiring by May 6, 2013, by purchasing new bonds or providing other forms of financing. They will also replace €3.3bn in expiring credit lines with new ones or other financing. 

Despite the turbulence, the eurozone remains stronger than the US or UK. Germany in particular with its strong dependence on exports, could profit from a weaker euro. 

Final April consumer price inflation data released on 14^th May, 2010, Friday in Spain showed that for the first time in the series of the data, the core inflation rate turned negative to - 0.1% on an annual basis from 0.2% in March. 

Headline inflation, which includes food and energy prices, rose from 1.4% to 1.5% on an annual basis.

Spain joins Slovenia, Portugal and Ireland in the number of countries where core prices are falling compared to the previous year. 

Greece, Portugal, Ireland and Spain have committed to take steps to cut debt but the first negative Spanish core CPI data reading on record raised the prospect that those measures won't be enough, in turn sparking fresh worries about economic growth. 

Spain's core inflation rate turned negative in April, falling 0.1% and sparking worries over potential deflation and stalling growth. 

French banks are some of the largest holders of peripheral European government debt and fell sharply on Friday. In one more hit for lenders, New York Attorney General is carrying out an investigation into the role of lenders and credit rating agencies in mortgage-bond deals. 

European banks reportedly under investigation include Credit Agricole, Deutsche Bank, Credit Suisse and UBS. 

The euro has lost ground against the dollar ever since Greece shocked markets last year by revising up its budget deficit and the euro dropped another 1.2% to $1.2384 against the dollar on Friday, hitting a 17-month low in the session. 

Having gone through the above facts, it gets very well clear that the Crisis in Europe is deepening day after day and may become worse as that of US. It will be wrong to say that this crisis would not impact US or any other economy in the world, as it is not a new crisis developed in Europe, in fact it is the part of that Crisis which emerged in US, a part of which was Sub-Prime Crisis and the other one is CDOs Market. It will be apt to say, after witnessing such crisis in the Developed Economies that, TODAY EACH AND EVERY ECONOMY IN THE WORLD TASTES THE BITTERNESS OF GLOBALIZATION. 

At the end, I would suggest the traders to trade very cautiously in the markets by maintaining Strict Stop Losses and Booking Nominal Profits and the investors to exit their holdings in profit and avoid making fresh investments at this point of time in the markets.

At the same time, investors and traders should also be prepared for the expected sharp correction in the Markets in the coming couple of weeks.