Key benchmark indices edged lower in choppy trade as a surprise decline in India' industrial production in June 2012 and lower-than expected growth in China's retail sales and industrial production in July 2012 hurt investor sentiment adversely. China is the world's second biggest economy after the US. The market breadth was negative. The barometer index, BSE Sensex, was down 39.69 points or 0.23%, up about 45 points from the day's low and off close to 140 points from the day's high. Most bank shares were in red. Tata Motors recovered in choppy trade after good Q1 results. Bharti Airtel extended Wednesday's losses triggered by weak Q1 results, with the stock hitting 52-week low. Bharti Airtel's weak Q1 results dragged other telecom stocks lower for the second straight day.
The Sensex has gained 324.69 points or 1.88% in this month so far (till 9 August 2012). The Sensex has jumped 2,105.95 points or 13.62% in calendar 2012 so far (till 9 August 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 2,425.01 points or 16.02%. From a 52-week high of 18,523.78 on 22 February 2012, the Sensex has lost 962.91 points or 5.19%.
Coming back to today's trade, index heavyweight Reliance Industries (RIL) edged lower. Index heavyweight and cigarette major ITC hit a record high. FMCG giant Hindustan Lever also hit record high. Mahindra & Mahindra (M&M) extended Wednesday's rally triggered by strong Q1 results. Airline stocks fell on recent surge in crude oil prices, with Kingfisher Airlines hitting a record low. Metal stocks were mixed. PSU OMCs fell after Indian Oil Corporation (IOC) reported a massive loss in Q1 June 2012. Ranbaxy Laboratories dropped on reporting reverse turnaround in Q2 June 2012.
The market edged higher in early trade on firm Asian stocks. The market trimmed gains in morning trade. Key benchmark indices once again pared gains after regaining strength in mid-morning trade after the latest data showed a surprise decline in industrial output in June 2012. The market retained positive zone in early afternoon trade. Key benchmark indices regained positive zone after slipping into the red in afternoon trade. A bout of volatility was witnessed as key benchmark indices hit fresh intraday low in mid-afternoon trade. High volatility was witnessed in late trade.
The BSE Sensex was down 39.69 points or 0.23% to 17,560.87, its lowest closing level since 6 August 2012. The index fell 83.57 points at the day's low of 17,516.99 in mid-afternoon trade. The index rose 102.42 points at the day's high of 17,702.98 at the onset of the trading session.
The S&P CNX Nifty was down 15.05 points or 0.28% to 5,322.95, its lowest closing level since 6 August 2012. The Nifty hit a low of 5,312.10 and a high of 5,368.20 in intraday trade.
The BSE Mid-Cap index fell 0.26% and the BSE Small-Cap index declined 0.41%. Both these indices underperformed the Sensex.
BSE clocked turnover of Rs 2,103 crore, lower than Rs 2421 crore on Tuesday, 7 August 2012.
The market breadth, indicating the overall health of the market, was negative. On BSE, 1,613 shares declined and 1,116 shares rose. A total of 137 shares were unchanged.
From the 30-share Sensex pack, 16 stocks rose and rest of them fell.
Index heavyweight and cigarette maker ITC rose 1.51% to Rs 265.85. The stock hit a record high of Rs 266.75 in intraday trade today. The company's net profit jumped 20.21% 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.
Tata Global Beverages rose 0.5% to Rs 130.65. The stock hit a 52-week high of Rs 133 in intraday trade today, 9 August 2012. The stock turned ex-dividend today, 9 August 2012, for dividend of Rs 2.15 per share for the year ended 31 March 2012.
FMCG major Hindustan Unilever (HUL) rose 2.38% to Rs 487.30. The stock hit a record of Rs 489.70 in intraday trade today, 9 August 2012. The company's net profit jumped 112.3% to Rs 1331.19 crore on 13.7% growth in net sales to Rs 6250.15 crore in Q1 June 2012 over Q1 June 2011.
Index heavyweight Reliance Industries (RIL) fell 1.31% to Rs 780.30. The stock hit a high of Rs 796.20 and a low of Rs 776.70. The oil ministry has reportedly agreed to conditionally approve the capital expenditure plans of RIL and its partners to make fresh investments for increasing production of natural gas at D6 oil and gas block in the eastern offshore Krishna-Godavari basin. Oil Minister Jaipal Reddy on Tuesday, 7 August 2012, 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.
According to production-sharing contracts for the oil and gas sector in India, the explorer invests in developing oil and gas blocks and later recovers the money through selling hydrocarbons. The investments made by the explorer need to be cleared by the government. 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%.
Indian Oil Corporation declined 1.52% after company during market hours today reported a net loss of Rs 22450.95 crore in Q1 June 2012, much higher than net loss of Rs 3718.70 crore in Q1 June 2011. The company's total income rose 5.25% to Rs 97514.44 crore in Q1 June 2012 over Q1 June 2011.
BPCL fell 2.96% ahead of its Q1 results tomorrow, 10 August 2012.
HPCL declined 2.25%. The company after market hours today reported a net loss of Rs 9248.80 crore in Q1 June 2012 compared with a net loss of Rs 3080.26 crore in Q1 June 2011. The company's total income rose 8.73% to Rs 44710.17 crore in Q1 June 2012 over Q1 June 2011.
The Petroleum Planning and Analysis Cell (PPAC), under the Ministry of Petroleum and Natural Gas, announced 1 August 2012 that the under-recovery on HSD (High Speed Diesel) applicable for 1st fortnight of August effective 1 August 2012 increased substantially to Rs 12.13 per litre. This is higher than Rs 9.95/litre prevailing during previous fortnight. In case of PDS Kerosene also the under-recovery is higher at Rs 28.54/litre for the month of August 2012 than Rs 27.20/litre for July 2012. Under-recovery on Domestic LPG for August 2012 at Rs 231/cylinder continues to rule at high. OMCs are currently (effective 1 August 2012) incurring daily under-recovery of about Rs 402 crore on the sale of Diesel, PDS Kerosene and Domestic LPG.
Bharti Airtel shed 6.4% to Rs 256.85, with the stock extending Wednesday's 6.6% losses triggered by weak Q1 results. The stock hit a 52-week low of Rs 254.50 in intraday trade today, 9 August 2012. Consolidated net profit as per international financial reporting standards (IFRS) fell 37.28% to Rs 762 crore on 14% increase in revenue to Rs 19350 crore in Q1 June 2012 over Q1 June 2011.
Bharti Airtel's weak Q1 results dragged other telecom stocks lower for the second straight day. Tata Teleservices (Maharashtra), Reliance Communications and Idea Celluar dropped by between 2.23% to 5.11%. But, MTNL gained 2.44%.
Adani Enterprises fell 1.9% after the company today, 9 August 2012, said its consolidated net profit declined 29% to Rs 403 crore on 15% growth in turnover to Rs 11036 crore in Q1 June 2012 over Q1 June 2011.
PSU bank stocks fell across the board. Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank shed by between 1.25% to 3.85%.
State Bank of India (SBI) declined 4.33% ahead of its Q1 results tomorrow, 10 August 2012. SBI last week cut interest rates on home and car loans even as it left its base rate unchanged. SBI said on Monday, 6 August 2012, it has decided to revise downwards the interest rates on NRE/NRO deposits for tenors of 5 years and above to 8.50% per annum with effect from August 07, 2012. SBI said on 2 August 2012, it has decided to revise downwards the interest rate on domestic term deposits for tenors of 5 years and above to 8.5% from 7 August 2012.
India's second biggest private sector bank in terms of branch network HDFC Bank rose 1.23% to Rs 604.85. The stock hit a record high of Rs 606.85 in intraday trade today, 9 August 2012.
India's largest private sector bank by net profit ICICI Bank shed 0.52%. The bank's profit after tax jumped 36% to Rs 1815 crore on 32% growth in net interest income to Rs 3193 crore in Q1 June 2012 over Q1 June 2011. ICICI Bank's net interest margin (NIM) improved to 3.01% for Q1 June 2012, from 2.61% for Q1 June 2011. The bank announced the results on 27 July 2012.
India's largest dedicated housing finance firm by revenue HDFC dropped 3.63%.
Metal stocks were mixed after the latest data showed lower-than expected growth in China's retail sales and industrial production in July 2012. China is the world's largest consumer of copper and aluminum. Bhushan Steel, Tata Steel, and Jindal Steel & Power fell by between 0.27% to 0.85%. Sterlite Industries, JSW Steel, Hindustan Zinc and Hindalco Industries rose by between 0.29% to 3.36%.
Steel Authority of India (Sail) declined 1.21% as the stock turned ex-dividend today, 9 August 2012, for final dividend of 80 paise per share for the year ended 31 March 2012.
Airline stocks fell on recent surge in crude oil prices. Kingfisher Airlines fell 3.59% to Rs 8.32. The stock hit a record low of Rs 8.21 in intraday trade today.
Jet Airways and SpiceJet shed by between 1.63% to 2%.
Aviation turbine fuel, or jet fuel constitutes more than 50% of operating cost for airliners. Prices of jet fuel are directly linked to crude oil prices. State-run oil marketing companies--Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation revise jet fuel prices on the 1st and 16th of every month based on the average international crude price in the preceding fortnight.
Cement stocks were mixed. Ambuja Cements rose 0.39% to Rs 193.30. The stock hit a record high of Rs 194.45 in intraday trade today, 9 August 2012. Ambuja Cements' net profit rose 34.9% to Rs 468.90 crore on 17.9% growth in net sales to Rs 2565.95 crore in Q2 June 2012 over Q2 June 2011.
UltraTech Cement gained 0.88% to Rs 1654. The stock hit a record high of Rs 1658 in intraday trade today, 9 August 2012.
Among other cement stocks, ACC, Jaiprakash Associates and India Cements dropped by between 0.26% to 2.28%.
Grasim Industries rose 1.5% to Rs 3020. The stock hit a 52-week high of Rs 3046 in intraday trade today, 9 August 2012.
Ranbaxy Laboratories dropped 2.63% after the company today, 9 August 2012, reported consolidated net loss of Rs 585.72 crore for Q2 June 2012, compared with net profit of Rs 243.23 crore in Q2 June 2011. Net sales jumped 54.49% to Rs 3174.06 crore in Q2 June 2012 over Q2 June 2011.
The depreciation of the Indian rupee (INR) against the US dollar (US$), though favourable to Ranbaxy's export business had an adverse impact on the company mainly on account of application of the accounting standards to marking to market the entire derivatives and foreign currency denominated loans outstanding. There was a net charge of $160 million (Rs 875.90 crore) on the P&L on account of the forex items.
Operating earnings before interest, tax, depreciation & amortization (EBITDA), excluding exceptional forex impact, was 16% of sales at Rs 511.30 crore in Q2 June 2012, up 142.32% against Rs 211 crore in Q2 June 2011.
Commenting on the business results for the quarter, Arun Sawhney, CEO & Managing Director, Ranbaxy, said, "Sales and profitability grew in the Quarter with overall improvement across major regions, aided further by exclusivity sales in some of the key markets. We capitalized on our product focus approach with the successful monetization of the Atorvastatin and Atorvastatin + Amlodipine opportunities. The launch Synriam, the first new drug from India was one of the high points of the quarter. The strategy to build long term, differentiated value drivers was rewarded with two NDA approvals in the dermatological space in the USA."
Wockhardt rose 0.47% to Rs 1156.50, with the stock extending recent strong gains triggered by healthy Q1 results. The stock hit a record high of Rs 1180.10 in intraday trade today, 9 August 2012. Consolidated net profit jumped 94.87% to Rs 377.97 crore on 35.37% growth in income from operations to Rs 1425.82 crore in Q1 June 2012 over Q1 June 2011.
Wockhardt recently concluded the divestment of its nutrition business to Danone for Rs 1280 crore. This has significantly improved the balance sheet position for the company and its debt to equity ratio now stands below 1, the company said in a statement.
Sun Pharmaceutical Industries gained 0.56% ahead of its Q1 results tomorrow, 10 August 2012.
Capital goods stocks declined as capital goods production shrank 27.9% in June 2012 compared to the level in the month of June 2011. Siemens, Punj Lloyd, BEML, ABB, Bhel and Crompton Greaves shed by between 0.26% to 2.92%. But, L&T gained 0.9% in volatile trade.
Realty major DLF fell 0.8% on profit booking after recent strong gains. The company's consolidated net profit rose 38.3% to Rs 292.79 crore on 15% decline in revenue to Rs 2329 crore in Q1 June 2012 over Q4 March 2012. The company at the time of announcing its Q1 results said it remains committed to its objective of consolidating its operations by focusing on the core and divesting the non-core. Through the outsourcing of construction, the company remains focused on faster execution of the projects and shall follow a product mix that envisages high visibility projects which would result in better value addition. DLF said it remains fully committed to achieve the divestment target of its non-core assets. The company realised Rs 369 crore from divestment of non-core assets in Q1 June 2012. DLF said it booked 1.34 million square feet (msf) sales in the quarter versus 2.3 msf in the corresponding quarter. Leasing volumes were reported at 0.29 msf during the quarter. The company had 48 msf of projects area under construction at the end of the quarter.
IT stocks were mixed. Infosys fell 0.135. The company today announced that it has been selected by the Department of Post, Ministry of Communications and Information Technology, Government of India for a mission-critical program that will enhance India Post's financial services across 1,50,000 post offices in the country. This project, estimated at Rs 700 crore, aims to transform India Post into a technology-enabled and autonomous market leader, by revolutionizing its financial operations and end-user services.
India's third largest software services exporter by revenues Wipro fell 1.24%.
HCL Technologies rose 0.2% to Rs 537.10. The stock hit 52-week high of Rs 539.40 in intraday trade today, 9 August 2012.
India's largest software services exporter by revenues Tata Consultancy Services (TCS) gained 0.64%.
Indiabulls group shares were mixed after the group initiated action against Canada's independent research firm Veritas Research Corporation, Mr. Neeraj Monga and Mr. Nitin Mangal. Indiabulls Infrastructure and Power, Indiabulls Financial Services and Indiabulls Real Estate rose by between 0.76% to 4.93%. Indiabulls Power, Indiabulls Securities and Indiabulls Wholesale Services fell by between 0.3% to 3.87%.
Police has booked Mr Neeraj Monga, Mr Nitin Mangal and Veritas Research Corporation under Sections of 383, 384, 420, 500, 506, 511 and 1208 under FIR No 99 dated 8 August 2012, Indiabulls said in a statement. Indiabulls officers filed complaint to the police against malafide Veritas report along with an email evidence where Mr Neeraj Monga demanded money through his personal email for holding back the report, Indiabulls said. The Veritas report has been published with gross incorrect data about each of its three flagship Indiabulls group companies, Indiabulls said. Indiabulls officers have also lodged complaints against Mr Neeraj Monga, Mr Nitin Mangal, Veritas Research Corporation and their accomplices with investigating agencies in Canada for causing harm and injury to Indiabulls companies and its shareholders.
Veritas Investment Research recommended 'sell' rating on all stocks in the Indiabulls Group citing corporate governance issues in a report dated 1 August 2012.
India's second largest commercial vehicle maker by sales Ashok Leyland gained 0.22%. The company's total sales jumped 25% to 9,785 units in July 2012 over July 2011. The company's light commercial vehicle (LCV) Dost which was launches last year clocked sales of 2,803 units in July 2012. Ashok Leyland's commercial vehicles sales, excluding LCV Dost, declined 11% to 6,982 units in July 2012 over July 2011.
Car major Maruti Suzuki gained 0.47%. Maruti on 1 August 2012 said it total sales rose 9.2% to 82,234 units in July 2012 over July 2011. Domestic sales rose 6.8% to 71,024 units and exports jumped 27.4% to 11,210 units in July 2012 over July 2011.
Maruti on 31 July 2012 said the management remains concerned about the safety and security of its employees and hence it is not in a position to take a decision on restarting operations as the Manesar plant in Haryana. The management will announce its decision to this effect only when it is assured of employee safety, Maruti said in a statement. The labour violence which rocked the plant on 18 July 2012 led to nearly 100 injured and one fatality. Maruti on 21 July 2012 declared lock-out at unit.
Local car sales in India rose 6.7% from a year earlier in July as discounts by auto makers and increased demand for diesel-driven models helped to partly offset waning customer demand for gasoline models. Sales in the past month grew to 1.43 lakh units from 1.34 lakh units a year earlier, according to data issued by the Society of Indian Automobile Manufacturers on Thursday, 9 August 2012.
India's largest commercial vehicles maker by sales Tata Motors fell 0.87% to Rs 239.35, off the day's low of Rs 232, after company said today consolidated net profit rose 12.25% to Rs 2245 crore on 30% increase in net revenues to Rs 43324 crore in Q1 June 2012 over Q1 June 2011.
Tata Motors said revenues grew on the back of strong growth in volumes of new products and favorable market mix at Jaguar Land Rover (JLR).
The company said the consolidated profit for the quarter ended 30 June 2012 was impacted by exceptional items of Rs 441 crore (loss of Rs 57 crore in corresponding period last year) on account of exchange loss, including on revaluation of foreign exchange borrowings, deposits and loans arising from depreciation of Indan rupee.
Mahindra & Mahindra (M&M) rose 2.87%, with the stock extending Wednesday's 3.92% gains triggered by strong Q1 results. The combined net profit of M&M and its 100% subsidiary -- Mahindra Vehicle Manufacturers (MVML) -- jumped 25.9% to Rs 778.50 crore on 35.2% growth in gross revenue to Rs 10003.90 crore in Q1 June 2012 over Q1 June 2011. MVML, located at Chakan near Pune in Maharashtra, has been set up as a 100% subsidiary of M&M with a view to source contemporary products for expanding the market offering of M&M.
M&M said the growth in first quarter net profit despite relentless increase in material costs was on the back of good volume performance of the company's automotive sector and also due to tight control on expenses.
M&M said some of the major group companies viz. Mahindra Finance, Mahindra Satyam, Mahindra Lifespace Developers and Mahindra Holidays & Resorts significantly improved their performance in Q1 June 2012.
M&M said the drought-like conditions prevailing in several states this year has added to the risks of domestic companies.
Two wheeler makers were mixed. Bajaj Auto rose 0.95%. The company on 2 August 2012 said its total sales declined 5% to 3.44 lakh units in July 2012 over July 2011. Motorcycle sales declined 3% to 3.08 lakh units in July 2012 over July 2011. The company sold 5,600 units of Pulsar 200 NS and 14,400 units of Discover 125 ST in July 2012. Bajaj Auto's commercial vehicles sales dropped 23% to 35,292 units in July 2012 over July 2011.
Bajaj Auto's exports declined 13% to 1.25 lakh units in July 2012 over July 2011. The company said there has been partial recovery in exports to Sri Lanka and Egypt and it expects further recovery in exports this month.
The company at the time of Q1 June 2012 results last month said that it has undertaken proactive measures like rationalizing the end-user cost of vehicles in Sri Lanka and with these measures the company expects normalcy in exports to resume by end of Q2 September 2012. Bajaj Auto lost exports of about 20,000 units in Sri Lanka in Q1 June 2012 due to introduction of import barriers by that country. The company also lost export of about 25,000 commercial vehicles in Q1 June 2012 due to restrictions by importing countries and due to political unrest in Egypt, Bajaj Auto said in a statement.
India's largest motorcycle maker by sales Hero MotoCorp fell 0.27%.
Coal India (CIL) rose 2.03%, with the stock gaining for the second straight day after. The company on Tuesday, 7 August 2012, said it has revised its penalty structure from the earlier 0.01% to anywhere between 1.5% to 40% depending on the level of shortfall. Consequently, CIL will be required to pay 1.5% of the shortfall value if coal delivered is between 65-80% of the Annual contracted quantity (ACQ), while in the worst case scenario, the penalty would be as high as 40% if CIL supplies below 50% of ACQ.
Sun TV Network rose 1.9%. The stock turned ex-dividend today, 9 August 2012, for interim dividend of Rs 2.50 per share for the year ending 31 March 203 (FY 2013).
Cairn India fell 1.89%. The company on Thursday, 8 August 2012, announced that Mr. Rahul Dhir has decided to step down as Managing Director and Chief Executive Officer of the company with effect from 31 August, 2012 to pursue his entrepreneurial interests. The search for Mr. Dhir's successor is underway and an announcement is expected soon, Cairn India said in a statement. During this intervening period, the board has appointed Mr. P. Elango, Director - Strategy and Business Services and a member of Cairn India's Executive Committee, as the Interim CEO. Mr. Elango, an experienced oil & gas veteran has been with Cairn for over 15 years and has worked competently alongside Mr. Dhir for the past six years.
On the eve of this announcement, Mr Dhir said, "It's been a privilege to be part of Cairn India's remarkable growth story over the past six years. We have achieved all major milestones set out at the time of the IPO. With the completion of Vedanta's acquisition, Cairn India's exceptional organization and unique asset base are well placed to continue to deliver sustainable growth and value for our Nation and all our stakeholders. This is the right transition point for me to pursue my entrepreneurial interests. I take this opportunity to thank all my colleagues at Cairn India, and our Board for their contribution and support in creating this amazing company".
Mr. Navin Agarwal, Chairman of Cairn India, said: "The success of Cairn India, under Rahul's leadership has been achieved through building a globally competitive team, ensuring a strong focus on disciplined execution, sustaining low cost and safe operations and innovative application of technology. These strategic pillars will continue to remain core to Cairn India's operating philosophy as it enters the next phase of its growth. We thank Rahul for his valuable contribution and wish him success in his future endeavours. Cairn India is well poised to continue its focus on exploration, and on augmenting our current production from Rajasthan and focus on growth in India and beyond".
Tata Power Company gained 2.55%. The company's consolidated net profit fell 66.09% to Rs 145.93 crore on 25% growth in revenue to Rs 7253.89 crore in Q1 June 2012 over Q1 June 2011. Tata Power said the sharp fall in net profit was mainly due to lower profit in coal business owing to lower price realization and higher cost of production, higher interest and depreciation cost due to commissioning of Mundra and Maithon power generation units and reversal of revenues due to change in effective date of MYT regulations in Mumbai.
On standalone basis, Tata Power's net profit rose 11% to Rs 312.30 crore on 19% growth in revenue to Rs. 2284.10 crore in Q1 June 2012 over Q1 June 2011.
Commenting on the first quarter results, Mr. Anil Sardana, Managing Director, Tata Power said: "During first quarter of FY 2013, the company reported revenue growth of about 20% and profit growth of about 10% which is highly satisfying. All our projects and subsidiaries by and large have performed well. Tata Power's generation capacity crossed 6,000 MW with commissioning of 800 MW unit 2 of the Mundra UMPP, reinforcing our position as the largest integrated power company in India. The company crossed 11,000 MWh of generation units at Mithapur Solar plant which is a significant milestone that demonstrates efficiency and state of art technology used at the plant. Our coal companies posted lower realization due to global economic slowdown and falling coal prices. By signing the coal supply agreement with PT Antang Gunung Meratus, we have taken proactive steps to ensure imported coal supply for our upcoming power projects to be developed for next 5 years."
Power Finance Corporation gained 3.02% after net profit rose 41.63% to Rs 971.88 crore on 34.9% growth in total income to Rs 3944.86 crore in Q1 June 2012 over Q1 June 2011.
Indiabulls Infrastructure & Power clocked highest volume of 1.88 crore shares on BSE. Cals Refineries (81.41 lakh shares), Kingfisher Airlines (57.36 lakh shares), Birla Power Solutions (50.26 lakh shares) and Mahindra Satyam (46.46 lakh shares) were the other volume toppers in that order.
SBI clocked highest turnover of Rs 188.79 crore on BSE. Tata Motors (Rs 94.03 crore), Bharti Airtel (Rs 77.58 crore), United Spirits (Rs 56.77 crore) and Mahindra Satyam (Rs 40.84 crore) were the other turnover toppers in that order.
Industrial production declined 1.8% in June 2012 compared to the level in the month of June 2011, as per the latest data released by the Ministry of Statistics & Programme Implementation. Manufacturing output, which has a 75.5% weight in the index of industrial production, fell 3.2% in June 2012 compared to the level in the month of June 2011. Capital-goods production shrank 27.9% in June 2012 compared to the level in the month of June 2011.
Union Finance Minister P. Chidambaram early this week said that a path of financial consolidation will be unveiled shortly. Government finances are under pressure as expenses exceed revenue, mainly because of subsidies doled out for cheaper supplies of food, fuel and fertilizer. Mr. Chidambaram today, 9 August 2012, said that the fiscal-deficit target for the current financial year will be reassessed after a mid-year review later this financial year depending on the pace of expenditure and the resource position of the government. The government is aiming to restrict spending on subsidies, the finance minister said. The government has already taken some steps to reduce expenditure. In late May, the finance ministry asked government departments to reduce their non-plan spending -- expenditure that won't create long-term assets -- by 10% this fiscal year as part of its efforts to keep the fiscal deficit under check.
The government intends to fine tune policies and procedures that will facilitate capital flows into India, Mr. Chidambaram said early this week. 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.
Mr. Chidambaram on Wednesday, 8 August 2012, said that the government has received requests to put off plans to implement the General Anti-Avoidance Rules (GAAR) which aim to check tax avoidance. The implementation of GAAR was postponed by one year in order to provide an opportunity of wider consultation before such a legislation is implemented, Mr. Chidambaram said in the lower house of parliament while replying to lawmakers' questions. The provisions of GAAR are directed toward preventing tax avoidance by way of aggressive tax planning, he added.
The implementation of GAAR proposal introduced in the Union Budget 2012-13 in March 2012 by then-finance minister Pranab Mukherjee has been deferred to 1 April 2013. This came after heavy criticism from foreign investors who fear that GAAR would give the authorities arbitrary powers to examine any deal that they feel is designed to avoid tax. Prime Minister Dr. Manmohan 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.
Dr. Singh last month also 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.
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 early this week.
On the macro front, inflation based on the monthly wholesale price index (WPI) is seen inching up to 7.4% in July 2012 from 7.25% (provisional) for the month of June 2012, as per the median estimate of a poll of economists carried out by Capital Market. The data is due for release at 11:30 IST on 14 August 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 monsoon has been less than average during the current year. Quantitatively, monsoon season rainfall for the country as a whole was deficient by 19% till 3 August 2012. Nineteen out of 35 states/union territories received less than the average rainfall till the end of July 2012. 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.
Rice sowing has picked up according to the latest data released by the Ministry of Agriculture. Rice was sown in 264.39 lakh hectares (lh) till Thursday, 9 August 2012, compared with 233.68 lh until 3 August 2012. Rice sowing so far has been below the normal area of 272.58 lh for the summer sown crop by this time of the year. Cumulative sowing of coarse cereals totaled 140.89 lh till 9 August 2012, compared with 135.75 lh until 3 August 2012. Sowing of coarse cereals remains much lower than 181.24 lh of normal area for the crop this time of the year.
Sowing of pulses totaled 74.48 lh till 9 August 2012, compared with 72.79 lh until 3 August 2012. Sowing of pulses remains lower than 92.81 lh of normal area for this time of the year. Sowing of oilseeds totaled 151.82 lh till 9 August 2012, compared with 145.17 lh until 3 August 2012. It is slightly lower than the normal area of 153.39 lh for oilseeds by this time of the year. Sowing of cotton totaled 109.23 lh till 9 August 2012, compared with 100.14 lh until 3 August 2012. The normal cotton sowing area of 99.9 lh by this time of the year has already been surpassed. Sowing of jute and mesta totaled 8.41 lh as on 9 August 2012, exceeding the normal area of 8.23 lk for the crop by this time of the year.
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 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 began on 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.
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.
Some major Indian firms will announcing their first quarter results over the next few days. State Bank of India, Sun Pharmaceuticals Industries, Siemens and BPCL announce quarterly results on tomorrow, 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.
European stocks edged kower on Thursday after the latest data showed lower-than expected growth in China's retail sales and industrial production in July 2012. Key benchmark indices in UK, Germany and France were down by between 0.07% to 0.68%.
The U.K. trade deficit widened to a record in the second quarter as cooling global growth sapped demand for British exports. The goods-trade gap increased to 28.3 billion pounds ($44.3 billion pounds) from 25 billion pounds in the previous quarter, the Office for National Statistics said today in London. Exports fell 4.9%, while imports slipped 0.5%
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.
Russia looks headed towards an economic slowdown, joining fellow emerging market powerhouses India and China whose economies are also showing signs of faltering, the latest report from the OECD showed on Thursday. The Paris-based economic think tank said its June composite leading indicator (CLI), which provides a measure of future economic activity and is based on a long-term average reading of 100, slipped to 99.5 for Russia from 100.3 in May. CLIs for China and India continued to point to a slowdown, while Brazil looked set for a more moderate pick-up in economic activity than in last month's assessment, the Organisation for Economic Cooperation and Development said. The overall indicator for the OECD area, covering 33 countries, eased to 100.3 after standing at 100.4 from February through to May, pointing to moderating growth.
Asian shares rose on Thursday, 9 August 2012, after a clutch of Chinese economic data pointed in the direction of more monetary-policy easing from the world's second biggest economy. Key benchmark indices in China, Indonesia, Taiwan, Hong Kong, Japan and South Korea rose by between 0.61% to 1.96%. Singapore's stock market was closed for a holiday.
Kicking off a busy day for Chinese data, inflation data showed consumer prices increased 1.8% from the year-ago period, just ahead of forecasts for a 1.7% increase, but slowing from the 2.2% increase recorded in June. Data released by the National Bureau of Statistics Thursday also showed a drop in producer prices. July retail sales rose 13.1% which was lower than 13.7% growth in June 2012. Industrial output advanced 9.2% in July 2012 which was lower than 9.5% expansion in June 2012. The latest data showed that fixed asset investments in non-rural China climbed 20.4% in the first seven months of 2012.
Sales of passenger cars in China, the world's largest automobile market, rose 11% from a year earlier to 1.12 million units in July, the China Association of Automobile Manufacturers (CAAM) said on Thursday. The data represented a 13% drop from June, when China sold 1.28 million passenger cars. July is one of the low seasons for car sales because auto makers usually carry out equipment maintenance in the summer.
The Bank of Japan (BoJ) today, 9 August 2012, left its interest rates and policy stance unchanged after a monetary policy review, with the Japanese central bank reiterating its commitment to powerful monetary easing, but taking no further action to achieve its goal to spur a 1% increase in consumer prices. The BoJ's policy interest rate was kept in the range of 0% to 0.1%, with the size of the asset purchase program also maintained at 70 trillion yen ($89.3 billion), as widely expected. The BoJ said it will proceed with monetary easing "in a continuous manner by steadily increasing the amount outstanding" of the asset purchase program that is currently in force. The inflation rate is likely to remain around zero for the time being, it added.
The BoJ said that while fixed investments by businesses and private consumption continued to improve moderately, exports had moderated, and recent readings on production were weak. On the external front, the BoJ said particular attention must be paid to developments concerning the European debt problem.
The Bank of Korea left its key policy interest rate at 3.0% on Thursday, after a surprise cut last month -- its first in more than three years.
Standard & Poor's Ratings Services affirmed its 'AA-' long-term and 'A-1+' short-term unsolicited issuer credit ratings on Taiwan. The outlook is stable. The transfer and convertibility assessment remains 'AA+'. At the same time, it affirmed the 'cnAAA/cnA-1+' Greater China scale ratings on Taiwan. Taiwan's extremely strong external position, sound monetary management, and dynamic information technology (IT) companies in the private sector support the ratings. Tempering these strengths are a moderately high government debt and a small, open economy that is vulnerable to global economic conditions.
Australia's seasonally adjusted unemployment rate totaled 5.2% in July, down from 5.3% in June, the Australian Bureau of Statistics said Thursday. The number of employed increased 14,000 to 11.5 million while the number of unemployed decreased 2,500 to 635,100. The labor force participation rate reached 65.2%, from 65.3% seasonally-adjusted in June.
Trading in US index futures indicated a flat opening of US stocks on Thursday, 9 August 2012. US stocks dipped on Wednesday following three days of gains as traders awaited more signals about central bank action in support of a stalling global economy.
Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012.
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