Sensex, Nifty retract from 3-week highs

Key benchmark indices edged lower amid intraday volatility as weak European shares triggered profit taking on the domestic bourses after recent strong gains in share prices. The barometer index BSE Sensex fell below the psychological 17,000 mark, having alternately moved above and below that mark in intraday trade. The Sensex shed 74.47 points or 0.44%, off about 200 points from the day's high and up close to 30 points from the day's low. The market breadth turned negative from positive in late trade.



From a 20 month low of 15,792.41 on 5 October 2011, the Sensex had risen 1165.98 points or 7.38% in four trading sessions to 16,958.39 on 12 October 2010. The Sensex has risen 430.16 points or 2.61% in this month so far. The index has slumped 3,625.17 points or 17.67% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 4,224.72 points or 20.01%. From a 52-week low of 15,745.43 on 4 October 2011, the Sensex has risen 1,138.49 points or 7.23%.

Coming back to today's trade, index heavyweight Reliance Industries (RIL) edged lower in volatile trade. Interest rate sensitive automobile stocks dropped on profit taking after recent strong gains triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. FMCG and capital goods stocks also declined. Interest rate sensitive banking and realty stocks extended their recent rally triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month.

The market was volatile. A firm opening took the barometer index BSE Sensex to a 3-week high above the psychological 17,000 level. The market trimmed intraday gains to hit fresh intraday low in morning trade. The market slipped into the red to hit fresh intraday low in mid-morning trade. The Sensex fell below 17,000 level. The market alternately swung between gains and losses in early afternoon trade. The market regained strength in afternoon trade, with the Sensex reclaiming the psychological 17,000 mark.

The market trimmed losses after reversing gains to hit fresh intraday lows in mid-afternoon trade. The Sensex fell below the psychological 17,000 mark. The market extended losses in late trade.

The BSE Sensex lost 74.47 points or 0.44% to settle at 16,883.92, its lowest closing level since 11 October 2011. The index jumped 125.68 points at the day's high of 17,084.07 in early trade, its highest level since 21 September 2011. The index declined 104.36 points at the day's low of 16,854.03 in late trade.

The S&P CNX Nifty lost 21.55 points or 0.42% to settle at 5,077.85, its lowest closing level since 11 October 2011. Nifty hit a high of 5,136.95 in intraday trade, its highest level since 21 September 2011. Nifty hit a low of 5,067.65 in intraday trade.

The BSE Mid-Cap index rose 0.03% and the BSE Small-Cap index gained 0.06%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2515 crore, lower than Rs 2716.64 crore on Wednesday, 12 October 2011.

The market breadth, indicating the overall health of the market, turned negative from positive in late trade. On BSE, 1,423 shares fell and 1,377 rose. A total of 115 shares were unchanged.

From the 30-share Sensex pack, 22 fell and the rest rose.

Index heavyweight Reliance Industries (RIL) fell 0.31% to Rs 846.85. The stock was volatile, gyrating between a high of Rs 857 and a low of Rs 842. The stock had surged recently on expectations of good Q2 results. RIL's advance tax payment rose 37.6% to Rs 1800 crore in Q2 September 2011 over Q2 September 2010, hinting at good Q2 results from the diversified firm. RIL unveils Q2 results on Saturday, 15 October 2011.

BP PLC recently said it expects its partnership with RIL to boost natural gas output at the D6 block in the Krishna Godavari basin, off India's east coast. BP Chief Executive Robert Dudley and RIL Chairman Mukesh Ambani met trade minister Anand Sharma in New Delhi on 28 September 2011. RIL is fighting a decline in gas output at the D6 block. BP and RIL on 28 September 2011, pitched for permission from the government to develop satellite fields adjacent to the D6 block.

RIL, last month, closed a deal with UK-based BP to sell a 30% stake in its 21 oil and gas exploration blocks in India. RIL 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 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.

FMCG stocks fell on profit taking. Nestle India, ITC, Hindustan Unilever, and Godrej Consumer fell by between 0.01% to 1.03%.

Capital goods stocks declined in a weak market. L&T, Bhel, Siemens, BEML shed by between 0.39% to 1.74%.

IT bellwether Infosys rose 0.55%, extending Wednesday's 6.83% surge triggered by good Q2 results and upward revision in full year earnings guidance. Infosys announced before market hours on Wednesday, 12 October 2011, that its consolidated net profit as per International Financial Reporting Standards (IFRS) rose 10.68% to Rs 1906 crore on 8.2% growth in revenue to Rs 8099 crore in Q2 September 2011 over Q1 June 2011.

Infosys has forecast 9.72% to 11.11% growth in non-annualized earnings per American Depositary Share at $0.79 to $0.80 in Q3 December 2011 over Q2 September 2011. It has forecast 3.2% to 5.3% growth in revenue at $1.802 to $1.84 billion in Q3 December 2011 over Q2 September 2011.

The company has for the second quarter in a row revised upwards its dollar earnings guidance for the year ending March 2012 (FY 2012). The company expects 15.3% to 16.8% growth in earnings per American Depositary Share at $3.02 to $3.06 in FY 2012 over the year ending March 2011 (FY 2011). However, the company has revised downwards dollar revenue growth guidance for FY 2012. The company expects 17.1% to 19.1% growth in revenue at $7.08 billion to $7.20 billion in FY 2012 over FY 2011.

Infosys has forecast 15.4% to 1.7.5% growth in non-annualised earnings per share (EPS) at Rs 38.51 to Rs 39.20 in Q3 December 2011 over Q2 September 2011. The company has forecast 8.97% to 11.2% growth in revenue at Rs 8826 crore to Rs 9012 crore in Q3 December 2011 over Q2 September 2011.

Thanks to a recent steep fall in rupee against the dollar, Infosys has sharply revised upwards EPS guidance for FY 2012. The company has projected 19.7% to 21.6% growth in EPS at Rs 143.02 to Rs 145.26 in FY 2012 over FY 2011. The company has also revised FY 2012 revenue guidance upwards. Infosys has projected 21.8% to 24% growth in revenue at Rs 33501 crore to Rs 34088 crore in FY 2012 over FY 2011.

India's largest software services exporter TCS gained 1.06%, extending Wednesday's 3.66% gains. India's third largest software services exporter Wipro fell 0.4% after Wednesday's 2.71% rise.

Interest rate sensitive automobile stocks edged lower on profit taking after recent strong gains triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Automobile purchases, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. India's largest truck maker by sales Tata Motors fell 3.09% on profit taking after surging 23.15% in the preceding five trading sessions. The recent rally in the counter was triggered by easing of euro-zone debt worries. UK unit, Jaguar Land Rover, generated 57% of Tata Motors' revenue during the year ended 31 March 2011, up from 53% a year earlier.

Tata Motors last week introduced its Manza sedan and Prima range of trucks in South Africa at the Johannesburg International Motor Show. "We see Africa as a region of tremendous potential for the group," Noel Tata, managing director of Tata International, the trading arm of Tata Group, said in a statement. "In South Africa, the auto industry is making giant strides and we are happy to contribute to this growth." Tata Motors sells its passenger vehicles and light trucks in South Africa through a local joint venture between group company Tata Africa Holding and South Africa's Associate Motor Holdings. Other trucks and buses are sold through a wholly owned subsidiary of Tata Africa, Tata Automobile Corporation South Africa (Pty).

Tata Motors' total sales rose 22% to 78,786 units in September 2011 over September 2010. The homegrown firm's total passenger vehicles sales in the domestic market stood at 26,319 units in September, up 10.22% from 23,877 units in the same month last year. The company's total exports grew by 23% to 6,220 units in September 2011 over September 2010.

India's top small car maker by sales Maruti Suzuki India fell 2.71% as labour woes continue at the company's Manesar, Haryana unit. There hasn't been any production at Maruti's Manesar factory since 7 October 2011 due to the labor unrest, and the company has also been forced to cut output at its Gurgaon plant, also in Haryana state, due to lower supplies of diesel engines and transmissions from Suzuki Powertrain India , a unit of the auto maker's parent Suzuki Motor Corp.

The current labor unrest follows Maruti's Aug. 29 decision to halt operations at Manesar after it asked 950 workers to sign a "good conduct bond" before they could enter the factory. The move came after the company said it discovered "serious and deliberate" quality problems in cars made at the plant.

India's largest tractor and sports utility vehicles maker Mahindra & Mahindra (M&M) shed 1.13%. M&M plans to raise monthly production of its new sport-utility vehicle--XUV500--by half to 3,000 units in January and more than double it to 5,000 units in June to meet robust local demand. The company currently produces 2,000 units of XUV500 a month. M&M on Wednesday said it has received more than 8,000 bookings for the vehicle in the first 10 days of the launch, forcing it to halt taking fresh orders.

M&M's total auto sales rose 25% to a record 44,137 units in September 2011 over September 2010. The company's domestic sales stood at 41,136 units during September 2011, as against 33,866 units during September 2010, an increase of 21%. M&M's Passenger Vehicles segment (which includes the Utility vehicles and Verito) registered a growth of 11%, having sold 19,447 units in September 2011, as against 17,537 units during September 2010. The 4-wheeler commercial segment which includes the passenger and load categories registered a phenomenal growth of 45%.

India's largest bike maker by sales Hero MotoCorp shed 1.03%. The company's total sales jumped 26.75% to 5.49 lakh units in September 2011 over September 2010. Hero MotoCorp's total sales increased 20.10% to 15.44 lakh units in Q2 September 2011 over Q2 September 2010. The company expects sales growth to continue into the festive season.

India's second largest bike maker by sales Bajaj Auto declined 0.43%. The company's total sales rose 18% to a record 4,17,686 units in September 2011 over September 2010. Motorcycle sales rose 18% to a record 3,71,208 units. Commercial vehicle sales rose 21% to 46,478 units in September 2011 over September 2010. The company said it achieved record three-wheeler sales in September 2011. Exports rose 39% to 1,41,913 units in September 2011 over September 2010.

Interest rate sensitive banking stocks extended their recent rally triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. India's second largest private sector bank by net profit HDFC Bank rose 0.71%, with the stock gaining for the fifth straight day. India's largest private sector bank by net profit ICICI Bank rose 2.22%, extending Wednesday's 3.24% jump.

State Bank of India (SBI) rose 0.79%, extending Wednesday's 6.07% rally triggered by hopes of capital infusion from the Government of India, its majority shareholder. Financial Services Secretary D.K. Mittal on Tuesday, 11 October 2011, said that the government will inject Rs 3000 crore to Rs 4500 crore in SBI this fiscal year to help improve its capital base. "The capital infusion in SBI may happen by December-end, but definitely before March 31," Mittal said. His comments come after Moody's Investors Service last week cut its rating on SBI's financial strength to D+ from C- and lowered its hybrid debt rating on the bank to Ba3 (hyb) from Ba2 (hyb), flagging concerns over capital and deteriorating loan quality.

Mittal said that the rating downgrade was "shocking" and "unfair", and that some banks in developed countries were rated higher despite their asset quality being inferior to SBI's, He also said that the capital infusion may not be through a rights issue or a public share sale as market conditions weren't right for that, but through other methods. He didn't elaborate.

Axis Bank fell 0.82% on profit taking after the stock soared 15.04% in preceding four trading sessions.

The government today, 13 October 2011, approved amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and debt recovery acts to enable banks to effectively deal with the menace of bad loans and also encourage them to disburse credit freely to home and corporate loan seekers. The Cabinet approved the introduction of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, in the next Winter Session of Parliament.

Information and Broadcasting Minister Ambika Soni said that suggested amendments will strengthen the ability of banks to recover debts due from the borrowers, enhance the ability of banks to extend credit to both corporate and retail borrowers, reduce the cost of funds for banks and their customers and reduce the level of non-performing assets.

Interest rate sensitive realty stocks extended their recent rally triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Purchases of both residential and commercial property are largely driven by finance. DLF, HDIL, Phoenix Mills and Sunteck Realty rose by between 0.71% to 2.63%.

Shares of Vijay Mallya-led UB Group companies Kingfisher Airlines, United Spirits, and United Breweries Holdings climbed 5.46% to 11.78% after the UB Group agreed to sell a 42.5% stake in its Formula One team to Sahara Group. Both Mallya and Sahara Group, headed by Subroto Sahara, will own 42.5% equity each in the team and the remaining 15% will be with the Dutch entrepreneur Michiel Mol family, say reports.

Media shares rose on reports that the Union Cabinet has cleared ordinance for cable network digitization. Wire & Wireless India (up 20%), Hathway Cable & Datacom (up 10.3%), Dish TV (up 3.21%), and Den Networks (up 0.8%) surged. The Telecom Regulatory Authority of India (TRAI) recommended digitization of the cable sector in its report and information and broadcasting (I&B) ministry had accepted the recommendation.

Telecom stocks fell for the second straight day after gaining in the preceding two sessions. Bharti Airtel (down 1.16%), Idea Cellular (down 1.63%), MTNL (down 0.49%) and Reliance Communications (down 0.13%) edged lower. The government unveiled draft of the new telecom policy early this week.

Cement shares witnessed profit taking. ACC, India Cements, Ambuja Cements, and Jaiprakash Associates shed by between 1.31% to 1.86%.

Metal stocks also fell on profit taking. Jindal Steel & Power, Sterlite Industries, Sail, Nalco Hindalco Industries and Jindal Saw shed by between 0.04% to 3.45%. LMEX, a gauge of six metals traded on the London Metal Exchange rose 2.42% on Wednesday, 12 October 2011.

Tata Steel rose 1.63%. Tata Steel Europe's chief executive said on Wednesday, 12 October 2011 that Tata Steel Europe is prepared to cut its output further if its order book weakens over the next couple of months. Tata Steel Europe is the European arm of Tata Steel. Tata Steel Europe has already shut down one blast furnace at its Scunthorpe, UK steel works and is operating at 80% to 85% of full production capacity, in line with other steelmakers in Europe. "We don't exactly know where this is going to go in the next couple of months. If it is a temporary thing we will find temporary solutions," Karl-Ulrich Koehler said at a press briefing at the annual World Steel Association on Wednesday. "If the order book is not supporting production, we will certainly reduce further," he added.

NTPC fell 1.92%. The coal ministry reportedly plans to give priority to NTPC when selling the fossil fuel through electronic auctions or e-auctions as part of efforts to mitigate a supply shortage at the state-run company's power generating stations. Coal shortages at NTPC's stations have worsened in the past few days, reducing electricity generation and causing outages in several states as well as the capital Delhi. Coal supply has been disrupted due to heavy rainfall, shutdowns in mining regions, protests in a southern state and a workers' strike at state-run miner Coal India early this week.

Coal Minister Sriprakash Jaiswal on Wednesday, 12 October 2011, said NTPC will have to pay prevailing market prices at the e-auctions and won't be given any special discounts. Any move that gives NTPC access to more coal will help India's largest power producer by capacity to increase electricity generation. Still, sales through e-auctions conducted by Coal India may not be enough to meet NTPC's requirement.

Shares of airline companies rose on buzz the government may allow foreign airlines to invest in domestic carriers. SpiceJet (up 2.43%), and Kingfisher Airlines (up 11.78%), edged higher. Jet Airways (India) rose 0.98% after the company announced comprehensive strategic cooperation with Vietnam Airlines.

Given the cash crunch at many domestic carriers, the Department of Industrial Policy and Promotion (DIPP) has reportedly sent several letters to the Civil Aviation Ministry on the issue of allowing foreign airlines to invest in domestic carriers. Besides cash infusion, foreign airlines can also help in operational efficiency and connectivity improvement, the DIPP has noted. Currently, India allows up to 49% foreign direct investment (FDI) in domestic airlines through the automatic route while NRIs can invest up to 100%. Foreign airlines are, however, barred from investing in domestic airlines.

In 2008, the civil aviation ministry had proposed to allow foreign carriers to hold up to 25% in local carriers within the overall FDI limit of 49%. It, however, later backed out arguing the time was not right for such a move given the nascent stage of Indian airline industry

Resurgence Mines clocked highest volume of 50.35 lakh shares on BSE. SpiceJet (49.03 lakh shares), K S Oils (41.21 lakh shares), Wire & Wireless (38.33 lakh shares) and Surya Chakra Power Corporation (37.62 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 196.25 crore on BSE. Jubilant FoodWorks (Rs 95.64 crore), Infosys (Rs 83.56 crore), RIL (Rs 67.32 lakh shares) and Tata Motors (Rs 60.83 crore) were the other turnover toppers in that order.

The Q2 results season has started on a positive note, with good results from IT bellwether Infosys on Wednesday, 12 October 2011. The company also revised upwards its full year earnings guidance in both dollar and rupee terms. Stock-specific activity may dominate trade in the near-term as earnings trickle in. Investors will closely watch the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook. Reliance Industries unveils Q2 results on 15 October 2011. IT major TCS, housing finance major HDFC and media major Zee Entertainment Enterprises unveil Q2 results on 17 October 2011. Jindal Steel & Power, Jet Airways (India), Hero MotoCorp and HCL Technologies unveil quarterly results on 18 October 2011. HDFC Bank unveils Q2 results on 19 October 2011.

Bajaj Auto, Cairn India, Biocon, UltraTech Cement, Exide Industries and Thermax unveil quarterly results on 20 October 2011. Engineering & construction major L&T, Idea Cellular, paints major Asian Paints, JSW Steel and Godrej Consumer Products reveal Q2 results on 21 October 2011. Axis Bank and Grasim unveil Q2 results on 22 October 2011. Cigarette major ITC, Sterlite Industries and Titan Industries unveil Q2 results on 24 October 2011.

NTPC, Kotak Mahindra Bank and Dr. Reddy's Lab unveil Q2 results on 25 October 2011. Maruti Suzuki reports Q2 results on 29 October 2011. ICICI Bank, Wipro, Dabur India, Colgate Palmolive (India) and BPCL unveil Q2 results on 31 October 2011. Cement majors ACC and Ambuja Cements and Aditya Birla Nuvo unveil quarterly results on 1 November 2011. ABB unveils results on 8 November 2011. Ranbaxy Laboratories unveils quarter results on 9 November 2011. Mahindra & Mahindra and India Cements unveil Q2 results on 14 November 2011.

Lower global commodity prices may ease pressure on corporate profit margins arising from higher raw material prices and at the macro level it could help ease inflation pressure. However, a weak rupee will offset the benefit of the recent steep fall in global commodity prices triggered by global growth worries. Most commodities imported by India, particularly oil, are denominated in dollars making these expensive for India. The rupee had declined from its 2011 high of 43.855 reached in late July 2011. The Standard & Poor's GSCI Index of 24 commodities, hit a 10-month low last week. Commodity prices have since recovered along with global equities.

The market regulator Securities and Exchange Board of India recently set a minimum net worth of Rs 100 crore for companies that wish to issue structured products or market-linked debentures to raise funds. Sebi also set the minimum size for such issues at Rs 10 lakh. Market-linked debentures are hybrid products which have the features of usual debt securities, but offer market-linked returns like an exchange-traded derivative. The issuer company will have to appoint a third party, a credit-rating company registered with the regulator, which will provide the value of the security at least once a week, Sebi said in a circular.

The government last month 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.

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 12 September 2011, further relaxed the norms on FII investment in such bonds. 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.

Industrial output in the month of August 2011 rose a slower-than expected 4.1% from a year earlier, data released by the government on Wednesday, 12 October 2011, showed. Industrial output growth for July was revised upwards to 3.84% from a provisional reading of 3.28%. Manufacturing output, which constitutes about 76% of the industrial production rose an annual 4.5% in August versus 2.3% in July. The government also revised upwards the industrial production growth for May 2011 to 6.15% from 5.91% reported earlier.

The government recently raised its borrowing target for the current fiscal year by Rs 52800 crore, surprising the market and fueling worries that it may even overshoot the new estimate because of muted revenue growth amid a slowing economy and swelling subsidies. The government will borrow Rs 2.2 lakh crore during October 2011-March 2012 period, or the second half of the fiscal year, compared with the target of Rs 1.67 lakh crore announced in budget in February 2011. C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, on 29 September 2011 said it is going to be difficult to achieve fiscal deficit target of 4.6% of GDP for the year ending March 2012.

The government's new borrowing programme may crowd out private borrowers who come into the market in the second half of the year. Credit growth normally picks up after October every year when the busy season starts.

Atsi Sheth, a New York-based vice president and senior analyst at Moody's Investors Service said in a media interview recently that Moody's is unlikely to change its rating outlook on India for now, though the extent of the increase in the government's borrowing target is a surprise. The possibility of fiscal slippage is, however, already factored into the sovereign rating, Sheth said.

Standard & Poor's Ratings Services on 3 October 2011 said it is maintaining its view that India will struggle to meet its fiscal deficit target. Takahira Ogawa, director of Sovereign and International Public Finance Ratings at S&P said India must prove its intent to continue with the process of fiscal consolidation in the medium term.

While its tolerance of inflation has gone up with rising income levels, the Reserve Bank of India (RBI) will raise rates further if high inflation persists, central bank deputy governor Subir Gokarn said Wednesday, 12 October 2011. The RBI will discuss domestic growth and inflation at its board meeting on Thursday, 13 October 2011, central bank governor D Subbarao added at a joint panel discussion, as he reiterated that controlling inflation is the main focus of monetary policy. Rangarajan on Wednesday, 12 October 2011, said the September inflation data will be key in shaping the RBI's next rate move.

The food price index rose 9.32% and the fuel price index climbed 15.10% in the year to 1 October 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 9.41% and 14.69%, respectively. The primary articles index was up 10.60%, compared with an annual rise of 10.84% a week earlier.

Wholesale price index-based inflation quickened to 9.41% from a year earlier, compared with 9.13% the previous week, according to data issued on Friday, 7 October 2011, by the Ministry of Commerce and Industry. On a week-on-week basis, the food articles index rose a marginal 0.2% to 197.7, recording the eighth successive week of rising prices.

Data on wholesale price index for September 2011 due on Friday, 14 October 2011, could provide cues on the Reserve Bank of India's likely monetary policy stance at the half-yearly review of the monetary policy on 25 October 2011. A Capital Market poll of economists expects 9.7% inflation for September 2011, compared with a reading of 9.78% for August 2011. Five out of nine economists polled by Capital Market expect a 25 basis points hike in repo rate from the Reserve Bank of India at its half-yearly review of the monetary policy on 25 October 2011. The rest four expect a status quo on rates.

RBI said at a monetary policy review on 16 September 2011 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. The RBI raised repo rate by 25 basis points on 16 September 2011.

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 in its 16 September 2011 policy statement. The overall tone of the RBI's September policy was softer than the previous policy announcement which was extremely hawkish.

RBI said on 16 September 2011 that corporate margins moderated across several sectors in Q1 June 2011 compared to levels in Q4 March 2011. However, barring a few sectors, significant pass-through of rising input costs is still visible, RBI said.

India's services sector contracted for the first time in more than two years as new business dried up and expectations weakened amid concern over a flagging world economy, a survey showed on 5 October 2011. The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of around 400 firms, plunged in September to 49.8 -- its lowest reading since April 2009 -- and below the 50 mark which separates growth from contraction.

The slowdown in growth has continued to broaden with the service sector seeing a further slowdown in economic momentum, HSBC economist Leif Eskesen said. The new business sub-index sank to a 28-month low of 51.6 in September, down from 54.9 in August. The weak expansion in new business -- the main cause of the stagnation in activity -- meant employment levels fell for a third consecutive month. Despite harsh conditions firms were able to pass on rising input costs to customers, albeit at a slightly lower pace than in August.

The growth in manufacturing sector nearly stalled in September 2011, hitting its weakest spot since March 2009 on slowing output and orders growth following a series of interest rate hikes, data showed on 3 October 2011. The HSBC Markit India Manufacturing PMI fell more than two points to 50.4 in September 2011 from 52.6 in August 2011, very close to the 50 mark which divides growth and contraction. The output index plunged by its biggest amount in one month since November 2008, to 51.1 from 56.

Exports jumped 44.25% to $24.3 billion in August 2011 from a year earlier, while imports for the month rose 41.82% to $38.4 billion, leaving a trade deficit of $14 billion, the latest government data showed.

European markets declined in volatile trade on Thursday, 13 October 2011. Key benchmark indices in Germany, UK and France were down by between 0.71% to 1.46%.

Slovakia is expected to approve the increase to the European Financial Stability Facility by the end of the week. Slovakia is the only euro-member nation yet to approve the changes to the EFSF, which would allow the fund to intervene in bond markets and help recapitalize banks.

Germany and France, the leading powers in the euro-zone, have promised to propose a comprehensive strategy to fight the debt crisis at an EU summit on 23 October 2011.

Asian markets on Thursday, 13 October 2011, extended their recent strong gains with export firms among the biggest gainers, as the latest plan to resolve Europe's sovereign-debt woes revived risk appetite. Key benchmark indices in China, Japan, Hong Kong, Indonesia, Singapore and South Korea rose by between 0.62% to 2.34%. Taiwan's Taiwan Weighted fell 0.14%.

China's trade surplus cooled in September 2011 for the second straight month as growth in exports and imports weakened against a backdrop of global economic woes. The surplus eased to $14.51 billion, compared to $17.76 billion in August, and $31.5 billion in July, according to data released Thursday by the General Administration of Customs. Exports rose 17.1% in September from a year earlier, compared to a 24.5% rise in August. Imports rose 20.9% from a year earlier, easing from a 30.2% rise in August, and short of market expectations.

Thursday's rally in Asian stocks followed an upbeat performance in the US and Europe on Wednesday, where sentiment was buoyed by growing hope that Europe is closer to a solution to its sovereign debt woes. European Commission President Jose Manuel Barroso on Wednesday, 12 October 2011, laid out a plan to recapitalize Europe's banks as part of a "roadmap" to tackle the region's sovereign debt crisis.

Trading in US index futures indicated that Dow could fall 39 points at the opening bell on Thursday, 13 October 2011. US stocks rose on Wednesday as Europe's progress toward bolstering its financial rescue fund brought more battle-weary investors back into the market. US Federal Reserve officials discussed the possibility of launching a fresh round of bond purchases before deciding last month on a more limited step to aid the economy, minutes released on Wednesday showed. Fed staff presented policy-makers with a range of ways they could step up monetary stimulus for the flagging economy, including laying out their goals for the labor market.