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Saturday, November 14, 2009

RIL leads 4% Sensex surge

Strong buying across-the-board lifted the market higher last week after a recent steep correction. The sentiment was helped by the government's push towards disinvestment, along with its plan to exit fiscal stimulus in a phased manner.

The BSE 30-share Sensex rose 690.55 points or 4.27% to 16,848.83 in the week ended 13 November 2009. The S&P CNX Nifty rose 202.8 points or 4.22% to 4998.95.

The BSE Mid-Cap index underperformed the Sensex, rising 2.63% to 6,418.65. The BSE Small-cap index also underperformed the Sensex, gaining 3.33% to 7,409.70.

The key benchmark indices spurted on Monday, 9 November 2009, as the US dollar fell sharply against major rivals after finance ministers and central bankers from the Group of 20 leading economic powers pledged to keep massive stimulus measures in place until the global recovery strengthens. The BSE 30-share Sensex rose 340.44 points or 2.11% to 16498.72. The S&P CNX Nifty jumped 102.25 points or 2.13% to 4898.40.

The key benchmark indices snapped previous four sessions' gains on Tuesday, 10 November 2009, closing with small losses due to profit taking. The BSE 30-share Sensex fell 58.16 points or 0.35% to 16440.56. The S&P CNX Nifty fell 16.70 points or 0.34% to 4881.70.

The key benchmark indices soared on Wednesday, 11 November 2009, tracking firm global stocks after China reported continued strength in industrial production growth, keeping alive hopes of a recovery in the global economy. The BSE 30-share Sensex rose 409.04 points or 2.49% to 16,849.60. The S&P CNX Nifty rose 122.25 points or 2.5% to 5,003.95.

Interest rate sensitive banking, auto and realty stocks led the slide on Thursday, 12 November 2009, as mostly lower Asian stocks triggered profit taking on the domestic bourses after a sharp rally in the past few days. Stocks fell despite strong industrial production data. The BSE 30-share Sensex fell 153.57 points or 0.91% to 16,696.03. The S&P CNX Nifty fell 51.30 points or 1.03% to 4952.65.

India's industrial output rose 9.1% in September 2009 over September 2008, data released by the government on Thursday showed. The government revised upwards the industrial production growth for August 2009 to 11% from 10.4%. Consumer durable goods output surged by an annual 22.2%, manufacturing production rose 9.3%, mining output was up 8.6% and power generation rose 7.9% in September 2009 over September 2008.

Equities ended a volatile session in the positive terrain on Friday, 13 November 2009. The BSE 30-share Sensex rose 152.80 points or 0.92% to 16,848.83. The S&P CNX Nifty rose 46.30 points or 0.93% to 4998.95.

Shares of public sector units were the flavour of last trading week after Prime Minister Manmohan Singh on 5 November 2009, approved divestment in public sector companies to raise funds for social welfare.

NMDC (up 28.80%), Hindustan Copper (up 14%), Rural Electrification Corporation (up 9.84%), Rashtriya Chemicals and Fertilisers (up 3.60%), Engineers India (up 13.09%), and Neyveli Lignite Corporation (up 13.40%), soared.

However, MMTC (down 0.33%), Dredging Corporation Of India (down 3.43%), and NHPC (down 1.23%), declined.

Mr Singh's government believes that divestment is not selling family jewels, but it is essential to save the nation's finances. The government is staring at a fiscal deficit of 6.8% this year, a 16-year high. If the estimated sale happens, Mr Singh would break the divestment record set by the Atal Behari Vajpayee government, which raised $6 billion between 1999 and 2004.

Use of disinvestment proceeds would free up government resources to that extent or bring down its fiscal deficit in line with targets set in the road map. The government targets fiscal deficit at 5.5% in 2010-11 and 4% in 2011-12.

India's largest private sector company by market capitalisation Reliance Industries (RIL) rose 8.17% in the week. Mukesh Ambani's RIL and Anil Ambani led Reliance Natural Resources (RNRL) are slugging it out in the Supreme Court over the supply of gas from RIL's D6 block in the Krishna-Godavari (KG) basin. While RNRL has sought the apex court's intervention in a special leave petition for immediate supply of 28 mscmd of gas from KG D6 at $2.34 per mmBtu for a period of 17 years, RIL has opposed this saying the price is 44% lower than that mandated by the government. RIL says it cannot supply gas at a price not approved by the government and to a user not listed in its gas utilization policy.

RIL, on 10 November 2009, said reports of a meeting between the billionaire Ambani brothers to settle a gas-pricing dispute were baseless. RIL said in a statement the matter would be decided by the Supreme Court, which is currently hearing the case.

RIL, on Tuesday, 10 November 2009, announced its first oil discovery in its exploration block in the Cambay Basin off Gujarat. Reliance holds 100% participating interest in the block. This block was awarded to Reliance under the fifth round of the New Exploration Licensing Policy.

India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) rose 2.10% on television reports the oil ministry has proposed a sharp hike in administered gas prices.

Meanwhile, the government has allowed ONGC Videsh - the overseas arm of state-run Oil and Natural Gas Corporation (ONGC) to invest an additional Rs 322 crore in an oilfield in Brazil. The approval of the Cabinet Committee on Economic Affairs (CCEA) will raise the total investment in the project to Rs 1,762 crore.

India's largest thermal power producer by sales NTPC rose 2.16%. A 5% stake sale in state-run power producer could fetch the government Rs 8100 crore ($1.7 billion), Sunil Mitra, a senior finance ministry official, said on Friday. Last week, the government mandated more sales of shares by state firms and changed the rules on how it can use the proceeds, as it seeks to boost revenues and rein in a widening budget deficit

Last month, the cabinet approved share sales for NTPC, Satluj Jal Vidyut Nigam and Rural Electrification Corp. The stake sales will be completed by March next year, Mitra said. Rural Electrification Corporation soared 9.84%.

Rate sensitive realty shares fell after the Reserve Bank of India (RBI), last month, raised the provisioning requirements for loans to commercial real estate from 0.4% to 1% in its monetary policy review meet on 27 October 2009. Unitech (down 3.78%), Indiabulls Real Estate (down 5.75%), DLF (down 3.06%), fell.

The latest RBI move will result in increase in borrowing costs for realty firms which depend heavily on borrowing. In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs), the central bank said in its quarterly policy review.

Banking shares rose on hopes of likely reforms in the financial sector. India's largest private sector bank by net profit ICICI Bank rose 7.15%. The bank's net profit rose 2.6% to Rs 1040.13 crore on a 12.7% decline in total income to Rs 8480.73 crore in Q2 September 2009 over Q2 September 2008. The result was announced during trading hours on 30 October 2009.

India's second largest private sector bank by net profit HDFC Bank rose 5.06%.

India's largest bank by net profit State Bank of India (SBI) rose 4.26%. State Bank of India said on 9 November 2009, that it had entered into an agreement with T. Rowe Price to sell a 6.5% holding each in UTI Asset Management Company and UTI Trustee Company. State Bank currently holds 25% in each of the companies and after the sale its holding would be reduced to 18.5%, it said in a statement.

SBI announced after market hours on Friday, 6 November 2009 it has revised downwards interest rates on deposits by 25-50 basis points for a few maturities effective from 9 November 2009. The bank's consolidated net profit rose 28.29% to Rs 3,133.16 crore on 22% rise in consolidated income to Rs 33,101.65 crore in Q2 September 2009 over Q2 September 2008. The results were announced on 31 October 2009.

Prime Minister Manmohan Singh said on Sunday, 8 November 2009, financial reforms, such as building up a domestic bond market and expanding foreign investment in sectors like insurance, would be pushed forward.

As per reports, the government plans to introduce two key bills in parliament by December 2009. It plans to introduce bills proposing the raising of foreign stake limits in insurers to 49% from the present 26% and opening up the pension sector to private and foreign firms.

Rate sensitive auto stocks rose as low interest rates and attractive benefits offered by companies pushed up sales in October 2009.

India's largest small car marker by sales Maruti Suzuki India rose 0.44%. The company's total sales grew 32.4% to 85415 units in October 2009, compared with 64490 units posted in the same month a year ago.

India's largest truck marker by sales Tata Motors rose 8.77%. The company's total sales grew 18% to 20,011 units last month against 17,014 units in the same period last year.

India's second largest motorcycle marker by sales Bajaj Auto rose 0.62%. Carlos Ghosn, chief executive of French car maker Renault and Japan's Nissan Motor Co, said on Tuesday an agreement had been signed with Bajaj Auto for a low-cost car which would come to India in 2012.

India's largest bike marker by sales Hero Honda Motors rose 3.22%. The company reported a marginal increase in October sales at 354,156 units as against 352,449 units in the same month last year

India's largest tractor maker by sales Mahindra & Mahindra rose 6.03%. The company's overall sales climbed 32% in October this year to 18,410 units against 13,935 units in the same month last year. Mahindra and Mahindra (M&M) reportedly plans to launch a motorcycle next year. The company is also looking at acquisitions in the electronic scooter space. The auto major had entered the two-wheeler market market by acquiring the assets of Pune-based scooter manufacturer Kinetic Motor in 2008.

Car sales in India rose an annual 34% to 132,615 units in October 2009, boosted by festival demand and easier availability of loans, an industry body said on Wednesday 11 November 2009. Sales of trucks and buses, a gauge of economic activity, rose 52% to 42,562 units in October 2009, the data showed.

Technology stocks rose as investor bought shares, following a recent correction, and on hopes that the environment for spending on information technology was improving. Last week, the software services trade body, National Association of Software and Services Companies, said it expects the industry to regain double-digit revenue growth from April 2010.

India's second largest software company by sales Infosys Technologies rose 6.36%. Infosys BPO, the business processing outsourcing subsidiary of Infosys Technologies, on Thursday announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States.

The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is $38 million with up to an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The announcement was made before market hours on Thursday 12 November 2009.

India's third largest software company by sales Wipro rose 5.63%. Wipro, sees robust deal pipeline on the back of improving IT demand worldwide, Suresh Vaswani, joint chief executive said on Tuesday 10 November 2009. The company said on 5 November 2009 it had agreed to buy some personal care businesses of Yardley for about $45.5 million, adding to its consumer goods business. Wipro said it had signed an agreement with UK-based Lornamead group, which owns the Yardley brand, for the businesses in Asia, the Middle East, Australasia and some African markets.

India's largest software company by sales Tata Consultancy Services (TCS) rose 7.98%. The company recently secured a 150 million pounds software implementation contract for 15 years from Cardiff city council, UK.

Metal stocks rose on strong demand. Hindalco Industries (up 4.02%), Sterlite Industries (up 4.13%), National Aluminium Company (Nalco) (up 3.24%). Nalco recently hiked the prices of aluminium products by Rs 1000 a tonne reflecting the recent uptrend in prices on the London Metal Exchange.

Tata Steel, the world's eighth largest steelmaker by output, rose 4.31%. The company said on Thursday 12 November 2009 it approved a new convertible bonds offer in exchange for an existing $875 million securities to reduce costs and ease repayment obligations. The company said on Friday 6 November 2009 steel sales at its Indian operations rose 38% to 462,000 tonnes in October 2009 over October 2008.

Demand for steel remains strong from auto, rural construction and infrastructure sectors. Also demand for construction grade steel has improved post monsoon season, and has resulted into higher sales.

Domestic bourses to take cue from global equities

With no major domestic trigger, the equity market is expected to move in tandem with the global markets. But upward momentum is likely to continue as sentiment in the market remains positive.

Sentiments in the Indian market are closely linked to the sentiment of the foreign investors as they have been large buyers in equities over the past few months and have been the main driver of the recent bull run. Foreign institutional investors (FIIs) inflow in November 2009 totaled Rs 2,727.10 crore, while the FII inflow in the calendar year 2009 totaled Rs 71,168.20 crore (till 11 November 2009).

The market will also keep a close watch on the US dollar. Investors are borrowing money at cheap rates in US dollars and buying risky assets like emerging market stocks and commodities. Experts believe that a rebound in the US currency may possibly lead to outflows from the emerging equity markets like India.

The Dollar Index, which measures the currency's value against six major units including the euro, gained on Thursday, 12 November 2009, after a weekly jobless report triggered strength in the currency. The US Dollar Index rose as much as 0.8% to 75.743 on Thursday. The dollar index gained strength on the back of risk aversion that led to a decline in equities and higher demand for the safe-haven dollar.

The 30-share BSE Sensex, which has doubled from its 2009 low in March, was one of the worst performers in October falling over 7% as investors began taking profits ahead of the close of the calendar year. The index, however, resumed its upwards march in November 2009, rising over 8% to 16696.03 on 12 November 2009, from a recent low of 15404.94 on 3 November 2009.

However, market participants are expected to remain cautious of accelerating inflation which tends to put upward pressure on interest rates and undermine equities. The government will unveil monthly inflation data for October 2009 on Saturday, 14 November 2009.

Although the Reserve Bank of India (RBI) held its main policy rates unchanged, as widely expected, at its review last month, the central bank gave enough indications that monetary tightening was round the corner with the focus shifting to tackling inflationary pressures.

Chairman of the Prime Minister's economic advisory council C. Rangarajan said on Wednesday stimulus measures may need to be withdrawn next year. He said excise duties, which were lowered twice between December 2008 and February 2009, needed to be adjusted while the government's expenditure needed to be cut in 2010/11 to reduce the fiscal deficit by 1% to 1.5%.

Rangarajan, a former central bank governor, said the economy could grow 7-8% in 2010/11 (April-March), but Finance Secretary Ashok Chawla said on Wednesday the economy cannot return to the 8-9% growth trajectory until exports revive.

Exports declined 11.4% in October from a year earlier, their 13th drop in a row, and trade secretary Rahul Khullar said exports would start growing only from January.

India's industrial output rose 9.1% in September 2009 over September 2008, data released by the government on Thursday showed. The government revised upwards the industrial production growth for August 2009 to 11% from 10.4%.

Consumer durable goods output surged by an annual 22.2%, manufacturing production rose 9.3%, mining output was up 8.6% and power generation rose 7.9% in September 2009 over September 2008

HP to acquire 3Com for US$2.7bn

HP will purchase 3Com, a leading provider of networking switching, routing and security solutions, at a price of US$7.9 per share in cash or an enterprise value of around US$2.7bn. The terms of the transaction have been approved by the HP and 3Com boards of directors. Under the terms of the merger agreement, 3Com stockholders will receive US$7.9 for each share of 3Com common stock that they hold at the closing of the merger. The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of 3Com’s stockholders. The transaction is expected to close in the first half of calendar 2010. HP anticipates that the transaction will be slightly dilutive to fiscal 2010 non-GAAP earnings.

Intel and AMD settle legal disputes

Intel is to pay Advanced Micro Devices (AMD) US$1.25bn to settle all legal disputes, marking an end to what has been a protracted and acrimonious battle between the world's biggest makers of personal computer chips. The move comes just days after Intel was sued by New York state for antitrust violations and follows a US$1.5bn fine slapped by the European Commission for antitrust offences. In their joint statement, the companies said: "While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development." AMD will drop all pending cases, including one before a federal court in Delaware and two cases pending in Japan. The company also agreed to withdraw all of its regulatory complaints worldwide. Intel CEO Paul Otellini termed the settlement as a painful, but pragmatic, compromise.

China...industrial output strong; prices drop

China said that its industrial production and retail sales accelerated at a faster-than-expected pace, but consumer prices and producer prices fell more than anticipated. Industrial production for October surged 16.1% from a year earlier, outpacing a 15.5% rise forecast by economists, while retail sales climbed 16.2%. The consumer price index (CPI) fell 0.5% from a year-earlier period and the producer price index (PPI) shrank 5.8%, with each dropping more than economists' estimates but still showing an increase from the previous month's data. The growth in urban fixed-asset investments in the first 10 months of this year (January-October 2009) also slowed to 33.1%, easing from the 33.4% growth in the first nine months of 2009. The latest batch of economic reports underscore China’s rapid economic recovery, thanks in part to a huge stimulus package unleashed by the government. Car sales, for instance, have been booming (up by 72.5% in October) because of a cut in sales tax on new vehicles. But as in the US and Europe, experts are wondering what will happen when the stimulus measures end.

Gold continues record rally

There is no stopping the gold bulls, as the US dollar continued to be under pressure amid prospects for a fragile economic recovery in the world's biggest economy. A weak greenback tends to bolster the appeal of gold as a safe haven investment. The precious metal had gained 5% last week on fund buying after the Reserve Bank of India (RBI) bought 200 tons of gold from the International Monetary Fund (IMF) and the dollar weakening further. Gold has gained more than 25% in 2009, driven by persistent weakness in the US currency, and growing doubts over its future as the world's reserve currency.

China's Prime Minister Wen Jiabao exhorted the US to keep its deficit in control to stabilize the dollar exchange-rate, according to media reports. China is the largest foreign holder of US Treasurys. Since early March, the US dollar index, which tracks the dollar's value against a basket of major rivals, has fallen about 15%, in part due to the Federal Reserve's loose monetary policy. Meanwhile, the IMF signaled that record low US interest rates are funding global carry trades and the dollar is still overvalued as concerns mount that new financial imbalances are forming.

Some countries expressed concern that the increasingly weak dollar might hamper recovery. US Treasury Secretary Timothy Geithner reiterated his belief in a strong dollar. Responding to the IMF’s comment that the yuan was "significantly undervalued", China’s central bank said that its foreign-exchange policy would take into account "capital flows and major currency movements".

Weekly Wrap - Nov 14 2009

Weekly Wrap - Nov 14 2009

Eurozone back in black

Economic growth returned to the euro zone in the third quarter after five consecutive declining quarters, but the bounce was weaker than had been expected, leaving economists to question the strength and sustainability of the 16-nation region's recovery. Euro-zone gross domestic product (GDP) rose by 0.4% compared to the previous three months, the European Union statistics agency Eurostat said in a preliminary estimate. Compared to the same period last year, the September quarter's GDP fell by 4.1%. Economists had been looking for a 0.6% quarterly rise and a 3.9% year-on-year decline.

Germany and France reported further growth in the third quarter. Italy too started to expand for the first time in more than a year even as Spain and UK continue to struggle. Germany, France and Italy account for more than two-thirds of aggregate euro zone output, and the third quarter marked a turning-point for the common currency area, which spans 16 countries.

Germany and France, which both emerged from recession in the second quarter with 0.3% growth, posted quarterly expansion rates of 0.7% and 0.3% respectively in the three months to end-September. Italian GDP turned positive with a rise of 0.6% quarter over quarter, following five quarters of contraction. The national data indicated that improving exports helped lead the region back to growth, while consumers continued to keep a tight grip on their wallets.

TVS re-launches Twin Spark Plug "Flame"

TVS Motor Co. Ltd. re-launched the much awaited Twin Spark Plug "FLAME" motorcycle after obtaining all necessary permissions and clearances in accordance with law. This executive segment motorcycle, launched under the brand TVS Flame DS 125, is propelled by three valve CC-VTi technology, fired by twin spark plugs. Developed with AVL Austria, this 125 cc three valve engine is tuned to the ideal swirl-tumble port combination so that it delivers superior performance while simultaneously enhancing low, mid range power and delivering high fuel efficiency. TVS Flame DS 125 has a unique combination of three valves and two spark plugs. Packing in 10.5 bhp @ 7500 rpm, TVS Flame DS 125 has a top speed of 95 kmph. Priced at Rs. 49,200 ex-showroom, the TVS Flame DS 125 comes in dual tone colours of red and black.

Cox & Kings IPO price band at Rs316-330/share

Cox and Kings (India) Limited fixed the price band between Rs316 and Rs330 per share for its Initial Public Offering (IPO) of 18,496,640 equity shares of Rs. 10 each for cash at a price to be decided through a 100% Book-Building Process. The Bid/Issue opens on November 18, and closes on November 20. The company has been assigned a "CARE IPO GRADE 4" to the proposed IPO. CARE IPO Grade 4 indicates above average fundamentals. CARE assigns IPO grades on scale of Grade 5 to Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

The IPO consists of a Fresh Issue of 15,450,000 shares and an Offer for Sale of 3,046,640 shares by Lehman Brothers Opportunity Limited, Deutsche Securities Mauritius Limited and Merrill Lynch Capital Markets Espana, SA, SV. The IPO comprises of a net issue to the public of 18,296,640 shares and a reservation of up to 200,000 shares for the eligible employees on a competitive basis. The IPO and the Net Issue would constitute 29.40% and 29.08% respectively of the fully diluted post issue paid-up capital of the company.

Cipla launches Antiflu to combat flu pandemic

Cipla Ltd. announced that it has launched Oseltamivir under the brand name Antiflu to combat the flu pandemic. The only drug from India to be pre-qualified by the World Health Organisation (WHO), Antiflu would be sold under Schedule X category, like Virenza (Zanamivir), Cipla said in a statement. Antiflu and Virenza directly target the virus and block its replication. Best results are seen if the medicines are taken within 48 hours of the symptoms being visible. Clinical trials suggest that the drugs reduce suffering considerably and time usage also lowers chances of other health complications, Cipla said. Antiflu will be available both in capsules (10 Nos) and liquid form (75 ml) and will be priced at Rs485. Virenza (20 capsules) will be retailed at Rs800. As of now 800 chemists across India have got the special license to retail the drugs made by Cipla. This includes 25-30 chemists in Mumbai. The number is likely to go up as more chemists apply for the license to sell these drugs.

Nissan-Renault inks low-cost car pact with Bajaj Auto

Nissan-Renault and Bajaj Auto signed an agreement to design, develop, manufacture and market a low-cost car in India. Bajaj Auto will design and manufacture the car while Nissan-Renault will market it, Carlos Ghosn, Chairman & CEO of Renault-Nissan Alliance said in New Delhi. It will be the cheapest small car in India, Ghosn claimed, adding that the car will also be competitive on fuel efficiency. The companies had announced the formation of a joint venture (JV) in May 2007, to develop, produce and market a car code-named ULC. "We intend to bring this highly price-competitive and fuel-efficient product to the Indian market in 2012," Ghosn said at the conclusion of the India Economic Summit. "The design, engineering, manufacturing and supply-base expertise to create this all-new product will be executed by Bajaj Auto with the support of the Renault-Nissan Alliance. The marketing and distribution will be led by the Alliance, with the support of Bajaj Auto," he said.

L&T sells 2.3% stake in Mahindra Satyam Mahindra

Shares of Mahindra Satyam slipped after Larsen and Toubro (L&T) sold 2.72 crore shares in the company in two bulk deals at an average price of Rs 113.65 in opening trade on the BSE. Prior to the deal, L&T held a 6.9% stake or 8.11 crore shares in the Hyderabad-based IT company which it had acquired in two tranches at an average price of Rs 82 a share. L&T also made an abortive bid to acquire the company. However in April 2009 Tech Mahindra, part of the Mahindra group, acquired a controlling stake in the scam-tainted company, and renamed it Mahindra Satyam. L&T had 12.04% holding in Mahindra Satyam, which subsequently got diluted with fresh issue of shares to Tech Mahindra.

Infosys BPO to acquire McCamish Systems

Infosys BPO Ltd., the business processing outsourcing subsidiary of Infosys Technologies, announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States. The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is US$38mn with up to an additional US$20mn payable to the sellers if McCamish Systems achieves certain financial targets in the future. The acquisition is expected to enhance Infosys’ capability to deliver end-to-end business solutions for the insurance and financial services industries. Founded in 1985, McCamish Systems provides innovative solutions to the insurance and financial services industries leveraging their proprietary VPAS, PMACS and Deferral platforms. The company counts half of the top 20 insurers among its many clients. For the year ended December 31, 2008, McCamish Systems reported revenue of US$38.2mn. The company has about 260 employees based in their Atlanta delivery center.

Govt mulls 33% hike in regulated gas price

The Petroleum Ministry proposed a 33% hike in the price of natural gas produced by ONGC and Oil India and gradually increase it to US$4.20 per mmBtu set for gas from Reliance Industries Ltd.'s (RIL) KG-D6 fields. The ministry circulated a Cabinet note for raising price of gas under administered pricing mechanism (APM) from Rs 3200 per thousand cubic metres (US$1.8 per mmBtu) to Rs 4,250 per thousand cubic metres (US$2.4 per mmBtu). Price of APM, or the gas produced from fields given to ONGC and OIL on nomination basis, is proposed to be raised in stages to Rs 7,500 per thousand cubic metres or US$4.2 per million British thermal unit by 2013. The price set for RIL's eastern offshore KG D-6 gas (US$4.2 per mmBtu) is being considered as the benchmark for market price of indigenously produced gas in the country. Producer price for ONGC is proposed at Rs 3,870 per thousand cubic metres from Rs 3,200 per thousand cubic metres. The consumer price would be 10% higher. For OIL, the producer price has been proposed at Rs 4,310 per thousand cubic metres.

October air passenger traffic up 13% YoY

Domestic air passenger traffic continued its growth momentum in October and witnessed a growth of 25% to nearly 4mn from 3.2mn during the same period last year. Compared with September this year, air passenger traffic grew by 13% in October. The total domestic passengers carried by the local Scheduled Airlines in October were 39.69 lakhs versus 35.05 lakhs in September.

Among the airlines, Jet Airways and its subsidiary JetLite, whose passenger count fell last month due to the pilot’s strike, emerged as the market leader at 27.7% followed by Kingfisher Airlines at 20.7%. The state-owned carrier Air India (Domestic) improved its market share to 18.6% from 17.5% last month. Among the low-cost carriers, IndiGo commanded the maximum share at 14.3% followed by SpiceJet at 13.2%, GoAir at 5.8% and Paramount at 2%.

The seat factor in October increased vis-à-vis September primarily due to onset of the tourist season. The overall cancellation rate of scheduled domestic airlines for the month has been 1.6%. Passengers carried by domestic airlines from January to October were 360.09 lakhs as against 348.51 lakhs in the corresponding period of 2008, thereby registering a growth of 3.32%.

GSM subscriber addition at 10.32mn in October

The GSM-based cellular service providers have reported subscriber additions of 10.32mn during October, as against addition of 9.03mn in September, the Cellular Operators Association of India (COAI) said. With this, the cumulative All India GSM subscriber base has now grown to 355.25mn in October, up from 344.93mn in September, the lobby group for GSM operators said. Among the companies, Vodafone Essar added 2.98mn new users in October, taking its total base to 85.82mn while market leader Bharti Airtel saw its total base rise by 2.7mn to 113.21mn. Idea Cellular added 1.9mn new customers, boosting its subscriber base to 53.35mn, while Aircel increased its base by 2.02mn to 27.75mn. BSNL added 0.6mn new customers, taking its reach to 53.96mn. Loop Mobile added 50,064 new subscribers, taking its total to 2.55mn. MTNL added 65,730 new customers, boosting its total base to 4.44mn. Bharti Airtel continues to be the top GSM operator in the country, with a market share of 31.87% followed by Vodafone Essar at 24.16%, BSNL at 15.19% and Idea at 15.02%.

Food inflation inches up to 13.68%

The Primary Articles index rose by 9.16% in the week ended October 31 versus 8.94% in the preceding week, the Government said. Inflation for the Food Articles group stood at 13.68% in the week under review as against 13.39% in the previous week. The index of Fuel & Power group declined by 1.71% in the last week of October compared to a drop of 6.2% in the week ended Oct. 24. From last week, the Government stopped releasing the weekly WPI data. The data for "All Commodities" for October was scheduled for release on November 12, but will now be released on Nov. 14, according to top officials in the Union Ministry for Commerce and Industry. In its mid-year review of the annual policy late last month, the Reserve Bank of India (RBI) raised the WPI inflation projection to 6.5% with an upside bias by end-March 2010, from 5% earlier.

India's Sept industrial output tops forecast

India’s Industrial Production in September rose by 9.1% as against 6% in the same month last year. Economists had expected IIP growth to come in at around 7-7.5%. The Government announced that it has revised August IIP growth from 10.4% to 11%. Manufacturing output in September stood at 9.3% versus 6.2% YoY. Electricity generation rose by 7.9% versus 4.4% YoY. Mining output expanded by 8.6% versus 5.8% YoY. Basic Goods output growth stood at 6.7% as against 5% in September 2008. Output of Intermediate Goods rose by 10.8% as against a drop of 2.5% in the same month last year. Capital Goods output growth declined to 12.8% from 20.8% YoY. Consumer Goods output grew by 8.2% versus 7.4% YoY. Consumer Durables output expanded by 22.2% as against 14.7% in the year ago period. Consumer non-durable output rose by 2.6% versus 4.8% YoY. Industrial production during the first six months of current fiscal grew by 6.5% as against 5% in the corresponding period of the last fiscal.

Weekly Newsletter - Nov 14 2009

Though the overall undertone remains positive over the longer term, in the near term the market will continue to be volatile and uncertain. Most indicators - economic or corporate - are throwing up mixed signals, which in turn adds to the anxiety about the future prospects. For every good news there is an equally disconcerting bad news. This has led to heightened volatility of late. Markets are struggling near annual highs but are unable to surge higher amid apprehensions that the ongoing recovery could get disrupted in the absence of the unprecedented government stimulus. Though most nations are yet to start reversing the extraordinary fire-fighting measures, and could delay the same in light of unconvincing data points, valuations are not cheap. Overseas inflows could taper off somewhat as we approach the end of the year. A major sell-off many not happen but even the upside doesn't appear to be too promising from here on.

Technically, 5000 is proving to be quite tough nut to crack for the bulls, as the Nifty hasn't managed to close above this level for a reasonably sustainable period. If it does manage to pierce this critical barrier in the near future, it could go as high as 5150. This could then turn out to be a major resistance, which if broken can take the Nifty up to 5350-5400. Of course, there could always be selling pressure at higher levels which means the higher end of the range will not be reached without any hiccups. On the way down, support is expected to kick in at around 4900 and 4850.

FM sees over 7% growth in FY11, 9% in FY12

Finance Minister Pranab Mukherjee said that he is hopeful of more than 7% growth in the fiscal year ending March 2011 and 9% growth in fiscal year 2012. He was speaking at the World Economic Forum's India Economic summit in New Delhi. India's economic growth slowed to 6.7% in the fiscal year ended March 2009 after three straight years of 9% plus expansion. Government officials and the Reserve Bank of India (RBI) are looking at a GDP growth rate of 6-6.5% this fiscal.

The Government will focus on driving domestic demand until key developed markets recover and will not exit fiscal stimulus measures until necessary, the Finance Minister said. "There is a need of generating strong domestic demand until the robust recovery all over the world, particularly the developed world takes place," he said. Mukherjee reiterated his pledge to pump massive investments in agriculture and infrastructure, and acknowledged that it would not be easy for Asia's third largest economy to compensate for the loss in exports through domestic demand.

"It is not easy for us to diversify the market overnight and make up the loss so we shall have to wait for some time," he said. "This cannot continue for a long period of time," Mukherjee said, referring to the exit from easy fiscal policy. "I have stated a number of times that in due course we shall have to take the corrective measures." He also said that he was not worried about the availability of foodgrains and the Government would continue to import food to meet any supply shortfall.

Govt outlines rationale behind PSU disinvestment

Disinvestment Secretary Sunil Mitra explained the Government's thinking on the proposed action plan for disinvestment of its equity in profit making Central PSUs in a media briefing held in New Delhi. The Government had approved the plan on November 5. He said that the proposal to list PSUs is aimed at unlocking greater shareholder value in them. Availability of good quality PSU shares for trading provides depth and liquidity to the market that has a stabilizing influence, Mitra said.

Direct "people ownership" effectively enables public to share the prosperity of PSUs while indirect "people ownership" is achieved through Mutual Funds and Insurance Companies’ participation in Public Offerings, Mitra said. The Department of Disinvestment will begin Inter-Ministerial consultations to identify PSUs for disinvestment.

In view of the deceleration of GDP growth due to global economic downturn coupled with the drought, the Centre could find it tough to raise the required budgetary resources. "To ensure this does not negatively impact the growth of the Indian economy, the Government has approved one-time exemption permitting full utilisation of disinvestment proceeds deposited in the NIF, over the current fiscal year and the next two financial years, in meeting the capital expenditure requirements of selected social sector programmes," Mitra said.

"The unlocking of the dormant wealth of our PSUs and their channelisation for capital expenditure in social sector schemes, will stimulate economic growth with benefits percolating to the masses," Mitra said in a statement.

The Centre has decided that all profitable listed central PSUs should meet the mandatory listing of 10% public ownership. In addition, all unlisted PSUs having positive networth, no accumulated losses and having a net profit in the three preceding consecutive years should get listed on the stock exchanges. The disinvestment proceeds would be channelised into the National Investment Fund (NIF). The corpus comprising deposits from April 2009 till March 2012 would be available in full for investment as capital expenditure in specific social sector schemes. The status quo ante of NIF will be restored from April 2012.