- An idea which does not seem very interesting to anyone else can have this special ‘smell’ for a creative person. This seems to be a sort of instinct in the way it operates. It is not, however, an instinct but a judgment built up from a lot of experience.
- At the very start of an idea, difference is a point of interest. Something which is different, or even the opposite, of the normal will always be interesting. Whether that interest develops into something practical is another matter.
- The purpose of any new idea is to show value and benefits. Any idea which at an early stage suggests large benefits is always worth hearing and pursuing. The benefits must, however, be made very clear.
- An idea that has no obvious benefits is not a creative idea. It is not much use delivering an idea and hoping that there may be benefits somewhere.
- An idea which immediately seems practical is always attractive. We can see how the idea can easily be put into practice. Practicality covers many aspects. The idea must be practical and feasible from a mechanical and scientific point of view. The idea must be practical from an ‘acceptance’ point of view; the people who are going to be required to implement the idea must accept the idea.
- A simple idea is always attractive. The idea may be simple to introduce. The idea may be simple to operate. The idea may replace existing complexity with simplicity. The ‘smell’ of simplicity is always enticing.
- There may be good ideas which will only work in very special circumstances. There may be good ideas which will only work for a certain class of people, for example people with little money but big ambitions.
- Not every idea has to be universal. There may be niche ideas which serve that particular niche very well. Such ideas may be worth implementing. In terms of the ‘smell of an idea’, however, niche ideas are not very attractive. If the niche is spelled out very clearly, then the idea can be seen to be valuable. It should not, however, be left to the listener to work out the niche where the idea does have value.
- Robust ideas are attractive - ideas that will work even when not fully implemented. This means that the ideas will work even outside the best circumstances.
- Business development is among the foremost concerns of any organization, and as a manager, much of your attention will be devoted to developing and exploiting the business opportunities that are presented to you and your company.
- Business development and making your organization successful is reliant on good knowledge of best practice and management theories.
- Business development management involves asking yourself some searching questions. Are you prepared to change to realize the vision created by your business development strategy? What must your business excel at? How does that affect processes, people and customers? Who does the planning and controls the implementation of the business development ideas, answering to which goals, actions and measures?
- Perhaps most significant of all, you have to decide whether to be radical rather than incremental – are you revolutionary in your skills as a business development manager or are you more evolutionary?
- Small business development contains a paradox – if the business turns out to be successful then it won’t be so small any more. The challenge, then, is that of developing a small business to grow while retaining the elements that made it successful in the first place.
- For more on business development, see the articles below.
- Reflecting the shortage of liquid funds in the system, banks on Monday borrowed over Rs 1,16,000 crore from Reserve Bank of India’s (RBI’s) Liquidity Adjustment Facility (LAF). They covered themselves to meet prudential norms for liquidity.
- However, the resource strain did not push the interbank call rates to cross double digits. Just 10 days back, the call rates had zoomed to a two-year high of 12 per cent when banks drew over Rs 1,17,000 crore from RBI.
- Dealers said this was the first week of the new reporting fortnight and banks kept themselves in excess of requirement, resulting in higher drawl at the LAF window.
- Despite the high borrowing, the call rates moved between 3.25 per cent to 7.10 per cent, according to Clearing Corporation of India data.
- Moses Harding, head global markets group with IndusInd Bank, said it (liquidity pressure) was not a surprise for the market. RBI has discontinued the special liquidity arrangement, so the regular LAF window saw higher demand.
- RBI was trying to bridge the gap in resource position through the buyback of government bonds and special liquidity window, he added.
- The large movement of funds for the public offer of Coal India Ltd had created a strain in the system.
- On October 29, RBI said the frictional liquidity pressure may persist. It opened a special window to provide liquidity comfort. Banks could avail additional liquidity support up to one per cent of their net demand and time liabilities.
- It waived penal interest for any shortfall in maintenance of statutory liquidity ratio, arising due to this facility.
Bonds drop for a second day
The 12-year government bonds fell for a second day as overnight borrowing rates in the local money market climbed, thus reducing demand for debt securities.
The yield on the most-traded bonds due in 2022 rose to a one-week high, after the cost of borrowing funds overnight in the interbank market, reached 7.5 per cent, the highest this month. That deterred banks—the biggest buyers of government debt—to buy securities with borrowed funds.
The yield on the 8.13 per cent note due September 2022 rose to 8.03 per cent at close in Mumbai, from 8.02 per cent on November 4. The price fell 0.03, or 3 paise per Rs 100 face amount, to Rs 100.78.
Bonds rose earlier on speculation RBI will purchase existing securities to ease a cash shortage in the financial system. The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, was little changed. The rate, a fixed payment made to receive a floating rate, was 6.68 per cent.
- Percentage completion rule to make its impact felt.
- Despite a tangible revival in demand in the real estate market, profitability of south-based real estate companies will remain subdued in the next quarter as under-construction projects will take some more time to be recognised in the balancesheet of these companies.
- As per accounting principles, revenue of an under-construction project is reflected in the book of a company after a certain degree of completion of the project. Usually, most companies follow the 30 per cent completion trigger to calculate the revenue on their balance sheet.
“Due to the 30 per cent completion norm, profitability is yet to be reflected in the books of the real estate companies,” Venkat K Narayana, chief financial officer of Prestige Developers, said.
- He, however, said that as new projects were launched by companies and with the growth in demand, profitability of companies would see a rising trend.
- Referring to this matter, N L Vaidyanathan, executive director of Nitesh Estates, said that profitability of real estate companies were subdued during the last quarter due to the percentage completion rule.
- As many new projects are launched in this quarter on the back of the revival in demand, this will take another one to two quarters to reflect completely, he added.
- Many real estate companies in south India have registered a flat growth or have seen a dip in their net profit during the second quarter of the present financial year. Those companies which have posted higher profitability figures have done so on the back of land monetisation than on higher core earnings.
“During the slowdown, many developers had stopped launching new projects. With the revival in the economy, new projects are being launched and those will take time to reflect in the balancesheet,” an analyst with Mumbai-based brokerage firm said.
- He also said that profitability would remain subdued in the near term for the real estate companies.
- However, some of the real estate developers have a different view regarding this issue.
“Though the accounting principle plays some role, still companies with robust sales growth have already shown growth in profit in the last quarter,” S Baaskaran, chief financial officer of Sobha Developers said.
- He also said that the upcoming quarters would register better revenue and profit growth on the back of robust demand.
HDFC GROWTH
- After an uneventful start, it began to get noticed in 2006, when Srinivas Rao Ravuri assumed charge. It then turned out to be a category outperformer, barring a disappointing 2009.
- Last year, Ravuri's over-cautious stance made it a third-quartile category underperformer. The suddenness of the recovery caught him off guard. Despite the equity market starting an upward journey in March 2009, the fund did not lower exposure to defensive sectors and held on to cash up to July 2009. Typical to the fund house, he focused on companies that depended on domestic demand, with strong balance sheets.
- He also avoided highly leveraged companies. His play-it-safe attitude backfired in 2009 but the current year's year-to-date (YTD) returns show that he stands vindicated. In his search for good fundamentals, he often bets on sectors against the current tide. In 2006, his peers were neutral towards healthcare, while he increased allocation to it. Similarly, he pruned allocation to financial services, while increasing it to automobiles. In 2007, the fund was more into healthcare and basic engineering, while others chased metals. The pattern followed in 2008. Even some of his stock picks stand out for the lack of popularity when they first made an appearance in the portfolio. Such as C&C Constructions, Solar Industries, Ahmednagar Forgings, KNR Constructions, Emico Elecon (India) and Technocraft Industries India. Recently, he has been trimming exposure to mid-caps and booked profits. On the whole, though it's never had a smooth ride, it's one of the better players in this category.
RELIANCE REGULAR SAVINGS EQUITY
- When Omprakash Kuckian took over the fund in November 2007, its assets under management were only Rs 290 crore. He rapidly changed its complexion and used the flexibility a small fund offers to the hilt. His moves paid off and in the December 2007 quarter, he delivered 54.66 per cent (category average, 25.7 per cent). But that has changed. With a corpus that has crossed Rs 3,000 crore, he still takes strong sector bets but plays it safe with individual stock bets. Nevertheless, he has managed to impress, and in 2009, beat the category average by 20 per cent (102 per cent).
- Bank may raise the fixed rate or offer it only for the first year
- State Bank of India (SBI), the country’s largest and the first to launch teaser rates, will decide on the continuation of the scheme next week.
- According to sources, the bank’s senior management, which will meet early next week, is divided on the issue. In September, the bank had extended the scheme till December 31.
- SBI sources said the bank’s top management was still debating whether to withdraw the scheme completely or take a middle path. “Whether one wishes to call it teaser or by any other name (SBI calls it ‘special home loan scheme’), the fact is that we have created a strong brand name. Our home loan portfolio has grown quite rapidly after the launch of the scheme,” said a senior SBI executive, explaining the reluctance among some officials to withdraw the scheme.
- The bank may consider raising the fixed rate for the first three years by around 50 basis points. At present, the scheme offers eight per cent for the first year and nine per cent for second and third years. Another option can be to retain the fixed rate only for the first year.
- In the last couple of weeks, both Housing Development Finance Corporation (HDFC) and ICICI Bank have withdrawn such schemes.
- SBI is the largest player in the teaser loan segment, with an exposure of Rs 23,000 crore, almost one-third of its retail home loan portfolio of Rs 79,275 crore. Housing finance giant HDFC has an exposure of Rs 18,000 crore and LIC Housing Finance has lent Rs 7,000-8,000 crore through its fix-cum-floating schemes, according to banking sources.
- However, there are certain concerns as well. “While rising cost of funds is an issue, an increase in provisioning for these loans by the Reserve Bank of India (RBI) is another reason why we need to re-look at them,” said an SBI official.
- RBI raised the provisioning for teaser loans from 0.4 per cent to two per cent in the second quarter monetary policy review. It implies that banks need to set aside more money for these loans. For SBI, it means an additional provisioning of around Rs 450 crore.
- In a press conference after the monetary policy, RBI Deputy Governor Usha Thorat (who has retired since) criticised teaser rates and blamed these for the rise in housing prices. SBI Chairman O P Bhatt had defended the scheme by calling it a special home loan scheme and not a teaser rate scheme.
- There is also lack of clarity on provisioning. Banks have sought a clarification from RBI. For instance, they are not clear if they have to continue with provisioning even after the customer has moved from fixed to floating rates. Since the scheme was launched two years ago, many customers have already moved to the floating rate regime.
- European shares shed early gains and peripheral euro zone bonds dipped on Thursday after Spain paid a high premium at a debt auction, ahead of a summit at which EU leaders will focus on the region's debt crisis.
- US Treasury yields eased but held near seven-month highs after jumping the previous day on a rise in inflation expectations and the spectre of higher growth and a wider deficit.
- EU leaders are meeting in Brussels on Thursday and Friday for their end-of-year summit, with efforts to overcome the year-long debt crisis at the heart of their agenda.
- Leaders will try to agree how to stop it spreading, with Portugal and Spain in their sights, and discuss changing the EU's treaty to create a permanent crisis-resolution mechanism from 2013 and might look at enlarging the existing crisis fund.
- Markets are not anticipating any significant developments from the summit, though any positive news would likely support the euro and risk appetite.
- "Spain is going to be the issue, with the threat of a downgrade, investors will be looking for comments from the EU meeting," Will Hedden, a sales trader at IG Index, said.
- "We don't want Spain to get bailed out. If it does, it sends a big message to investors that if an economy as big as Spain is fragile, then the euro-zone may be a risky place to do business."
- Spain was forced to pay a hefty premium at its final bond auction of the year on Thursday, in a key test of investor appetite for euro zone peripheral debt a day after Moody's said it may cut the country's rating.
- The Spanish Treasury raised 2.4 billion euros ($3.20 billion), within the targeted range of 2-3 billion euros but disappointing some analyst who expected more debt to be sold.
- "In the short term this should reduce pressure on the Spanish market, but I think when one looks at the bigger picture and considers the small amount sold, with low bid-covers, yet at a high yield, then it seems clear that peripheral markets remain under pressure and in need of support from policymakers," said Peter Chatwell, rate strategist at Credit Agricole in London.
- Government debt yields for Spain as well as Portugal and Italy were pulled higher after the auction, while Bunds traded in a narrow range with yields little changed on the day.
US YIELDS EASE
- European stocks gave up earlier gains to trade close to flat at 1,128.79 as shares in southern Europe dipped following the Spanish bond sale.
- The euro was up 0.1 per cent against the dollar at $1.3225 after coming under pressure on Wednesday on Moody's Spain warning, while the dollar was steady versus a basket of currencies.
- Oil was trading a touch lower at $88.10 and gold rose 0.2 per cent.
- In the cash market, the yield on the 10-year US note slid to 3.47 per cent after climbing as high as 3.57 per cent overnight.
- The 10-year yield has risen nearly 90 basis points since November, contributing to a dramatic steepening of the 2-year to 10-year yield curve to 282 basis points from 226 basis points at the beginning of November.
- That spread is on course for the largest widening in a quarter since the first quarter of 2008.
- "The market is very difficult now ... but what I do sense is that we've got down to levels that are technically supportive," said a trader at a European firm.
- "It's difficult to sell at this low and initiate a new position," he added.
- US equity futures were pointing to a slightly lower open ahead of a raft of US data, with the current account, housing starts, weekly jobless claims and the Philly Fed Business Activity index all set for release.
- The Nifty rally is likely to mature around 6,010 and an upside breakout is possible only if the index closes above 6,060, the trading pattern in index futures suggests.
- There are no strong cues for a directional break-out yet, says Moses Harding, head, global markets group, IndusInd Bank. The trading pattern in Nifty futures and key stock futures did not throw up a trend on a day when all trading activity fell within a small price range.
- The trading volume in December futures dropped significantly by over 10 million shares, which indicates lack of interest from day traders. Nifty December futures was trapped in a narrow band in the value area (5,920-5,955), where 55 per cent volume changed hands. The initial balance range (5,906-5,938) was compressed in the 25-point range with 34 per cent volume indicating significant support at that level from liquidity providers.
- Top traders were in the buy mode in the initial balance range and booked profit in the value area, the trade summery matrix (TSM) suggested. The December futures closed at a 16-point premium to the spot while only 109,700 shares were added in open interest, mostly through sell-side trades, the TSM data suggested.
- The Nifty is expected to move in a narrow band tomorrow based on price projection using time-price opportunities (TPOs). The TPO projection is hinting at an index level of 5,970, also the day’s high value. The volume picture chart, however, indicates the Nifty may face strong resistance above 6,010. The build-up of open interest in call and put options is hinting at support at 5,800 and resistance above 6,000.
- There was a significant unwinding of long positions in the 5,800-5,900-strike call options through sell trades, according to the TSM data. The 6,000-strike call options added 281,650 shares in open interest through change of hands. There was change of hands in the 6,100-6,200-strike call options, which clearly indicates that the market participants expect strong resistance above 6,000.
- Key stock futures such as Reliance Industries (RIL), Larsen & Toubro (L&T), State Bank of India (SBI) and Tata Motors (TTMT) are expected show an upside movement. The December futures of RIL is expected to move up around Rs 1,070 on strong volume in the value area and the day’s mid-point level of Rs 1,051. TTMT is projected to move up around Rs 1,327, L&T around Rs 2,022 and SBI around Rs 2,847, the market picture chart suggests.
