Friday, February 22, 2013
The market is likely to edge lower in opening trade tracking mostly lower Asian stocks. Trading of CNX Nifty futures on the Singapore stock exchange indicates that the Nifty could slide 11.50 points at the opening bell. Asian stocks were mostly lower on Friday extending a monetary-policy-inspired sell-off from the previous session into the end of the week. Bharat Heavy Electricals (Bhel) would be in focus as the Union Cabinet on Thursday, 21 February 2013 gave its approval for merger of Bharat Heavy Plate & Vessels (BHPV) with Bharat Heavy Electricals (Bhel). The merger will facilitate BHPV to become a unit of Bhel. BHPV would be able to participate in tenders, obtain orders and attract best vendors for procuring materials / capital goods. BHPV is an engineering / heavy fabrication company established in 1966 in Vishakhapatnam, Andhra Pradesh. Due to various factors, there were heavy losses and the company was declared sick by the Board for Industrial and Financial Reconstruction (BIFR) in October, 2005. Bhel took over BHPV as its 100% subsidiary in 2008. However, the company's performance was not upto the mark, as it remained a separate company and it could not derive full benefits of synergy with Bhel. Pharma major Lupin after market hours on Thursday, 21 February 2013, said that its subsidiary Lupin Pharmaceuticals Inc. has received final approval for its Lorazepam Oral Concentrate USP, 2 mg/mL from the United States Food and Drugs Administration (US FDA) to market a generic version of Lorazepam Intensol, 2 mg/mL, of Roxane Inc. Lupin's Lorazepam Oral Concentrate USP, 2 mg/mL is indicated for the management of anxiety disorders or for the short term relief of the symptoms of anxiety or anxiety associated with depressive symptoms. Lorazepam Oral Concentrate had annual US sales of approximately $10.7 million as per IMS MAT September 2012 sales data. Havells India after trading hours on Thursday, 21 February 2013, said that the board of directors of the company has by way of a circular resolution and subject to the approval of the shareholders of the company, the Reserve Bank of India and any other authorities, resolved to increase the limit of shareholding by registered foreign institutional investors (FIIs) to 40% in the paid-up share capital of the company. The decision comes close on the heels of the Reserve Bank of India (RBI) banning fresh purchases of Havells India shares by FIIs. RBI on 15 February 2013 said that no further purchases of shares of Havells India would be allowed on behalf of FIIs since the overall FII investment limit of 24% of the company's paid-up capital has been surpassed. Havells India's board has also decided to alter the Objects Clause of the Memorandum of Association of the company and commence new business, pursuant to sections 17 and 149(2A) of the Companies Act, 1956. ABB after market hours on Thursday, 21 February 2013 said its board has approved to change the name of the company as "ABB India". This change of name is however subject to the approval of the company's shareholders, Registrar of Companies Karnataka, and any other concerned authorities, as may be required in this regard. Key benchmark indices slumped on Thursday, 21 February 2013 as stocks fell across the globe after minutes from the US Federal Reserve released on Wednesday, 20 February 2013, stoked concerns that policy makers could pull back on their massive quantitative-easing program as the US central bank said that it would review the program in March 2013. The Fed's asset purchases, known more popularly as quantitative easing (QE), are regarded as a key source of global liquidity that helps support an array of assets, including equities. The BSE Sensex lost 317.39 points or 1.62% to settle at 19,325.36, its lowest closing level since 27 December 2012. Foreign institutional investors (FIIs) bought shares worth a net Rs 1213.57 crore on Thursday, 21 February 2013, as per provisional data from the stock exchanges. PSU disinvestment and reduction of promoter stake to meet the Securities & Exchange Board of India (Sebi) mandated minimum public shareholding of 25% for private companies and 10% for state-run firms will result in supply of equity in the market over the next few months. The government has set target of Rs 30000 crore from PSU divestment for the fiscal year ending 31 March 2013. Meanwhile, as per the Sebi mandated minimum public shareholding rule, private-sector companies must cut founders' stake to adhere to the rules by 13 June 2013, while the deadline for state-run firms is 13 August 2013. Finance Minister Mr. P. Chidambaram on Tuesday, 19 February 2013, emphasized the need to meet the financing requirements of the infrastructural deficit. He said that that the government has initiated several major steps in this direction. He said that the government has set-up the Cabinet Committee on Investments (CCI) with the Prime Minister as the Chairman to expedite decisions on approvals/clearances for implementation of projects. This is likely to improve the investment environment by bringing transparency, efficiency and accountability in accordance of various approvals and sanctions, Chidambaram said. The government is also promoting Public Private Partnerships (PPPs) as an effective tool for bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services, Chidambaram said. The Viability Gap Funding Scheme has been further strengthened by adding many new sectors like modern storage, education, health, irrigation etc. The cost and tariff of infrastructure services are likely to go down as a result of low cost long term debt provided by Infrastructure Debt Fund (IDFs), Chidambaram said on the occasion of the launch of the first Infrastructure Debt Fund (IDF) under the NBFC structure on 19 February 2013. A buy-out guarantee from Project Authority will enable IDF-NBFC to maintain zero NPAs, Chidambaram said. The taking over of existing bank debts by IDFs will release an equivalent volume for fresh lending by banks to infrastructure projects, the finance minister said. The Reserve Bank of India governor D. Subbarao said in mid-February 2013 that he sees limited room for further interest rate cuts. The annual rate of inflation, based on monthly wholesale price index (WPI), decelerated to 6.62% in January 2013 from 7.18% in December 2012 and 7.24% in November 2012, data released by the government on 14 February 2013 showed. This is the first time since November 2009 that the inflation rate has dropped below 7%. The non-food manufacturing inflation or core inflation decelerated to 4.08% in January 2013 from 4.19% in December 2012. Inflation based on the combined consumer price index for urban and rural India edged up to 10.79% in January 2013, from 10.56% in December 2012, another data released by the CSO on 12 February 2013 showed. Within the consumer price index, inflation in the category 'food and beverages' stood at 13.36% in January 2013. Inflation based on the All-India Consumer Price Index for Agricultural Labourers (CPI-AL) edged up to 12.3% in January 2013 from 11.33% in December 2012, data released by the government on Wednesday, 20 February 2013, showed. Within CPI-AL, food price inflation stood at 12.98% in January 2013. Inflation based on the All-India Consumer Price Index for Rural Labourers (CPI-RL) edged up to 12.28% in January 2013 from 11.31% in December 2012. Within CPI-RL, food price inflation stood at 12.94% in January 2013. The Reserve Bank of India (RBI) on 29 January 2013 announced a 25 basis points reduction in its key policy rate viz. the repo rate to 7.75% from 8% after a monetary policy review. The central bank also announced a reduction of 25 basis points in the cash reserve ratio (CRR) to 4% from 4.25% effective the fortnight beginning 9 February 2013. With headline inflation likely to have peaked and non-food manufactured products inflation declining steadily over the last few months, there is an increasing likelihood of inflation remaining range-bound around current levels going into 2013-14, the Reserve Bank of India (RBI) said. This provides space, albeit limited, for monetary policy to give greater emphasis to growth risks, the central bank said in its policy guidance. This policy guidance will, however, be conditioned by the evolving growth-inflation dynamic and the management of risks from twin deficits viz. the current account deficit and fiscal deficit, RBI said. The next mid-quarter review of Monetary Policy for 2012-13 will be announced on 19 March 2013. The central bank on 29 January 2013 also signaled that there is less room for aggressive policy rate cuts amid any negative surprise emanating from inflation and the twin deficits. Investors' focus is now on Union Budget 2013-14 to be presented to the Parliament on 28 February 2013. Investors will focus on changes, if any, in excise duty and service tax in the Budget. It remains to be seen if the government announces measures to revive weak investment growth. It also remains to be seen if the government announces more economic reforms. A key figure to watch out is the divestment target for 2013-14. It remains to be seen if the Budget contains a clear roadmap for the implementation of Goods and Services Tax (GST). There has been some debate over taxing the super-rich. It remains to be seen if the Budget provides a clear roadmap to cap the government's subsidy bill. It also remains to be seen if there are measures to increase agriculture production to rein in food inflation. President Pranab Mukherjee said in his speech delivered at the beginning of the Budget session of the Parliament on Thursday, 21 February 2013, that the government is taking steps to deal with factors of economic slowdown. Both global and domestic factors have adversely affected India's economic growth, Mukherjee said. The government has responded to the situation by taking several measures to revive investment activity and investor sentiment, he said. Inflation is reducing gradually but still a problem, Mukherjee said. The government is working with the state governments to reach a consensus on the Goods and Services Tax (GST), Mukherjee said. The President of India said that the government remains committed to increasing the share of manufacturing to 25% of GDP and creating 100 million jobs within a decade. The next phase of the Jawaharlal Nehru Urban Renewal Mission is being finalized, Mukherjee said. Meanwhile, the tenure of the current Mission has been extended until March 2014 for completion of ongoing projects and for sanction of new projects so as to maintain the momentum of development of urban infrastructure. In order to give a push to capacity building efforts of Urban Local Bodies, the Government has decided to create a separate fund of Rs 1000 crore, Mukherjee said. In due course, the Direct Benefits Transfer System will cover wages and subsidies on food and LPG, Mukherjee said. The Direct Benefits Transfer System will help cut down leakages, bring millions of people into the financial system and lead to better targeting of beneficiaries, Mukherjee said. The Dedicated Freight Corridor project is an ambitious mega project connecting our Eastern and Western Coasts with the interiors of the country and will cover 3,300 km of railway track, Mukherjee said. Construction of over 1,000 km route length is expected to begin shortly, he said. In 2012-13, 42 PPP port projects have been targeted for award, involving an additional capacity of 251 Million Tonnes Per Annum with an investment of Rs 14770 crore in 2012-13. The government proposes to establish two new major ports, one at Sagar Island in West Bengal and the other in Andhra Pradesh with a total additional capacity of around 100 Million Tonnes Per Annum. The Budget Session of the Parliament which began on Thursday, 21 February 2013, will conclude on 10 May 2013. In order to enable the Standing Committees to consider the Demands for Grants of Ministries/Departments and prepare their Reports, the two Houses will adjourn for recess on 22 March 2013 to meet again on 22 April 2013. The Railway Budget for 2013-2014 will be presented to the Lok Sabha on 26 February 2013 immediately after Question Hour. The Economic Survey of India will be laid in the Parliament on 27 February 2013. On the eve of the commencement of the Budget session of the parliament, Prime Minister Dr. Manmohan Singh on Wednesday, 20 February 2013, said that the Budget session of the Parliament is going to transact the important financial business before the house, and that he is hopeful and confident that this session is going to be a fruitful session. "I have said this before and I repeat it again. Parliament is a forum for discussion, for dialogue, and all parties have an obligation to ensure that Parliament runs smoothly. This is a session, as I said, which is going to deal with the financial business, and our country faces many economic challenges, and it is my sincere hope that all political parties will join hands to find productive, constructive solutions to the formidable challenges facing our nation", Dr. Singh said. The government has lined up a number of key bills for consideration and passing during the Budget session of the parliament, which include The Forward Contracts (Regulation) Amendment Bill, 2010, The Pension Fund Regulator and Development Authority Bill, 2011, The Land Acquisition, Rehabilitation and Resettlement Bill, 2011, The National Food Security Bill, 2011 and The Insurance Laws (Amendment) Bill, 2008. Economic affairs secretary Arvind Mayaram on 9 February 2013 said that the fiscal deficit for the current financial year ending 31 March 2013 will not exceed the projected 5.3% of the country's gross domestic product. He said that the government will stick to its fiscal deficit aim and its borrowing plan. Finance Minister, P. Chidambaram on 9 February 2013 said he it confident of a 5.5% growth rate in the economy for this year. In the second half of this fiscal year, there are indications of green shoots in the economy, he said, adding it is imperative for the country to achieve a growth rate of 8%. The Ministry of Finance on 8 February 2013 said that since the GDP growth is turning around, it is likely that the CSO's advance estimate of 5% GDP growth for 2012-13 will be revised upwards and the final estimate will be closer to the finance ministry's estimate of a growth rate of 5.5% or slightly more. Early sign of an upturn in the economy are evident in the year on year growth in Union Excise Duty of 16% and of 33% increase in service tax in April-December 2012. The Purchasing Manager's Index (manufacturing) has started moving up since October 2012. This has been accompanied by a seasonally adjusted stabilization of the index of industrial production since October 2012, the finance ministry said in a statement. The finance ministry also said that lower interest rates will help support growth. The Ministry of Finance in its initial reaction to the CSO's advance estimate had said on 7 February 2018 that the finance ministry is keeping a watch on the situation adding that it has taken and will continue to take appropriate measures to revive growth. The Ministry of Finance on 14 January 2013 said that the government has decided to defer the implementation of the General Anti Avoidance Rules or GAAR by two years until 1 April 2016 and that it has accepted major recommendations of the Parthasarathi Shome Committee on GAAR with some modifications. The provisions of GAAR will apply to only those foreign institutional investors (FIIs) who seek to take advantage of the double taxation avoidance treaties India has with different countries. The rules won't apply to the non-resident individual investors who put money with the FIIs. Any investments made before 30 August 2010 won't be examined under GAAR. Finance Minister Mr. Chidambaram said that the GAAR provisions strike a balance between the government's need for revenue generation and investors' interests. Commerce, Industry and Textiles Minister Mr. Anand Sharma on 9 January 2013 said that the Joint Working Group on Indo-Mauritius Double Taxation Avoidance Convention (DTAC), which is scheduled to meet in February 2013, would be able to take the deliberations forward. Finance Minister Mr. P. Chidambaram on 31 January 2013 reiterated the commitment of the government for observing the path of fiscal consolidation and imposition of fiscal targets and policies that will make necessary fiscal correction needed for the economy and take the economy back to the path of higher growth. Chidambaram highlighted the efforts being made to turn the economy around and create a more investor-friendly climate. Chidambaram said that to encourage foreign flows into India and offer reassurance on the positive investment climate, he had recently held discussions with a cross section of international investors at Singapore, Hongkong, London and Frankfurt last month and hoped to get positive results. He was speaking at the Sixth Meeting of the Financial Stability and Development Council. The finance ministry in October 2012 announced a five-year plan to cut fiscal deficit. The deficit target is 5.3% of gross domestic product for the current fiscal year through March, 4.8% in the next fiscal year, and 3% by the end of the year through March 2017. The government on 17 January 2013 allowed PSU OMCs to increase diesel prices by a small margin from time to time, a decision aimed at reducing the government's oil subsidy burden and fiscal deficit and improving the government's finances. Oil Minister Veerappa Moily said after a meeting of the Union Cabinet that there was an earlier proposal to deregulate diesel prices, and in pursuance of that, oil companies have been authorised to make price corrections from time to time. Finance Minister P. Chidambaram on 17 January 2013 said the government will factor in the reduction in subsidies and its impact on the deficit once the retailers say how much they intend to increase prices by. The government on 17 January 2013 also said it has increased the limit of subsidized cooking-gas cylinders to nine per year a family from six now. Mr. Moily said that the raising of the cap will cost the government about an additional Rs 10000 crore a year. RBI said after Third Quarter Review of Monetary Policy 2012-13 on 29 January 2013 that a staggered increase in diesel prices will percolate through to overall costs and inflation. However, these price pressures will dissipate over time, and the consequent reduction entailed in the fiscal deficit will bring about an enduring reduction in inflation and inflation expectations, the central bank said at that time. Bahujan Samaj Party (BSP) chief Mayawati slammed the UPA government last month for its decision to deregulate diesel prices and said that it would affect prices and hit common man badly. She, however, ruled out the possibility of withdrawing BSP's support to the government, saying she did not want to destabilise it as the general election is not too far. BSP provides outside support to the Congress led UPA government which has already been reduced to a minority government after Trinamool Congress withdrew support to the government in September last year. Asian stocks were mostly lower on Friday extending a monetary-policy-inspired sell-off from the previous session into the end of the week. Key benchmark indices in Taiwan, Hong Kong, Japan and Singapore were down by 0.12% to 0.83%. Key benchmark indices in Indonesia, South Korea and China were up by 0.05% to 0.44%. US stocks fell on Thursday as uncertainty over future US monetary policy hurt sentiment.