Sunday, December 11, 2011
The Asian Development Bank (ADB) and Reliance Power Limited, one of India’s largest private power developers, are joining forces to build what will be the country’s largest solar photovoltaic power plant. The project is expected to be completed by the second quarter of 2012. "India’s solar energy potential is one of the highest in the world and this plant will help kickstart large-scale, private-sector solar electricity generation in the country," said Michael Barrow, Director in ADB’s Private Sector Operations Department. ADB is providing a long-term loan of up to $48 million to finance the 40 megawatt (MW) Dahanu Solar Power Project located in Jaisalmer district in the western state of Rajasthan. The state has one of the highest levels of solar irradiation in India. Reliance Infrastructure Limited, a leading private distribution company, will buy the electricity under a long term power purchase agreement to fulfill its renewable purchase obligations set by India’s electricity regulators – the first time for a fully private sector transaction in solar power. The power will be distributed to households in Mumbai.
SKS Microfinance Limited today reiterated its commitment to client protection by integrating customer grievance redressal into the business plan and by capping the Return on Assets at 3 per cent for the microfinance business. The Company plans to appoint a social sector veteran as its Ombudsman by the end of December 2011 to herald a new chapter in customer grievance redressal and customer protection in the microfinance industry. SKS Microfinance, which has been demonstrating its business agility in inventing innovative solutions with quickest implementation time-frames, also unveiled its plans to launch a wholly owned subsidiary for its non-microfinance business, seven months after diversifying into Sangam Stores, Mobile Handset Loans and Gold Loans. The Company plans to invest Rs. 150mn in the next three years in order to align its customer grievance redressal and client protection practices with globally recognised benchmarks. The investment will drive a five-pronged customer protection strategy: 1. privacy of client data; 2. transparent and responsible pricing; 3. mechanism for redressal of grievances; 4. avoidance of over-indebtedness among borrowers; and 5. appropriate collection practices. In order to achieve the above-mentioned client protection objectives, SKS will implement the following in a time-bound manner: 1. appointing a panel of national and international experts who will oversee all key customer grievance redressal and customer protection initiatives; 2. upgradation of systems, processes and human resource training; 3. seeking external validation for key client protection practices including pricing transparency, customer grievance redressal and ethical staff behaviour among others; 4. realigning the employee incentive system by integrating customer grievance redressal and customer protection into the KRAs; and 5. appointment of dedicated talent.
The year ahead will be a difficult one for equity investors with the prospects for capital appreciation in most developed equity markets expected to be low, and the need to focus on the income-generating aspects of equities has never been greater, says Fidelity Worldwide Investment (Fidelity). Fidelity Global Chief Investment Officer, Equities Dominic Rossi says while emerging markets will not be immune from eurozone-inspired volatility, their attractions will become more conspicuous as the developed world’s problems are laid bare during the final, volatile phase of the sovereign debt crisis.Economic weakness and financial contagion in Europe will inevitably impact global growth. However, Fidelity does not see a slowdown in emerging markets as a big concern because these markets face inflationary pressures to which slower growth is a partial solution. This allows monetary policy in emerging markets to become more accommodative. While the prospect of capital appreciation is very low in developed equity markets, Rossi believes opportunities exist in income and in emerging markets.
Domestic sales of passenger cars rose by 7% to 171,131 vehicles in November 2011 as against 159,939 units sold in the same month last year, the Society of Indian Automobile Manufacturers (SIAM) said on Thursday. Car sales registered their steepest decline in nearly 11 years in October, sinking by ~24% as a crippling labour unrest hit output at market leader Maruti Suzuki India. Hardening interest rates, rising fuel prices and increasing cost of vehicles have hit car sales this fiscal. Motorcycle sales grew by ~22.70% to 869,070 units during the month under review versus 708,476 units in the corresponding month last year, according to the SIAM data. Total two-wheeler sales were up 25.3% to 1,163,294 units from 928,660 units sold in November 2010, the SIAM data showed. Commercial Vehicle (CV) (trucks and buses) sales jumped ~35% to 66,264 units from 49,087 units sold in the year-ago period, SIAM said. Total automobile sales across categories rose by 22.2% to 1,489,714 units in November 2011 from 1,218,885 units in the same month last year, it added.
Car makers in India may just break even in the ongoing fiscal year, the industry body warned today and said that it would cut its sales outlook for the year. "During the auto expo next month, we are going to revise our sales projections for the fiscal... I feel the passenger car segment will again be downgraded," said Sugato Sen, senior director of the SIAM. "The current estimate is 2-4%. I don't see that happening. We may just break even," he said. The SIAM has already cut its growth forecast twice this year, slashing it to 2-4% in October from its July forecast of 10-12%. At the start of FY12, the SIAM had projected a growth rate of 16-18% in domestic sales of passenger cars. The rise in November sales was partly owing to a low base of last year. "The base was low specifically for passenger cars, which created quantitative growth," said Sen. "There is some revival in demand. But this is not enough to turn around the industry." During April-November this fiscal, domestic car sales declined by 3.5% to 1,219,509 units from 1,264,142 units in the year-ago period. "We may not see a decline in car sales for the entire fiscal. The numbers may be just at the same level of last fiscal," Sen said. The industry body expects car sales to improve in the first few months of 2012, Sen said.
Media reports suggested on Thursday that India's industrial output declined by 7% in October, dragged down by a fall in the capital goods sector. This will be the first contraction in the IIP since June 2009, a national daily reported. The Government is scheduled to release the IIP data on December 12. India's industrial growth slowed to a two-year low of 1.9% in September. India's infrastructure output plunged in October to touch its lowest in six years, raising concern about the fast deteriorating outlook for industrial production. Eight core industries, which have a combined share of 37.90% in the IIP, stalled in October, growing by a mere 0.1%, compared to its growth of 7.2% in October 2010. The core sectorhad expanded by 2.3% in September 2011. Out of Coal, Crude Oil, Natural Gas, Petroleum Refinery and Fertilizer sectors shrank in October, while that of Cement remained flat.
India's GDP growth in the current fiscal year (2011-12) is expected to be around 7.5%, plus or minus 0.25%, Finance Minister Pranab Mukherjee said on Friday while presenting a mid-year economic scorecard in the Parliament. The latest GDP projection by the Government is down from the original 9% GDP growth forecast made at the start of the year. The slowdown is among the least severe worldwide, Mukherjee told lawmakers today, adding that some revival can be expected next year. It is possible for India to return to long-term growth rate of 9% as fundamentals of the economy remain strong, the Finance Minister said today. Overall WPI inflation is likely to decline from December while the same will be around 7% at the end of the ongoing fiscal year in March, the Finance Ministry report said. Depreciation in the rupee vs the US dollar is in line with other currencies, Mukherjee said. Overall fiscal stance of the Government is that of consolidation, he said, adding that the country's external debt is at manageable levels.
After much ado, the Lokpal draft was finally tabled in both houses of Parliament on Friday. The Rajya Sabha was, however, adjourned till 2.30 PM due to an uproar over Minister SM Krishna’s alleged involvement in the mining scam, reports said. This occurs ahead of Anna Hazare’s day long fast at Jantar Mantar on Dec 11 to push for a strong Lokpal. The Gandhian has declared that an extended agitation would be held at Ramlila Gounds beginning 27 if the legislation is not passed in the Winter Session of the Parliament, reports added. The draft report of the Lokpal Bill was finalised by the Parliamentary Standing Committee on Dec 7. Members of the Opposition namely Bharatiya Janata Party, Left parties and the Samajwadi Party submitted their dissent notes on the report and were joined by some Congress members too. Most dissenting notes deal with the exclusion of roughly 5.7 million Group C staff, the largest chunk of government employees, from the Lokpal's purview, reports said. Other dissent notes included the demand for inclusion of the PM and lower bureaucracy in the scope of the Lokpal. However, the controversial matters are left to be dealt with by the Parliament by way of debates, according to Panel chairman Abhishek Manu Singhvi.
Food inflation in India slid further in the fourth week of November, falling under the 7% mark, data released by the Government showed on Thursday. Fuel inflation remained steady. The sharp drop in food inflation over the past one month or so is likely to provide some much-needed breather to consumers and the policymakers. However, it will be a while before the RBI starts considering a cut in its policy rates. Food inflation declined to 6.6% in the week ended November 26 from 8% in the preceding week, the Commerce & Industry Ministry said today. Food inflation stood at 8.93% in the corresponding week last year. Inflation in the Primary Articles group fell to 6.92% in the week under review, from 7.74% in the week ended November 19, according to the Commerce Ministry statement. It was at 14.01% in the year-ago period. Inflation in the Fuel & Power group stood at 15.53% in the week ended November 26, unchanged compared to the previous week, the Government data showed. It was at 10.07% in the comparable week of the previous year. Inflation in the Non-Food Articles space slid to 1.37% in the week under review from 2.14% in the previous week, the Government data showed. It was at 27.31% in the same period a year earlier.
The European Union (EU) leaders agreed on new rules for budget discipline among its member nations but failed to reach a consensus on treaty changes on reported resistance from few others like the UK. Any deal may now just involve the 17 nations that share the euro, plus others who may want to join, the reports said. An agreement involving all 27 EU members fell through after British Prime Minister David Cameron reportedly demanded concessions that Germany and France were not willing to give. EU leaders chose to create a new inter-governmental treaty which will be negotiated only among 23 of the bloc’s members. The split on the new budget rules will leave the UK and Hungary out while the Czech Republic and Sweden are still considering whether to join or not.
Next week is again very important for our markets. The IIP data for October will be out on Monday. The number is likely to be a pretty dismal one with one national daily actually reporting a 7% contraction.
Latest inflation report will be released on Dec. 14 and the RBI will take up its review on Dec. 16. A pause is what the RBI had predicted at its previous meeting. But, one has to see what stance the central bank takes as the rupee's depreciation has made things worse with cost of imports shooting up sharply.
Domestic and global woes weighed on the sentiments this week. The Sensex fell 3.76% and the Nifty dropped 3.63%.
Headlines for the week
India’s services sector rebounds in November
Food Inflation at 6.6% versus 8%
2G scam: Court to decide on Swamy's plea against Chidambaram
Domestic sales of cars up by 7%, bikes by 22.67% in November
FM says FDI in retail suspended to avoid mid-term polls
FY12 growth seen at 7.5%: FM report