US Congress may extend unemployment benefits-Economic Reviews

WASHINGTON: The US Congress will consider extending unemployment benefits after it returns in September to help 1.5 million Americans who risk

exhausting them, Senate Majority Leader Harry Reid said on Friday.

"Soon after Congress returns to Washington we'll need to address this matter," Reid said. "There is an economic case to be made for extending unemployment benefits."

The unemployment rate eased to 9.4 percent in July from 9.5 percent the prior month, according to Labor Department data released on Friday. It was the first time the U.S. jobless rate has fallen since April 2008.

But the number of long-term unemployed continues to rise as the country struggles with the longest recession since the Great Depression of the 1930s, and many analysts attributed the dip in July to people giving up the job hunt.

Data ranging from home sales to manufacturing have pointed to an economic revival, but the unemployment rate is expected to remain high, which could lead to an anemic recovery. Obama administration officials say they still expect the unemployment rate to reach 10 percent this year.

As of July 25, 6.31 million people were collecting long-term unemployment benefits, according to Labor Department data.

Some 1.5 million of those people could exhaust those benefits by the end of the end of the year, according to the National Employment Law Project.

"We must help those who are suffering as a result of an economic crisis they did not create," Reid said.

Congress has already extended unemployment benefits for up to 79 weeks and Obama administration officials and Democratic leaders in the House of Representatives have said they will work to extend them further.

But that could widen the already yawning budget deficit, which shot up another $300 billion in July to reach a record $1.3 trillion for the first 10 months of fiscal 2009, according to the Congressional Budget Office.

The CBO expects the budget deficit to top $1.8 trillion for the fiscal year which ends September 30, in large measure due to a $787 economic stimulus bill passed by Congress in February.

Polls show rising public unease with the record deficit and Republicans have sharply criticized it.

"Instead of seeking new ways to expand the government, this Congress needs to get back to the basics of deficit reduction," Republican Senator Judd Gregg said in a statement.

PSUs for disinvestment - Econamic Reviews

NEW DELHI: Steel Ministry has identified two Public Sector Units (PSUs) for disinvestment, and is going to send its recommendations to the cabinet later this month, Union Steel Minister Virbhadra Singh said on Friday. "We have identified two steel PSU's for disinvestment. We will be going to cabinet within this month," Singh told reporters here. Speaking on the sidelines of Converging India Leadership Summit, Singh said the ministry is in the process of finding more PSU's for disinvestment. "A couple more are in the pipeline for selling govt stake", he added. Singh said the ministry is looking to raise about 15,000 crore rupees from the process of disinvestment. Meanwhile, the Steel Ministry has already sent its proposal to sell 10 per cent of its stake in Manganese Ore (India) Limited to the Ministry of Finance. Steel Secretary P K Rastogi had said on August 4 that the ministry had approved the sale of 8.38 percent of its stake in iron ore producer NMDC and would take the proposal in a day or two to the Finance Ministry. India's present annual steel production stands at 55 million tonnes and is being enhanced to 124 million tonnes by 2011-12.

Gas row: Ambani brothers trade charges

MUMBAI: Personal sensitivities of Ambani brothers were on public display today with Mukesh expressing sadness at allegations levelled by Anil, Reliance Industries' KG-D6 facility World's top oil exporting countries World's top 10 oil producers World's largest refining companies who in turn wondered if it was vendetta, greed or advisers who were motivating his elder brother. In its first statement after a series of allegations levelled against it by Anil Ambani and his group companies, RIL said: "We shall continue to exercise restraint in the face of Anil Ambani's provocative public statements. We hope that Anil and his associates will also exercise similar restraint and leave the matter to be decided by the Supreme Court." "While Mukesh Ambani is profoundly saddened by his brother's remarks, he requests the media to respect his decision not to respond," RIL's petroleum business president Atul Chandra said, reading out from the statement. This was in reply to "several personal commentrs" made by Anil, including his accusation that Mukesh had traded his father's vision for corporate greed and that he was against any role for their mother in settling the dispute. In no time, Reliance Power CEO J P Chalsani released Anil's statement that said the younger Ambani was "pained" to see RIL doing everything to renege on its binding commitments under his "respected elder brother's leadership." "This is so contrary to the fundamental values... that my visionary father, Dhirubhai Ambani, stood for... Whatever be the reason... and I have no idea what it is...corporate greed, personal vendetta, misguided advise from the 3Cs - chelas, chamchas and cronies," Anil said. Anil had made similar comments in the run up to his parting ways with Mukesh, while advising Mukesh to beware of the '3Cs'. The exchange of barbs came ahead of the scheduled hearing of their cross-appeals by the Supreme Court on September one. While Anil group has sought implementation of the June 15 Bombay High Court order that asked RIL to supply 28 mmscmd of gas to RNRL at $2.34 per mmBtu for 17 years, it has been challenged by the other side. RIL also accused that Anil and "his associates have attempted to convert what are essentially legal issues into public issues for a self-serving media campaign aimed at maligning RIL as also other venerable institutions of the country for private and personal gains." "It is unfortunate... and deeply, deeply distressing to me at a very personal and emotional level," Anil replied, terming RIL's media statement as "Mukesh Ambani's purported remarks." "We have the highest respect for the Supreme Court and our every action will always preserve its dignity and honour," Chalsani said responding to RIL's comments. "RIL's utter disrespect and disregard, on the other hand, for the judiciary is visible in its refusal to even implement the Mumbai High Court's judgment to enter into a bankable gas supply agreement within 30 days - even though that judgment has not been stayed by a superior Court," he said.

Rainfall woes weigh on market

Traders pressed the panic button towards the fag end of the session Thursday, after reports suggested that below-than-expected rainfall

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may force the government to declare some states as drought-hit. Rainfall for the week to August 5 stood at 23.5 mm, which is 66% below normal, media reports suggested. This is seen as a major concern for economic growth.

“The monsoon problem appears to be more severe than policymakers had anticipated. The government may now have to allocate more funding, possibly via subsidies and loan waivers, to support struggling farmers. Meanwhile, authorities are also under pressure to ensure food security by building up reserves, which will add to this year’s fiscal outlay. The bid to contain the damage caused by insufficient monsoon rains and maintain social stability has made fiscal management difficult. The budget deficit for fiscal 2009-2010 is likely to be larger than the government’s current estimate,” said Sherman Chan, economist at Moody’s Economy.com.

National Stock Exchange’s Nifty settled at 4585.75, down 2.31 per cent or 108.4 points from the previous close. The index slipped to a low of 4559.20 from a high of 4718.15.

Bombay Stock Exchange’s Sensex declined 2.45 per cent or 389.80 points to 15,514.03. The index crashed to a low of 15,443.22 from a high of 15,969.81.

“Global markets painted a firm picture so the sell-off was clearly driven by domestic concerns such as below-normal rainfall. In any case, the market had run up sharply in the last few days so a correction was definitely on the cards,” said Sunil Jain, head of research at Nirmal Bang Securities.

Moreover, the 30-share Sensex was within kissing distance of the psychological 16000 level – a critical resistance. Traders began booking profits close to those levels but the rainfall reports triggered the massive sell-off.

The broader market ended on a weak note as well. The BSE Midcap Index was down 2.39 per cent while BSE Smallcap Index climbed 1.29 per cent.

All sectoral indices ended in the negative terrain but the worst hit was the BSE Auto Index down 4.43 per cent, followed by BSE Realty Index shedding 3.65 per cent and BSE FMCG down 3.29 per cent.

Among frontline stocks, Tata Motors (-6.93%), Hindalco Industries (-6.5%), Jaiprakash Associates (-5.53%), Maruti Suzuki (-5.34%) and Hero Honda (-5.25%) were under severe pressure.

Sun Pharmaceuticals (1.53%) and Wipro (0.04%) were the only gainers in the 30-share index.

Market breadth on BSE worsened with 1614 declines outnumbering 1080 advances.

Indians defy high gold prices as festive season starts

Indians have started buying gold jewellery and wholesalers are stocking up against anticipated price rises as the busy season

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gets under way in the world's largest bullion consumer, dealers said on Wednesday.

India, which accounted for more than 20 percent of global demand for gold jewellery in 2008, celebrates the Hindu festivals of Raksha Bandhan, Janmasthami and Ganesh Chaturthi in August, when demand for bullion usually picks up.

Elsewhere in Asia, gold's rise to a two-month high above $970 an ounce spurred selling, but premiums for gold bars were steady at 70 cents to the spot London price in Singapore, suggesting that consumers would still buy on dips.

"As against nothing earlier, there is at least something now. This month for the festivals, the real consumers will be buying, so demand has revived a bit," said Haresh Acharya, bullion desk head at Parker Agrochem Exports Ltd, a wholesaler in Ahmedabad.

"However there is hardly any demand from northern India because of the below normal monsoon. If the monsoon fails, the full year will be very bad," said Acharya, referring to sales.

Jewellery is the most common gift during religious events in India and forms an essential part of the dowry basket. Weddings usually take place during the festive season, when parents give gold jewellery to their daughters for financial security.

Weak monsoon rains could hurt demand because farmers, who account for 65 percent of India's gold demand, depend on good harvests, but some dealers said wholesalers were active in the local market, looking for an opportunity to buy.

"When prices fall a bit, there is buying. The sentiment we saw in the first half of the year has turned around," said Ajit Shinde, a director at wholesaler Magna Projects Pvt. Ltd., which is based in the eastern city of Kolkata.

The most active October contract on the Indian gold futures added 25 rupees, to 14,920 rupees ($312.8) per 10 grams on Wednesday. Cash gold fell $3.20 to $963.55 but was within sight of a two-month high of $970.05 on Tuesday.

India's jewellery demand has suffered because of high global prices earlier this year and an economic slowdown, with consumption falling 52 percent to 34.7 tonnes in the first quarter.

Gold was around 4 percent below an 11-month high above $1,000 hit in February.

"In the near-term, it certainly has a bit of upside pressure and with expectations for the dollar to weaken further, I would expect gold to remain buoyant for now," said Adrian Koh, an analyst at Phillip Futures in Singapore.



Premiums were also steady in Hong Kong at 30 cents to the spot London prices, but physical trading slowed to a trickle in Tokyo during the summer holidays. Japanese dealers offered gold bars at a discount of 50 cents to London, compared with a premium of 25 cents two weeks ago.

Infrastructure-based funds back in vogue due to govt’s big push

The infrastructure theme in mutual funds industry is like festivals in India. It recurs with predictable regularity to garner mixed
response. This year funds that play on infrastructure theme are back in vogue, because of the Budget’s emphasis on infrastructure. The government has earmarked Rs 12,887 crore for urban infrastructure, an increase of 87% over the previous year.

This gives an indication for infrastructure funds and investors to align their strategies towards the theme. If reports are to be believed, Reliance MF new infrastructure fund offer has managed to mop up around Rs 2,500 crore. So would these do well to offer good returns ? Would it be prudent to invest in these funds? We at ETIG analyse the performance of existing schemes in bullish and bearish phases in the light recent development in the power sector.

STRUCTURE AND PERFORMANCE

A confusion investors face while investing in infrastructure funds is how different those are from diversified equity funds. They are among the most diversified funds. The confusion has, however, been compounded by the marketing strategy employed by fund houses.

Last two years’ performance record suggests that around 10 diversified equity funds beat most of the infrastructure funds on returnsparameter . However, in the last oneyear Taurus Infrastructure Fund has been the best performer in the entire gamut of such funds. This is a critical period to gauge a fund’s performance considering market volatility. The fund has given a reasonable 21% returns in the last one year and for last six months it has given a whopping 119%.

Sahara Infrastructure Variable Pricing is the second best performing fund, which has given around 20.9% returns in the last one-year and 78.23% in the last six months.


Reliance Diversified Power and ICICI Pru Infrastructure are two formidable players in the industry. Sectors such as Oil & Gas, Petroleum & Refinery, Power Generation, Transmission & Equipment, Engineering & Industrial Machinery, and Electricals & Electrical Equipments are the main composition of both Taurus Infrastructure Fund and Sahara Infrastructure Variable Pricing. Investors who invested in infrastructure theme funds and held on from January 2006 to December 2007, would have made returns of anywhere between 50% and 100% in this period.

THE DISTINCTION

As an investor you should lay immense stress on the track record of an infrastructure fund before investing with it. Though the objective of diversification to varied sectors remains the same for both diversified and infrastructure funds, it makes sense that as an investor you should regularly book profits on the theme you see in vogue irrespective of the long term. The reason being infrastructure funds, on an average, have declined more than 40 % yearto-date , higher than the declines seen in most diversified funds.

Apart from the theme play, investors should also consider the point that most infrastructure funds have track record of less than five years.
Hence, it would be too early to form a confirmed opinion on the performance of infrastructure funds considering the projects and plans of an infrastructure are long-timed . Those investors who hope to gain for the short-term diversified equity funds, however, those believe in longer we-stay-and-higher-wegain norm are set to benefit from prudent investing in infrastructure funds.

Also given the recession phase, the government’s stimulus is obvious. And considering the government’s intervention, it would inadvertently focus on infrastructure projects and hence funds investing in infrastructure companies are set to gain. Investors intending to play Indian equity,