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Saturday, February 27, 2010

Core sector growth jumps in January

Production at India's six key infrastructure industries rose by a strong 9.4% in January 2010 as against 2.2% in the same period last year, Commerce & Industry Ministry said in a statement. The index of six core industries, having a combined weight of 26.7% in the Index of Industrial Production (IIP), stood at 275.1 in January 2010 as against 251.5 in January 2009, the Government data showed. Growth in India's infrastructure sector stood at 6.4% in December 2009 and was at 6% in Nov. 2009 and 3.8% in Oct. 2009.

Crude oil production grew by 9.7% in January 2010 compared to a negative growth rate of 8.1% in January 2009. Petroleum refinery production registered a growth of 3.8% in January 2010 versus a drop of 1.3% in January 2009. Cement output was up by 12.4% in January 2010 as against 8.3% in January 2009.

Steel production grew by 16.2% in January 2010 compared to 3.2% in January 2009. Electricity generation was up by 5.6% in January 2010 as opposed to a growth rate of 1.8% in January 2009. Coal output registered a growth of 6% in January 2010 versus a growth rate of 6.7% in January 2009.

During April-January 2009-10, the collective output of the six core sector industries expanded by 5.4% as against 3% in the year-ago period.

Q3 GDP slows to 6% on poor rains

India’s GDP grew by 6% in October-December quarter as against expectations of a 6.9% expansion, data released by the Government showed. India's GDP growth was 7.9% and 6.1% in Q2 FY10 and Q1 FY10, respectively. In the third quarter of the fiscal 2008-09 stood at 6.2%. Reacting to the latest GDP numbers, Finance Minister Pranab Mukherjee said that India's agriculture sector must grow by 4% a year to sustain a high GDP growth target of 9% for the economy in the medium term.

The slowdown in the third quarter was primarily due to a 2.8% fall in agriculture production and a 2.2% drop in community, social and personal services. The fall in the growth of community, social and personal services was mainly on account of high base in Q3 of FY09, following the implementation of Sixth Central Pay Commission’s recommendations, the CSO said.

The manufacturing sector continued its upward march, expanding by 14.3% as against 1.3% in the same period last year. Growth was also strong in sectors such as services, construction, mining and electricity.

Official CSO estimates have pegged the economic growth in FY10 at 7.2%. To achieve the target, the economy would have to grow by faster rate in the fourth quarter. Final GDP figures for FY10 may turn out to be higher, Finance Minister Pranab Mukherjee said while announcing the Union Budget.

Planning Commission Deputy Chairman, Montek Singh Ahluwalia, said the third quarter GDP growth reading was on expected lines and he was hopeful of 7.2% growth this fiscal year. Following the global crisis, India’s growth slipped to 6.7% during FY09 from over 9% during the previous three years.

Weekly Stock Picks - Feb 27 2010



Buy Reliance Capital

Buy Axis Bank

Buy Siemens

Weekly Newsletter -Feb 27 2010

The event risk is now out of the way and what a pleasant surprise for the market. The key indices rose sharply on Friday after being range bound for most part of the week following positive feelers from the budget. Investors cheered the government’s move to rein in the fiscal deficit as it announced a partial rollback of some of the stimulus measures. Finally, the benchmark Sensex added 1.5% and NSE Nifty added 1.6% over the week.

The coming holiday-shortened week will see investors trying taking a closer look at the budget announcements and assessing whether the targets mentioned are achievable. Auto companies like Maruti have already announced a hike in prices of cars. The monthly numbers of auto and cement companies will be closely watched. The impact of fuel price hike will see some loud protests from many.

Wish you a nice long weekend and a Happy Holi-day!

Budget...FM shuns populism, embraces pragmatism

Thankfully for the benefit of all, Union Finance Minister Pranab Mukherjee shunned populism and chose a more balanced approach in devising the Budget for 2010-11. There weren't too many big bang reform-centric announcements. But, what probably came as a relief to the markets was absence of major negatives, barring the hike in MAT and increase in the levy of oil prices. Still, it wasn't completely devoid of concerns, especially given the fact that the Finance Minister failed to give any definite timeline on key reforms - GST, DTC and Oil Subsidies. In short, the Finance Minister has laid emphasis on consolidating the economic recovery, improving investment environment, inclusive development, strengthening transparency and public accountability.

The Finance Minister said the Indian economy is in a far better position than a year ago. At the same time, he cautioned that there are challenges that face the Indian economy even today. The first challenge is to return to the high GDP growth path and to attain double digit growth in the next few years. The second challenge is to harness the economic growth and make development more inclusive. The third challenge is to improve the delivery mechanism.

FY10 was a challenging year for India. The deceleration in the economic activity in the second half of 2008-09 led to a GDP growth of 6.7% versus an average 9% in the previous three years. However, the Finance Minister also said that the ongoing economic recovery is encouraging. There is momentum in manufacturing and signs of a turnaround are also visible in merchandise exports, he said. He went on to add that inflation has to be contained and the Government should ensure better management of the food economy.

The Finance Ministry will bring out a status paper and a road map on curtailing the overall public debt, as suggested by the 13th Finance Commission. This will be followed by an annual report, the Finance Minister said. The Government will endeavour to introduce the GST and Direct Tax Code in April 2011 while proceeds from the PSU disinvestment will be increased in FY11

More gains in store for equities on market-friendly budget

The forthcoming week will largely be driven by post-budget reactions as analysts revise their estimates based on the announcements made in the budget. Market players largely welcomed the Union Budget 2010-11 which proposed market friendly measures including reduction in surcharge on corporate tax, lower fiscal deficit projection, roadmap for rollout of goods & service tax (GST) and direct tax code (DTC), among others. The stock market remains closed on Monday, 1 March 2010 on account of Holi.

A thrust on the infrastructure sector also augurs well from a long-term growth perspective. The Finance Minister has provided Rs 1.73 lakh crore for infrastructure development in 2010-2011, which accounts for over 46% of the total plan expenditure for the year.

Finance Minister, Pranab Mukherjee, has pegged the fiscal deficit for the year ended March 2011 (FY11) at 5.5% of the gross domestic product (GDP). This is lower than the fiscal deficit as percentage of GDP of 6.9% in the revised estimates for the current fiscal. The finance minister said the government also aims to reduce the deficit further to 4.8% of GDP in the year starting 1 April 2011, and to 4.1% in the year from 1 April 2012.

Progressing further with its disinvestment drive, the government has estimated to raise Rs 40000 crore from disinvestment in the year ended March 2011. It has also estimated Rs 35000 crore from sale of third generation telecom auctions.

The Finance Minister in his budget speech also unveiled a roadmap for implementation of goods and service tax (GST) and direct tax code (DTC). He said that the government is confident of rollout of GST and DTC by 1 April 2011. The deadline for the GST introduction was earlier pegged at 1 April 2010.

DTC will replace the Income Tax Act whereas the GST will replace most indirect taxes at central and states levels like service tax, excise duty, VAT, cesses, surcharges and local levies.

The Finance Minister also proposed a reduction in surcharge on corporate tax for domestic companies to 7.5% from the present 10%.

Foreign institutional investors (FII) inflow in February 2010 totaled Rs 1460.60 crore as of 24 February 2010. Their inflow in the calendar year 2010 totaled Rs 960.10 crore.

A lot will also depend on how the global markets pan out. US markets have turned volatile as sentiment took a hit from recent data showing a weaker-than-expected labor market. Meanwhile, global credit agencies have warned of further downgrades to Greece, which is struggling to tackle its debt crisis