Rupee weakens on dollar demand
Mumbai: The rupee fell against the dollar on the back of heavy demand for dollar.

The rupee opened at 44.52 and touched an intra-day high of 44.5725 closing the day at 44.5475, down from Wednesday's 44.50/51.

Dealers said there was demand from PSU banks as well foreign banks for dollars.

Forwards: In the forward premia market, the 6-month premium closed at 2.15 (2.5) per cent and the 12-month premium at 1.77 per cent (2).

Bonds: In the bond market, prices edged up slightly due to the marginal easing of liquidity. Dealers said the marginal reduction in the borrowing of banks from RBI through the repo window and the call rate easing below 7 per cent improved buying interest. In a statement to the press, the Finance Minister said that the central bank would intervene to manage the tightness in liquidity next week.

G-Secs: The 9.39-5 year-2011 paper opened at Rs109.36 (7.22 per cent YTM) and closed at Rs109.55 (7.18 per cent YTM), up from Wednesday's Rs109.40 (7.21 per cent YTM). The 8.07 per cent-11 year-2017 paper opened at Rs104.75 (7.42 per cent YTM) and closed at Rs105.08 (7.38 per cent YTM), higher than the previous close of Rs10

Call rate: The call rate closed on Thursday at 6.90-7 per cent (7.10 per cent).

Repo Auction: In the one-day reverse repo, under the liquidity adjustment facility, the RBI accepted one bid, amounting to Rs100 crore and 24 bids for Rs15,135 crore through the repo window. In the second auction, the RBI accepted three bids for Rs1,240 crore through the reverse-repo and 15 bids for Rs4,965 crore in the repo.

CBLO: The CBLO market saw 294 trades, aggregating Rs18,631.2 crore in the rate range of 6.35-7 per cent.
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SBI Act changes approved
Mumbai: The Union Cabinet has approved legislative changes that will enable State Bank of India (SBI) to sell shares in its associate banks. The changes will also facilitate SBI to split the shares of its subsidiaries. However, this will require Parliament's approval.

SBI has seven associate banks of which three banks are listed. These include State Bank of Travancore (SBT), State Bank of Mysore (SBM) and State Bank of Bikaner and Jaipur (SBB&J). The shares of these banks carry a face value of Rs100. At present, no individuals can hold more than 200 shares in the listed entities.

As on December 31, 2005, SBI held 75 per cent stake in SBT, 92.3 per cent in SBM and 75 per cent in SBB&J. Other subsidiaries of SBI are: State Bank of Hyderabad, State Bank of Patiala, State Bank of Indore and State Bank of Saurashtra.

The Government will now have to introduce a Bill in Parliament to amend the State Bank of India (Subsidiaries Banks) Act, which the Cabinet has approved today. The shares of SBI's subsidiaries rose after the Cabinet approval.

For SBI, the positive factor is that it can reduce its stake in the subsidiaries and generate profit, which it can use for its tier-I capital. The parent will also not have to provide capital for its subsidiaries. This will give relief for capital adequacy.
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Government issues oil bonds worth Rs5,750 crore
Mumbai: The Government has issued oil bonds to three PSU oil marketing companies to compensate them for under-recoveries in the sale of domestic LPG and kerosene (sold through PDS)during the current fiscal, a release from Reserve Bank of India said here.

The three special oil bonds worth Rs5,750 crore, called the `Oil Marketing Companies Government of India Special Bonds' include: a) 7.07 per cent-three year-2009 bond for Rs2,000 crore, b) 7.44 per cent-six year-2012 bond for Rs2,000 crore and c) 7.59 per cent-nine year-2015 bond for Rs1,750 crore. The bonds were issued at par to Indian Oil Corporation for Rs3,542.95 crore, Bharat Petroleum Corporation for Rs1,062.31 crore and Hindustan Petroleum Corporation for Rs1,144.74 crore.

Investment in these special bonds will not be treated as an eligible investment for the purpose of statutory liquidity ratio. The bonds will be transferable and eligible for market ready forward transactions (repo). The bonds, however, will not be an eligible underlying security for ready forward transactions (repo/ reverse repo) with the RBI.
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ICICI Bank nets Rs7.6 crore through SIB stake sale
Chennai: ICICI Bank has netted Rs7.58 crore by selling 47.23 lakh shares of South Indian Bank, according to some calculations. In March 1995, two development finance institutions, ICICI and SCICI, (that merged in 1996-97 ) each bought 14.20 lakh shares of SIB for Rs8.52 each. ICICI Bank picked up 12.33 lakh shares in SIB at Rs30 a share in February 1998. It subscribed to South Indian Bank's rights issue in October 2004 and got 13.41 lakh shares for Rs40 a share.

The average price for its 54.14 lakh shares works out to Rs48.20 per share. Recently ICICI Bank sold 6.91 lakh shares in the market and the remaining 47.23 lakh shares on Wednesday for Rs64.25 a share, making a profit of Rs7.58 crore in the bargain.

Also India Capital Fund, which bought up 25.7 lakh shares of South Indian Bank from ICICI Bank, has said it is bullish on the Kerala-based bank. India Capital Fund had earlier picked up a 3.08 per cent in South Indian Bank, subscribing to the bank's recent public issue.

The sale of 6.71 per cent stake of ICICI Bank in South Indian Bank raises the FII holding in the latter to 22.9 per cent. FII shareholders include Goldman Sachs (which bought 12 lakh shares from ICICI Bank to add to its earlier holding of 1.80 per cent,) The India Fund (1.8 per cent), ABN Amro (1.4 per cent) and Credit Suisse First Boston and Citicorp Global, 0.8 per cent each.
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PSU banks to hike interest rates
Mumbai: Public sector banks, which account for about 75 per cent of the banking industry, are readying to raise their prime lending rates (PLRs) next month. The increase in PLRs will lead to an increase in lending rates across the board, including for home loans and corporate loans.

At a meeting with Finance Minister P Chidambaram in New Delhi today, bank chairmen made it clear that they had no choice but to hike their PLRs in the face of tight liquidity.

The PLRs of public sector banks currently range between 10.25 and 10.75 per cent and have not been revised for more than a year. The deposit rates have, on the contrary, been increased by as much as 200 basis points since January 2006. The increase in PLRs is likely to be in a range of 50 basis points to 100 basis points, depending on the pressure on interest margins.
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UCO Bank to enter derivatives marketing
Mumbai: Kolkata-based UCO Bank plans to foray into the derivatives business to augment its fee-based income and to hedge its risks.

However, the bank says it is yet to take a decision on this front. Sources said the bank has already finalised a consultant, which has initiated discussions with the public sector bank to prepare the roadmap for its proposed venture.

UCO Bank floated a tender a few months back for the appointment of a consultant for venturing into the derivatives market.

In addition to increase their fee-based income, public sector banks in the country find derivatives an appropriate route to hedge the investment portfolio for minimising the risk factor and market volatility.

Though derivatives trading commenced in India in June 2000, the market is yet to mature.
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