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Today's Hot Stories - July 18, 2009

10 Headlines for Today

(1) Parliament approves the extension of President’s rule in Jharkhand
(2) The Ahmedabad Crime Branch police arrest Vinod Chauhan alias Dagri, who is believed to be the main supplier of the spurious liquor that has taken a toll of over 130 lives
(3) France eager on ‘full’ civilian nuclear relationship with India
(4) Indian banking posts a robust profit of more than Rs 42,700 crore during the global Top Global Banks financial meltdown in 2008-09
(5) Government slaps Rs 26-cr penalty on Kingfisher
(6) Goodyear to close Philippines plant, cut 500 jobs
(7) England seizes control of the second Ashes Test at Lord's with a tremendous bowling display late on the second day
(8) Tiger Woods crashes out of the British Open at the halfway stage
(9) Olympic champion Usain Bolt wins the 100m at the Golden League meeting in Paris in a stunning time of 9.79 seconds
(10) Harry Potter and the Half-Blood Prince' takes the biggest paid preview opening (Rs 1.5cr ) in India for 2009

5 Stories for Today

(1) Intel centres to keep tabs on China's missiles, navy
(2) Clinton seeks goodwill in India
(3) Banks face fines for ATM errors
(4) GE revenue trails estimates, CEO lowers outlook
(5) VCs, PEs go fund-hunting again

(1) Intel centres to keep tabs on China's missiles, navy

Stung by China's aggressive posturing, including its deployment of missiles in Delingha near Tibet, and other increasingly hostile activities in India's neighbourhood, the Cabinet Committee on Security is considering a proposal to set up separate centres for nuclear or missile intelligence and maritime security. In fact, with strong backing by National Security Advisor M K Narayanan, the CCS, which is still smarting under the Chinese `aggression', is all set to give the go-ahead to the proposal.

The inability of central intelligence agencies like RAW, DIA and IB in keeping a tab on recent deployment of intermediate range missiles like DF-4 and reports that Beijing might station ICBMs in the Delingha region seem to have alarmed authorities into action. The medium-range ballistic missiles which are already deployed in Delingha can hit targets that are almost 3,000 kilometres away. China has also built several launch pads for nuclear-tipped ballistic missiles in the same region.

"The entire northern India and parts of central India can be hit from there. The way these missiles have been deployed, they can only hit four countries - Nepal, Pakistan, Myanmar and India. And because the other three countries are not potential adversaries of China, there is obviously deep concern here about China's intentions and you can say that this is one way of addressing this concern,'' said a source, adding that the separate centres for missile and maritime intelligence will initially comprise officers from central intelligence agencies. Till now, the Joint Intelligence Committee (JIC) has worked as the nodal agency responsible for the functioning of all internal and external intelligence agencies.

A security official admitted that the need for separate missile intelligence centres was primarily because of China's expanding missile development programme. The new agency will not just gather information but also analyse information available with central agencies like DIA, RAW, IB and NTRO and recommend action to counter any adverse development.

"This agency, once it comes into being, will deal exclusively with nuclear and missile intelligence. The agencies carrying out this work now function under the JIC but the committee is not exclusively for missile and nuclear intelligence,'' he added. The new agency will function directly under the National Security Council and will be accountable for all inputs from the neighbouring region on developments related to missile and nuclear technology.

This proposal was first mooted by a joint task force on intelligence headed by former JIC chief S D Pradhan. Two other members of the task force are former IB director P C Haldar and scientist Roddam Narasimha. The task force was constituted at the behest of Narayanan himself and it has submitted its report to the government.

Similarly, a separate centre for maritime intelligence is also likely to be cleared by CCS. This centre will work as pivot around which all intelligence agencies involved in maritime security will function.

(2) Clinton seeks goodwill in India

US Secretary of State Hillary Clinton has begun a five-day visit to India aimed at strengthening political and economic relations.

She is currently in Mumbai, where she attended a private ceremony to honour the victims of last November's attacks which left more than 170 people dead.

She is staying in the Taj Mahal Palace hotel, where many of the victims died.

Mrs. Clinton is also likely to press for better ties between India and Pakistan when she goes to Delhi on Sunday. Observers say she will argue that the current US alliance with Pakistan is not at India's expense. The US focus is on Pakistan and Afghanistan, and the battle against Taliban insurgents in both countries. But the Obama administration is keen to address concerns in India that Delhi's interests are being neglected.

The secretary of state is keen on people-to-people diplomacy and usually holds town hall events and meetings with civil society leaders on foreign visits.

Before the official part of the visit in Delhi on Monday, she will take time in Mumbai, the commercial capital, to meet business leaders and visit a women's NGO that helps to provide poor women with employment.

In the afternoon she will spend an hour at a school talking to volunteers at the Teach India programme, promoting education for the poor.

As her first engagement, she attended a morning ceremony to mark the Mumbai attacks, held in private and without press coverage. It was held in the Taj Palace hotel where she was staying.

The attacks, in November last year, have become a major source of tension between India and Pakistan. India wants Pakistan to punish those responsible and take tough action against militant groups. The US has been working to bring the sides back into dialogue.

If tensions along Pakistan's border with India were reduced, the Pakistani military would be able to focus more fully on the north-west and dealing with its own insurgency there. Pakistan is now promising to address the concerns about militants, but many in India are skeptical.

The visit is also partly about business. The agreement which ended a three-decade ban on the sale of civilian nuclear technology to India was a centerpiece of the last Bush administration. Now India is expected to name two sites where US companies can build nuclear power plants. It is business worth billions of dollars.

(3) Banks face fines for ATM errors

Banks will now have to pay accountholders a compensation of Rs 100 per day for every day of delay in reversing a failed ATM transaction.

The Reserve Bank of India (RBI) has imposed stringent penalties on banks who fail to reverse a transaction where cash is not dispensed by the ATM but the customer’s account gets debited within 12 days.

In a circular issued on Friday, RBI has said banks must re-credit such customers’ accounts within 12 working days from the date of receipt of the complaint.

The circular is in response to complaints from customers who had to put up with delays in getting back money erroneously debited during failed ATM transactions. Besides imposing the stiff penalty, the central bank also made it clear that this amount needs to be credited to the customer’s account automatically on the day of the re-credit without the customer having to make a claim.

In case the delay is because of a third-party bank ATM through which the customer has transacted, the card-issuing bank must still pay the penalty to the customer. However, it will recover this amount from the bank that owns the ATM.

Similarly, if a non-bank network operator is the reason behind the delay, the bank will make the payment and recover the penalty from the operator.

Furthermore, the RBI has instructed banks to extend the scope of concurrent audit to cover cases of such delays. Banks are now also required to place a quarterly review of ATM transactions to its board of directors, indicating the quantum of penalties paid, reasons for the same, and the remedial action taken to prevent the recurrence of such cases. A copy will have to be forwarded to the central bank.

This apart, the Reserve Bank made a critical note of different banks setting different cutoff limits for permitting cash withdrawals from/for other bank customers.

(4) GE revenue trails estimates, CEO lowers outlook

General Electric Co warned investors that the economic contagion that has dragged down its finance and media businesses has spread to its heavy industrial units, prompting Chief Executive Jeff Immelt to lower his profit forecast for those businesses.

Shares of the largest US conglomerate fell 5 per cent after it reported a profit that topped Wall Street's expectations, but a 17 per cent drop in revenue that was sharper than analysts had foreseen.

Immelt said he now expects the company's two big infrastructure units plus its NBC Universal media business to collectively report a flat profit for the year. Previously, GE had forecast that earnings at those units would be flat to up 5 per cent.

"We see these earnings being flat for the total year," Immelt told investors on a conference call. He held the outlook for GE Capital steady - predicting it would be profitable - and said earnings at GE's consumer and industrial units would be flat.

Second-quarter profit was down at all GE's businesses except the energy arm, which makes electricity-producing turbines and gear used in oil and gas production.

"Hitting the bottom line number was pretty good news, but that top line revenue, that's a big miss," said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, which owns GE shares. "That was definitely disconcerting."

For the year, Wall Street expects the Fairfield, Connecticut-based company to earn 99 cents per share, a drop of almost half.

GE's second-quarter net income fell to $2.67 billion, or 24 cents per share, from $5.07 billion, or 51 cents per share, a year earlier. Profit from continuing operations came to 26 cents per share. On that basis, analysts on average had looked for 24 cents, according to Reuters Estimates. Revenue fell 17 per cent to $39.08 billion. Factoring out fluctuating exchange rates, it would have fallen 12 per cent. Analysts had looked for a 10 per cent revenue drop.

Profit tumbled 80 per cent at the company's GE Capital unit and 41 per cent at its NBC Universal media business. Its energy unit recorded a 13 per cent increase in earnings.

GE's size and the scope of its operations - which range from commercial lending to building railroad locomotives to running the NBC television network make it a bellwether of the world economy, which is experiencing a brutal recession.

"The actual earns number looks pretty good, but revenues were a little lighter than Wall Street expected," said Russell Croft, portfolio manager at Croft Leominster in Baltimore, which owns GE shares. "In a tough environment, it looks like a pretty good quarter.

GE Capital has cut its exposure to commercial paper - a short-term debt market that briefly locked up last fall to $50 billion, from $72 billion at the end of 2008. It has also raised its Tier 1 common ratio, a measure commonly applied to banks, to 7.4 per cent from 5.7 per cent at the year's end.

(5) VCs, PEs go fund-hunting again

The worst may be over for the private equity and venture capital industry in India. Some expect sizable deals to happen in the second half of the year. "There have been clear signs of revival in the last couple of months, especially in emerging markets including India," said Sudhir Sethi, CMD of IDG Ventures.

Anticipating a recovery, many VC firms are raising fresh funds. Recently, the Kanwal Rekhi-promoted Inventus Capital announced the availability of $100 million, while Helion Ventures raised $200 million. Accel India (formerly Erasmic), Sequoia Capital, Nexus India Capital and Reliance Technology Ventures are also seen to be getting ready for the next wave of growth.

Reliance Technology Ventures CEO Harshal Shah said the outlook has turned positive. "But the VC industry will now be driven by fundamentals, not sentiment,'' he said. Arun Natarajan, MD of Venture Intelligence India, a VC tracker firm, said the first quarter of 2009 had seen a dramatic decline in volumes, but the second quarter showed stability, suggesting a recovery.

Venture capital firms invested $117 million over 27 deals during the first six months of 2009, according to a joint study by Venture Intelligence and Global India Venture Capital Association. That was substantially lower compared to $413 million invested in 67 deals during the first half of 2008 and $402 million invested in 75 deals in the second half.

Education, healthcare, life sciences, microfinance, banking & finance, and technology-driven businesses are expected to drive the next generation growth of the VC industry. Many are particularly bullish on healthcare.

A recent survey of over 60 PE/VC firms conducted by Venture Intelligence shows that investors are keen to tap into sectors like diagnostic services, medical devices, medical equipment, hospital chains and wellness products and services.

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