FY07 GDP tops Govt's estimate
Spurred by strong performance of the industrial and service sectors, the Indian economy grew by 9.4% in the fiscal year ended March 2007 as against 9% in the previous financial year, the Government said. The reading was better than the Government's advance estimate of a 9.2% expansion in the Gross Domestic Product (GDP) for FY07 and was the fastest annual growth in 18 years. The only time the Indian economy grew faster was in 1988-89, when the GDP growth rate touched 10.5%. In 2004-05 it was 7.5% and in 2005-06 it was 9%.
With this, India's economy crossed the trillion dollar mark, only the 12th country in the world to achieve the milestone. India's economy at market prices stood at Rs41,25,724 crores at the end of 2006-07 - which translates to about US$1,020 billion at the current rupee-dollar rate of 40.50. What's heartening is that the per capita income in real terms is estimated to have grown by 8.4% in FY07 to Rs22,483. The Gross Fixed Capital Formation is estimated to have grown by 29.5% (28.1%) at current prices while at constant prices the same expanded by 27.9% (26.7%).
Finance Minister P. Chidambaram said that the CSO data confirmed the Government's belief that the Indian economy had shifted to a higher growth trajectory. Chidambaram emphasised the criticality of growth, saying that high growth generates its own momentum. "With high growth comes high investment, which in turn, reinforces growth itself," he said. "Because we have high growth, we can make bold claim that we would do everything possible to make the growth inclusive."
However, in the fourth quarter, the GDP grew by 9.1% versus 10% in the corresponding quarter of the previous financial year. The fourth quarter growth was a little lower than expectations of 9.5% but was higher than third quarter's revised expansion of 8.7%. Meanwhile, the GDP data for the first quarter and second quarter was revised upwards to 9.6% (8.9%) and 10.2% (9.2%), respectively. Apart from the slowdown in the last couple of quarters, what is also worrying is that farm sector growth has decelerated and service sector growth also appears to be stagnating.
Mallya flies higher with Deccan
The flamboyant Vijay Mallya has managed to wrest control of Deccan Aviation Ltd., the troubled low-cost carrier promoted by Capt. GR Gopinath, in his quest for supremacy in the Indian skies. United Breweries Holdings Ltd. (UB Holdings), which owns an 80% stake in Kingfisher Airlines and is the holding company of the UB Group, will buy a 26% stake in Deccan via a preferential allotment for Rs5.5bn. It will pay Rs1.5bn upfront while the balance amount will be paid by the end of next month. UB Holdings will pay Rs155 per share for purchasing the Deccan stake. Later, UB Holdings will also make an open offer for an additional 20% stake in Deccan. The Kingfisher-Deccan combine is likely to hold a 32-34% share in the domestic market. The Jet-Sahara combine have a market share of 31.5% and Indian has a market share of 22%. The two carriers will be run separately. Speaking at a news conference in Bangalore Gopinath said he will be the Executive Chairman of the merged entity while Mallya will be the Vice-Chairman. Both the sides will have equal representation on the new Board of Directors. There will be six independent directors and a CEO, who will report to the Board. Deccan shares gained 6% on the week to shut shop at Rs145 after touching a high of Rs162. UB Holdings rose by 4.8% to finish at Rs692 after hitting a peak of Rs799.
Bulls on Caribbean Cruise
Sail away, it's time to leave
Rainy days are yours to keep
The bulls had a fairly okay sort of a ride this week, barring Wednesday when a meltdown in the Chinese market caused a ripple effect across the globe. The key indices notched up their third consecutive week of gains. With the Indian economy going great guns and inflation under control, the bulls are comfortably placed at the moment. As we enter the monsoon period, traders seem to have left behind the misery of February-March crash, thanks largely to strong corporate results, continuous inflows from FIIs and firm global markets.
A combination of these ors have lifted the Sensex much closer to its previous all time high. Capital Goods, Auto, Banking and Pharma stocks were among the biggest gainers this week. BHEL, L&T and SBI were the prominent index winners. The benchmark BSE Sensex closed at 14571, adding 232 points or 1.6% on the week while the NSE Nifty advanced by 49 points or 1.15% to close at 4297. On Friday, it touched a new all-time high of 4325 before profit booking dragged it lower.
Spurred by strong performance of the industrial and service sectors, the Indian economy grew by 9.4% in the fiscal year ended March 2007 as against 9% in the previous financial year. Also impressive results by L&T, Cummins and Punj Lloyd boosted the Capital Goods stocks. However, concerns continued over the performance of IT stocks, as the Rupee breached the 40.50 per dollar mark. A strong F&O expiry also aided the bulls in their endeavour to push major indexes higher.
Capital Goods stocks hogged the limelight. The index surged nearly by 7%. L&T led from the front. It was the top gainer in the Sensex. The scrip rallied by over 15% to close at Rs2002. L&T climbed to a record after the chairman said more contracts will be secured this financial year. The company’s full year profit was at Rs14.03bn (up 38%) and sales stood at Rs175.79bn (up 19.1%). Punj Lloyd rallied by over 20% to Rs220. BHEL was up 4.5% at Rs1414 and ABB gained over 4.5% to Rs4696.
Auto stocks managed to regain some of the lost ground ahead of monthly sales numbers. The BSE Auto index rose 3.5% on the week. M&M was the major gainer, adding 4% to Rs761. The company’s May auto sales surged 50% to 18116 units. Tata Motors was up 3% to Rs747, Ashok Leyland gained 2.5% to Rs38 and Eicher Motors rose over 14% to Rs348.
Pharma stocks recorded healthy gains. Cipla gained over 9% to Rs224. Wockhardt surged by over 5% to Rs425, Divi’s Lab advanced 5% to Rs4972 and Lupin added 4.6% to Rs722.
IT stocks continued to be laggards amid growing worries about the impact of the rupee's rally versus the dollar. The BSE IT index was down 1% on the week, led by Infosys. The scrip was down 2.3% at Rs1940. However, Satyam and Wipro managed to buck the negative trend. Satyam gained 1.5% to Rs478 and Wipro was up 0.4% at Rs544.
Banking stocks continued their dream run. The BSE Bankex rose by 2.9% during the week. HDFC Bank was the leading gainer. The scrip was up by over 7.5% to Rs1153, SBI gained 6% to Rs1378 and ICICI Bank advanced 2% to Rs930.
The M&A street remained abuzz. Kingfisher Airlines bought 26% stake in Air Deccan, sending Deccan Aviation's shares sharply higher. The scrip rose by 6% to Rs145 after hitting a high of Rs160. Tata Tea was also in focus. The company agreed to buy 10.76% of Mount Everest Mineral Water at Rs140 a share from the founders. The scrip gained by over 4% during the week to Rs952. It had hit a high of Rs990 and a low of Rs870.
Sensex eyes a new all-time high
The Nifty has scaled a new peak. And, slowly but surely the Sensex too is inching closer to its lifetime high. It will crack a new milestone next week given the ongoing momentum in the market and lack of major bad news. FIIs remain bullish on India, which is likely to grow by 8-9% in FY08 after clocking the fastest growth in two decades last year. Inflation has started to soften as well, though there are lingering fears of additional monetary tightening steps from the RBI. Global markets too are on a firm footing, due to improvement in liquidity flows and rising risk appetite for equities. Having said that, the bulls may still have to hunt for new catalysts to stay on top of the bears as the market has rallied quite a bit in the last couple of months. As of now there doesn't appear to be any major threat to the bulls. Though there could be an odd day when the key indices will fall sharply. Stock specific action is expected to continue, though one must remain cautious while investing in small and mid cap shares. Once the Sensex makes a new high, the next target will be 15,000. But, after that valuations will begin to pinch and we may see some shake out before the next move up.
Rupee zooms past 40.50 barrier
Strong dollar inflows into the stock market lifted the rupee past the 40.50 per dollar mark, even as Commerce Minister Kamal Nath expressed concern about the partially-convertible currency's sharp appreciation against the dollar this year. On Monday, the Indian currency rose as high as 40.28, the highest level since May 1998, prompting the Reserve Bank of India (RBI) to resume its dollar purchases. The rupee did fall to 40.85 levels on Wednesday following weakness in other Asian currencies, but rebounded on the following two days to shut shop at 40.52 for the week. The rupee is the best performer currency among 16 most-active currencies in Asia, spurred by relentless foreign capital inflows in a booming economy. According to official data FIIs have pumped in about US$4bn into local equities this year after investing nearly US$8bn in 2006. Plus, a lot of overseas money is waiting in the wings for the blockbuster IPOs of real estate major DLF and banking giant ICICI Bank. JPMorgan Chase expects capital flows to exceed US$5bn in the next eight weeks as companies including DLF and ICICI Bank sell shares. The RBI has allowed the rupee to rise by 9% this year to fight inflation. But, going forward the central bank may check excess gains in the currency to protect exporters.Inflation falls to 10-month low
India's inflation, based on the Wholesale Price Index (WPI), declined to 5.06% in the week ended May 19 due to a high base of last year and lower food product prices, the Government said. The annual inflation rate was the lowest in nearly 10 months. Inflation matched the figure given by Finance Minister P. Chidambaram on Thursday evening and was in line with a average forecast of 5.06-5.07%. In the previous week, the point-to-point inflation was at 5.27% while the annual inflation rate in the comparable period last year was 5.05%.Trade gap swells in April
India's trade deficit for April was US$7.06bn, higher than US$3.9bn a year earlier, as imports surged amid rapid economic expansion. Exports rose 23.1% in April from a year earlier to US$10.6bn, while imports rose an annual 40.7% to US$17.64bn. The trade deficit was US$3.8bn in March, US$4.66bn in February and US$5.78bn in January.CPI (M) wants licensing system in retail
The Communist Party of India (Marxist) reiterated its demand to block the entry of multinational retail giants like Wal-Mart in the country. Not only that the party also sought restrictions on the rapid expansion of local retail majors such as Reliance and Pantaloon. The party, which is a key ally of the Congress, proposed a licensing system for the organised retail sector, and added that there should be a limit on the number of outlets that a company can open in a city or state. The Government should also abandon the move to permit FDI in retail through the back door as in the case of the joint venture between Wal-Mart and Bharti Enterprises, the CPI (M) said. "Several Indian corporate houses have entered the retail sector and are expanding there operations aggressively," the CPI (M) said. "These developments in the retail sector are having an adverse impact on the livelihoods of a large section of people, who are engaged in unorganised retail across the country."
Navi Mumbai SEZ plan put on hold again
With various thorny issues related to it being unresolved, the fate of the Mukesh Ambani-promoted Navi Mumbai multi-product Special Economic Zone (SEZ) continues to hang in balance. The Board of Approval (BoA) for SEZ yet again deferred a decision on clearing the controversial SEZ. Commerce Secretary and BoA Chairman G.K Pillai said that the Government had received a report from the Revenue Department on the Navi Mumbai SEZ, but was awaiting views from the state government and the developers. "We wanted to get comments from the developers and the state government on the report of the Revenue Department," Pillai said, adding that the Revenue Department wanted to know whether arrangements had been made for plugging possible revenue leakages. Meanwhile, the BoA approved the Tata Group's Gopalpur SEZ in Orissa.
BSNL, MTNL cut roaming charges
BSNL and MTNL slashed national roaming charges to Re1 for incoming calls and 40 paise for outgoing calls within any visiting network as part of a new post-paid plan to be launched on June 3. The monthly rental for the plan has been fixed at Rs550. The subscribers will also get 300 minutes of free talk-time for receiving calls. The call rates of Re1 will apply after the free talk-time is exhausted. Outgoing calls to networks outside the visiting state will be charged at Re1. The public sector telecom operators expect 20-25% jump in volume from the new scheme. At present, BSNL charges Rs1.75 per minute for incoming calls and Rs2.40 a minute for outgoing calls while roaming. The move by BSNL and MTNL is likely to put pressure on private players to follow suit. On May 22, Reliance Communications cut roaming tariffs on outgoing calls to 40 paise per minute on select plans and introduced a flat Re1 rate on incoming calls from Rs1.75 earlier.
India Inc steps up buying spree
Shares of Tata Tea Ltd. and Mount Everest Mineral Water Ltd. climbed after a business news channel reported that the Tata Group firm will buy a majority stake in the maker of 'Himalayan' brand of bottled water. Last week, Tata Tea agreed to sell its 30% stake in US-based enhanced water maker Glaceau to Coca-Cola Co. for US$1.2bn. In August 2006, the company had acquired the stake for US$677mn.
Tata Consultancy Services Ltd. (TCS) announced it had increased its stake from 51% to 100% in the joint venture IT services company TCS do Brasil. The company acquired Group TBA's 49% stake for US$33.4mn. TCS do Brasil recorded a top line of US$66.5mn for the year ended March 2007 and has over 1700 employees.
Crompton Greaves Ltd. said it has concluded an arrangement for the acquisition of Microsol Holdings Ltd. together with other companies in the Microsol Group. The approximate enterprise value of this acquisition is €10.5mn. Microsol is based in Ireland with operations in the UK, USA and Ireland, and is engaged in the business of providing sub-station automation for MV and HV sub-stations.
Ranbaxy Laboratories Ltd. announced that its wholly owned subsidiary Ranbaxy Laboratories Inc. has acquired from Bristol-Myers Squibb Co. (BMS) the US rights to a group of 13 dermatology products. The US dermatology market value is estimated at US$10bn and has experienced growth of 10% per annum.
Strides Arcolab Ltd. said that it has agreed with the shareholders of Diaspa SpA to acquire their fermentation assets near Milan, Italy. The acquisition would be carried out through a Special Purpose Vehicle (SPV) incorporated in Italy, which will be owned by Strides Arcolab International Ltd.
3i Infotech Ltd. announced the acquisition of a 50.5% stake in Aok In-house BPO Services Ltd. and Aok In-house Factoring Services Pvt. Ltd. and a 60% stake in KNM Services Pvt Ltd.
Sintex Industries Ltd. said it will acquire 81% of the shareholding of Wausaukee Composites Inc (WCI). The company has acquired 81% of the shareholding of WCI in the first tranche and the balance shareholding will be bought subsequently.
BNP Paribas bought a 50% stake in the infrastructure equipment finance arm of SREI Infrastructure Finance for Rs7.75bn. SREI will demerge its equipment finance business and BNP Paribas Lease Group (BPLG) will pick up equity in the new entity, SREI Infrastructure Development Finance. SREI will chip in with Rs250mn.
Lipitor...Ranbaxy wins legal battle in Norway
Ranbaxy Laboratories Ltd. announced that the Norwegian Appeals Court has given a favorable decision in its case against Pfizer Inc., involving key patents on Atorvastatin in Norway. The court ruled that Pfizer's four patents are either invalid or not infringed upon by a proposed generic product from Ranbaxy. Three patents covering intermediate compounds used to make Atorvastatin, the active ingredient in Lipitor, would not be infringed by the sale of a Ranbaxy generic product in Norway, the court ruled. Cholesterol-buster Lipitor is the world's top-selling drug. The Oslo City Court had previously ruled in favour of Ranbaxy saying its generic drug did not infringe on two of Pfizer's Norwegian patents. It had, however, denied Ranbaxy's claim of non-infringement on another of Pfizer's Norwegian patent, which was then appealed by the company. The favourable ruling clears the decks for Ranbaxy to launch a generic version of Lipitor in Norway.
DLF launches US$2.4bn IPO
DLF Ltd., the largest real estate development company in India, proposes to enter the capital market on 11th June with a public issue of 175,000,000 equity shares of Rs.2 each through 100% book building process. The issue closes on 14th June and the price band has been fixed at Rs.500 to Rs.550 per share. The issue will constitute 10.26% of the fully diluted post-issue capital of the company. Out of the net proceeds of the issue, DLF proposes to utilize Rs35bn for acquisition of land and development rights, Rs34.93bn for development and construction costs for existing projects and the remaining amount for prepayment of loans of the company. Meanwhile, reports said that the order book for India's biggest ever IPO was fully covered with huge demand coming from Indian and overseas institutional investors. The offer price values DLF at over US$23bn at the upper end of the band, and will make the company eighth largest in terms of market cap ahead of ICICI Bank and Wipro.
Dr. Naresh Trehan to join Apollo Hospitals
he recent confrontation between noted heart surgeon Dr. Naresh Trehan and the management of Fortis Healthcare Ltd. prompted the former to join rival Apollo Hospitals Enterprise Ltd. Shares of Apollo Hospitals rose on the news while Fortis shares fell. In a separate statement, Fortis said that Dr. Trehan, Executive Director of Escorts Heart Institute and Research Centre Ltd., a subsidiary of the company, has resigned from the services. The resignation will be effective from June 1. Over the weekend Dr. Trehan and Fortis promoters reached an out of court settlement over the unceremonious removal of the veteran cardiologist from Escorts Heart Institute earlier this month. Meanwhile, reports suggested that 70 medical personnel submitted their resignations post Dr. Trehan's exit, a spokesperson of Fortis said that only 12 doctors and 12 paramedics had resigned. Fortis management maintained that less than 15 doctors will leave the hospital and there was no need to panic.
Binani Cement slips, MIC Elec shines on debut
Shares of Binani Cement Ltd. and Insecticides India Ltd. fell below the issue price while that of MIC Electronics Ltd. and McDowell Holdings Ltd. climbed on their stock market debut. Binani Cement opened at Rs75 per share on the BSE, the same as the issue price. It closed the week at Rs67 after touching a high of Rs79 and a low of Rs66.35. Insecticides India was not lucky either. The stock opened at Rs105 on the BSE versus the issue price of Rs115. The scrip ended the week at Rs113 after being as low as Rs101 and as high as Rs127. MIC Electronics listed at Rs210.25 on the BSE, up 40% over its issue price of Rs150 per share. It finished the week at Rs380 after hitting a high of Rs439 and a low of Rs210. McDowell Holdings opened at Rs195.60 on the BSE as against the base price of around Rs157. The scrip ended the week at Rs282 after being as low as Rs196.China stocks tumble on higher stamp duty
Chinese shares plunged after the government tripled stamp duty on securities transactions to cool down possible speculative activity in the stock market that could lead to a bubble. "Stamp duty on share trades has been increased to 0.3% from 0.1%, to promote the healthy development of the securities market," the Chinese Finance Ministry said. The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, dropped 4.6% this week, the first decline in 11 weeks. It's up 86% this year, the most among 90 global benchmarks. This year's spurt has made Chinese shares the most expensive in the Asia-Pacific region, with the CSI 300 Index trading at 48 times reported earnings. That's more than double valuations in Japan and India, the region's next most expensive markets. Central bank officials, former US Federal Reserve Chairman Alan Greenspan and Li Ka-shing, Asia's richest man, have all warned of an impending correction this month. The CSI 300 yesterday rallied to a new high, its 11th record this month. Concerns that the government will take further action grew today after figures released by the clearing house showed more than 400,000 new accounts were opened the day that the stamp duty was raised. The daily average for the quarter is 300,000.
US economy crawls in first quarter
The US economy nearly came to a grinding halt in the first quarter, clocking its weakest expansion in more than four years, as housing slumped, the trade deficit widened and businesses slashed inventories. The world's largest economy grew at a 0.6% annualised pace in the January-March quarter, the Commerce Department said in its second estimate of quarterly GDP. It was the slowest growth since late 2002 and was much lower than the preliminary forecast of 1.3%.
But, some economists feel that last quarter could turn out to be the low point for the US economy as recent reports have shown a rebound in business spending. Also, lower inventories have prompted factories to lift production. Having said that, hopes for a reversal of fortunes for the beleaguered housing sector have diminished by further declines in key indicators. Besides, consumer spending has kicked off the second quarter on a weak note.
Japanese industrial production falls in April
Japan's industrial output surprisingly declined in April from a month earlier as a steep downturn in the US economy, the nation's biggest export destination, led to lower sales of cars and consumer electronics. According to preliminary data from the Ministry of Economy, Trade & Industry, the index on the output of factories and mines last month fell by a seasonally-adjusted 0.1% to 107.5 points from March, the second monthly fall. The index had reached a record 109.6 points in December. Economists had been looking for a rise of 0.5% month-on-month in April. Industrial production declined by 0.3% in March, the Ministry of Economy, Trade and Industry said. Year-on-year, industrial output in April was up 2.3%, rising for the 21st consecutive month.
Inflows to emerging markets gather pace: EPFR
Looks like global investors are beginning to get a little more comfortable in terms of taking more risks as equity markets across the globe has shown tremendous resilience post the crash in February and March. As a result, emerging market equity funds attracted strong inflows in the fourth week of May, says global fund tracker Emerging Portfolio Funds Research (EPFR). Latin America and Global Emerging Markets (GEM) equity funds had their best week in over a year while EMEA (Europe Middle East Africa) equity funds posted inflows for the first time in six weeks, says the Boston-based EPFR. Meanwhile, investors continued to avoid Chinese and Japanese dedicated funds, though the pace of outflows slowed.
Bush picks Robert Zoellick as new WB President
President George W. Bush tapped former US trade chief Robert Zoellick, to run the World Bank, following the controversial exit of outgoing president Paul Wolfowitz. Zoellick, 53, would succeed Wolfowitz, who is stepping down June 30 after a special bank panel found that he broke rules when he arranged a hefty compensation package in 2005 for his girlfriend, Shaha Riza, a bank employee. Bush's selection of Zoellick must be approved by the World Bank's 24-member board. Zoellick said his biggest challenge would be to calm the waters following the storm over outgoing president Wolfowitz. "One of the issues will be to try to calm the waters, but also then try and get a sense from people about how we can build some consensus about the direction of the institution," Zoellick told reporters soon after Bush's announcement.
Dell, Motorola, IBM unveil job reductions
Dell said it would slash 10% of its workforce, or about 8,800 jobs, in an attempt to cut costs and regain market share lost to the likes of rival Hewlett-Packard. The world's second-largest personal-computer maker didn't say how much money it intends to save with the job cuts. In a statement, Chief Executive Michael Dell said the headcount reductions were "difficult," but that they were necessary for the company to proceed with its restructuring efforts.
Motorola also said it plans to trim an additional 4,000 jobs this year, bringing the total cuts for 2007 to more than 11% of its work force, as the world's No. 2 mobile phone maker reduces costs to return to profitability. Motorola, which had already planned to complete 3,500 job reductions by June 30, forecast restructuring charges of about US $300mn, or about 8 cents per share, over the rest of 2007 as a result of the latest lay-offs.
IBM, the world's largest IT services company, cut about 1,570 jobs mainly in its technology services unit, where profit fell 19% in the latest quarter. Most of the reductions were in North America and workers were notified. The division accounted for more than a third of IBM's US$22bn in sales in the first quarter. The cuts are equal to about 1.2% of the US workforce. This month IBM also slashed about 1,300 jobs at its global services unit, which incorporates the technology division, to help reduce expenses in the US, where IBM has about 128,000 employees.