Euro Stalls As Markets Brace For Next Greek Hurdle

LONDON (Dow Jones)--Currency markets breathed a collective sigh of relief after the new cabinet of embattled Greek Prime Minister George Papandreou won a confidence vote late Tuesday but are now braced for the Greek parliamentary vote on crucial austerity measures next week.

Members of parliament must pass stringent measures worth some EUR28 billion before Greece gets a EUR12 billion lifeline from the European Union and International Monetary Fund. Approval must come by June 30 so that Greece is ready for a meeting of euro-zone finance ministers scheduled July 3. Much can happen by then. The confidence vote went along party lines as members of Papandreou's Panhellenic Socialist Movement, better known as PASOK, were eager to stave off early elections but they may not be as quick to say 'yes' to the raft of tough measures given widespread public protests in Greece.

The euro rose to as high as $1.4435 against the dollar after the parliamentary vote late Tuesday, a one-week peak, but has since eased back to a touch below $1.44.

While some prophets of doom see widening protests in Greece as reason to doubt the resolve of Greek MPs, there is still a widespread belief in the market that Greece will pull through this battle.

"The $1.40-$1.50 range will hold and we're in the middle of that now. I'm quite sure Greece will get what it wants. The euro will only plummet if the problem gets so bad that the survival of the euro is at stake. I don't see that happening," said Steven Barrow, currency strategist at Standard Bank.

Analysts at BNP Paribas echoed that view. "It would seem perverse for MPs to vote in favour of the new cabinet last night only to vote down the most important piece of legislation associated with that same cabinet a week later," they said in a research note.

There's no denying though that at this stage the euro is struggling to build on its gains since the Greek confidence vote. It seems the uncertainty dogging the single currency has simply moved on to the next milestone: the austerity package vote, said one trader.

That view was echoed elsewhere. Analysts at Barclays Capital, meanwhile, said that investors appear to be aware of the risks facing the euro, but for now are willing to sell dollars..

Smaller cities attract large realtors: CRISIL Research

CRISIL Research has come out with its report on real estate. According to the research firm, Price stability and growth prospects of smaller cities are attracting large real-estate developers. The developers are diversifying from metro cities with an eye on future growth.

Price stability and growth prospects of smaller cities are attracting large real-estate developers. The developers are diversifying from metro cities with an eye on future growth. A recent report released by CRISIL Research, titled ‘Real(i)ty Next: Beyond the Top 10 Cities of India’, estimates the sales of new residential apartments in 10 such smaller cities at around Rs 180 billion in 2012.

The study details the planned supply, the expected demand and the outlook for prices in 65 submarkets across the 10 cities: Bhopal, Bhubaneswar, Coimbatore, Indore, Jaipur, Lucknow, Nagpur, Surat, Vadodara and Visakhapatnam. Almost 354 million sq ft of supply has been planned in these cities over the next three years.

The study finds that the smaller cities offer better price stability and demand growth. It foresees prices rising in seven of the smaller cities. In contrast, prices are likely to increase only in four of 10 large cities–Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai, National Capital Region and Pune.

Affordability in smaller cities is greater, as prices have not risen as much as in the large cities. Prices increased only by 10-12 per cent in the smaller cities over the two years up to April 2011. In contrast, prices rose by 25-30 per cent in the large cities.

“The proportion of buyers taking home loans is relatively lesser in these smaller cities. A gradual increase in penetration of home loans would boost demand. Moreover, a shift in preference from independent houses to apartments will also support volumes,” said Prasad Koparkar, Head–Industry and Customised Research, CRISIL Research.

The growth prospects in the smaller cities are attracting large developers with multi-city presence. A few large developers already have a presence in Bhopal, Lucknow, Indore, Jaipur, Nagpur and Coimbatore. Many of the developers are building land banks in these cities, says CRISIL Research report...

IRDA issues draft guidelines for life insurers' IPO

Insurance companies which have completed 10 years of operations are now eligible to go for initial public offer (IPO).

Prior to filing of the draft document for issue of share capital or making public offer with the Securities and Exchange Board of India (SEBI), the insurance company should take a “formal approval” from the Insurance Regulatory and Development Authority (IRDA).

For approval, the insurer should have maintained a satisfactory regulatory record, J Hari Narayan, Chairman, IRDA, said in the draft guidelines on Issues of Capital and Disclosure Requirements (ICDR) for life insurance companies announced on Tuesday.

The objective of the public issue could be to augment solvency requirement and general corporate purposes.

Financial statements for a period of last five years should be provided along with gross premium, cross-selling, operating expenses ratio, investment yield, liability of future policy benefits and manner of arriving at unrealised gain/loss.

In addition to meeting the disclosure norms laid down by SEBI in ICDR regulations, any insurance company should also disclose risk factors specific to the insurance companies.

An overview of insurance industry, disclosure of financial statements, particulars about the issue and insurers should also be provided.

The risk factors to be mentioned in the offer documents should cover risks arising out of insurance risk (mis-estimation and fluctuations in the frequency of claims) besides market, credit, liquidity and operational risks, the guidelines said.

The guidelines would come into force after their notification in the Gazette, IRDA added.

At present, there are 24 life insurance companies approved by IRDA while about four/five of them would have completed 10 years of operations..

India to Get Below-Normal Rains, Eroding Prospects for Food Grain, Lentils

Monsoon rain in India will be below normal for the second time in three years, the weather office said, potentially lowering farm output and accelerating inflation which is the highest among Asia’s major economies.

Rainfall will be 95 percent of the 50-year average in the June-September season, Science and Technology Minister Pawan Kumar Bansal told reporters in New Delhi today. That compares with 98 percent predicted by the India Meteorological Department in April. The bureau defines normal precipitation as 96 percent to 104 percent of the long-term average.

Prime Minister Manmohan Singh is betting on adequate rainfall to harvest record quantities of food grain and lentils for a second year and cool inflation, which has led the central bank to raise rates for a 10th time in 15 months. Agriculture makes up almost 14 percent of the economy and a reduced harvest can lower rural incomes, hurting sales of tractors and cars.

“A subnormal monsoon can very easily put pressure on inflation,” Dharmakirti Joshi, a Mumbai-based economist at Crisil Ltd., the local unit of Standard & Poor’s, said by phone. “Expectations of food price increases will accentuate” if the monsoon rains aren’t adequate, he said.

The wholesale price index in India accelerated 9.06 percent in May after having increased 8.66 percent a month earlier, according to official data released on June 14. An index measuring wholesale prices of farm products including milk and lentils rose 8.96 percent in the week ended June 4 from a year earlier, according to the commerce ministry.

Food Prices

Global food prices will remain higher in the next decade than in the past 10 years as agricultural production slows and demand increases, the Organization for Economic Cooperation and Development and the United Nations’ Food and Agriculture Organization said in a joint report June 17.

India imported record quantities of sugar, lentils and oilseeds in 2009 following the weakest monsoon since 1972. A below normal monsoon this year may prompt the government to keep a ban on exports of wheat and rice, and extend curbs on shipments of sugar.

The South Asian nation, the world’s second-biggest grower of wheat and rice, may need as much as 70 million metric tons of grains to supply to its citizens at subsidized rates after the parliament approves a food security bill, Food Minister K.V. Thomas said in an interview last week. The government will keep a ban on exports of the food grain, he said.

Export Bans

India banned shipments of wheat in early 2007 and non- basmati rice in April 2008 to bolster domestic supplies amid a global food crisis. State reserves of food grains totaled 65.6 million tons on June 1, almost triple the quantity five years ago, according to the Food Corp. of India.

The forecast for below-average rains may further pressure India’s stocks, the worst performer in Asia this year, said Arun Kejriwal, a director at Mumbai-based Kejriwal Research & Investment Services Pvt.

“The market tone is currently bearish and confused. A comment like this will affect sentiments and only add to the pressure on stocks,” he said by phone today.

The Bombay Stock Exchange Sensitive Index rebounded from its lowest close in four months today, gaining 0.3 percent to 17,560.30. The gauge has lost 14 percent of its value in 2011.

Rainfall in July, the wettest month of the monsoon season, may be 93 percent of the long-period average as a weakening of La Nina weather conditions causes less precipitation, the forecaster said today. Showers in August are forecast at 94 percent, it said.

Cotton Region

Rains over northwest India, the nation’s main cane, cotton and rice-growing region, may be 97 percent of the 50-year average, the forecaster said. Central India, which includes the top soybean-producing areas, may receive 95 percent rainfall, while showers over the southern peninsula will be 94 percent, the weather office said. Showers over northeastern states, the top tea-growing region, may be 95 percent of the average.

Rains will be “well distributed” and won’t hurt crops, Ajit Tyagi, director general of the bureau told reporters.

India’s 235 million farmers depend on rain for irrigating crops from rice to cotton and sowing of monsoon crops begins in June and harvesting starts in September. The rains typically start over the southern Kerala state by the first week of June, before blanketing the entire nation by July 15..