World`s 20 powerful economies G20 summit begins in Cannes today

The crucial summit of world`s 20 powerful economies (G-20) starts today amidst the Greek and eurozone crisis which has propelled fears of another recession.

The summit on the French Riviera had been meant to focus on reforms of the global monetary system and steps to rein in speculative capital flows, but a shock decision by Greek Prime Minister George Papandreou Monday to call a referendum on a new EU/IMF aid package for his country has upended the talks.

Papandreou was summoned to Cannes on the eve of the summit and given a stark warning by French President Nicolas Sarkozy and German Chancellor Angela Merkel, both clearly angered by his gambit, which has sent global stock markets and the euro currency spiraling lower.

They convinced the Greek prime minister to bring forward the referendum to early December and insisted it be focused on the broad issue of whether Greece wants to stay in the currency bloc, rather than limiting it to a vote on a new 130 billion euro ($179 billion) bailout package, which a strong majority of Greeks oppose.

They also made clear that Athens would not receive an 8 billion euro aid tranche it desperately needs to avoid default until the referendum had passed.

Meanwhile Prime Minister Manmohan Singh yesterday arrived at French coastal resort to attend the crucial summit.

While underscoring the need to avoid protectionism, he is expected to advocate the importance of an open, transparent and rules-based multilateral trading system as a driver of global growth.

The economist-turned prime minister, whose advice is often sought at the G20 high table, is expected to give this prescription for providing the necessary confidence to global markets and ensure a more stable global economic environment.

Asian shares lower, euro capped ahead of Europe

Asian stocks fell on Thursday, as growing investor caution about taking risks ahead of a key European leaders' summit at the weekend weighed on riskier assets across the board and supported safe-haven government bonds.

The euro struggled to make much headway, having pared gains on Thursday on fresh reports suggesting Europe remains a long way from resolving its debt woes. The single currency was up 0.1 percent against the dollar at USD 1.3770.

Plans to tackle the euro zone debt crisis have stalled, with Paris and Berlin at odds over how to increase the firepower of the region's bailout fund, French President Nicolas Sarkozy said on Wednesday, heightening concerns about how much progress could be made at a summit of European leaders on Sunday.

Investors are looking for more details from the meeting of plans to contain the euro zone sovereign debt crisis, particularly beefing up the rescue fund, a vehicle to guarantee national governments' sovereign debt issuance, although many believe a rapid solution is unlikely.

The meeting is also expected to agree on a plan to recapitalize European banks, but a report in the Financial Times said on Thursday that the plan to strengthen Europe's banking system is set to fall short of market expectations.

MSCI's broadest index of Asia Pacific shares outside Japan fell 0.6 percent, with the materials sector leading the decline, falling 1.5 percent.

Australian shares fell 1.2 percent on Thursday as miners sank after copper and gold prices fell, while Japan's Nikkei stock average opened down 0.4 percent.

The MSCI world stocks index was down 0.3 percent at 297.88, while US stocks ended lower on Wednesday as sentiment was also undermined by the Federal Reserve's Beige Book report, which suggested the outlook for the US economy grew dimmer in September.

Oil edged up in early Asia on Thursday, after falling the day before on concerns about growth. Brent crude futures were up 0.4 percent to USD 108.88 a barrel, while US crude futures edged 0.2 percent higher at USD 86.30 a barrel.

In Asian credit markets, spreads on the iTraxx Asia ex-Japan investment grade index, a gauge for whether investor risk appetite is returning, widened a tad by 1 basis point.

US Treasury prices rose modestly on Wednesday, with benchmark 10-year Treasury notes trading up 4/32 in price to yield 2.16 percent, down from 2.18 percent late Tuesday.

Gold fell for a third consecutive session on Wednesday, moving once again in tandem with riskier assets, as jittery investors sold on a lack of progress over euro zone debt talks and an uncertain US economic outlook. Spot gold was steady at USD 1,641.49 an ounce.

US rejects plan to strengthen IMF in euro zone crisis

Proposals to double the size of the IMF as part of a broader international response to Europe's debt crisis ran into resistance from the United States and others, burying the idea for now and putting the onus firmly back on Europe.

The outlines of the plan, that had the backing of several developing economies, emerged as G20 finance ministers and central bankers met in Paris to discuss a world economy under threat from European nations mired in debt.

A second day of talks on Saturday may produce more robust language on the urgency of tackling the euro zone debt crisis but little of substance is likely to be inked in with an EU summit in nine day's time the make-or-break moment.

A communique and round of closing news conferences are expected around 11 a.m. EDT with other decisions set up for a G20 leaders' summit in Cannes on November 3/4.

One G20 source said emerging market policymakers backed injecting some USD 350 billion into the International Monetary Fund.

US Treasury Secretary Timothy Geithner and his Canadian and Australian counterparts poured cold water on the idea. The IMF's dominant shareholders, including the United States, Japan, Germany and China, are content that the fund's USD 380 billion worth of resources is enough.

"They (the IMF) have very substantial resources that are uncommitted," Geithner said.

German Finance Minister Wolfgang Schaeuble agreed the euro zone debt crisis was for Europe to solve, and expressed confidence that EU leaders would produce a plan at the October 23 summit that would be convincing for financial markets.

The United States is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is lapping at Spain and Italy.

Canadian Finance Minister Jim Flaherty also said the G20 should keep up pressure on the euro zone on its "arduous" journey toward a solution and not focus on IMF resources.

If minds needed concentrating further, Standard and Poor's cut Spain's long-term credit rating, citing the country's high unemployment, tightening credit and high private sector debt, highlighting the risk of a much larger economy than Greece coming under threat.

French and German officials are trying to put flesh on the bones of a crisis resolution plan in time for the European Union summit.

Fears about the damage a default by Greece -- and possibly others -- could inflict on the financial system have driven a confidence-sapping bout of market volatility since late July, with global stocks falling 17 percent from their 2011 high in May.

Unlike in 2009 when the G20 launched coordinated stimulus to pull the world out of crisis, the rest of the world is chafing at Europe's slow response while Washington and Beijing are sparring over the yuan currency.

The Franco-German crisis plan is likely to ask banks to accept bigger losses on their Greek debt than the 21 percent spelled out in a July plan for a second bailout of Athens, which now looks insufficient.

"It will be more, that's more or less certain," French Finance Minister Francois Baroin said.

It should also lay out a system for recapitalizing banks and plans to leverage the euro zone's 440 billion euros European Financial Stability Facility to give it more punch.

Schaeuble said European banks should be helped, if necessary, with state means to strengthen their capital.

Whilst the EFSF has the resources to cope with bailouts for Greece, Portugal and Ireland, it would be overwhelmed by the need to rescue a bigger economy such as Italy or Spain.

The most effective method would be to turn the EFSF into a bank so it could draw on European Central Bank resources. Both Germany and the ECB are opposed to that. Attention has turned to the idea of making the fund more like an insurer.

G20 sources said most BRICS economies were in favor of bolstering the IMF's capital as a crisis-fighting tool.

"We have said this before and have conveyed this again, that if emerging economies and the BRICS are called upon to contribute, we can do it via the International Monetary Fund," one of the sources said. "India is open to it, China and Brazil are also okay with the idea."

Another G20 source said the IMF would present a plan which had broad support to its executive board to make short-term credit lines available to fundamentally healthy countries hit by liquidity crises. It could aid euro zone countries hit by the current crisis of confidence in the bloc's sovereign debt.

Any real progress on bigger goals such as setting parameters to measure global imbalances and reining in speculative capital flows is unlikely to come before a November 3-4 summit in Cannes, where France passes the G20 baton to Mexico.

A separate G20 source said after preparatory talks late on Thursday that China would commit to boost its consumption through a five-year plan, via households and companies as well as infrastructure.

The G20 countries make up 85 percent of global output.

An April G20 meeting placed seven large economies under review -- the debt-burdened United States, export driven China and the economies of France, Britain, Germany, Japan and India. Officials have said privately the aim was to get Beijing to discuss the yuan, and China's cooperation is essential to the success of the process.

A G20 official said China would not commit to a quick liberalization of its yuan currency to help rebalance global growth, but would offer to use expansionary fiscal policy to fuel domestic demand.

"No, they were pretty firm on that -- there will be no progress," the official said.

Cognizant performance is great

Cognizant's growth and its rise to the No. 3 spot among IT services providers in India is viewed by some as exceptional. The fact is, it is exceptional compared to the two laggards in the business -- Wipro and Infosys. But compare it with TCS, HCL, and the more recent performances of midsize companies like Hexaware and KPIT Cummins, and you will find that Cognizant is only as good as the best.

Even in the latest quarter, TCS and Cognizant's revenue growth was the same; TCS's profit growth was faster. While Cognizant's revenues have grown faster than HCL, it lags HCL in profit growth.

Ankur Rudra, IT analyst at brokerage firm Ambit Capital, said that Cognizant's relatively nimble organization structure and larger investments in sales and marketing must be credited for its fast growth. "It keeps its margins low and continues investing in sales - it did that even during the recession -- which has enabled it to build good client relationships and grow fast."

But margins can only be a partial explanation because companies like TCS and HCL that maintain higher margins have also been able to maintain industry leading growth.

An industry analyst who did not want to be named said the timing of Cognizant's growth over the last 2-3 years has added sheen to its strong financial performance. It came at a time when Infosys and Wipro were undergoing restructuring exercises that slowed their growth.

Cognizant has also benefited from its huge focus on the banking, financial services and insurance (BFSI) space, which accounts for over 40% of its revenues, unlike a Wipro that has only 26% of its revenues from the segment. Srishti Anand, IT sector analyst at Angel Broking, said that the IT sector growth in recent times has been led by spends from the BFSI vertical.

But some of these very factors could become its Achilles heel. The dependence on BFSI could become a liability if the sector slows down, and there are signs of that already in the global economy. Unlike its peers, Cognizant has no presence in product engineering services (PES) that now contributes significantly to the revenues of companies like Wipro and HCL.