Market snaps 3-day winning streak on Greek default fears

Key benchmark indices snapped three-day winning streak as world stocks fell after a meeting of European finance ministers over the weekend made no progress toward resolving the euro zone debt crisis. The cost of insuring Greek government debt against default rose, with the market showing investors nearly 100% certain Greece will eventually default. The BSE Sensex was down 188.48 points or 1.11%, up close to 35 points from the day's low and off close to 120 points from the day's high. The market breadth was negative. Index heavyweight Reliance Industries (RIL) edged lower.



The market has been volatile off late. From a recent low of 16,467.44 on 13 September 2011, the Sensex had jumped 466.39 points or 2.83% in three trading sessions to one-week closing high of 16,933.83 on Friday, 16 September 2011. Before the three-day rebound, euro-zone debt worries had pulled Indian shares lower. From a 5-week closing high of 17,165.54 on 8 September 2011, the Sensex had tumbled 698.10 points or 4.06% in three trading sessions to 2-week closing low of 16,467.44 on 13 September 2011. Earlier, the market had staged a strong rebound after a steep setback in August 2011.

Coming back to today's trade, capital goods stocks fell on worries higher interest rates could affect capital expenditure plans of Indian firms, with power-equipment major Bhel hitting 52-week low. Interest rate sensitive banking stocks fell on worries that higher lending rates will crimp loan growth. Metal stocks fell as LMEX, a gauge of six metals traded on the London Metal Exchange dropped 0.39% on Friday, 16 September 2011. FMCG stocks too, declined. Some consumer durables stocks bucked the weak market. Cement stocks also edged higher.

The market opened on a weak note as euro-zone debt worries resurfaced. The market weakened once again after recovering from intraday lows in morning trade. The market moved in a tight range in the negative terrain in mid-morning trade. The market extended losses to hit fresh intraday low in early afternoon trade. Weakness prevailed in afternoon trade as European stocks opened on a weak note. Weakness continued in mid-afternoon trade. The market trimmed losses after hitting fresh intraday low in late trade.

With Q2 September 2011 drawing towards a close, focus may shift to expectations of Q2 results of individual firms. Advance tax payments made by the top 100 companies based in the country's financial capital Mumbai reportedly rose 18% in Q2 September 2011. The tax collections are not uniformly good or bad across companies and sectors, except for oil marketing companies, which saw a decline in levies paid.

The BSE Sensex was down 188.48 points or 1.11% to settle at 16,745.35, its lowest closing level since 14 September 2011. The index fell 67.90 points at the day's high of 16,865.93 in early trade. The index declined 224.42 points at the day's low of 16,709.41 in mid-afternoon trade.

The S&P CNX Nifty was down 52.30 points or 1.03% to 5,031.95, its lowest closing level since 14 September 2011. The Nifty hit a low of 5,019.25 in intraday trade. The Nifty hit a high of 5,068.40 in intraday trade.

The BSE Mid-Cap index fell 0.29% and the BSE Small-Cap index declined 0.02%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2279 crore, lower than Rs 2786.52 crore on Friday, 16 September 2011.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,434 shares fell and 1,350 shares rose. A total of 103 shares remained unchanged. The breadth had become positive from negative in early trade.

Among the 30-share Sensex pack, 21 fell and the rest rose.

Cement stocks edged higher on hopes of improved demand as monsoon nears end. ACC, Ambuja Cements, UltraTech Cement, Jaiprakash Associates and India Cements rose by between 0.17% to 2.96%.

Index heavyweight Reliance Industries (RIL) fell 0.8%, with the stock falling for the second straight day. The company's advance tax payment reportedly jumped 67% to about Rs 2000 crore in Q2 September 2011 over Q2 September 2010.

BP PLC will be able to start work on jointly developing RIL's oil and gas blocks in India only after a revised production-sharing contract is drafted and signed by the stakeholders, the upstream regulator said on Thursday, 15 September 2011. "The amendment to the production-sharing contract is yet to be signed. BP will come in only when the amendment is signed," S.K. Srivastava, Director at the Directorate General of Hydrocarbons, told reporters on the sidelines of an industry conference. In the production-sharing contract, the explorers agree with the government to bear risks, production and development costs in return for a share of production.

Srivastava said that RIL is yet to approach the regulator with a new draft of the contract. RIL on 30 August 2011 closed a deal with BP to sell a 30% stake in its 21 oil and gas exploration blocks in India to the UK-based explorer.

RIL had, recently denied inflating costs on its D6 gas field in the Krishna-Godavari (KG) basin. RIL made the clarification after CAG said in its final report submitted to the parliament on Thursday, 8 September 2011, that RIL initially estimated capital expenditure of D-1 and D-3 gas discovery at $2.4 billion, which it later revised to $8.8 billion.

Oil exploration stocks fell as crude oil prices declined. Cairn India dropped 0.38%. India's second biggest oil and gas exploration firm by revenue, Oil India, fell 2.84%. Lower crude oil prices will result in lower realizations from crude sales for oil exploration firms.

State-run ONGC declined 1.95% on profit taking. The stock surged 5.61% on Friday, 16 September 2011, boosted by a hike in petrol price announced by state-run oil marketing companies (PSU OMCs). The petrol price hike could help reduce the subsidy sharing burden of the state-run oil exploration major which is required to share under-recoveries at PSU OMCs on selling diesel and cooking fuels at government-set prices.

Meanwhile, the government on Friday, 16 September 2011, deferred the about Rs 11000-crore follow-on public offer (FPO) of ONGC. ONGC said in a statement that the government has decided not to proceed with the FPO of ONGC as per the timeline mentioned in the Red Herring Prospectus dated 5 September 2011 and it will evaluate its decision in relation to the FPO in due course. The FPO was scheduled to open on 20 September 2011 and close on 23 September 2011.

PSU OMCs declined as a ministerial panel's meeting to consider limiting the sale of cooking-gas cylinders at subsidized rates which was scheduled on Friday, 16 September 2011, was deferred due to opposition from allies of the Congress-led United Progressive Alliance government. Indian Oil Corporation and HPCL fell by between 0.35% to 1.7%. BPCL rose 0.48%, reversing initial losses. PSU OMCs sell cooking gas, diesel and kerosene at state-set discounted prices to help the government control inflation. They get cash subsidy from the government to help trim their losses.

PSU OMCs are currently losing Rs 267 a cylinder. The government is considering to restrict the number of subsidized gas cylinders to help retailers cut their losses and reduce the government's subsidy burden. It is also working on a proposal to directly transfer fuel subsidies to the poor.

IT stocks were mixed on a weak rupee against the dollar. The Indian rupee fell more than 1% on Monday, 19 September 2011, as mounting fears Europe's sovereign debt troubles could trigger a full blown banking crisis curtailed risk appetite and sent shares and the euro lower. A weak rupee boosts revenue of IT companies in rupee terms as the sector derives a lion's share of revenue from exports.

HCL Technologies rose 0.95% after company during market hours today announced that its business transformation division HCL AXON has undertaken a major implementation of the SAP® Customer Relationship Management (SAP CRM) application and an upgrade of SAP® for Utilities solutions at Sacramento Municipal Utility District (SMUD), a community-owned electric utility serving more than 1.4 million people. This is the 25th utility transformation program HCL has executed during the years in North America.

India's largest software services exporter Wipro rose 0.52%. The company recently entered into a strategic alliance with Saab AB to develop and market protective software for the Swedish major's Land Electronic Defence System (LEDS). LEDS provides protection to light and medium combat vehicles and main battle tanks against rocket-propelled grenades, anti-tank missiles, mortars and artillery shells.

India's largest software services exporter TCS declined 1.11%. The company said during market hours today that Deutsche Bank has selected the company as a strategic partner for its production management transformation initiative within their capital market business unit. TCS's advance tax payment reportedly jumped 111.11% to Rs 570 crore in Q2 September 2011 over Q2 September 2010.

India's second largest software services exporter Infosys declined 1.33%. The company is reportedly close to acquiring the health care business of Thomson Reuters in a $700-750 million deal. If the deal goes through, it will be the largest acquisition by Infosys. Thomson Reuters' health care business provides data, analytics and performance benchmarking solutions and services to companies, government agencies and health care professionals.

Sun Pharmaceutical Industries fell 2.65%. The company said before market hours today, 19 September 2011, that one of its US units has successfully resolved an issue arising from a US Food and Drug Administration (USFDA) warning to its manufacturing facility in Cranbury, New Jersey, over regulatory violations. Sun Pharmaceutical Industries Inc.'s facility has been found to have an "acceptable" regulatory status after the FDA re-inspected it in June, the Indian generic drug maker said in a statement.

The FDA had issued a warning letter to the facility on 25 August 2010, after identifying violations of good manufacturing practice regulations during an inspection. Sun Pharma also said that Caraco, a wholly owned subsidiary of company, continues to work with consultants to resolve the issues raised by the USFDA at its Detroit plant.

Tata Motors, India's biggest auto maker by revenue, fell 0.22%, reversing initial gains. The stock had jumped 7.02% on Friday. Tata Motors today, 19 September 2011, said its Jaguar Land Rover luxury car unit will invest 355 million British pounds to build a new engine plant in the UK. The facility will produce a new range of four-cylinder gasoline and diesel engines with lower emissions that will power the future of Jaguar Land Rover, the Mumbai-based auto maker said. The plant at i54 South Staffordshire, a business park near Wolverhampton in the UK's Midlands, is expected to create up to 750 direct jobs at Jaguar Land Rover and thousands more indirectly, it said.

Tata Motors' global vehicle sales in August rose 3% from a year earlier to 87,459 units. Sales at its UK-based luxury car unit, Jaguar Land Rover, jumped 31% to 21,242 vehicles during the month. Sales of Land Rover sport-utility vehicles surged 43% to 17,833 units, but Jaguar sedan sales fell 10% to 3,409 autos. Global sales of all trucks and buses rose 17% to 48,023 units, the company said. Tata Motors' advance tax payment reportedly remained unchanged at Rs 90 crore in Q2 September 2011 over Q2 September 2010.

Maruti Suzuki India jumped 3.09%, on reports production at its two plants in Haryana resumed on Sunday, 18 September 2011. It may be recalled that strike by about 1,900 workers at Suzuki Powertrain India and Suzuki Castings led to a shortage of critical parts, including diesel engines and transmissions for some gasoline car models of Maruti which had forced Maruti to halt production on Friday, 16 September 2011, at its factories in Manesar and Gurgaon in Haryana.

The workers at Suzuki Powertrain and Suzuki Castings had gone on strike to express solidarity with workers at Maruti's Manesar plant. Maruti on 29 August asked 950 regular workers in Manesar to sign a "good conduct bond" before they could enter the factory after the company said it discovered "serious and deliberate" quality problems and suspended and dismissed 21 employees.

Mahindra & Mahindra rose 0.25%. The company's board last week approved divestment of up to 8.09% stake in its subsidiary Mahindra Holidays & Resorts India (MHRIL) in one or more tranches at the best available price through a recognised stock exchange by June 2013 to enable increase of MHRIL's public shareholding and free float in the stock market. M&M currently holds 83.09% of the equity of MHRIL. Shares of MHRIL jumped 4.97%. M&M's advance tax payment rose 6.25% to Rs 170 crore in Q2 September 2011 over Q2 September 2010.

Shares of bike makers were mixed amid fears the latest petrol price hike may adversely impact sales during the festive season. India's second largest two wheeler maker by sales Bajaj Auto fell 1.48% to Rs 1601.50. The stock had hit a record peak of Rs 1694.90 in intraday trade on 6 September 2011. The company's advance tax payment reportedly rose 4.17% to Rs 250 crore in Q2 September 2011 over Q2 September 2010. The company's total sales rose 16% to a record 3.82 lakh units in August 2011 over August 2010. Motorcycle sales jumped 17% to a record 3.38 lakh units in August 2011 over August 2010.

India's largest two-wheeler maker by sales Hero MotoCorp rose 0.39% to Rs 2210. The stock had scaled a record high of Rs 2,231.70 in intraday trade on 9 September 2011. The company's sales rose 19% to 5.03 lakh units in August 2011 over August 2010.

The timing of the latest petrol price hike has been bad for two-wheeler makers. The festive season started early this month and it will last until Diwali, the festival of lights, at the end of October 2011. Sales normally pick up during the festive season every year.

Realty stocks fell on worries higher interest rates could dent demand for residential and commercial properties. Purchases of both residential and commercial property are largely driven by finance. DLF, Indiabulls Real Estate, Phoenix Mills and Ackruti City shed by between 1.26% to 3.3%.

Capital goods stocks fell on worries higher interest rates could affect capital expenditure plans of Indian firms. BEML, Praj Industries, Crompton Greaves, Punj Lloyd and Siemens fell by between 0.91% to 2.38%.

Bhel declined 1.73% to Rs 1657.35. The stock hit 52-week low of Rs 1651.10 today.

Larsen & Toubro dropped 3.02%. The company announced during market hours today that it has bagged orders worth Rs 1015 crore in building and factories segment in Q2 September 2011.

ABB fell 2.06% after the company's Managing Director Bazmi Husain said high interest rates have led to several customers putting off large capital investments, slowing down new business. This, coupled with rising raw material costs, has led to pressure on its profit margins, Husain said. He said, however, that the company is confident of continued growth in its India business on the back of its strong order book.

Interest rate sensitive banking stocks declined on worries that higher lending rates will crimp loan growth. India's largest private sector bank by net profit ICICI Bank declined 2.42%. ICICI Bank's advance tax payment reportedly remained unchanged at Rs 600 crore in Q2 September 2011 over Q2 September 2010.

India's largest bank by branch network and net profit State Bank of India (SBI) fell 1.49% to Rs 1916.60. The stock had hit a 52-week low of Rs 1,812.90 in intraday trade on 14 September 2011. SBI's advance tax payment reportedly fell 10% at Rs 1700 crore in Q2 September 2011 over Q2 September 2010.

Punjab National Bank, Bank of India and Bank of Baroda dropped by between 0.52% to 3.43%.

India's second largest private sector bank by net profit HDFC Bank rose 0.24% to Rs 484.80, off the day's low of Rs 477.10. HDFC Bank's advance tax payment reportedly rose 33% to Rs 800 crore in Q2 September 2011 over Q2 September 2010.

Axis Bank fell 2.2%. The private sector bank said on Friday, 16 September 2011, that its board has considered and unanimously approved the transfer of the financial services business of Enam Securities whereby the Enam Financial Services business will be demerged from Enam into the bank under a Scheme of Arrangement. Enam shareholders will get 5.7 equity shares of Axis Bank for every one equity share of Enam. Upon completion aforesaid transaction, the bank will sell the Enam Financial Services business to ASSL, its wholly owned subsidiary. ASSL will pay the bank a cash consideration of approximately Rs 274 crore, which represents the book value of the Enam Financial Services Business, Axis Bank said. A total of 1.37 crore shares of Axis Bank will be issued to Enam shareholders.

Metal stocks fell as LMEX, a gauge of six metals traded on the London Metal Exchange dropped 0.39% on Friday, 16 September 2011. Sterlite Industries, Sesa Goa, Hindustan Zinc, Bhushan Steel, Sail, Hindalco Industries and Nalco shed by between 0.69% to 3.49%.

Tata Steel fell 1.27%. The company's advance tax payment reportedly rose 19.23% to Rs 620 crore in Q2 September 2011 over Q2 September 2010.

Tata Steel, last week, announced a major five-year improvement programme at its IJmuiden steelworks in the Netherlands. The five-year programme with investment of euro 800 million is designed to sustain the plant's potential to be a world-class steelmaker, Tata Steel said in a statement. After the investment, the plant's annual capacity will rise to 7.7 million liquid steel by 2015-16, from current 7.2 million.

The total number of full-time jobs will reduce by 1,000 over the next four years. There will also be investment of staff training and development and enable the plant to meet the demand of the current complex market situation, the company statement said. "The IJmuiden works enjoys the great advantages of an ideal location with its own port for bringing in raw materials and close proximity to the market, excellent lay-out, an ability to be flexible in the use of raw materials, and a high level of technology and craftsmanship," said Dr Karl-Ulrich Köhler, MD & CEO, Tata Steel Europe.

JSW Steel rose 0.64%, with the stock gaining for the second straight day. The company, last week, said that a cut in its steel production is expected to continue till the resumption of iron ore supplies from e-auction by 'Monitoring Committee' in terms of a Supreme Court order.

Some consumer durables stocks bucked the weak market. Blue Star, Videocon Industries, Gitanjali Gems and Titan Industries shed by between 0.51% to 1.27%.

FMCG stocks declined in a weak market. Marico, Hindustan Unilever, ITC and United Spirits dropped by 0.39% to 2.93%.

India Securities clocked highest volume of 4.78 crore shares on BSE. SRS (1.06 crore shares), GTL (70.58 lakh shares), GVK Power & Infrastructure (65.35 lakh shares) and Unitech (51.82 lakh shares) were the other volume toppers in that order.

India Securities clocked highest turnover of Rs 274.98 crore on BSE. SBI (Rs 80.70 crore), Delta Corp (Rs 51.59 crore), GTL (Rs 48.52 crore) and Larsen & Toubro (Rs 47.85 crore) were the other turnover toppers in that order.

A recent India investor survey report prepared by J P Morgan Asset Management-ValueNotes expects benchmark Sensex to trade between 20,000 and 22,000 by end of this year. According to the report, the investment sentiment is affected by concerns such as recession, frequent hikes in interest rates and volatility in the domestic investment environment. Despite witnessing a 4.2-point decline from the last quarter, the 'Retail Investor Confidence Index' ranks the highest at 137.5 points. Retail investors' activity in mutual funds has improved 11% since the last quarter, the survey said. The survey was carried out from 22 July to 4 August 2011.

The survey also shows that investors are becoming cautious as preserving capital emerges as a popular investment strategy among retail investors (40%). However, 40% of investors, in comparison to 57% in March 2011, are expected to turn "somewhat aggressive" about their investment strategy over the coming six months.

At the time of announcing a 25 basis points rate hike, the Reserve Bank of India (RBI) on Friday, 16 September 2011, said that it is imperative to persist with the current anti-inflationary stance because a premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions.

In recent weeks, as a result of global risk aversion, the rupee has depreciated, which may have adverse implications for inflation, the RBI said. Inflation remains high, generalised and much above the comfort zone of the Reserve Bank of India, it said. The central bank said that Friday (16 September 2011)'s repo rate hike is expected to reinforce the impact of past policy actions to contain inflation and anchor inflationary expectations. As monetary policy operates with a lag, the cumulative impact of policy actions should now be increasingly felt in further moderation in demand and reversal of the inflation trajectory towards the later part of 2011-12, RBI said.

Going forward, the stance of the monetary will be influenced by signs of downward movement in the inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments, RBI said.

Although India's exports have performed extremely well in the recent period, this trend is unlikely to be sustained in the face of weakening global demand, RBI said. This, combined with the slowing down of domestic demand, to which the monetary policy stance is also contributing, suggests that risks to the growth projection for 2011-12 made in the July 2011 monetary policy review are on the downside, RBI said.

Corporate margins in Q1 June 2011 moderated across several sectors compared to levels in Q4 March 2011. However, barring a few sectors, significant pass-through of rising input costs is still visible, RBI said.

The central government's fiscal imbalances widened during April-July of 2011 reflecting, primarily, the impact of decline in revenue receipts coupled with pressures from non-plan revenue expenditures on account of higher petroleum and fertiliser subsidies. Fiscal deficit at 55.4% of the budget estimates in the first four months of the current fiscal was significantly higher than that of 42.5% during the corresponding period last year (when adjusted for the more than budgeted spectrum proceeds).

Reacting to the RBI's latest rate hike, Navneet Munot, Chief Investment Office (CIO), SBI Mutual Fund said, "The lag effect of past actions and global environment would moderate the domestic demand and inflation trajectory going forward, in our view. Our sense is that RBI is likely to take a pause after today's rate action. This should be viewed positively by bond and equity markets. Sentiments in equity markets should improve on evident signs of peaking of rate cycle. Markets would closely watch global developments and movement in commodity prices".

Bank of America Merrill Lynch said in a research note after the RBI's latest hike that it continues to believe that the Indian rate cycle is peaking with growth likely to slip below 7.5% during the second half of 2011 and inflation set to come off to 7% in Q1 2012. The RBI will pause after a final 25 basis points (bps) policy rate hike on 25 October 2011 and cut rates by 100 bps from April 2012 onwards, it said.

Reacting to RBI's latest rate hike, Dhawal Dalal, Senior Vice President and Head Fixed Income, DSP Black Rock Mutual Fund, said the RBI is likely to increase the repo rate by another 25 bps at its next policy review on 25 October 2011. "We expect the RBI to pay a lot more attention to the inflation trajectory going forward with focus on core inflation. The RBI has not been unduly worried about the prospective slowdown in the GDP numbers and is confident of the resilient nature of economy", Dalal said.

Economic Affairs Secretary R. Gopalan on Thursday, 15 September 2011, said that the government has raised the limit of overseas borrowing for companies to $750 million from $500 million. Indian companies can also now raise loans up to $1 billion in Chinese yuan, Mr. Gopalan added. The relaxation of overseas borrowing rules will help Indian companies tap cheaper cash abroad amid rising credit costs in the local market. US and European countries have near-zero interest rates in a bid to support weak economic growth.

The government on Thursday, 15 September 2011, cleared the ambitious $90-billion Delhi-Mumbai industrial corridor. The Delihi-Mumbai industrial corridor project will set up nine mega industrial zones of about 200-250 square kilometre (km) along with a 1,500 km high speed freight line connecting the two cities. It will include three ports and six airports, as well as a six-lane intersection-free expressway connecting the two cities and a 4,000 megawatts (MW) power plant and also set up seven new cities.

The public private partnership (PPP) approval committee approved projects worth Rs 18000 crore on Thursday, 15 September 2011, that include a housing project for para-military forces and a road project among others.

Finance Minister Pranab Mukherjee on Tuesday, 13 September 2011, said central banks in emerging economies have been forced to raise interest rates repeatedly as they battle high inflation, exposing them to volatile capital flows. "An issue of immediate concern for emerging economies is managing large capital flows," he said. "Large and volatile capital flows to emerging markets can be destabilizing as they lead to high exchange rate volatility and in some cases make it incumbent to maintain high levels of foreign exchange reserves as an insurance against sudden and large-scale flight of international capital."

Given the lackluster initial FII response to the government's sharply raising the ceiling of FII investment in long-term corporate bonds issued by the companies in the infrastructure sector in March 2011, the government on Monday, 12 September 2011, further relaxed the norms on FII investment in such bonds. The Finance Ministry said in a statement that FIIs can now invest in long-term infra bonds, subject a ceiling of $5 billion limit, which have an initial maturity of five years or more at the time of issue and residual maturity of one year at the time of first purchase by FIIs. These investments are subject to a lock-in period of one year. FIIs can trade amongst themselves in these bonds but cannot sell to domestic investors during the lock-in period of one year.

FIIs can also now invest, subject to a ceiling of $17 billion, in long-term infra bonds which have an initial maturity of five years or more at the time of issue and residual maturity of three years at the time of first purchase by FIIs. These investments are subject to a lock-in period of three years. During the three-year lock-in period, FIIs can trade amongst themselves but cannot sell to domestic investors. The Securities & Exchange Board of India (Sebi) is expected to issue notifications incorporating these changes in the scheme by 15 October 2011.

Sebi had in early August 2011 allowed Qualified Foreign Investors (QFIs) to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of $3 billion within the total ceiling of $25 billion.

Planning Commission deputy chairman Montek Singh Ahluwalia on Monday, 12 September 2011, said at a conference that private funding has to make up half of the infrastructure investment of $1 trillion planned for in the five years during 2012-2017. Prime Minister Manmohan Singh said at the conference that to overcome the fund crunch for infrastructure projects, the government has proposed to set up a $11 billion fund to help finance infrastructure projects. "We have also constituted a high-level committee to suggest measures necessary for financing our ambitious program in infrastructure development," Mr. Singh said.

Prolonged rainfall in the latter part of the season has helped ease concerns that this year's monsoon might drop below the long-term average after a brief lull in July, when the country usually receives a third of its monsoon rains. The first advance estimates for the 2011-12 kharif season point to a record production of rice, oilseeds and cotton, while the output of pulses may decline.

A good monsoon season can typically boost rural farm incomes and have an impact on the wider economy through increased spending on consumer goods as well as reduced prices of food items. But food prices may not necessarily fall if delayed and excess rains in some regions affect crop yields.

Moody's Investors Services affirmed its Baa3 rating for India's foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released early this month. The ratings firm assigned a positive outlook to India's rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.

The report was upbeat about India's ability to weather a global economic downturn. "While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors," the report said. It noted that India's foreign currency reserves equal four times its foreign debt obligations.

A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India's revenues annually. However, "Moody's expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio," the report said.

European stock markets traded lower on Monday, 19 September 2011, led by banks like Royal Bank of Scotland Group PLC and Societe General SA, as worries about euro-zone debt issues took center stage following an inconclusive weekend meeting of European Union finance ministers. Key benchmark indices in UK, France and Germany were down by 2% to 2.87%.

European stocks had risen last week amid optimism going into the EU finance ministers meeting in Poland. But that gathering failed to announce any new measures to combat the region's debt crisis, with fears that Greece won't get its next tranche of bailout funds again on the rise. Without more money, Greece is expected to run out of funds next month, according to reports.

The Greece cabinet of Prime Minister George Papandreou met on Sunday to discuss growing concerns over the nation's ability to meet fiscal targets. International lenders are withholding the next disbursement of aid to Greece until the government comes up with a credible plan to meet its deficit-reduction commitments.

In a sharply worded statement released after the cabinet meeting Greece Finance Minister Evangelos Venizelos said the government takes full responsibility for the implementation of the agreed program, but also warned that Greece shouldn't be the "scapegoat" used by European institutions to hide their inability to manage the euro-zone crisis. Venizelos is due to hold a teleconference today, 19 September 2011, with representatives from the the European Commission, the International Monetary Fund and the European Central Bank.

The cost of insuring European bank and sovereign government debt against default rose on Monday, 19 September 2011, after the meeting of European finance ministers over the weekend made no progress toward resolving the euro zone's debt crisis. The cost of insuring Greek government debt against default rose, with the market showing investors nearly 100% certain Greece will eventually default.

In Germany, the party of German Chancellor Angela Merkel on Sunday, 18 September 2011, reportedly suffered another regional election loss, this time in Berlin.

Asian stocks fell on Monday, 19 September 2011, as concerns about a Greek default came back to the fore amid indications that Europe is losing patience with the country's efforts to cut its debt pile. Key benchmark indices in China, Hong Kong, Indonesia, Singapore, South Korea and Taiwan fell by between 1.04% to 2.76%. Japanese equity markets were closed for a holiday.

Trading in US index futures indicated that the Dow could fall 137 points at the opening bell on Monday, 19 September 2011.

US stocks rose for a fifth day in a row on Friday and the S&P 500 scored its best week since early July on signs euro zone leaders were acting together to limit any damage from its sovereign debt crisis. US economic data showed consumer sentiment inched up in early September, but Americans were gloomy about the future. A gauge of expectations fell to its lowest level since 1980.

The Federal Open Market Committee (FOMC) is scheduled to undertake a two-day policy review on US interest rates on 20 and 21 September 2011. It remains to be seen if the Federal Reserve announces further measures to revive the US economy. Among the options that the Fed may consider include another round of quantitative easing or QE3, the Operation Twist which is the purchase of long-term verses selling short-term bonds so as to lower long-term yields, and lowering the rate on excess reserves held by banks at the Fed in order to increase the monetary aggregates.