Indian Rupee (INR) is at an 8 month low

Heavy dollar demand from oil companies and other corporates have pushed rupee down to an eight-month low on Tuesday. The domestic currency opened lower at 40.65 and touched an intra-day low of 40.98/99. It ended the day at 40.96, about 35 paise lower than the earlier close of 40.61/62.

International oil price also touched a record high of $121 a barrel on threats to supply in Nigeria and Iraq and growing global fuel consumption. Most oil companies stock up on oil supplies before the monsoon, to avoid the difficulties they could face in transportation. Therefore, the rupee typically weakens in the first quarter of the fiscal.

Further there seems to be corporate demand for dollars possibly for remittances abroad. The remittances may be for completing acquisitions overseas. Companies such as Tata and Bharti Telecom would be requiring dollars for their overseas acquisitions. These factors have led to sharp depreciation in rupee in the recent past. We expect IT companies in particular to outperform the broader market on account of these developments.

Tata Steel is looking to acquire Brazilian iron ore assets of London Mining

Tata Steel, the world's sixth-largest steel maker, is looking to acquire Brazilian iron ore assets of the UK-based London Mining (LM), which will help ensure raw material supply for its Anglo-Dutch subsidiary, Corus. The valuation of the asset is yet to be completed, but it could be in the range of $2 billion. Tata Steel is among various global steel and mining majors that have shown interest in acquiring the assets after London Mining said it was reconsidering its investments in Brazil last month.

London Mining currently owns assets in Sierra Leone, Saudi Arabia, Greenland and Mexico. Raw materials for Tata Steel's plants in India are sourced from captive mines. Corus, which produces 20 million tonnes of steel a year, is facing raw material shortage. The company's iron ore security stands at just 15 per cent. Tata Group Chairman Ratan Tata had earlier said that the Indian conglomerate plans to invest about $15 billion in Brazil through various group companies.

The Indian conglomerate is interested in Brazil because it has one of the world's largest reserves of minerals and iron ore. According to the US Geological Survey, Brazil has produced 300 million tonnes of iron ore last year, which stands second to China's 520 million tonnes. Further Brazil gives geographical advantage to ship the raw materials to Corus units at relatively lower costs.

Tata Power is planning to invest $500-mn in shipping

Tata Power plans to foray into shipping. The company will invest $500 million through its Singapore-based special purpose vehicle, TPC Energy Asia, to prepare a fleet of nine vessels to transport coal from Indonesia to its plants located in the western coast of India. The company has already signed charter agreements for three ships. If company doesn’t get balance requirement of ships through charter agreements then it will go for buyout option. It would buy ships worth up to $100 million each.

The company intends to raise its electricity generation capacity to 12,861 MW by 2012-13 (April-March) from 2,474 MW at the end of the current financial year. Most of the new capacity being added by the country's largest private sector electricity generator will be fuelled by imported coal, largely from Indonesia. The company's annual requirement of imported coal is seen rising to 25 million tonnes by 2012 from 1.8 million tonnes now, which will significantly drive up the cost of coal and freight charges. Fuel cost, which includes that of coal, oil and gas and transport, is the single largest cost component for Tata Power, accounting for 60-70 per cent of the company's total expenditure.

It may also use its shipping fleet to provide services to its arm importing coal or ore and exporting finished goods. India-bound freight rates are expected to be firm as companies such as Vedanta, Reliance Power and other ultra mega power projects begin shipment of coal. It is not just the prospect of high rates that is weighing on the minds of power producers, but also the possibility that ships too may not be available.