A bout of volatility was witnessed as key benchmark indices trimmed intraday gains in morning trade. Gains in most of the Asian stocks supported domestic bourses. Data showing continuation of buying of Indian stocks by foreign funds on Tuesday, 7 August 2012, underpinned sentiment. The market breadth was strong. Index heavyweight and cigarette maker ITC edged higher. Another index heavyweight Reliance Industries (RIL) also edged higher. The barometer index, BSE Sensex, hit its highest level in nearly twenty weeks. The 50-unit S&P CNX Nifty hit its highest level in over 18 weeks. The Sensex was up 12.36 points or 0.07%, off close to 65 points from the day's high and up about 5 points from the day's low. Bharti Airtel tumbled on poor Q1 results. Metal stocks rose as global metal prices gained on Tuesday, 7 August 2012.
The market edged higher in early trade. It trimmed gains in morning trade.
Most Asian stocks rose for a third day on Wednesday as speculation that central banks will take steps to spur growth and better-than-forecast U.S. corporate earnings boosted the outlook for the economy.
Foreign institutional investors (FIIs) bought shares worth Rs 815.94 crore on Tuesday, 7 August 2012, as per provisional figures on the stock exchanges. FIIs bought shares worth Rs 564.70 crore from secondary equity markets on Monday, 6 August 2012, as per data from Securities & Exchange Board of India (Sebi). FIIs bought shares worth a net Rs 1364.50 crore from the secondary equity markets in four trading sessions from 1 to 6 August 2012. The inflow this month comes on the top of substantial purchases last month. FIIs bought shares worth net Rs 9691 crore from the secondary equity markets in July 2012.
At 10:20 IST, the BSE Sensex was up 12.36 points or 0.07% to 17,614.14. The index rose 77.57 points at the day's high of 17,679.37 in early trade, its highest level since 22 March 2012. The index rose 7.46 points at the day's low of 17,609.24 in early trade.
The S&P CNX Nifty was up 6.40 points or 0.12% to 5,343.10. The Nifty hit high of 5,361.40 in intraday trade, its highest level since 3 April 2012. The Nifty hit a low of 5,339.40 in intraday trade.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1273 shares rose and 677 shares fell. A total of 102 shares were unchanged.
From the 30-share Sensex pack, 19 stocks rose and rest of them fell. NTPC, Hindustan Unilever and Coal India gained by between 1.03% to 1.59%. GAIL (India), TCS and ICICI Bank shed by between 0.62% to 2.13%.
Index heavyweight and cigarette maker ITC rose 0.06% to Rs 261.20. The stock had hit a record high of Rs 262.05 in intraday trade on 2 August 2012. The company reported 20.21% growth in net profit to Rs 1602.14 crore on 15.34% growth in net sales to Rs 6652.21 crore in Q1 June 2012 over Q1 June 2011. Despite series of tax hikes, ITC's performance in cigarettes business remains robust and displays pricing power for the company.
Index heavyweight Reliance Industries (RIL) rose 0.55% after taking a breather on Tuesday. The stock had jumped 5.71% on Monday following reports that benchmark Singapore gross refining margins (GRM) have strengthened from the 2nd week of July 2012 to average at $8 a barrel from $6.7 a barrel in the quarter ended June 2012. Oil Minister Jaipal Reddy on Tuesday, 7 August 2012, said the government may approve RIL's new investment plan for the D6 block in Krishna-Godavari basin as the country continues to face an acute shortage of natural gas. He said the D6 block is producing only 29 million standard cubic meters a day of gas compared with an expected 80 mmscmd in the current financial year through 31 March 2013.
RIL and its partners are struggling to raise production from their D6 block, India's largest gas find so far. The field produced 104.40 billion cubic feet of gas during April-June 2012, down 33% from a year earlier due to reservoir complexity and natural decline. While RIL holds a 60% stake in the block, UK's BP PLC owns 30% and Canada's Niko Resources the remaining 10%.
Metal stocks gained across the board as LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.19% on Tuesday, 7 August 2012. Sterlite Industries, JSW Steel, Hindalco Industries, Jindal Steel & Power, and Hindustan Zinc rose by between 0.08% to 2.61%.
Sail rose 1.5%, with the stock extending recent gains as the company's core operating profit margin surged to 14.05% in Q1 June 2012 from 12.16% in Q1 June 2011. Net profit declined 17.9% to Rs 696.41 crore on 3.08% fall in total income to Rs 11055.95 crore in Q1 June 2012 over Q1 June 2011. The fall in net profit was mainly due sharply higher foreign exchange loss of Rs 256.94 crore in Q1 June 2012 compared with foreign exchange loss of Rs 11.66 crore in Q1 June 2011.
Tata Steel gained 1.39%, with the stock extending recent gains as euro zone worries eased. European operations constitute almost 65% of Tata Steel's sales.
Bharti Airtel tumbled 3.27% after consolidated net profit fell 37.28% to Rs 762 crore on 14% increase in revenues to Rs 19350 crore in Q1 June 2012 over Q1 June 2011.
Bharti Airtel said its monthly average revenue per user (ARPU) in the country fell 2% to Rs 185 in Q1 June 2012 over Q4 March 2012. For its African operations, Bharti reported an ARPU of $6.5 in Q1 June 2012, down from $6.7 in Q4 March 2012.
Bharti Airtel's consolidated revenues rose 14% to Rs 19350 crore, marked by growth of 31.5% in Africa and a strong 44.2% increase in India Mobile Data revenues.
EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) margin at 30.2% was depressed due to the adverse regulatory and tax developments in India, enhanced market participation and planned accelerated investments in both India and Africa.
Consolidated operating free cash flows for the quarter was healthy at Rs 2273 crore, which represents an increase of 67.4% over the corresponding period last year. The net debt - equity ratio was at 1.38 (Q4 March 2012: 1.29) and net debt - EBITDA ratio was held at 2.54 (Q4 March 2012: 2.56).
The company said mobile revenues in India during the quarter were impacted due to the Telecom Regulatory Authority of India (TRAI) guidelines around processing fees restricted the sales of combo packs, which offered bundled service propositions to augment customer value. Indian mobile revenues were also impacted due to the service tax hike from 10.3% to 12.36%, effective 1 April 2012, causing all telecom services to become dearer by nearly 2%, with the entire additional levy being passed through to the exchequer.
The company's Africa revenues grew by 31.5%, driven by strong operational performance in the last year and favourable currency movements. However, economic and currency headwinds are presently evident in key markets, as a result of the eurozone crisis, lower aid and grants, rising inflation and political issues in some countries. With this in mind, the company intensified market operations, advertising, network rollouts, as well as new growth initiatives such as 3G, airtel money and Rwanda, the company said in statement.
In a statement, Sunil Bharti Mittal, Chairman & Managing Director, Bharti Airtel, said: "Telecom revenues in India have been depressed due to hyper-competition and recent regulatory & tax developments. I am happy to note that, despite these adverse developments, Airtel has kept its focus on network expansion, market investments, superior customer experience and new product innovations. I am also pleased to see that India data pick-up is accelerating with over 38 million customers and mobile data revenues up 44%. On the African side, we are gaining market share, benefitting from the significant investments made in the last two years."
Bharti Airtel said that the board of directors of company's subsidiary, Bharti Infratel (BIL) at its meeting held on August 08, 2012 has appointed a committee of the board of directors (Committee of Directors) to consider the listing of the shares of Bharti Infratel. The proposed issue may include an offer for sale of shares, if desired by the existing shareholders of BIL. BIL has informed Bharti Airtel that any offering and its timing will be subject to market conditions, obtaining necessary shareholder and regulatory approvals. BIL has indicated that there can be no assurance that any offering will happen in a timely manner or at all. The final decision for the proposed issue will be taken by the Committee of Directors/the board of directors of BIL. The board of directors of Bharti Airtel in its meeting held on August 08, 2012 has constituted a Committee of its board of directors, to consider and finalise the terms and conditions with respect to participation in the offer for sale of shares upto 10% of BIL's equity share capital.
Among other telecom stocks, MTNL, Tata Teleservices (Maharashtra) and Reliance Communications rose by between 0.15% to 0.61%. But, Idea Celluar fell 0.75%.
Tata Chemicals fell 1.82% as the stock turned ex-dividend today, 8 August 2012, for dividend of Rs 10 per share for the year ended 31 March 2012.
Union Finance Minister P. Chidambaram on Monday, 6 August 2012, said that a path of financial consolidation will be unveiled shortly. He made it clear that the burden of fiscal correction must be shared fairly and equitably by different classes of stakeholders. The Finance Minister said that the poor must be protected and others must bear their fair share of the burden. Obviously, adjustments must be made both on the revenue side and on the expenditure side, he said. The Finance Minister said the government has asked Dr. Vijay Kelkar, Dr. Indira Rajaraman and Dr. Sanjiv Misra to assist the government in formulating the path of fiscal consolidation and said he expects the work will be completed in a few weeks.
Government finances are under pressure as expenses exceed revenue, mainly because of subsidies doled out for cheaper supplies of food, fuel and fertilizer. The subsidy expense was 2.4% of GDP in the last fiscal year. The government aims to bring it down to 2% of GDP this year, and reduce fiscal deficit to 5.1% from 5.75%. The oil ministry has already sought Rs 32800 crore in cash subsidy from the finance ministry to compensate retailers who sell diesel and cooking fuel at government-set discounted rates.
Mr. Chidambaram said that price stability is an important objective and that the government will work with the Reserve Bank of India to ensure that inflation is moderated in the medium term. Sometimes it is necessary to take carefully calibrated risks in order to stimulate investment and to ease the burden on consumers, Mr. Chidambaram said adding that the government will take appropriate steps in this regard.
The key to restart the growth engine is to attract more investment, both from domestic investors and foreign investors, Mr. Chidambaram said. "Since investment is an act of faith, we must remove any apprehension or distrust in the minds of investors. We will improve communication of our policies to potential investors", Mr. Chidambaram said. The aim will be to remove the perceived difficulties in doing business in India, including fears about undue regulatory burden or regulatory over-reach. Public sector enterprises which have large cash balances will be encouraged to restart investment. Proposals pending with the Foreign Investment Promotion Board will be processed and decisions taken expeditiously, Mr. Chidambaram said.
The government intends to work with manufacturers and exporters and implement appropriate short term and medium term measures to reverse the trend of sluggish growth in manufacturing and exports which are two key drivers of the economy, Mr. Chidambaram said. The government intends to find practical solutions to the problems that impede higher production or output in the coal, mining, petroleum, power, road transport, railway and port sectors. The Cabinet Committee on Economic Affairs will examine the issues affecting each sector and take decisions that will lead to quantitative growth in these sectors, Mr. Chidambaram said.
The government aims to raise the level of investment to 38% of the GDP that was achieved in 2007-08, Mr. Chidambaram said. The Finance Minister said that Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and other schemes will be converged to meet the challenge of drought.
The government intends to fine tune policies and procedures that will facilitate capital flows into India, Mr. Chidambaram said. Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance to investors, Mr. Chidambaram said. The government has recently appointed two committees -- one to examine anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) legal provisions and guidelines and the other to review taxation of the IT sector and Development Centres. Mr. Chidambaram said he has also directed a review of tax provisions that have a retrospective effect in order to find fair and reasonable solutions to pending as well as likely disputes between the Tax Departments and the Assessees concerned.
In the next few weeks, the government will announce a number of decisions to attract more people to invest in mutual funds, insurance policies and other well-designed instruments, Mr. Chidambaram said.
Prime Minister Dr. Manmohan Singh last month decided to refer the issue of implications on FIIs and portfolio investors of the amendment made to the Income Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India to the Expert Committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR). "It is necessary to have clarity on the tax liability of portfolio investors and foreign institutional investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment", the Prime Minister's Office (PMO) said in a statement issued on 30 July 2012. Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR, the PMO said.
Dr. Singh last month constituted an expert committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) to undertake stakeholder consultations and finalise the guidelines for GAAR by 30 September 2012.
The government will unveil industrial production data for June 2012 on Thursday, 9 August 2012. Industrial production grew 2.4% in May 2012. Industrial production declined 0.9% in April 2012.
The India Meteorological Department (IMD) last week said the El Nino weather pattern is likely to reduce rains again in the second half of the June to September monsoon season. The IMD said rains over the entire June to September season are now expected to be less than 90% of long-term average. This is lower than IMD's previous forecast of 96%. Monsoon rains are considered deficient -- a drought in layman's terms -- if they fall below 90% of a 50-year average. Between June 1 and August 1, rainfall was about 19% below normal. The IMD expects normal rains in August -- a critical month for summer crops. It expects rainfall to be 5-6% below average in September due to the possibility of El Nino. The weather office said rainfall during August-September is expected to be 91% of the long-term average.
The rainfall distribution has been erratic this year as major crop- growing regions such as Maharashtra, Karnataka, Gujarat, Punjab and Haryana have received scanty showers threatening the prospects of summer crops. A panel of Indian ministers last week approved steps to contain the impact of a near-drought situation. The steps include providing a diesel-price subsidy to farmers, increasing the subsidy on seed supplies and removal of the import tax on oilmeals.
Insufficient rainfall could lead to higher food inflation. There will be an impact on foodgrain output, but it is too early to give any estimate, Farm Minister Sharad Pawar last week. Mr. Pawar said the government will raise subsidies for the supply of various seeds for alternate crops in affected areas.
The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year. A bad monsoon will have a larger impact on inflation than on growth as agriculture output constitutes a relatively small portion of India's economy, Indian central bank officials said on 1 August 2012, in a conference call following the release of its monetary policy review on 31 July 2012. The Reserve Bank of India (RBI) kept its key policy rate viz. the repo rate unchanged at 8% after first quarter review of Monetary Policy 2012-13 in an effort to keep a lid on inflation and inflation expectations. The RBI, however, lowered banks' statutory liquidity ratio, or the part of deposits that must be invested mainly in government bonds, by a percentage point to 23% to ensure that liquidity pressures do not constrain the flow of credit to productive sectors of the economy.
Principal adviser to the Planning Commission Pronab Sen last month said slowing investment due to weak confidence in the economy is hurting growth. Mr. Sen said Indian companies aren't facing any shortage of funds. Many of them are sitting on piles of cash and aren't even repatriating overseas borrowings, he added.
The government should take steps to meet the fiscal deficit target set out in the budget and that would improve sentiment and revive investments, Mr. Sen said. He said the government should scale back its spending and slash subsidies on fuels, food and fertilizers to help check its budget deficit.
Slowing growth in investment remains a cause for concern for India. Investment makes up 35% of India's economic activity.
A comprehensive Land Acquisition, Rehabilitation and Resettlement Bill is among the 31 Bills the government has lined up for consideration and passing during the monsoon session of Parliament, which begins today, 8 August 2012. Among the other bills include those on Forward Contracts, Banking laws, whistle-blowers and women's reservation as also the Prevention of Bribery of Foreign Public Officials bill. The monsoon session of Parliament will conclude on September 7.
Hamid Ansari has been re-elected as India's vice-president. A nominee of the ruling Congress-led alliance, the 75-year-old Ansari defeated opposition-backed rival Jaswant Singh by 252 votes for the largely ceremonial post. An electoral college of members of parliament elects the vice-president, who also acts as chairperson of the Rajya Sabha. Of the 736 votes cast, Ansari got 490 votes while Jaswant Singh got 238. Eight votes were declared invalid.
An India-Mauritius joint panel will discuss a series of proposals to review the double taxation avoidance treaty between the two nations on 22-24 August in Mauritius. India has been looking to negotiate the double taxation avoidance agreement with Mauritius for the past few years to check so-called round tripping and other potential abuses. Round tripping entails moving money out of one country to another, and getting it back under the garb of foreign capital. Capital gains tax is close to zero in Mauritius and almost 40% of investments into India come through the island nation. Under the bilateral agreement, capital gains from sale of securities can be taxed only in Mauritius. The India-Mauritius joint working group will also discuss the inclusion of a so-called limitation of benefit clause, similar to the Singapore tax treaty with India, to ensure only genuine Mauritius-based companies are benefited. India's tax agreement with Singapore says that only those companies that spend a minimum of $200,000 (about Rs 1 crore) in Singapore can avail the benefits of the treaty.
Sanctity of tax residency certificates issued by a country to companies operating in its jurisdiction to enable the firms to claim tax benefits under various treaties is another issue between India and Mauritius. While India in this year's national budget said the certificates are a necessary but not sufficient condition, Mauritius wants those issued by it honoured. Draft guidelines issued by Indian government for implementing the controversial anti-avoidance tax proposal viz. the GAAR state that GAAR provisions should be invoked on a foreign institutional investor (FII), if it chooses to take a treaty benefit, but would not in any case be invoked in the case of the non-resident investors of the FII. The draft guidelines suggested that the onus of proving wrongdoing should be on the authorities.
Investors' focus is currently on Q1 June 2012 earnings. Tata Motors and Ranbaxy Laboratories unveil quarterly results tomorrow, 9 August 2012. State Bank of India, Sun Pharmaceuticals Industries, Siemens and BPCL announce quarterly results on Friday, 10 August 2012. ONGC announces Q1 results on Saturday, 11 August 2012. Tata Steel and Coal India unveil Q1 results on 13 August 2012. Hindalco Industries, Reliance Infrastructure and IDFC will unveil Q1 results on 14 August 2012.
Most Asian stock markets rose to a three-month high on Wednesday (August 8, 2012), supported by expectations that policymakers will soon decisively address the euro zone fiscal crisis and declining global growth. Key benchmark indices in Indonesia, Taiwan, Japan and South Korea rose by between 0.26% to 1.29%. Key benchmark indices in China, Hong Kong and Singapore fell by between 0.09% to 0.43%.
China is due to release a slew of July data including inflation, industrial production, retail sales and inflation on Thursday, 9 August 2012, which investors will comb through to gauge the health of the world's second-largest economy.
The Bank of Korea is set to consider cutting rates for a second month tomorrow, while the Bank of Japan starts a two-day policy meeting today.
German factory orders declined much more than consensus forecast in June, as sales to euro area countries slumped amid recession-like conditions across most of the region. German factory orders fell at a seasonally-adjusted rate of 1.7% in June, as domestic orders dropped 2.1% and orders from within the eurozone fell 4.9%, the Economics Ministry reported Tuesday.
Germany's Federal Constitutional Court will announce a decision on lawsuits challenging the country's participation in the permanent euro-zone rescue fund, the European Stability Mechanism, and the fiscal pact on 12 September 2012. The court held a public hearing earlier this month to examine complaints that participation in the fund and the fiscal pact violated German law by taking some authority over the national budget away from parliament.
Italy's economy contracted for a fourth straight quarter in the three months ended June, as a protracted eurozone debt crisis continued to take its toll on bigger European nations. Italy's economy contracted by 0.7% in the second quarter of 2012, Rome-based national statistics institute Istat said in a preliminary report on Tuesday.
Ratings agency Standard & Poor's on Tuesday revised Greece's outlook to negative, saying the debt-ridden euro zone country could need more help from its international creditors. "Following delays in implementing budgetary consolidation measures and a worsening Greek economy, we believe Greece is likely to require additional financing for 2012 under the EU/International Monetary Fund (IMF) program," S&P said in a statement. "We are revising the outlook on the long-term ratings on Greece to negative, reflecting the possibility of a downgrade if Greece fails to secure the next disbursement of the EU/IMF Program," S&P said.
Trading in US index futures indicated that the Dow could fall 13 points at the opening bell on Wednesday, 8 August 2012. US Stocks extended gains on Tuesday, on expectations that the European Central Bank will soon take action to combat the euro zone's debt crisis.
Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012.
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