Ratnamani Metails , Ahmednagar Forgings, Thermax
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Thursday, August 30, 2007
Of bubbles and troubles
In the wake of the discount rate cut by the Federal Reserve on 17 August, Asian stock markets staged an impressive recovery last week. Just as drug addicts deprived of their daily shot when they run out of money treat themselves with more than one shot when they find some money, investors have grabbed Asian stocks with both hands and more. This hunger for Asian stocks will result in indigestion, eventually. Some historical perspective would help investors.
In the 1990s, China exported deflation to the rest of the world by becoming the centre for global manufacturing. The West, trying to opportunistically lower inflation, welcomed it. Import prices came down dramatically everywhere. The declining price of crude oil added its own deflationary weight to this mix. That is why, when the technology, media and telecom bubble melted in the US and Europe, central bankers’ fears were about deflation. They eased aggressively—some early, some late—and they kept rates low for long. They were willing to take the risk of allowing some inflation back into the system. Soon, the pendulum began to swing the other way.
Crude oil prices began to rise from a combination of war, political tensions in West Asia, rising demand and supply discipline. Strong global growth revived prices of industrial metals, which boomed. With each year of strong growth, capacity utilization edged up globally and all raw material prices began to climb. China thus began to export inflation, indirectly. It is about to do so more directly now that its inflation rate has climbed to nearly 6% from around 1% a year ago.
The US, which had put monetary policy on hold in 2006 but was keeping its finger on the trigger for another rate hike, has been forced to take its hand off the trigger because Wall Street has just sent a bill to the Main Street and policymakers are paying up. Politicians would see to it that they pay a lot more. In America, capitalists have rigged the system effectively in their favour. David Walker, the comptroller general of the country, warns darkly of the threat of the US going the way of the Roman Empire. Perhaps I am digressing.
Even as the central bank is busy providing liquidity and cutting interest rates, inflation ghosts are not about to disappear soon. Commodity prices have resumed their uptrend. Wheat prices are at a 20-year high and crude oil is firmly ensconced above $70 per barrel. Monetary policy contradictions might soon reappear in the US. That is what happened in 1987. After the infamous October 1987 crash, the federal funds rate was lowered from 7.25% to 6.5% by February 1988. Soon, within six months, the rate was rising. In the middle of the super-bull market between 1982 and 1999, the S&P 500 delivered a princely annual return of just over 4% from September 1987 to end-1994. Adjusted for inflation, the real returns were actually negative.
Asia fared little better. Between October 1987 and December 1990, the Hang Seng index returned -30.0%, the Singapore Straits Times index, -15.0% and Taiwan weighted index, -33.0%. Only Korea’s KOSPI gave positive 40.0% returns. With the exception of Japan, Asian stocks began to rally in 1991, up to end-1993. But, that was because it was preceded by a three-year drought. After a five-year feast of returns, famine awaits Asian investors, as not just the US but China, too, will be complicating matters for them.
In China, monetary policymakers had to put on hold even token attempts at tightening on seeing the inflation rate climb to 5.6% because the US had successfully exported its structured finance and alphabetical viruses all over the globe. Initially, we were told that Chinese banks were not infected. Mea culpa followed reluctantly last week. It is just the first instalment of confessions.
So, China held back from tightening monetary policy and came up with a clever plan to export its stock price bubble. It allowed its residents to buy foreign shares, including H-shares in Hong Kong. The Hang Seng index, at one stage, had surged 3,000 points from the intraday low on 17 August to an intraday high on Tuesday (21 August) morning. This was insanity at its best (or, worst?).
Economic theory has taught us that developed countries would export technology and capital while developing countries would export raw material and consumer goods. Instead, the US exported its housing bubble and consequent troubles to the other (China) and the other is now exporting its bubble to Hong Kong and, through that, to the rest of Asia and the world. It would be soon exporting its inflation as well.
When economic policy in two of the world’s biggest economies is geared towards propping up asset prices and ponzi schemes, the end result would likely be disastrous. It would not hurt investors to be afraid.
Market Close: Positive ending to a very choppy day!!
Volatile day on the back of FNO Expiry but the Indian indices ended with gains for the fourth straight session. Indices had a good start following its firm global peers. But profit booking at higher levels kept indices to trade in a narrow range. But Final hours of trading witnessed some value buying in index heavy weights like M&M, Wipro, HDFC Bank and Bajaj Auto which pushed up the Indices to end in green. Buying was seen across the board but except Realty stocks which ended in red. Auto, Sugar, Banking and IT stocks cheered the day. Mid and Small caps were inline with the front line indices. Asian markets ended firm while Europe was in green.
Sensex closed up by 129 points at 15121.74. It was helped up by gains in RCVL (534.4,+3 percent), HDFC Bk (1182.05,+2 percent), Bajaj Auto (2364.55,+2 percent), ACC (1061.1,+2 percent) and ICICI Bk (872.05,+2 percent). Restricting the gains were Cipla (165.2,-3 percent), Rel Energy (766.75,-2 percent), TISCO (657.35,0 percent), L & T (2580.3,0 percent) and SBI (1572.3,0 percent).
TTK Prestige kitchen solutions provider embarked into a joint development pact with the Salarpuria Group to carry out a commercial project, on its factory land in Bangalore. Salarpuria is a Kolkata-based property developers. The TTK group, which initially planned to sell its factory land would either build an office complex or a retail mall on it to add another revenue stream. Investment for a mall project is estimated around Rs 150 cr while an office complex will cost about Rs 100 cr. TTK owns 6.5 acres at Dooravaninagar, Old Madras Road, Bangalore. After shifting many of its operations to Tamil Nadu and Uttarakhand from Bangalore, it plans to exploit the land for commercial purpose. It also partnered with Ernst & Young to identify real estate developing agency. It is awaiting clearances and approvals from the Bangalore Development Authority and local authorities to commence work on the project. So this benefits will not accrue immediately. However on back of the envelope calculations indicate land value at Rs 50 per share. Thats quite good. The business valuation is cheap. We have a wow call on TTK and that we believe it should deliver. The stock closed up by 3.26%.
Trai has recommended that there will be no limit on the number of players in telecom sector, relaxation of stringent M&A norms and technology neutrality for telecom licences. It further added that both GSM and CDMA players should pay an entry fee and higher spectrum fee for additional 2G radio frequency allocation. Trai has also proposed increasing the spectrum fee in addition to recommending a one time entry fee for allocation of spectrum beyond 10 Mhz for GSM operators and 5 Mhz for CDMA operators. Trai has not warped under intense pressure from India?s powerful GSM lobby who were demanding a cap on the number of operators, retention of the existing M&A norms and ban of offering dual technology (CDMA and GSM) under the same licence and retention of the existing spectrum allocation norms. As per Trai?s proposals, operators offering dual technologies will be subject to an entry fee, which is equivalent to the amount for obtaining a new licence for that service area. This implies CDMA operator such as Reliance Communications which has applied for GSM spectrum across the country must pay an entry fee of Rs 1,700 cr to offer these services on a pan India level. These new rules would lead to more competition. There are some positives as well in terms of lower fees. The negative is more for the GSM Telecom companies like Bharti and Idea. Rcom ended up by 1.7% while Bharti closed marginally down.
Technically Speaking: It was a choppy session through out the day before closin in green. Sensex touched intraday high of 15201 and low of 15054. Overall breadth was in favor of Advances, where the Advances to Declines ratio stood at 1.5:1. The turnover was pretty good as the market churned Rs 5378 cr. Sensex has expectedly been choppy and closed below 15200. We can expect a correction in the current rise upto 14960. On the higher side, if Sensex breaks above 15200, we might see a rally upto 15650.
RBI Annual Report 2006-2007
| Assessment of 2006-07 |
| Overall Performance |
| During 2006-07, the Indian economy exhibited acceleration in growth, led by manufacturing and services sector activities. The sustained high growth since 2003-04 has been supported by increase in domestic savings and investment. Robust growth during 2006-07, however, was accompanied by inflationary pressures on account of rising capacity utilisation, strong growth in monetary and credit aggregates, demand-supply gaps in domestic production of foodgrains and oilseeds, and firm global commodity prices. A series of timely and appropriate measures undertaken by the Reserve Bank and other supply side responses to rising prices made by the Government helped to contain headline inflation. More importantly, the measures facilitated the anchoring of inflationary expectations to a certain extent. Strong growth in general and of the industrial sector in particular enabled the corporate sector to maintain high profitability. This, in turn, resulted in buoyant tax collections and played a major role in improving public finances. The growth process was facilitated by financial market conditions, which remained orderly, barring a few episodes of volatility. However, interest rates in various segments of the financial market hardened to some extent. Strong growth led to a widening of the trade deficit. Nonetheless, the current account deficit, as per cent of GDP, remained unchanged from the previous year since the widening of the merchandise trade deficit was offset to a large extent by the continuing buoyancy in net invisibles surplus. Large capital flows led by external commercial borrowings and net foreign direct investment (FDI) inflows resulted in large accretion to foreign exchange reserves. |
| Real GDP growth accelerated from 9.0 per cent during 2005-06 to 9.4 per cent during 2006-07. The growth, thus, averaged 8.6 per cent per annum during the four-year period ended 2006-07. Real GDP growth during the Tenth Five Year Plan period averaged 7.6 per cent per annum, the highest in any Plan period. Acceleration in the growth rate during 2006-07 was attributable to buoyancy in the industrial and services sectors, which exhibited double-digit growth (11.0 per cent each). Higher growth in the industry and services sectors more than offset the deceleration in the agricultural sector. Growth in the agricultural sector decelerated from 6.0 per cent in 2005-06 to 2.7 per cent in 2006-07, partly on account of uneven rainfall during the South-West monsoon and partly due to the base effect. Although the overall foodgrains production rose by 3.6 per cent in 2006-07, the production of major crops still did not reach the previous peak touched in 2001-02. Amongst the non-foodgrains, the production of sugarcane and cotton scaled new peaks during 2006-07, while that of oilseeds declined. |
| Monetary Developments |
| Money supply (M3) increased by 21.3 per cent (Rs. 5,80,733 crore) during 2006-07 as compared with 17.0 per cent (Rs. 3,96,878 crore) during 2005-06. Amongst the major components, time deposits exhibited a growth of 23.2 per cent (Rs. 4,41,913 crore) during 2006-07 as compared with 15.3 per cent (Rs. 2,53,056 crore) during 2005-06. Higher growth in time deposits could be attributed to factors such as higher interest rates on bank deposits and availability of tax benefits under Section 80C for bank deposits. On the sources side, growth of bank credit remained high, although there was some moderation. Demand for bank credit was largely broad-based with agriculture, industry and personal loans absorbing 14 per cent, 36 per cent and 24 per cent, respectively, of incremental expansion in overall non-food credit during 2006-07. Growth of credit to sectors such as real estate remained high, albeit with some moderation. In order to maintain asset quality, the Reserve Bank further tightened the provisioning requirements in respect of sectors witnessing high growth in credit. Banks’ SLR investments, as a proportion of their net demand and time liabilities (NDTL), declined further to 28.0 per cent by end-March 2007 (close to the prescribed ratio of 25 per cent) as the expansion in investments did not keep pace with the expansion in the NDTL. Net foreign assets remained the key driver of reserve money and the Reserve Bank continued to modulate market liquidity through operations under the liquidity adjustment facility (LAF), issuance of securities under the market stabilisation scheme (MSS) and use of the cash reserve ratio (CRR). |
| Headline inflation firmed up from 4.0 per cent, y-o-y, on April 1, 2006 to 5.9 per cent on March 31, 2007 with an intra-year high of 6.7 per cent on January 27, 2007 and a low of 3.7 per cent on April 15, 2006. Both demand and supply side factors added to inflationary pressures during 2006-07. Demand pressures emanated from both high investment and consumption demand, strong growth in credit and monetary aggregates, and elevated asset prices. Supply side pressures emerged from demand-supply gaps in domestic production of major foodgrains and oilseeds amidst rising global prices. Although there was some improvement in domestic agricultural production during 2006-07, the production of major foodgrains has exhibited stagnation over the past few years. For instance, the production of rice, wheat and pulses during 2006-07 was still lower than the previous peaks touched during 2001-02, 1999-2000 and 1998-99, respectively. Consumer price inflation rose from 4.9-5.3 per cent in March 2006 to 6.7-9.5 per cent in March 2007, mainly reflecting the impact of higher food prices. In order to contain inflation and to stabilise inflationary expectations, the Reserve Bank persevered with the policy of pre-emptive actions and gradual withdrawal of monetary accommodation, using various instruments at its disposal flexibly. Between the second half of 2004 and July 31, 2007, the repo and the reverse repo rates were increased by 175 basis points and 150 basis points, respectively. In addition, the cash reserve ratio was raised by 250 basis points (including the increase of 50 basis points effective August 4, 2007). The Government also took various fiscal and supply-side measures to contain inflation during the latter part of 2006-07. |
| Balance of Payments |
| India’s balance of payments in 2006-07 reflected a number of positive features. Merchandise trade continued to exhibit robust growth during 2006-07, although there was some loss of pace from the strong growth of 2005-06. The higher growth of imports vis-à-vis exports led to a persistent rise in the trade deficit, on a balance of payments basis. Nonetheless, the current account deficit, as per cent of GDP, remained unchanged (1.1 per cent of GDP) from the previous year since the widening of the merchandise trade deficit was offset to a large extent by the continuing buoyancy in net invisibles surplus. Net capital inflows to India remained buoyant (4.9 per cent of GDP), far exceeding the current account deficit. Higher capital flows could be attributed to the strengthening of macroeconomic fundamentals, greater investor confidence and ample global liquidity. Net FDI inflows from abroad of US $ 19.4 billion exceeded FII inflows (net) during 2006-07 aggregating US $ 3.2 billion. The debt flows (net) at US $ 25.0 billion were led by external commercial borrowings reflecting strong investment demand. Net capital flows, after financing the current account deficit, led to accretion of US $ 36.6 billion, excluding valuation changes, to foreign exchange reserves during 2006-07. |
| Financial Markets |
| Financial markets remained orderly during 2006-07, barring some episodes of volatility, especially during the second half of March 2007. Capital inflows and movements in Government cash balances continued to be the key drivers of liquidity conditions and overnight interest rates. Interest rates in the various market segments hardened during the year, broadly in tandem with the pre-emptive monetary tightening measures taken by the Reserve Bank. By and large, the exchange rate of the Indian rupee exhibited two-way movement with respect to the main reserve currencies during 2006-07. The stock market remained buoyant with the benchmark indices reaching record highs during 2006-07 amidst intermittent corrections. The primary segment of the capital market exhibited buoyant conditions. |
| Outlook for 2007-08 |
| Available information so far indicates continuation of the growth momentum during 2007-08 at a strong pace with the impulses of growth getting more broad-based. Steady increases in the rate of gross domestic saving and investment, consumption demand, addition of new capacity as well as more intensive and efficient utilisation/capitalisation of existing capacity are expected to provide support to growth during 2007-08. |
| For monetary policy purposes, the Reserve Bank, in its Annual Policy Statement (April 2007), placed the real GDP growth for 2007-08 at around 8.5 per cent, assuming no further escalation in international crude prices and barring domestic or external shocks. In view of the lagged and cumulative effects of monetary policy on aggregate demand and assuming that supply management would be conducive, capital flows would be managed actively and in the absence of shocks emanating in the domestic or global economy, the Reserve Bank in its Annual Policy Statement noted that the policy endeavour would be to contain inflation close to 5.0 per cent in 2007-08. The Reserve Bank in its First Quarter Review of the Annual Statement of Monetary Policy in July 2007 retained its projection of real GDP growth at around 8.5 per cent, barring domestic and external shocks. Assuming that aggregate supply management will continue to receive public policy attention and that a more active management of the capital account will be demonstrated, the outlook for inflation in 2007-08 in the First Quarter Review remained unchanged. Accordingly, it was indicated in the Review that holding headline inflation within 5.0 per cent in 2007-08 assumed priority in the policy hierarchy; while reinforcing the medium-term objective to condition policy and perceptions to reduce inflation to 4.0-4.5 per cent on a sustained basis. |
| Monetary Management |
| Expansion of money supply (y-o-y) as on August 3, 2007 was higher (21.7 per cent) than a year ago (19.3 per cent) and also higher than the indicative projection of 17.0-17.5 per cent set out in the Annual Policy Statement. Growth in aggregate deposits accelerated, led by time deposits. Bank credit witnessed some moderation from the strong pace of the preceding three years. Growth of non-food credit of scheduled commercial banks was 23.6 per cent, y-o-y, as on August 3, 2007 as compared with 32.5 per cent a year ago. Commercial banks’ investments in SLR securities, as per cent of their net demand and time liabilities, at 28.6 per cent were marginally higher than those at end-March 2007, but below those of 31.1 per cent a year ago. Growth of reserve money as on August 10, 2007 at 26.9 per cent (19.6 per cent adjusted for the first round impact of the increase in the CRR) was higher than a year ago (17.2 per cent), mainly on account of accretion to the Reserve Bank’s net foreign assets. |
| Headline inflation, based on movements in the wholesale price index (WPI), moderated to 4.1 per cent, y-o-y, on August 11, 2007 from 5.9 per cent at end-March 2007 and 5.1 per cent a year ago. Inflation for all the three sub-groups of the WPI eased from their end-March levels. Fuel group inflation turned negative (-2.1 per cent) reflecting cuts in domestic prices during November 2006 and February 2007. International crude oil (average) prices have, however, increased by around 28 per cent up to July 2007 from February 2007, when domestic prices were cut last. Non-oil global commodity prices also remained firm led by food and metals. Various measures of consumer price inflation were placed lower in June 2007 (5.7-7.8 per cent) than those in March 2007 (6.7-9.5 per cent). However, consumer price inflation continued to exceed wholesale price inflation mainly on account of higher food prices. Although inflation has eased since end-March 2007, inflationary pressures could potentially persist for several reasons. There are concerns regarding further hardening of international commodity prices, in particular, oil prices. Moreover, the possibility of inflationary pressures from domestic factors such as strong growth in monetary aggregates, elevated asset prices and large capital flows with implications for domestic liquidity conditions need to be recognised. Accordingly, a continuous vigil supported by appropriate policy actions by all concerned would be needed to maintain price stability so as to anchor inflationary expectations on a sustained basis. |
| The stance of monetary policy in 2007-08, as observed in the Annual Policy Statement, would be conditioned by the patterns in which the global and, more particularly, the domestic environment unfold. The likely evolution of macroeconomic and financial conditions indicates an environment supportive of sustaining the current growth momentum in India. Monetary policy, while contributing to growth, has to ensure and maintain conditions of price and financial stability. Accordingly, the policy preference for the period ahead was articulated strongly in favour of reinforcing the emphasis on price stability and anchoring inflation expectations. The Reserve Bank in its First Quarter Review of the Annual Statement of Monetary Policy in July 2007 observed that monetary policy in India would continue to be vigilant and proactive in the context of any accentuation of global uncertainties that pose threat to growth and stability in the domestic economy. The domestic outlook continues to be favourable and would dominate the dynamic setting of monetary policy in the period ahead. It is important to design monetary policy such that it protects growth by contributing to the maintenance of stability. Accordingly, while the stance of monetary policy would continue to reinforce the emphasis on price stability and well-anchored inflation expectations and thereby sustain growth momentum, contextually financial stability may assume greater importance in the months to come. |
| Agriculture |
| The recent upward trends in global prices of major food items have significant implications for the domestic agricultural sector and overall macroeconomic and financial stability. Increases in global food prices reflected a shortfall in global production and the rising demand for non-food uses such as bio-fuels. Reflecting the sustained uptrend in major food prices, the food price index (compiled by the IMF) reached a 26-year high in June 2007 - the highest since early 1981. Against the backdrop of these hardening trends in global food prices, there is an urgent need to take measures to accelerate the growth in Indian agriculture, especially food crops. |
| Although the share of agriculture in overall GDP declined over the years from around 40 per cent in 1980-81 to below a fifth in 2006-07, it continues to play an important role in the Indian economy. Since the mid-1990s, however, the growth of the agricultural sector has been low as well as volatile; the growth decelerated from an annual average of 4.7 per cent per annum during the 1980s to 3.1 per cent during the 1990s and further to 2.2 per cent during the Tenth Plan period. Volatility in agricultural production has not only implications for overall growth but also, as the experience of 2006-07 amply demonstrated, for maintaining low and stable inflation. Enhanced growth of the agricultural sector is vital for ensuring food security, poverty alleviation, price stability, overall inclusive growth and sustainability of growth of the overall economy. |
| The reduction in agricultural growth since the mid-1990s could be attributed to stagnant/declining yields, which, in turn, reflect a variety of factors such as declining investment, lack of proper irrigation facilities, inadequate other infrastructural facilities, inadequate attention to R&D for developing high yielding varieties of seeds, absence of major technological breakthroughs, improper use of fertilisers/nutrients and institutional weaknesses. In view of stagnation in the production of major foodgrains, there may be a need to refocus production efforts in alternative potential areas with suitable agro-climatic conditions, rather than the traditional areas, particularly in the case of rice and wheat. As Indian agriculture continues to be heavily dependent on the monsoon, the need for enhancing the irrigation potential to meet the growing water requirements of farmers and to impart stability to agricultural production and yield assumes greater emphasis. More focus needs to be placed on agricultural research in the coming years as the success so far has been restricted to select crops. A growing disparity between the actual and the potential yields points to a crucial gap between research and extension. There is an urgent need to revive the extension system so that it is able to respond to the emerging demands of renewed agricultural growth. In order to bring marketing reforms, there is a need to take forward the process of implementing Agricultural Produce Marketing Committee (APMC) Act in all the States. There is also a need to have an appropriate legislative framework that is conducive to participatory organisations. In view of significant weather and price risks, appropriate risk mitigation policies would need to be put in place to provide relief to distressed farmers as well as enhance efficiency of production. While agricultural growth is envisaged at four per cent per annum during the Eleventh Plan, the Planning Commission’s projections suggest that the production of foodgrains needs to increase by 2-2.5 per cent per annum. The production of non-foodgrains will, thus, have to expand at a much higher rate to achieve the overall target of four per cent which will necessitate substantial development of activities such as horticulture, dairy, poultry, and fishery. This would require a revolution on the lines of the green revolution of the 1970s. |
| Inclusive growth calls for greater financial inclusion with, inter alia, enhanced and easy access to institutional credit. The programme for financial inclusion initiated by the Reserve Bank in collaboration with banks and several State Governments by adopting modern technology needs to be intensified and expanded urgently. In view of small and fragmented farm holdings, the population dependent upon agricultural activity and incomes will have to increasingly rely on non-farm sources of income in future. Thus, diversification towards activities such as poultry, food processing and other rural industries will be critical for the betterment of living standards in rural areas. While there has been rapid integration of the Indian economy with the global economy since the early 1990s, the pace of progress on intra-regional integration within the country needs to be quickened to enable the rural areas to reap the benefits of higher growth. |
| Industry and Infrastructure |
| The rebound in industrial production that started during 2002-03 continued during 2006-07 resulting from increased domestic and external demand. The sustained growth has led to high capacity utilisation and is contributing to increased investment activity. Modernisation of the capital stock, reduction/rationalisation of import tariffs and other taxes, increased openness of the economy, higher foreign direct investment inflows, greater competitive pressures, increased investment in information and communication technology and greater financial deepening are contributing to productivity gains in industry. The sustained growth in industry is vital to generate employment opportunities and to absorb the disguised labour force dependent upon the agricultural sector. |
| The manufacturing sector has recorded robust growth, despite several infrastructure deficiencies. It is imperative to augment the existing infrastructure facilities, particularly roads, ports and power, to provide the enabling environment for industry to prosper. There has been mixed progress in the infrastructure sector so far. The telecom sector has witnessed high growth as reflected in the accelerated spread of mobile telephony in the country. Railways and ports have also witnessed some improvement. However, progress remains less than adequate in other sectors such as power, coal, water, roads, urban infrastructure and rural infrastructure. Urban infrastructure is a vital element in the growth process. Studies show that increase in the size of urban agglomerations is associated with large productivity gains. These gains emanate from the proximity to the product as well as labour markets, which provide savings in trade and transport costs on the one hand and the availability of skilled labour on the other. Efficient functioning of cities of all sizes is essential for improving the overall efficiency. Improvements in the provision of water, transport, sanitation, health and education facilities in urban areas are also essential for the welfare of the poor. The High Level Committee on Infrastructure headed by the Prime Minister has estimated that an investment of Rs.14,50,000 crore during the Eleventh Plan would be required to develop world class infrastructure. This would require a substantial increase in spending on infrastructure by both the public and privates sectors from the current levels of 4.6 per cent of GDP to almost 8 per cent of GDP every year. |
| Services |
| The sustained strength of manufacturing activity, strong growth in tourism, improvements in the telecommunications, buoyancy in IT and BPO sectors, robust growth of the construction sector, acceleration in deposit and credit growth and opening up of the insurance sector have buoyed the services sector in recent years. The impressive performance of the services sector was attributable largely to the availability of skilled and cheap labour. However, the sustained acceleration in the services and the manufacturing activities is leading to incipient pressures on the supply of good quality skilled labour. While its demographic profile places the country favourably in terms of manpower availability, there are reports of emerging talent supply shortages. In order to reap the benefits of the demographic dividend, substantial expansion and reforms in the education sector would be needed on an urgent basis. |
| Fiscal Policy |
| The process of fiscal consolidation in Central Government finances under the rule-based framework of the FRBM has been characterised by front-loaded reduction in deficit indicators in 2004-05, pause in 2005-06 and resumption of the process in 2006-07. The fiscal correction process is budgeted to continue during 2007-08. With the gross fiscal deficit budgeted at 3.3 per cent of GDP in 2007-08, the FRBM target of 3.0 per cent by 2008-09 appears feasible. The revenue deficit is budgeted at 1.5 per cent of GDP for 2007-08; the FRBM path envisages elimination of revenue deficit in 2008-09. Adherence to the FRBM target would require a reduction of 1.5 per cent in the revenue deficit/GDP ratio during 2008-09. |
| The fiscal consolidation strategy has been underpinned by revenue-led correction and reprioritisation of expenditures with a focus on outcomes, reflecting improved quality of adjustment. Maintaining the current buoyancy in tax revenues over a higher base needs to be continued with sustained effort in the light of high income growth. The scope for deepening fiscal empowerment further through improved tax revenues lies in maintaining a moderate structure of tax rates and broadening the base without affecting the growth momentum of the economy. The Government’s policy of reprioritising expenditure has led to higher outlays for the social sector. The shares of public expenditure on education and health in India are, however, still low by international standards. Reprioritisation of expenditures towards social sectors along with higher capital outlays would promote fiscal discipline without restricting operational efficiency of the Government. Higher public spending on social services would improve the social infrastructure and provide productivity gains. |
| External Sector |
| India’s linkages with the global economy are getting stronger, underpinned by the growing openness of the economy and the two way movement in financial flows. The ratio of merchandise exports to GDP has been rising since the early 1990s reflecting growing international competitiveness. At the same time, import intensity has been rising steadily as domestic entities have expanded access to internationally available raw material and intermediate goods as well as quality inputs for providing the cutting edge to domestic production and export capabilities. Structural shifts in services exports, led by software and other business services, and remittances have imparted stability and strength to India’s balance of payments. The net invisible surplus has offset a significant part of the expanding trade deficit and helped to contain the current account deficit to an average of one per cent of GDP since the early 1990s. Capital flows (net) have remained substantially above the current account deficit and have implications for the conduct of monetary policy and macroeconomic and financial stability. |
| Like India, several other countries are facing a similar situation of excess foreign exchange inflows which is affecting monetary management in these countries as well. However, monetary management at the current juncture in India is more complex than in other EMEs for several reasons. First, domestic interest rates are higher than the return on foreign exchange reserves, which leads to quasi-fiscal costs. Second, although the fiscal deficit and public debt have declined in recent years in India, by international standards, they still remain high. This restricts the flexibility available to fiscal policy to keep inflation relatively low. Third, in India, the real sector has been liberalised over the years which constrains the ability to take administrative measures with regard to supply management. At the same time, several policy rigidities persist, inhibiting the rapid and flexible adjustments that are needed by the demands of a well-functioning market economy. Further, in India, the banking system has been gradually deregulated and the conduct of monetary policy is largely through the use of market-based instruments. This restricts the ability to use administrative instruments such as prescribing deposit and lending rates, which some other countries may be able to use. Moreover, some countries are managing capital account more actively than before. Finally, it is also necessary to recognise that India is one of the few emerging market economies (EMEs) to record current account deficits, along with a significantly high trade deficit. |
| There has been a significant liberalisation of the policy framework with regard to capital outflows over the past few years. The policy regime for capital outflows is designed keeping the specific country context in view, especially characteristics of the real sector, and not merely the contextual level of inflows and extant absorptive capacity of the economy. First, the current regime of outflows in India is characterised by liberal but not incentivised framework for corporates to invest in the real economy outside India, including through the acquisition route. The regime has served the country well since Indian corporates are increasingly able to establish synergies with overseas units; to make up for lack of scale that has been a legacy problem in India, and to quickly acquire domain knowledge through acquisition. Second, significant liberalisation of outflows by individual households has been implemented following recommendation of the Committee on Fuller Capital Account Convertibility (Chairman: Shri S. S. Tarapore, 2006). However, the international experience shows that resident individuals often precede overseas investors in initiating outflows when the perceptions in regard to domestic economy’s performance or stability appear to turn adverse. Further, more favourable tax treatment, if any, on investments from foreign destinations relative to domestic investments provides a compelling incentive for round tripping. Third, as regards the regime for outflows through financial intermediaries, the approach is characterised by caution and quantitative stipulations whereby both prudential considerations and compulsions of management of capital account are relevant. |
| Financial Sector |
| During 2006-07, the Reserve Bank continued to fine tune the regulatory and supervisory initiatives. In order to ensure asset quality, prudential measures were further tightened through increases in the provisioning requirements and risk weights in respect of specific sectors. The focus of the various prudential and supervisory measures was on anchoring financial stability while providing flexibility to the financial system. In order to further strengthen the domestic banking sector and to conform the banking sector with international best practices, commercial banks will migrate to Basel II norms in a phased manner from the year ending March 2008. Although implementation of Basel II poses a significant challenge to both banks and the regulators, it also offers two major opportunities to banks, viz., refinement of risk management systems and improvement in capital efficiency. |
| Monetary Policy |
| In view of the incipient inflationary pressures, the stance of monetary policy progressively shifted from an equal emphasis on price stability along with growth (October 2004/April 2005) to one of reinforcing price stability with immediate monetary measures and to take recourse to all possible measures promptly in response to evolving circumstances (January 2007). Concomitantly, the Reserve Bank has taken pre-emptive monetary measures beginning mid-2004 to contain inflation and inflationary expectations. The major policy challenge for monetary policy during the recent period has been to manage the transition to a higher growth path while containing inflationary pressures so that potential output and productivity are firmly entrenched to sustain growth. Monetary measures, supported by supply side and fiscal measures, have helped in containing inflation and anchoring inflation expectations while supporting the growth momentum. |
| The Reserve Bank’s self-imposed medium-term ceiling on inflation at 5.0 per cent has had a salutary effect on inflation expectations and the socially tolerable rate of inflation has come down. In recognition of India’s evolving integration with the global economy and societal preferences in this regard, the resolve, going forward, would be to condition policy and expectations for inflation in the range of 4.0–4.5 per cent. This would help in maintaining self-accelerating growth over the medium-term, keeping in view the desirability of inflation at around 3 per cent to ensure India’s smooth global integration. |
| The conduct of monetary policy has turned out to be more complex in recent years for a variety of reasons. Globalisation has brought in its train considerable fuzziness in reading underlying macroeconomic and financial developments, obscuring signals from financial prices and clouding the monetary authority’s gauge of the performance of the real economy. There is considerable difficulty faced by monetary authorities across the world in detecting and measuring inflation, especially inflation expectations. The operation of monetary policy in India is also constrained by some uncertainties in the transmission of policy signals to the economy. |
| Monetary policy in India has also to contend with the burden of challenges emanating from other sectors. First, fiscal imbalances remain large by international standards and have to be managed in a non-disruptive manner. Second, the enduring strength of foreign exchange inflows complicates the conduct of monetary policy. Third, in India, levels of livelihood of a large section of the population are inadequate to withstand sharp financial fluctuations which impact real activity. Accordingly, monetary policy has also to take into account the effect on these segments of the economy of volatility in financial markets, often related to sudden shifts in capital flows. Fourth, limitations on the elasticity of aggregate supply domestically impose an additional burden on monetary policy, particularly in the short term. While open trade has expanded the supply potential of several economies, it does not seem to have had any significant short-term salutary effect on supply elasticities. Persisting supply shocks to prices of commodities and services to which headline inflation is sensitive can exert a lasting impact on inflation expectations. Faced with longer term structural bottlenecks also in supply, with less than adequate assurance of timely, convincing and demonstrated resolution, monetary policy has to respond appropriately. The burden and the dilemmas, in fact, are greater in the event of a structural supply problem on account of its persistent effects on inflation. Managing structural change, while keeping inflation low and stable, without dampening the growth momentum is the quintessential challenge to monetary policy in the period ahead. |
RBI Annual Report - 2006-07
Market rallies for fourth consecutive session.
The market settled with gains for the fourth straight session on continued buying demand for index pivotals. It saw volatile swings in fag session of day, after staying firm throughout the day. It had opening on a firm note today, 30 August 2007, as US stocks rallied overnight on expectation that the US Federal Reserve would cut rates in September 2007 to cushion the impact of the subprime crisis on the broader US economy.
The BSE Sensex settled above the 15,100 mark while the S&P CNX Nifty ended above the 4,400 level. Turnover was also healthy today.
The BSE 30-share Sensex up 128.70 points or 0.86% at 15,121.74. It opened with a 175.65-point upward gap at 15,168.69 and advanced further to hit a high of 15,200.81. The index touched a low of 15,053.98. It oscillated in a range of 114.71 points for the day
It has now urged 957 points in four trading sessions, from its close of 14,163.98 on 23 August 2007.
The S&P CNX Nifty up 53 points or 1.22% at 4,412.30. August 2007 futures & options (F&O) contracts expired today. The Nifty September 2007 futures settled at 4350, a sharp discount of 62.30 points as compared to spot closing
The total turnover on BSE spiked to Rs 5,378 crore as against Rs 4,815 crore yesterday, 29 August 2007.
The NSE’s F&O turnover also surged to Rs 71,282.94 crore as compared to Rs 76,510.22 crore yesterday, 29 August 2007.
The market breadth was strong on BSE, with 1,578 shares advancing as compared to 1112 that declined, while 84 remained unchanged.
The BSE Mid-Cap Index rose 0.54% to 6,485.44, the BSE Small-Cap Index gained 1.06% to 7,957.96
All the sectoral indices on BSE settled with gains, except the BSE Realty index, which lost 1.28% to 7,116.08
BSE Capital Goods Index (up 0.45% at 13,306.72), BSE Health Care Index (up 0.43% at 3,501.17), BSE Auto Index (up 1.38% at 4,776.70), BSE Metal Index (up 0.83% at 11,297.31), BSE FMCG Index (up 0.67% at 1,949.32), BSE Oil and Gas Index (up 0.50% at 7,976.43), BSE IT Index (up 1.06% at 4,552.30) and BSE Bankex (up 1.29% at 7,751.50), all posted gains
Among the 30-member Sensex pack, 21 advanced while the rest declined.
Mahindra & Mahindra, the country’s top tractor maker by sales, rose 2.47% to Rs 672 on 1.15 lakh shares. It was the top gainer from Sensex pack. The stock rose on reports that it is conducting due diligence on Jaguar and Land Rover, put up for sale by Ford. Other potential bidders include private equity groups TPG Capital, Cerberus Capital Management, Ripplewood Holdings, One Equity Partners and Tata Motors.
India's top truck maker Tata Motors rose 0.59% to Rs 679, off its day’s high of Rs 699.
Banking shares advanced on fresh buying on a view that interest rates have peaked. ICICI Bank (up 1.46% to Rs 869.50), HDFC Bank (up 2.02% to Rs 1180), Syndicate Bank (up 2.77% to Rs 76), Allahabad Bank (up 3.41% to Rs 88), Canara Bank (up 1.54% to Rs 240) and Andhra Bank (up 2.11% to Rs 82.35), advanced.
Market expectations peg inflation rate at 3.94% for 12 month to 18 August 2007 compared to previous week’s 4.1%. The data will be released by the government tomorrow, 31 August 2007, afternoon.
India’s largest pharma company by sales Ranbaxy Laboratories rose 1.60% to Rs 378. Recently, US Food and Drug Administration gave approval to the company to make and market two drugs hydrocodone bitartrate and acetaminophen prescribed for pain relief. Total annual market sales of the drugs were $391 million.
India's largest firm by market capitalisation and oil refiner Reliance Industries (RIL) slipped sharply just before closing bell. It was up marginally by 0.11% to Rs 1891.80 on 8.96 lakh shares, after surging to a high of Rs 1924. A newspaper reported on Wednesday, 29 August 2007, the government is likely to approve a pricing formula for the company's natural gas within a few days. The stock had hit an all- time high of Rs 1948 on 26 July 2007.
India’s second largest software services exporter Infosys Technologies rose 1.42% to Rs 1860. As per report, Infosys Technologies plans to increase billing rates for new customers by 3-4% due to the sharp appreciation of the rupee against the dollar. The billing rates for existing contracts could increase by 2-3%. Infosys gets about 60% of its revenue from the United States.
Tata Consultancy Services (TCS), the country’s leading software services exporter rose 0.80% to Rs 1040 after it won a deal worth Rs 574 crore ($ 140 million) over a multi period from BSNL to provide comprehensive range of telecom services.
The rupee was hovering at 41.13, slightly weaker than Wednesday (29 August 2007)’s close of 41.10/41.11
Cipla, the country’s third largest pharma company by sales lost 2.50% to Rs 165.50 on 8.71 lakh shares. It was the top loser from the Sensex pack.
Reliance Energy (down 1.80% to Rs 768.10), State Bank of India (down 0.74% to Rs 1563.25) and Bharti Airtel (down 0.53% to Rs 875) were the other losers from the Sensex pack.
India’s largest power equipment maker by sales Bhel declined 0.87% to Rs 1835.30, off the session’s high of Rs 1884, after the company won a Rs 1990-crore order for supply and installation of power equipment to a project in southern India.
Tata Steel, the world's sixth largest steel manufacturer lost 0.51% to Rs 656.50. It came off sharply from day’s high of Rs 679.80. It had surged 9.2% to Rs 659.85 yesterday, 29 August 2007 after it recorded a consolidated net turnover of Rs 31,155 crore for Q1 June 2007, an increase of 442% over the same period last year, on the back of Corus acquisition.
Its consolidated operating profit surged 186% to Rs 4,904 crore in Q1 June 2007 over Q1 June 2006. The results also include an extraordinary item of Rs 4,121 crore primarily representing actuarial gains due to increase in yield rates on bonds held by various pension funds of Corus.
Three block deals of 18.85 lakh shares each were struck in Axis bank counter at an average rate of Rs 614 per share on BSE in opening trade. The stock rose 2.44% to Rs 627 on high volume of 82.33 lakh shares.
Sugar shares surged for the second consecutive day on reports that a group of ministers had recommended mandatory blending of 10% ethanol with petrol by October 2008 to deal with the massive oversupply of sugar.
Dwarikesh Sugar (up 10.26% to Rs 56.40), Sakthi Sugar (up 8.93% to Rs 78.70), Triveni Sugar & Industries (up 11.19% to Rs 80), Balrampur Chini Mills (up 2.68% to Rs 61.35), Shree Renuka Sugars (up 0.45% to Rs 534.50), Dhampur Sugar Mills (up 5.17% to Rs 54.90) and Bajaj Hindustan (up 2.54% to Rs 137.50) gained.
In a related move, the GoM has also suggested that the import duty on imported industrial ethanol be reduced from 7.5% to 5%.
Puravankara Projects settled at Rs 361.75 on BSE, a discount of 9.56% over the IPO price of Rs 400. On BSE, 71.23 lakh shares of the scrip were traded. The stock debuted at Rs 399 on BSE, a discount of 0.25% over the IPO price of Rs 400. It hit a high of Rs 399 and a low of Rs 357.55. The IPO had ended on 8 August 2007 with 1.91 times subscription.
Among the side counters, Kemrock Industries (up 10.63% to Rs 342), Rasoya Proteins (up 15.88% to Rs 63.50), Aristocrat (up 10% to Rs 57.20), Kirloskar Electric (up 10% to Rs 231) and Aarvee Denim (up 10% to Rs 88.60) gained.
Cambridge Solutions (down 8.64% to Rs 111), Jindal Worldwide (down 7.87% to Rs 117), Fortis Healthcare (down 7.22% to Rs 81), Khaitan Industries (down 6.63% to Rs 50) and TCI Industries (down 5% to Rs 3691) declined.
VSNL surged 5.59% to Rs 403 after its ADR gained 3.65% to $18.47 overnight on New York Stock Exchange (NYSE).
ICSA (India) surged 5.60% to Rs 1752.10 after its board approved 5-for-1 stock split.
Bartronics India rose 2.57% to Rs 197.95 after its board approved the issue of foreign currency convertible bonds (FCCB),Global depository receipts (GDRs) and/or American depository receipts (ADRs) of $ 50 million.
Real estate major DLF slipped 0.80% to Rs 591. It will develop a 250-room super luxury five-star hotel with premium brand Four Seasons Hotels and Resorts in Gurgaon at an investment of Rs 600 crore. The hotel project will be developed in around 10 acre land at DLF Golf Link in Gurgaon by DLF Hotels - the hospitality arm of DLF.
Escorts gained 4.45% to Rs 89.25. Yesterday, 28 August 2007, National Stock Exchange banned building fresh positions in the company’s derivatives contracts as the open interest crossed 95% of the position limit.
GlaxoSmithKline Pharma rose 3.35% to Rs 1162. The company, recently launched anti-cervical cancer vaccine Cervarix in Southeast Asia. The drug combats the virus that is responsible for over 70% of cervical cancer cases worldwide.
Andhra Cement jumped 7.10% to Rs 37 after a block deal of 66 lakh shares at Rs 40 per share on BSE in opening trade. At the strike price of Rs 40 per share, the total deal size works out to Rs 26.40 crore.
Sun TV Network rose 5.47% to Rs 329 after it said during trading hours today, 30 August 2007, its unit has bought 48.9% stake in Red FM to expand its radio FM business to the north, west and east Indian markets.
Karuturi Networks advanced 3.80% to Rs 194 on reports that it has acquired Dutch floriculture firm Sher Agencies in a deal worth $69 million to become the world's largest rose producer.
Vijaya Bank surged 5.36% to Rs 56 after its chairman and managing director Prakash P. Mallya said on Wednesday, 29 August 2007, the bank plans to sell its stake in Principal Pnb Asset Management Company.
Software services firm 3i Infotech slipped 0.15% to Rs 138.85. It said after trading hours on Wednesday, 29 August 2007, it had acquired 51% in back-office services firm HCCA Business Services
Dry-cell battery maker Eveready Industries lost 4.12% to Rs 52.40 after it said during trading hours today, 30 August 2007, its board would meet on 6 September 2007 to consider raising funds through issue of shares and warrants to promoters and other investors.
For the second day India Foils gained on reports yesterday that Ess Dee Aluminium was in the final stages of negotiations to acquire it. The stock surged 5% to Rs 11.13 today. Reportedly, Ess Dee would use the Rs 81.08 crore that it raised by selling a 5% stake to Morgan Stanley for the acquisition. It had surged 5% yesterday, 29 August 2007.
New Delhi Television vaulted 3.47% to Rs 351.95 on reports that UB group may announce 5-year advertisement commitment of Rs 100 crore to company’s forthcoming lifestyle channel, NDTV Good Times.
Construction firm Gammon India rose 2.06% to Rs 455. It entered the hospitality sector by forming an alliance with the US-based Wyndham Hotel Group International, Inc., to develop affordable or budget hotels. The Wyndham Group, which runs more than 6,500 hotels under 10 brands in six continents, is one of the largest hospitality companies in the world.
Most of the Europe markets were trading higher today, 30 August 2007. Key benchmark indices from France (up 0.26% to 5,534.56) and United Kingdom (up 0.21% to 6,145) advanced. Germany’s DAX slipped 0.09% to 7,432.69
All Asian markets were trading higher today, 30 August 2007, except Singapore's Straits Times (down 0.41% at 3,321.15). Hang Seng (up 2.02% at 23,486.29), Shanghai Composite (up 1.14% to 5,167.57), Japan's Nikkei (up 0.88% at 16,153.82), Taiwan Weighted (up 1.48% at 8,772.20), and South Korea's Seoul Composite (up 0.85% at 1,841.70) edged higher.
US stocks rallied across the board on Wednesday, 29 August 2007 boosted by strong gains in technology and energy shares. The Dow Jones Industrial Average surged 247 points, or 1.9%, to 13,289. The S&P 500 index rose 31 points, or 2.2%, to 1,463 and the technology-laden Nasdaq Composite rallied 62 points, or 2.5%, to 2,563 points.
Crude oil prices steadied on Thursday, 30 August 2007. US crude inched up 2 cents to $73.53 a barrel.
The government has decided to form a panel to study a controversial nuclear deal with the United States, taking into account objections from communist parties. The announcement came after a meeting between senior government leaders and their communist allies who have demanded the deal be put on hold. Foreign Minister Pranab Mukherjee said the operationalisation of the deal will take into account the committee's findings. The announcement came after trading hours today, 30 August 2007.
Puravankara Projects ends with 10% discount
At Rs 361.75 over IPO price of Rs 400 on the BSE
Puravankara Projects ended at Rs 361.75 on BSE, a discount of 9.56% over the IPO price of Rs 400.
On BSE, 71.23 lakh shares of the scrip were traded. The stock had debuted at Rs 399, a discount of 0.25% over the IPO price of Rs 400. It hit a high of Rs 399 and a low of Rs 357.55.
At the current price of Rs 361.75, the PE multiple works out to 59.30, based on the year ended March 2007 EPS of Rs 6.1. Each share has face value of Rs 5.
The company had fixed the issue price at low end of the Rs 400-450 revised price band.
The IPO had ended on 8 August 2007 with 1.91 times subscription. The qualified institutional buyers (QIBs) category was subscribed 2.7 times, the non institutional investors category - made up of corporates and high networth investors - was subscribed 0.98 times. The retail individual investors category was subscribed 0.63 times.
The company had revised the price band of the IPO to Rs 400-Rs 450 per share, compared to the previously set price band of Rs 500 - Rs 525 a share, amid volatile secondary market conditions prevailing at that time.
Bangalore-based real estate developer, Puravankara Projects will use the proceeds of the IPO for retiring high interest loans and for acquiring land.
The company, currently has its presence in Bangalore, Kochi, Chennai, Coimbatore, Hyderabad, Mysore, Colombo and U.A.E. Over 80% of Puravankara Projects’ portfolio is residential and the other 20% is commercial.
On a consolidated basis, Puravankara Projects reported a net profit of Rs 130.40 crore on revenue of Rs 416.86 crore in the year ended 31 March 2007.
Sensex gains on positive global cues
The market attracted considerable buying interest for the fifth straight session on firm global cues and gained nearly 200 points in early trades. The Sensex resumed with a huge positive gap of 176 points at 15,169. The market was range-bound with a positive bias, but the index lost some ground in the late morning trades to touch the day's low of 15,054, up 61 points from yesterday's close. The market however regained its lost momentum towards the final hour of the session on hectic upsurge in banking, heavyweight and auto stocks but, profit booking at close led the Sensex shed its gains and end the session at 15,122, up 129 points. The Nifty gained 53 points to close at 4,412.
The breadth of the market was positive. Of the 2,699 stocks traded on the BSE 1,567 stocks advanced, 1,058 stocks declined and 74 stocks ended unchanged. Among the sectoral indices the BSE Auto notched up gains of 1.38% at 4,777 followed by the BSE Bankex index (up 1.29% at 7,752) while the BSE IT index and the BSE Teck index up 1.06% respectively.
Most of the index heavyweights received considerable buying interest. Mahindra & Mahindra soared 2.95% at Rs675, Reliance Communication rose 2.77% at Rs534 HDFC Bank was up 2.20% at Rs1,182. Among the other major gainers Bajaj Auto shot up by 1.96% at Rs2,365, ACC jumped 1.92% at Rs1,061, ICICI Bank added 1.76% at Rs872, Ranbaxy gained 1.57% at Rs378, HDFC moved up by 1.37% at Rs1,986 and Infosys was up 1.33% at Rs1,858. However, Cipla slipped 2.68% at Rs165 and Reliance Energy fell 1.97% at Rs767 while Tata Steel, L&T, SBI, Bharti Airtel, Ambuja Cement and Maruti Udyog inched marginally lower.
Auto and auto ancillary stocks notched up significant gains during the day. AmteK Auto surged 6.58% at Rs370, Escorts scaled up 5.50% at Rs90, Exide Industries rose 4.51% at Rs61, TVS Motors jumped 2.95% at Rs61, Apollo Tyre added 2.23% at Rs39, Bajaj Auto gained 1.96% at Rs2,365 and Hero Honda was up 1.37% at Rs646.
Over 4.36 crore Bella Steel shares changed hands on the BSE followed by Ispat Industries (1.60 crore shares), Tata Teleservices (1.55 crore shares), Nagarjuna Fertilisers (1.29 crore shares) and JP Hydro (1.07 crore shares).
Value wise, Axis Bank registered a turnover of Rs504 crore on the BSE followed by Puruvankara (Rs264 crore), Housing Development & Infrastructure (Rs257 crore), GMR Infrastructure (Rs192 crore) and Reliance Industries (Rs171 crore).
Post Market Commentary
The markets closed the session on a positive note as BSE Sensex closed higher by 128.70 points at 15,121.74 and the Nifty grew by 53 points to end at 4,412.30. The BSE mid cap and Small cap closing higher by 35.05 points and 83.74 points at 6,485.44 and 7,957.96 respectively. The market breadth was strong with 1,567 stocks advancing and 1058 stocks declining.
BSE Metal index surged by 93.54 points to close at 11,297.31 as SAIL (2.54%), Sterlite Industries (2.38%) and Hindalco industries (1.21%) closed in positive while Tata steel (0.38%) and JSW Steel (0.35%) closed in negative.
BSE Auto Index grew by 65.01 points to close at 4,776.70 as M&M (2.95%), Bajaj auto (1.96%), Hero Honda (1.37%) and Tata Motors (1.02%) closed in green while Maruti Udyog (0.02%) closed in red.
BSE oil & gas index improved by 39.92 points to close at 7,976.43 as ONGC (0.47%), BPCL (0.37%), IPCL (0.15%) and Reliance petroleum (0.04%) closed higher while GAIL (2.15%) and HPCL (1.06%) closed lower.
BSE bankex index closed higher by 98.72 points at 7,751.50 as AXIS Bank (2.89%), HDFC Bank (2.20%), IDBI Bank (2.01%), ICICI bank (1.76%), PNB (1.42%) and BOI (0.53%) closed in green.
BSE Capital goods index grew by 60.01 points to close at 12,306.72 as Siemens (3.02%), ABB (2.19%) and BHEL (0.38%) closed in green while Praj industries (1.31%) and L&T (0.31%) closed in red.
BSE Health Care Index closed higher by 14.86 points at 3,501.17 as GlaxoSmithKline (5.35%), Sun pharma (2.33%), Ranbaxy (1.57%), Dr Reddy lab (1.02%) and Glennmark (0.73%) closed higher while Cipla (2.68%) closed lower.
BSE FMCG index increased by 13 points to close at 1,949.32 as ITC (1.16%), Dabur (0.54%), HUL (0.17%) and Tata Tea (0.13%) closed in green.
BSE IT index closed up by 47.90 points at 4,552.30 as HCL technologies (3.16%), Infosys (1.33%), Wipro (1.29%), TCS (0.92%) and Satyam (0.06%) closed higher.
Karuturi’s bed of roses in full bloom
India Inc’s shopping list isn’t restricted to the world’s top car and mobike companies, Scotch and tea labels, hotels and steel factories—a bunch of roses too could make up for the necessary pleasantries.
Bangalore-based Karuturi Networks has acquired Dutch floriculture major Sher Agencies in a e50-million ($69 million) deal to become the world’s biggest rose producer.
After the takeover, the company’s top line will bloom from Rs 100 crore to Rs 400 crore. Karuturi’s rose-producing capacity will also grow from about 150 million stems to around 650 million.
Incidentally, Sher Agencies FC, a top Kenyan football club based in Naivasha, which was being promoted by the Dutch flower major, has also come as part of the deal.
Prior to the deal, Karuturi was among the four largest rose producers in the world, the others being Sher, James Finlay of Hong Kong (which originally owned what is now called Tata Tea) and World Flower. Karuturi now plans to invest in building capacity in Bangalore and Ethiopia, where it is already present, as well as in Kenya, where it will get Sher’s floriculture business. “We will produce 1 billion stems of roses and become a Rs 1,000-crore company by 2010. We are well on course,” Karuturi MD KS Ramakrishna told ET, confirming the deal. He said all formalities of the deal will be completed in the next 2-3 weeks.
Karuturi plans to raise $70 million through a mix of qualified institutional placements, foreign currency convertible bonds and external commercial borrowings, Mr Ramakrishna said.
Sensex regains 15,000; Nifty ends 1.22% higher
Indices ended a choppy session on a positive note on Thursday. Automobile stocks were the star performers of the day. IT and telecom shares also put up a good show. But realty ended lower as traders sold for profits.
The National Stock Exchange's Nifty finished 53 points or 1.22 per cent up at 4412.3. The Bombay Stock Exchange's Sensex closed 129 points or 0.86 per cent higher at 15,121.74.
Biggest Sensex gainers comprised Mahindra & Mahindra (up 2.95%), Reliance Communications (2.77%), HDFC Bank (2.2%), Bajaj Auto (1.96%) and ACC (1.92%).
Cipla (down 2.68%), Reliance Energy (1.97%), Tata Steel (0.38%), Larsen & Toubro (0.31%) and State Bank of India (0.17%) were the losers on the 30-share index.
Market breadth on BSE showed 1554 advances and 1064 declines, while on NSE, advances to declines stood at 729:429.
Sensex gains 81 points on firm global markets
The market saw volatile swings in fag session of day, after staying firm throughout the day. It had opening on a firm note today, 30 August 2007, as US stocks rallied overnight on expectation that the US Federal Reserve would cut rates in September 2007 to cushion the impact of the subprime crisis on the broader US economy.
Key Asian and European markets were trading higher today, 30 August 2007.
The BSE 30-share Sensex rose 81.06 points to 15,074.10, as per provisional closing. It opened with a 175.65-point upward gap at 15,168.69 and advanced further to hit a high of 15,200.81. The index touched a low of 15,053.98. It oscillated in a range of 114.71 points for the day
The S&P CNX Nifty rose 9.35 points to 4,398.35, as per provisional closing.
The total turnover spiked in last one hour of trade. On BSE it amounted to Rs 5,378 crore as compared to Rs 4,181 crore by 14:30 IST. Turnover aggregated Rs 4,815 crore yesterday, 29 August 2007.
The market breadth was strong on BSE, with 1,578 shares advancing as compared to 1112 that declined, while 84 remained unchanged.
Among the 30-member Sensex pack, 21 advanced while the rest declined.
Mahindra & Mahindra, the country’s top tractor maker by sales, rose 2.47% to Rs 672 on 1.15 lakh shares. It was the top gainer from Sensex pack. The stock rose on reports that it is conducting due diligence on Jaguar and Land Rover, put up for sale by Ford. Other potential bidders include private equity groups TPG Capital, Cerberus Capital Management, Ripplewood Holdings, One Equity Partners and Tata Motors.
India's top truck maker Tata Motors rose 0.59% to Rs 679, off its day’s high of Rs 699.
Banking shares advanced on fresh buying on a view that interest rates have peaked. ICICI Bank (up 1.46% to Rs 869.50), and HDFC Bank (up 2.02% to Rs 1180), advanced.
Market expectations peg inflation rate at 3.94% for 12 month to 18 August 2007 compared to previous week’s 4.1%. The data will be released by the government tomorrow, 31 August 2007, afternoon.
India’s largest pharma company by sales Ranbaxy Laboratories rose 1.60% to Rs 378. Recently, US Food and Drug Administration gave approval to the company to make and market two drugs hydrocodone bitartrate and acetaminophen prescribed for pain relief. Total annual market sales of the drugs were $391 million.
India's largest firm by market capitalisation and oil refiner Reliance Industries (RIL) slipped sharply just before closing bell. It was up marginally by 0.11% to Rs 1891.80 on 8.96 lakh shares, after surging to a high of Rs 1924. A newspaper reported on Wednesday, 29 August 2007, the government is likely to approve a pricing formula for the company's natural gas within a few days. The stock had hit an all- time high of Rs 1948 on 26 July 2007.
India’s second largest software services exporter Infosys Technologies rose 1.42% to Rs 1860. As per report, Infosys Technologies plans to increase billing rates for new customers by 3-4% due to the sharp appreciation of the rupee against the dollar. The billing rates for existing contracts could increase by 2-3%. Infosys gets about 60% of its revenue from the United States.
Tata Consultancy Services (TCS), the country’s leading software services exporter rose 0.80% to Rs 1040 after it won a deal worth Rs 574 crore ($ 140 million) over a multi period from BSNL to provide comprehensive range of telecom services.
The rupee was hovering at 41.13, slightly weaker than Wednesday (29 August 2007)’s close of 41.10/41.11
Cipla, the country’s third largest pharma company by sales lost 2.50% to Rs 165.50 on 8.71 lakh shares. It was the top loser from the Sensex pack.
Reliance Energy (down 1.80% to Rs 768.10), State Bank of India (down 0.74% to Rs 1563.25) and Bharti Airtel (down 0.53% to Rs 875) were the other losers from the Sensex pack.
India’s largest power equipment maker by sales Bhel declined 0.87% to Rs 1835.30, off the session’s high of Rs 1884, after the company won a Rs 1990-crore order for supply and installation of power equipment to a project in southern India.
Tata Steel, the world's sixth largest steel manufacturer lost 0.51% to Rs 656.50. It came off sharply from day’s high of Rs 679.80. It had surged 9.2% to Rs 659.85 yesterday, 29 August 2007 after it recorded a consolidated net turnover of Rs 31,155 crore for Q1 June 2007, an increase of 442% over the same period last year, on the back of Corus acquisition.
Its consolidated operating profit surged 186% to Rs 4,904 crore in Q1 June 2007 over Q1 June 2006. The results also include an extraordinary item of Rs 4,121 crore primarily representing actuarial gains due to increase in yield rates on bonds held by various pension funds of Corus.
Three block deals of 18.85 lakh shares each were struck in Axis bank counter at an average rate of Rs 614 per share on BSE in opening trade. The stock rose 2.44% to Rs 627 on high volume of 82.33 lakh shares.
Key benchmark indices in Europe including Germany (up 0.09% to 7,445.59), France (up 0.61% to 5,553.47), and United Kingdom (up 0.43% to 6,158.50), advanced
All Asian markets were trading higher today, 30 August 2007, except Singapore's Straits Times (down 0.41% at 3,321.15). Hang Seng (up 2.02% at 23,486.29), Shanghai Composite (up 1.14% to 5,167.57), Japan's Nikkei (up 0.88% at 16,153.82), Taiwan Weighted (up 1.48% at 8,772.20), and South Korea's Seoul Composite (up 0.85% at 1,841.70) edged higher.
US stocks rallied across the board on Wednesday, 29 August 2007 boosted by strong gains in technology and energy shares. The Dow Jones Industrial Average surged 247 points, or 1.9%, to 13,289. The S&P 500 index rose 31 points, or 2.2%, to 1,463 and the technology-laden Nasdaq Composite rallied 62 points, or 2.5%, to 2,563 points.
August 2007 futures & options (F&O) contracts expired today. As per reports, the marketwide rollover from August 2007 series to September 2007 series stood at 64.7% as compared to 60% in July 2007 expiry, so far. The Nifty rollover was 64% as against 61% in July 2007 series.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 163.73 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 65.48 crore on Wednesday, 29 August 2007.
Crude oil prices steadied on Thursday, 30 August 2007. US crude inched up 2 cents to $73.53 a barrel.
The BSE 30-shares Sensex advanced 73.85 points, or 0.50%, to 14,993.04, on Wednesday, 29 August 2007. The S&P CNX Nifty rose 38.60 points, or 0.89%, to 4,359.30, on Wednesday, 29 August 2007.
From a recent low of 13,989.11 on 21 August 2007, the Sensex has surged 1,004 points to 14,993.04 on 29 August 2007.
The United Progressive Alliance (UPA) and the Left parities are expected to firm up a mechanism on Thursday, 30 August 2007, to address the concerns of the allies on the Indo-US nuclear deal. The four Left parties met on Wednesday, 29 August 2007, to chalk out their joint strategy ahead of their meeting with UPA leaders on the issue.
The Communist Party of India (CPI) on Tuesday, 28 August 2007, said it had no intention of destabilising the government and force an immediate election on the contentious Indo-US nuclear deal issue. The party, however, wanted its concerns on the deal to be addressed by the ruling coalition by a mechanism, like a committee at the political level, to clarify all doubts on 123 agreement and allied matters like the Hyde Act.
The UPA government and the Left parties, on Monday 27 August 2007, agreed to formalise a joint mechanism to address the latter's objections on the civil nuclear deal with the US. But the Left's main demand of not proceeding with International Atomic Energy Agency (IAEA) negotiations remains unresolved. In a meeting of government with the Left party leaders held on Monday, 27 August 2007, Left parties had reiterated their that they would agree to participate in the mechanism, but the government shouldn't go ahead with next round of IAEA negotiations.
The Left Front's opposition to the nuclear deal with US had stoked concerns over the past few days that if the Communist allies of the ruling coalition government at the Centre decide to pull their support, the government will be reduced to a minority, triggering fresh elections
Trading Calls
Buy GMR Infrastructure with a stop loss of Rs 750 for target of Rs 1000
Buy Tata Steel with a stop loss of Rs 615 for target of Rs 732
Pre Market Watch
Indices are poised to open higher on Thursday mirroring global markets. Increased short covering of positions in the derivatives segment due to the futures and options expiry which boosted the market Wednesday, is likely to continue today.
In the derivatives segment, Nifty August futures ended at a 6-point premium to the spot, while open interest in the contract decreased to 1.59 crore.
Wednesday, Bombay Stock Exchange’s Sensex closed up 74 points or 0.5 per cent at 14,993.04. National Stock Exchange’s Nifty ended 39 points or 0.89 per cent higher at 4359.30.
Foreign institutional investors were net sellers of equity worth Rs 163.73 crore out of total traded value of Rs 10,766.56 crore Wednesday, as per provisional data on NSE.
Despite large FIIs selling in the current month, the fall in the Sensex has been less intense as compared with past occasions when the index had taken a beating even on much lower FII outflows.
GLOBAL MARKETS
US stocks rallied Wednesday led by technology and energy stocks.
Dow Jones Industrial Average was up 247 points or 1.9 per cent at 13,289.29. The Standard & Poor's 500 Index was up 31 points or 2.19 per cent at 1,463.76. The Nasdaq Composite Index was up 63 points or 2.5 per cent at 2,563.16.
In Japan, the benchmark Nikkei ended the morning session up 1.3 per cent or 206 points at 16,218.95, while the broader TOPIX Index gained 1.1 per cent or 18 points to 1,575.21.
Hong Kong’s Hang Seng surged 499 points or 2.17 per cent to 23,519.65. Singapore’s Straits Times added 37 points or 1.11 per cent to 3,371.78. In Seoul, the KOSPI advanced 19 points or 1.05 per cent to 1,845.45.
STOCKS TO WATCH
Bangalore-based Karuturi Networks has acquired Dutch floriculture major Sher Agencies for $ 69 million to become the biggest rose producer in the world. After the buyout, Karuturi’s topline will increase to Rs 400 crore from the current Rs 100 crore. This news will boost the company’s shares.
Ashok Leyland will see an upside on the company inking a deal with Nissan Motor Company to develop, manufacture and distribute light commercial vehicles. The companies will form three joint ventures for vehicles, powertrain manufacture and technology development.
Bajaj Auto announced the closure of its plant at Akurdi in Pune. The management has blamed the impact of government policies on capacity rationalisation that forced them to shut the facility. The facility shutdown may lead to a downside for the company’s shares.
Via ET
Grey Market - Indowind, Magnum, Motilal Oswal
Power Grid Corporation 44 to 52 11 to 12
Motilal Oswal 825 95 to 98
Indowind Energy 55 to 65 Discount
Magnum Venture 27 to 30 Discount
Puravankara Projects 400 Discount
Purvankara is listing today....
Pre Open Market Commentary
Indian market is likely to have a positive opening on the back of strong global cues. On Wednesday, the Indian markets ended on a positive note, as BSE Sensex closed higher by 73.85 points at 14,993.04 while Nifty grew by 38.60 points to close at 4,359.30. We expect the market to see some bull run during the trading session.
Wednesday, the US markets closed in green. The Dow Jones Industrial Average (DJIA) surged by 247.44 points to close at 13,289.29. The S&P 500 (SPX) index grew by 31.40 points to close at 1,463.76 and the NASDAQ Composite (RIXF) advanced by 62.52 points to close at 2,563.16.
Indian ADRs ended in positive territory. In technology sector, Patni computers grew by (6.95%) along with Infosys and Wipro each by (4.07%) and Satyam by (3.62%). In banking sector, HDFC bank and ICICI bank advanced by (3.81%) and (1.15%) respectively. MTNL and VSNL closed higher by (4.83%) and (3.65%) respectively. Tata Motors grew by (3.33%).
The major stock markets in Asia are trading strong. Japan''s Nikkei trading higher by 206.12 points at 16,218.95.Hang Seng grew by 425.19 points to trade at 23,445.79. Taiwan weighted advanced by 157.08 points to trade at 8,800.40. Seoul Composite increased by 18.81 points to trade at 1,845.
Today, Nifty has support at 4,320 and resistance at 4,530 and BSE Sensex has support at 14,900 and resistance at 15,420.
Market may advance further on firm global cues
After crossing the psychological mark of 15,000 yesterday the market is likely to move forward taking cues from firm Asian markets in current trades and overnight gains in US markets. The gradual increase in fund inflows in domestic equities and presence of strong bullish sentiment also help the market to remain firm. However, today being the last day of August derivative expiry series may keep the market volatile in the later part of the day. Among the local indices, the Nifty could test 4,400 on the upside and may slip to 4,290 on the downside. The Sensex has a likely support at 14,700 and may face resistance at 15,250.
Major US indices registered significant gains on Wednesday, on the back of big drop in yen and encouraging comments from Federal Reserve chairman on recent market turmoil. While the Dow Jones flared up by 247 points at 13,289, the Nasdaq moved up by 63 points to close at 2563.
All the Indian ADRs traded firm on the US bourses. Patni Computer led the pack with gains of nearly 7% while MTNL, Wipto and Infosys jumped over 4% each. Among other gainers Satyam, Dr Reddy's Lab,Tata motors, Rediff, ICICI Bank and HDFC abank added around 1-3% each.
Crude oil prices advanced further, with the Nymex light crude oil for October delivery gaining by $1.78 to close at $73.51 a barrel. In the commodity space, the Comex gold for December delivery gained $1.90 to settle at $675.40 an ounce.
Market to stay volatile on August 2007 Futures & Options expiry
Market is expected to see volatility today, 30 August 2007, as derivative contracts for August 2007 series expire. The BSE 30-shares Sensex advanced 73.85 points or 0.50% at 14,993.04, on Wednesday, 29 August 2007.
From the recent low of 13,989.11 on 21 August 2007, the Sensex has recovered 1004 points to current 14,993.04.
The S&P CNX Nifty rose 38.60 points or 0.89% at 4,359.30, on Wednesday, 29 August 2007.
As per reports, the marketwide rollover from August 2007 series to September 2007 series stood at 64.7% as compared to 60% during the July 2007 expiry. Nifty rollover was 64% as against 61% in July 2007 series.
Asian markets were trading higher today, 30 August 2007. Hang Seng (up 1.85% at 23,445.79), Japan's Nikkei (up 1.29% at 16,218.95), Taiwan Weighted (up 1.82% at 8,800.40), Singapore's Straits Times (up 1.11% at 3,371.79) and South Korea's Seoul Composite (up 1.03% at 1,845) edged higher.
US stocks rallied across the board Wednesday, 29 August 2007 boosted by strong gains in technology and energy shares. The Dow Jones Industrial Average surged 247 points, or 1.9%, at 13,289. The S&P 500 index rose 31 points, or 2.2%, at 1,463 and the technology-laden Nasdaq Composite rallied 62 points, or 2.5%, at 2,563 points.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 163.73 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 65.48 crore on Wednesday, 29 August 2007.
Crude oil prices steadied on Thursday, 30 August 2007. US crude inched up 2 cents to $73.53 a barrel.
Morning Call - Aug 30 2007
Market Grape Wine :
In House :
Nifty at a supp of 4330 and 4300 with resis at 4400 and 4420
Intra day: Buy ACC above 1046 with a TGT of 1085 and a SL of 1033
Buy REL above 786 with a TGT of 800 and a SL of 778
F&O: Buy SBIN above 1583 with a TGT of 1617
Buy Tatachem above 248 with a TGT of 258 and a SL of 244
Out House :
Markets at a support of 14786 & 14654 levels with resistance at 15243 & 15324 levels .
F&O Expiry today Nifty might expire at 4420 levels
Buy : JpAsso & Centextile
Buy : REL & NTPC
Buy : Titan bullet
Buy : TTML
Buy : Indiacement & ACC bullet
Buy : JPHydro & GKW bullet
Buy : IndiaInfoline & IBulls
Buy : SBIN , Kotak & Union Bank
Dark Horse : TTML , Kotak , Titan , IOLBroad , SBIN , Aban , REL & Centextile
Bullet for the Day : JpAsso , AIAEngg , Bharti & Aban with strict stop loss
ITC, Nicholas Piramal, Automobiles
ITC
Cluster: Apple Green
Recommendation: Buy
Price target: Rs200
Current market price: Rs168
Expansion plans on the board
Key points
- ITC has purchased five acres of land in Hyderabad for its hotel project. The cost of acquisition of land was Rs127.5 crore. The plan for the hotel rooms has not yet been finalised but the management has indicated that depending on the plan the number of rooms could vary from 300-500.
- The paperboards and specialty papers division of ITC has decided to invest Rs35 crore by the year-end to increase the capacity at its Bolaram facility. Post expansion, the capacity of the facility would go up to 42,000 tonne a year from the present 18,000 tonne a year.
- At the current market price of Rs168, the stock is attractively quoting at 20x its FY2008E earnings per share (EPS) and 12.6x FY2008E enterprise value (EV)/ earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on ITC with a target price of Rs200.
Nicholas Piramal India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs326
Current market price: Rs253
Demerger of discovery R&D to unlock value
Key points
- Nicholas Piramal India Ltd (NPIL) is planning to restructure its research and development (R&D) division by spinning off its new chemical entity (NCE) research unit into a separate entity. The company is holding a board meeting on August 31, 2007 to consider the proposal.
- NPIL currently spends around 5-6% of its turnover on discovery R&D. With a focus on the therapeutic segments of oncology, diabetes, inflammation and infectious diseases, NPIL has a pipeline of one new NCE and two phytopharmaceutical products in the clinics. Additionally, five of its NCEs and one phytopharmaceutical product is scheduled to enter the clinics in 2007, which would make it one of the largest clinical development pipelines among the Indian players.
- We have attempted to value the demerged discovery R&D entity of NPIL in line with Sun Pharma Advanced Research Company (SPARC-which is the demerged innovative R&D unit of Sun Pharmaceuticals). We estimate the value of the demerged R&D company at Rs2,369.1 crore, which translates into a value of Rs113.4 per share.
- Assuming that the demerger is effective from April 1, 2007, the same would provide some relief to the base business in terms of the reduction in R&D expenses and the associated loss of the tax shield. We estimate that the demerger would result in Rs55.3 crore and Rs67.9 crore of incremental net profit for the base business, which adds an additional Rs2.6 and Rs3.2 to the earnings per share (EPS) of FY2008E and FY2009E respectively.
SECTOR UPDATE
Automobiles
Don't throw caution to the winds yet
Key points
- The automobile sector has been underperforming the market since the last six months on account of low demand due to higher interest rates, low availability of finance, the monsoons and the higher base of last year. The medium and heavy commercial vehicle (M&HCV) and the motorcycle segments have been the worst affected, while the passenger car segment has outperformed the industry on the back of a number of new launches.
- Even though most of the companies are expecting a revival during the forthcoming festive season, the slowdown in the first four months of FY2008 has been higher than anticipated. The revival is also expected to be delayed in view of the late festive season this year. Hence we continue to remain cautious on the industry and need to keenly monitor the next two months.
- Our channel checks indicate mixed outlook. The commercial vehicle (CV) segment is witnessing some pick up in demand. The two-wheeler industry is also witnessing a bit of revival, but lack of any powerful new launch and tight funding may continue to de-grow the industry for the next three-four months. The passenger car segment is witnessing a double-digit growth, but increasing inventory levels and competition are forcing the players to offer huge discounts.
- We have given our estimates for Q2FY2008. For our large cap auto universe we expect the sales to be down by 10.6%, whereas profit after tax (PAT) is expected to decline by 28.1%. The performance in Q2FY2008 could show significant quarter on quarter (q-o-q) and year on year (y-o-y) decline in profits and the reported profits could also be impacted due to foreign exchange (forex) loss arising out of weakening of the rupee.
- In view of the above-mentioned factors, we are revising our estimates on these companies. We are reducing our volumes as well as earnings estimates for Tata Motors by 0.5% (due to better performance of subsidiaries), Ashok Leyland by 10.9%, Maruti Suzuki by 2.5% and Bajaj Auto by 5.7%. Maruti Suzuki is our top pick in the sector.
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