Indian steel market for both long and flat products has surged by more than 8% since March beginning, when steel majors declared their new prices for March deliveries citing additional burden of increased excise duty.

For a variety of reasons, steel buyers have rushed to the market to secure large volumes last week resulting in a mad scramble to take deliveries from steel mills and their warehouses, which are mostly reported to have very small inventories and are facing stock out situation for many sizes and specifications.

Anticipation of mid term price hike by steel majors has further added fuel to the fire as traders and stockiest across country started piling up their inventories putting sever pressure on the supply side. Market players have hiked their selling prices in anticipation of price hike pushing buyers further in corner.

Now, there is a strong possibility of mid term hike announcements by some of the steel majors to catch up with the market dynamics on week opening.

Even if mid term price revision does not happens, the market prices are not likely to decline as then the price revision would happen in April, which is just 15 days ahead, and probably by higher increments.

As per market sources the actual steel demand in India has not gone up significantly so as to drive the prices up so much in a short period, but the surge is led by “buy now” sentiments generated due to

1. Increased input costs from April

Long term pricing for coking coal is likely to see an increase of about USD 70 per tonne thus adding about USD 50 per tonne to steel making cost. Benchmark price for iron ore is likely to go up by USD 50 per tonne thus adding about USD 80 per tonne to steel making cost. On ball park basis, theoretically the cost would go up by about USD 130 per tonne or say about INR 6000 per tonne

But this is not totally true as the big players in India have their own iron ore mines and the smaller players normally buy on spot, which are already at the April levels and in reality would not effect the costing much. Incidentally it is true even for Chinese steel mills, who are also crying on proposed hike in benchmark for iron ore, as they have been mostly buying on spot market where the prevailing prices are even higher.

However, off late the extant of role played by sentiments has increased a lot in Indian steel market resulting in sever volatility as seen in December when prices went up by about 27% in a span of 30 days. And today the positive sentiments are mostly being driven on the pretext of cost pressures rather than real surge in demand

2. Support from global price levels

Both China and Black Sea steel mills, the most important price deciders in the global game, have increased their export offers pushing the global levels.

In addition to the perceived cost pressures, Chinese domestic prices have surged in last few days propping up their export prices whereas Black Sea mills are taking advantage of revival of demand in some regions.

Billet prices FOB Black Sea have crossed USD 500 per tonne level although the finished long products like rebar and wire rod etc have not caught up as much due to weak demand.

For flat products, benchmark product HR has seen major surge in export offers from Russia and Ukraine after the new price announcements on Friday.
North Europe - EUR 510 per tonne CFR FO Antwerp or equivalent port
South Europe - EUR 500 per tonne CFR FO Mediterranean Port

On the other hand, Chinese steel mills, which were at USD 560 CNF levels for India before Chinese holiday are now reported to be at USD 630 plus levels.

However, some of the market players are not so optimistic for the market scenario in later part of April and anticipate correction. But again that is highly questionable, isn't it?

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The Financial Express reported that Japan’s second largest steel firm, JFE Steel, is close to acquiring around 10% stake in JSW Steel.

As per report “Though the financial details of the deal is still being worked out, going by the closing share price of JSW at INR 1,166 on the BSE on Thursday, a 10% stake, together with a marginal premium, would cost around INR 2,700 crore for JFE.”

The report added that an announcement is expected shortly.

However the reported added that Mr Sheshagiri Rao CFO of JSW Steel said “We are still in the discussion stage with the JFE Group and so far nothing has been formalized.”

JFE already has a tie up with JSW for making high quality automotive steel and operating an integrated steel plant in West Bengal. While announcing the tie up in November last year, JSW Steel vice CMD Mr Sajjan Jindal had said that an equity deal between the two companies may happen in future.

(Sourced from FE)

Indian domestic steel prices continued positive movement this week with Indian Steel Price Index INDSPI gaining 291 points or 3.9% WoW.

Long products continued positive momentum for the second week. The Indian Long Product Price Index ILPPI during the week gained 276 points or up by 3.9% WoW.

On the other hand flat products also gained a bit during the week. Indian Flat Products Index IFPPI increased by mare 307 points or 3.9% WoW.

Movement of indices during Week 10

Long Products

PI - Product Index

Flat products

PI - Product Index

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BL reported that the Orissa government's order banning what it feels “illegal” mining by private companies in the state's iron ore rich Banspani Jarauli areas has proved too much for TATA Steel.

The order, also promulgating Sec 144 Cr PC, has stopped iron ore loading at the company's Joda East mines, with the result iron movement from the mines to the Jamshedpur plant has remained suspended for the past few days. If the present situation continues, the production at the Jamshedpur plant will be hit.

TATA Steel's Joda East mines on an average load four rakes of iron ore a day, accounting for 40% of the Jamshedpur plant's daily requirement of 10 rakes.

An attempt has been made to step up loading at neighboring Noamundi mines also belonging to the TATA Steel. But the increased loading at Noamundi, it is felt, will not be enough to cover the shortfall.

The report quoted a TATA Steel source as saying that “There is nothing illegal about our mining at Joda East, as the mines are our own, siding is our own and we produce entirely for our captive consumption and we're open to all inspection and verification by any government agency. But the problem is that those who implement government orders do not differentiate between chalk and cheese”.

TATA Steel, it was informed, had already taken up the matter with the appropriate authorities at every level, both at the centre and Orissa, but with little success so far.

(Sourced from BL)

ET recently reported that Mr Rewant Ruia 27 year old son of Mr Ravi Ruia Essar Group’s vice chairman has taken charge of the Essar Group’s North American operations, spanning the US as well as Canada.

As per report the top brass of the Essar’s North American operations, including Mr Madhusudhan Vuppulluri president America, Mr Armando Plastino CEO of Essar Steel Algoma and Mr Ken Woodring CEO of Trinity Coal will report to Mr Rewant Ruia.

As per report, Mr Rewant Ruia is now focusing on ramping up capacities, setting up a pellet plant at Minnesota to use 1.4 billion tonnes of iron ore reserves.

The group bought Canada based Algoma Steel in 2007 which has a capacity of 2.5 million tonnes and an iron ore mine in Minnesota the next year. Last week it acquired Trinity Coal.

(Sourced from ET)

It is reported that POSCO, which is planning to set up a steel plant in the Karnataka, is reportedly exerting pressure on the government to issue mining licenses before identifying a location for the project.

A senior official in the State Government told Deccan Herald that POSCO, which ha snot selected any site and is yet to make any final commitment on the amount of investment, is reportedly exerting pressure on the state government to issue iron ore mining licenses.

The official said “The State Government has recommended a few sites. But nothing has been finalized. May be, the company is trying to pressurize the administration to get iron ore mining licence.”

POSCO has applied for iron ore mining licenses in 300 hectares at one site and 500 hectares in another. The state government has not given any promises at this juncture as issuing of mining licence involves several procedures.

POSCO is planning to set up a steel manufacturing plant in the Karnataka with an investment of INR 32,000 crore to produce 6 million tonnes of steel per annum.

POSCO seems to be treading cautiously on its Karnataka venture following their bitter experience in Orissa where it could not move an inch because of local resistance regarding land acquisition, even four years after getting clearance.

(Sourced from Deccan Herald)

DH News Service reported that Karnataka’s Industry Minister Mr Murugesh Nirani said that the government tried to persuade ArcelorMittal to set their steel plant in Bijapur or Koppal, but gave in to the steel giant’s demand for land in Bellary.

He told the Legislative Council “We requested the technical committee of ArcelorMittal to select either of Bijapur or Bagalkot. But they chose Bellary. Considering the reputation of the company, the government did not want to miss the opportunity and notified the land in Bellary.”

Mr Nirani defended the government’s move by saying that ArcelorMittal is a globally renowned industrial house and its entry would help the state to attract investments from other global corporates.

He however admitted that the state government is aware that heavy concentration of industries would pose serious challenges in future.

The council witnessed strong criticism by the Opposition to the government’s move to allot 4,000 acres of land in Bellary to ArcelorMittal for setting up a steel plant.

A section of the members alleged that the government is providing facilities for the investor at the cost of public inconvenience.

Congress member Mr KC Kondaiah said “7 steel plants were already functioning in Bellary and Koppal districts. In the next 10 years, the collective capacity of steel plants will go up to 20 million tonnes a year. Supply of raw material to all these industries would be a difficult task in the coming years. The heavy concentration of industries at one place would increase pressure on road infrastructure. It would be better if the ArcelorMittal’s plant is shifted to either Chitradurga or Tumkur where iron ore is available.”

(Sourced from DH)

McNally Bharat Engineering Company Ltd has announced that the Company have received an order for Design, Engineering, Supply of Equipment, Civil Work, Structural work, Erection & Commissioning etc for the Interplant Transportation Facilities (Package- 092) for Rourkela Steel Plant of Steel Authority of India for a value of INR 245.42 Crores, mc contractual period of completion is 22 months.

The major equipment to be supplied as part of the turnkey project are belt and pipe conveyors, double roll crushers, vibrating screen, vibrating feeder, steep angle conveyor, payloader

India's industrial output growth eased in January in line with market forecasts and analysts said that it could further weaken with an expected rate hike coming on the heels of stimulus withdrawal.

Output grew 16.7% in January, below the upwardly revised 17.6% record growth in December and in line with a Reuters poll forecast for a 16.65% rise.

Mr Kaushik Basu finance ministry's chief economic adviser said that the reading backed his view the economy will grow over 8.5% in the current quarter.

But analysts questioned whether the fast industrial expansion was sustainable.

Mr Indranil Pan chief economist at Kotak Mahindra Bank in Mumbai said that "Growth at this level does not look sustainable for very very long. The base effect, the cyclical downturn, you can't just expect people to continue to buy cars.”

Mr Indranil Pan continued that "On the monetary front, the April rate hike may have an impact on (output growth) but that will not be very immediate, there will be a lagged impact."

Between April and January, industrial output in Asia's third largest economy expanded 9.6%. It grew 2.6% in the year to March 2009.

(Sourced from moneycontrol.com)

Diversified business conglomerate Punj Lloyd said that it expects to garner work orders to the tune of INR 3000 crore from the oil and gas sector in both domestic and overseas markets in the next financial year.

Mr HK Kaul executive president technical of Punj Lloyd said that "We expect an over INR 3000 crore of work orders from the oil and gas sectors in FY 11 from both Indian and international markets. Of this, we expect over 50% from state owned ONGC. Considerable investment in the infrastructure sector particularly in India, especially in power and gas, holds a great promise and we want to tap the growing market.”

Mr Kaul said that "The oil and gas industry has been instrumental in fuelling the rapid growth of the Indian economy. There will be a basket of work-orders in the coming days.”

Punj Lloyd today launched a new vessel called Kuber which would be capable of laying pipelines at a water-depth of 150 meters. Mr Kaul said that "Kuber is the only Indian flag vessel which is now capable of laying pipelines at a water depth of 150 meters. It is capable of laying pipes in the Western Offshore Oilfields of India including the Mumbai High oilfield of ONGC.”

(Sourced from Economic Times)

It is reported that Pune based Thermax and Nuclear Power Corporation of India are working on new packages such as balance of plant and allied work relating to secondary portion of nuclear power plants.

Mr MS Unnikrishnan MD and CEO Thermax told Business Line “We are working with NPCIL for the new packages that are coming up. NPCIL wants Indian companies to pre-qualify and participate in the construction and we are one of the companies identified. We will also be one of the BOP suppliers in that area. We are not into the main nuclear business of reactor.”

The tenders for the packages are likely to be floated by NPCIL in the next three to four months.

Thermax is also looking to get into the nuclear components manufacturing business.

Mr Unnikrishnan said that “We need the ASME ‘N' stamp (American Society of Mechanical Engineers nuclear certification).”

He added that it would take time for Thermax to create facilities as well as upgrade existing facilities to the standards required, for making nuclear components, manufacture and get them approved.

The company aims to align its core strength in heat and mass transfer that comes in the secondary unit of nuclear plants, the first being the reactor.

Mr Unnikrishnan said that “Our strength is in high quality manufacturing units, besides heat and mass transfer and project management capabilities.”

(Sourced from Business Line)

India and Russia have inked the fresh USD 2.33 billion deal for refit of aircraft carrier Admiral Gorshkov.

India will now get Gorshkov in 2013, instead of the earlier August 2008, by paying USD 2.33 billion instead of the USD 974 million earmarked for it in what was thought to be a fixed price contract when it was inked in January 2004.

The fresh agreement on Gorshkov, rechristened INS Vikramaditya by India, will bring to end the bitter wrangling over the huge cost escalation in its refit, which has bedeviled bilateral military ties for the last four-five years.

BS reported that Mahindra & Mahindra would open a new plant in the Chakan industrial estate near Pune on Saturday with an initial annual production capacity of 300000 vehicles.

Mr Pawan Goenka president, automotive sector of M&M on the sidelines of a conference at the Maharashtra Economic Summit said that the company invested INR 4,000 crore and took two years to set up the plant.

Mr Goenka added that the Chakan facility, spread across 236 hectares, would produce vehicles ranging from the recently-launched 0.75 tonne (light truck) Maxximo and 49 tonne Mahindra Navistar Truck to all new premium SUVs and pick up trucks.

(Sourced from Business Standard)

India’s second largest Bharati Shipyard which held 45.8% stake in drilling company Great Offshore has acquired an additional 3% in the company from its rival, ABG Shipyard for INR 53.7 crore.

Bharati Shipyard said it had bought the Great Offshore shares from ABG Shipyard at INR 480 a share, a premium of 10.5% to the stock's closing price of INR 434.25 a share on the Bombay Stock Exchange.

ABG had acquired a 15.23% stake in Great Offshore through an open offer in December. The company and its rival, Bharati Shipyard, had made competitive bids to acquire 33.8% and 20% stakes, respectively in Great Offshore.

ABG’s offer was to acquire stake at INR 520 a share while Bharati’s was to acquire at INR 590 a share. Bharati received 27% of the stake against its offer to acquire 20%.

(Sourced from Business Standard)

It is reported that India’s largest two wheeler maker Hero Honda is conducting a feasibility study in 10 states to find the best suitable location for its fourth manufacturing facility and the decision will be taken in the next six months.

Mr Pawan Munjal MD of Hero Honda said that “There would be at least 10 states we would be looking at, at this moment. We are looking at the whole country as a clean slate.”

When asked about his meeting with the Karnataka chief minister for setting up the plant in the state, he said that “Yes we met the Karnataka Chief Minister. I thought they were very open for us to go to the state. It was just a request from the chief minister to have breakfast with him, so we did.”

(Sourced from IRIS.com)

Though the government has committed to allot the remaining hydel projects with a capacity of 1,000 MW to private sector under the self identified route in Uttarakhand, the hullabaloo by the Opposition parties appeared to have cast shadow over the process.

In less than a month after allotments during Phase-I, some developers have now started backing out. The government said that companies and individuals had withdrawn from seven hydel projects.

Last month, the government had allotted 56 projects having capacity to generate 960 MW.

Now, after making commitment to allot remaining hydel projects, the government is treading a very cautious path in the wake of allegations of irregularities. Mr Pant said “It will take a long time to complete the process.”

Though the government claims the allotment was done in a transparent manner, Congress alleged widespread irregularities in the process, with the leader of opposition Harak Singh Rawat demanding a CBI probe. He also called for immediate cancellation of the entire process, alleging that a series of projects had been allotted to liquor companies.

The government had received nearly 736 bids from private developers. Of these, only 621 bids were found to be valid and the rest were rejected. Of the 621, only 175 projects were shortlisted for the allotment, of which 49 have now been allotted.

(Sourced from Business Standard)

Gayatri Energy Ventures part of Gayatri Projects Ltd is close to achieving financial closure for the INR 6800 crore of 1320 MW coal fired coastal power plant proposed near Krishnapatnam in Andhra Pradesh.

The Hyderabad based diversified infrastructure company which is foraying into power sector with the execution of this project with a debt equity ratio of 75:25, has received nod for nearly 80% of the debt component from banks and financial institutions including REC, PFC and Canara Bank.

Mr TV Sandeep Reddy MD of Gayatri Projects told Business Line that the debt component of INR 5,100 crore would be tied by the end of this financial year. The entire project funding would be in place latest by April to May 2010, including equity.

Mr Reddy added that “The company is in negotiations with a strategic partner in South-East Asia, who will pitch in with the equity part. We are in negotiations and expect to announce the tie-up shortly. Once the work commences latest by June, we expect to commission the project within 39 months. The coal linkage for the project has been secured from Mahanadi Coal Fields. The necessary logistics are being worked out. This could be evacuated either by rail or potentially from the sea route from Paradip port too.”

Mr KG Naidu vice president of Finance, Gayatri Projects said that “All the mandatory clearances for the project, including environmental have been secured. The Andhra Pradesh Government has allotted 1,400 acres and the necessary formalities have also been completed.”

(Sourced from Business Line)

Gujarat Industries Power Company Ltd has now announced with reference to the status of 2x125 MW Surat Lignite Power Project, that all the required parts are now dispatched from M/s BHEL, Hyderabad Works duly repaired and full task force of the Company as well as BHEL, the EPC Contractor is working round the clock on this activity. Barring unforeseen circumstances, the Company expects to again synchronize Unit 3 by March-April, 2010. The Company is making all possible efforts in this direction.

T is reported that Russia has offered Oil and Natural Gas Corporation stake in gas fields in the Arctic Peninsula of Yamal, but the Indian state owned company is more interested in Sakhalin-3 and Vankor oilfields in East Siberia.

As per report energy-hungry India is keen on sourcing one million barrels per day of oil and oil-equivalent gas from Russia and has identified Sakhalin-3 in Far East, Vankor in East Siberia, and Terbs and Titov oilfields in the Timan Pechora region.

Official sources said talks during Russian Prime Minister visit focused on these but the Kremlin did appear inclined to oblige New Delhi’s request.

Instead, it said Indian companies were welcome to join Russian gas monopoly Gazprom in the Yamal Peninsula. Yamal Peninsula is ranked low in ONGC’s priority as fields in northwest Siberia require huge investment and these are gas-rich fields that need conversion into LNG and have to be shipped to the Pacific.

Sources said that due to its location, LNG from Yamal cannot reach India and ONGC was more keen on oilfields, the produce from which can be shipped back home.

ONGC Videsh Ltd already has 20% stake in Sakhalin-1 oil and gas field in Far East Russia and in 2008 acquired Imperial Energy, which has fields in Siberia.

(Sourced from Business Standard)

Wardha Power a subsidiary company of KSK Energy has emerged as the lowest bidder in a bidding process intiated by Gujarat Urja Vikas Nigam Ltd to purchase power on long-term basis.

Wardha is followed by Shapoorji Pallonji and Essar Power.

After evaluating technical bids last week, the apex electricity company of the state-GUVNL opened the financial bids.

A sources closely associated with bidding process said that "Wardha Power has quoted a price of INR 2.34 per unit. The company has bid for supplying 1010 MW of power.”

Shapoorji Pallonji has offered a price of INR 2.80 per unit to become the second lowest bidder, while Essar Power has emerged as the third lowest with INR 3.13 per unit. Shapoorji Pallonji and Essar Power's bids are for supply of 800 Mw and 1000 Mw respectively.

(Sourced from Business Standard)

It is reported that cement prices are likely to go up by about INR 20 to INR 25 a bag in various markets across the country before end of March.

According to industry sources, currently, the retail price of a bag of cement is at INR 275 in Mumbai, INR 260 to INR 270 in Kolkata, INR 270 to INR 280 in Kerala, INR 240 to INR 250 in Chennai and INR 170 to INR 190 in Andhra Pradesh.

Managing Director of a cement company told Business Line that “The price has gone up by INR 10 to INR 20 a bag across national markets in the last three to four weeks. We are expecting this trend to continue. There is also some pressure from the Government to hold on to the prices due to fears of inflation spreading to non food items.”

Mr G Balaji director finance of Bharathi Cement Corporation Ltd said that “After a steep fall in September-October last year, the price is looking upwards. There will be at least two more rounds of price hike by the end of March.”

Expert said that “The increase in price is being driven by surging demand in rural areas both in the south and north (especially in Uttar Pradesh and Bihar), apart from rising input costs.

According to Cement Manufacturers' Association data, despatches had gone up to 143.67 million tonnes between April 2009 and February 2010 compared with 127.79 million tonnes in the year ago period. The cement production had gone up to 144.60 million tonnes from 128.22 million tonnes in the same period.

(Sourced from Business Line)

Kalyani Steels Ltd has informed BSE that the Hon'ble High Court of Judicature at Bombay, has passed an Order on March 12th 2010 approving

1. The Scheme of Arrangement between Kalyani Steels Ltd and Chakrapani Investments & Trades Ltd. and Surajmukhi Investment & Finance Ltd. and Gladiolla Investments Ltd and Kalyani Investment Company Ltd and their respective shareholders.

2. The reduction of Equity Share Capital of Kalyani Steels Ltd.

Triveni Engineering & Industries Ltd has announced that the Board of Directors of the Company at its meeting held on March 12th 2010 approved the Scheme of Arrangement between Triveni Engineering and Industries Ltd and Triveni Turbine Ltd and their respective shareholders and creditors for the demerger of the steam turbine business of Triveni to TTL wef October 1st 2010.

TTL is a wholly owned subsidiary of the Company with Triveni having beneficial interest over all the 100,000,000 Equity Shares of INR 1 per each issued by TTL.

Upon completion of the demerger and in terms of the Scheme, the business of such Demerged Undertaking will become the focal business of TTL. The Scheme is in the interest of all concerned including the shareholders, creditors, employees arid the general public as it would provide Focused management orientation, Opportunities for strategic partnerships and Flexibility for fund raising capability for future growth and expansion and create a structure geared to take advantage of growth opportunities.

The demerger would result in issuance of equity shares to the shareholders of Triveni by TTL, thereby resulting in unlocking and maximizing shareholders value.

(Sourced from Equity Bulls)

Hindustan Construction Company Ltd has announced that HCC-CPPL- JV i.e. Hindustan Construction Co. Ltd and Coastal Projects Pvt Ltd has been awarded a contract for Design and Construction of Single Tunnel No 1 at 15.880 to 19.500 kilometer in between Dholakal and Kalmal in connection with construction of New Railway Line Project Jiribam - Tupul (Imphal) from North Frontier Railway of Guwahati.

The total value of the contract is INR 197.06 Crore. The Company's share in the total value of the contract is 60% ie INR 118.24 Crore. The project is to be completed in 24 calendar months from the date of issue of this Letter of Acceptance.
=

Transport Corporation of India Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 17th 2010, inter alia, to consider the proposed De-merger/ Re-structuring of "Real Estate & Warehousing" Division of the Company.

Shree Shubham Logistics Ltd has entered into a MoU with Rajasthan State Warehousing Corporation.

The MoU was signed recently by Mr Aditya Bafna ED of Shree Shubham Logistics Ltd and Mr Damodar Sharma CMD of Rajasthan State Warehousing Corporation.

Through the strategic tie up, Shree Shubham Logistics Ltd will manage 38 warehouses of RSWC with a storage capacity of 405000 tonnes.

Rajasthan State Warehousing Corporation has a total of 90 warehouses with an aggregate storage capacity of over 760000 tonnes all over the State. Shree Shubham Logistics Ltd will upgrade the warehouses with the latest technology and equipment. The release added that it will also provide commodity funding service to all Rajasthan State Warehousing Corporation customers through its tie up with various banks and financial institutions.

(Sourced from Business Line)

A joint study of the Associated Chambers of Commerce and Industry of India & Pricewaterhouse Coopers said that India would need to work on sustaining its economic fundamentals over a period of time with a strong banking system before going ahead with the implementation of Capital Account Convertibility.

It points out that as recognized in the recent Tarapore Committee Report, the ability of financial institutions to identify, measure, and manage risk will also depend on the availability of instruments to manage risk, the liquidity of financial markets and the quality of market infrastructure, and level of market discipline.

However, key segments of the Indian capital markets remain underdeveloped. The term money market is limited and although there is a domestic yield curve for government securities with maturities up to 30 years, its depth and liquidity are limited. The corporate bond market is relatively small and illiquid, and the market for securitized assets has fallen short of expectations. The OTC derivatives market is growing rapidly but its prudential and regulatory framework has just been laid out.

Releasing its findings here today, the ASSOCHAM spokesman said “Regulators and market participants have been warning for years about the dangers of the unchecked growth of the credit default swap market and about the difficulty of assessing, who could be at risk for derivative market failures.

The study points out that in India, delinquencies in retail portfolios of banks have still not reached panic levels. Nonetheless, they are inching up slowly but surely. Add that to the sudden drying up of liquidity and the domestic mutual fund industry emerges as India’s weakest link in the securitisation food chain. The bigger fear is that that this exposure could have a cascading effect on the entire banking sector, with the risk getting transferred to many of the parent companies of these MFs. The dominance of mutual funds in securitization coincided with private sector banks slipping into overdrive to hawk retail loans.

As regards, dangers with securitized products, the ASSOCHAM-PwC study points out that high risk, high return products originated by private sector banks, Non banking Financial Companies and companies; the mutual funds that pick them up have no control over their credit quality, highly illiquid with no secondary market; Mutual funds have no option but to hold the ABS or MBS till maturity, not very transparent products; disclosures are on a monthly basis to rating agencies. Globally, despite rating agencies rating them highly, a sudden chain of defaults in the underlying assets brought down the big institutions.

Innovative financial products have played a key role in the development of the current financial crisis, and have also compounded the difficulty of resolving it. This is because the difficulty of valuing such products has, in many cases, caused markets for them to cease functioning. This has led to great uncertainty regarding the financial position of institutions holding these products, which has, in turn, frozen the process of trying to separate good assets from bad assets, an important step in restoring the normal functioning of credit markets.