Sensex jumps 2.1% on hopes Greece will avoid near-term default

Key benchmark indices spurted to 1-1/2 week closing highs as European stocks rose and as US index futures jumped, buoyed by expectations that Greece will receive the next aid tranche from international creditors as well as hopes that the Federal Reserve may announce fresh measures to stimulate the economy. The barometer index BSE Sensex regained the psychological 17,000 level. The Sensex jumped 353.93 points or 2.11%, up about 375 points from the day's low and off close to 35 points from the day's high. All the 13 sectoral indices on BSE were in positive zone.



Index heavyweight Reliance Industries (RIL) jumped nearly 4%. IT stocks rose on a weak rupee. Interest rate sensitive banking stocks rose across the board. Metal and consumer durables stocks also edged higher. The market breadth was strong.

The Indian government's decision to defer the mega Rs 11000 crore follow-on public offer (FPO) of ONGC has helped ease concerns of the large issue sucking secondary market liquidity. As per the original plan, the FPO was scheduled to open for bidding on 20 September 2011.

With Q2 September 2011 drawing towards a close, focus may shift to expectations of Q2 results of individual firms. Advance tax payments made by the top 100 companies based in the country's financial capital Mumbai reportedly rose 18% in Q2 September 2011. The tax collections are not uniformly good or bad across companies and sectors, except for oil marketing companies, which saw a decline in levies paid.

The market nudged higher in opening trade as most Asian stocks reversed initial losses. The market soon extended initial gains. The market further extended gains to hit fresh intraday high in morning trade. The market moved in a narrow range in mid-morning trade. The market remained firm in early afternoon trade. Key benchmark indices hit fresh intraday highs in afternoon trade as European stocks bounced back soon after a weak opening. The market extended gains to hit fresh intraday high in mid-afternoon trade. The market spurted to 1-1/2-week high in late trade.

The BSE Sensex jumped 353.93 points or 2.11% to settle at 17,099.28, its highest closing level since 8 September 2011. The index jumped 390.09 points at the day's high of 17,135.44 in late trade. The index gained 13.34 points at the day's low of 16,758.69 in early trade.

The S&P CNX Nifty was up 108.25 points or 2.15% to settle at 5,140.20, its highest closing level since 8 September 2011. The index hit high of 5,149.90 in intraday trade.

The BSE Mid-Cap index rose 0.9% and the BSE Small-Cap index gained 1.23%. Both these indices underperformed the Sensex.

BSE clocked turnover of Rs 2409 crore, higher than Rs 2294.25 crore on Monday, 19 September 2011.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,838 shares rose and 977 shares fell. A total of 104 shares remained unchanged.

Among the 30-share Sensex pack, 28 rose and only 2 declined.

State-run ONGC declined 2.86%, with the stock falling for the second straight day. The stock had surged 5.61% on Friday, 16 September 2011, boosted by a hike in petrol price announced by state-run oil marketing companies (PSU OMCs). The petrol price hike could help reduce the subsidy sharing burden of the state-run oil exploration major which is required to share under-recoveries at PSU OMCs on selling diesel and cooking fuels at government-set prices.

Meanwhile, the government on Friday, 16 September 2011, deferred the about Rs 11000-crore follow-on public offer (FPO) of ONGC. ONGC said in a statement that the government has decided not to proceed with the FPO of ONGC as per the timeline mentioned in the Red Herring Prospectus dated 5 September 2011 and it will evaluate its decision in relation to the FPO in due course. The FPO was scheduled to open on 20 September 2011 and close on 23 September 2011.

Index heavyweight, Reliance Industries (RIL) jumped 3.73% to Rs 851.50 on expectations of strong Q2 results as RIL's advance tax payment reportedly jumped 67% to about Rs 2000 crore in Q2 September 2011 over Q2 September 2010.

RIL, owner of the world's biggest refining complex, today, 20 September 2011, said it is planning to take Maintenance and Inspection (M&I) shutdown of Light Cycle Oil hydrocracker (LCOHC) and Vacuum Gas Oil hydtrotreating unit (VGOHT) of SEZ refinery at Jamnagar refinery complex from 19 to 23 September 2011 respectively. These maintenance shutdowns will be for a period of approximately 4 weeks, RIL said. The routine shutdown of these units is being planned for the first time since commissioning. Both the refineries at Jamnagar complex are planned to operate at maximum crude processing capacity i.e. 1.3 million barrels per day during this period. All other major processing units at the complex are also planned to operate at normal capacity, RIL said.

Separately, RIL announced after market hours on Monday, 19 September 2011, that Reliance Security Solutions, a subsidiary of RIL and Siemens have signed a memorandum of understanding to jointly develop homeland security solutions for safe, secure and smart cities and highways in India.

Shares of offshore oil services providers jumped as crude oil futures rose for the first time in three days. Aban Offshore, Deep Industries, Great Offshore, SEAMEC and Dolphin Offshore gained by between 0.46% to 7.09%.

Oil exploration stocks edged higher as crude oil prices recovered. Cairn India jumped 5%. India's second biggest oil and gas exploration firm by revenue, Oil India, rose 0.02%. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms.

Crude for October delivery was up $1.15 a barrel or 1.32% at $86.85 a barrel. Oil prices rose for the first time in three days as the euro pared losses against the dollar and European equity markets advanced, easing concern that euro-zone debt crisis is damping demand for fuel.

State-run oil marketing companies (PSU OMCs) pared initial gains as crude prices recovered. BPCL rose 0.22%. Indian Oil Corporation fell 0.08%. HPCL was flat. Higher crude oil prices could increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol. PSU OMCs, last week, hiked petrol prices by Rs 3.14 a liter.

Shares of PSU OMCs had declined in the preceding two trading sessions as a ministerial panel's meeting to consider limiting the sale of cooking-gas cylinders at subsidized rates which was scheduled on Friday, 16 September 2011, was deferred due to opposition from allies of the Congress-led United Progressive Alliance government. PSU OMCs sell cooking gas, diesel and kerosene at state-set discounted prices to help the government control inflation. They get cash subsidy from the government to help trim their losses.

PSU OMCs are currently losing Rs 267 a cylinder. The government is considering to restrict the number of subsidized gas cylinders to help retailers cut their losses and reduce the government's subsidy burden. It is also working on a proposal to directly transfer fuel subsidies to the poor.

State-run Indian power producer NTPC rose 1.72%, after the company's Chairman Arup Roy Choudhury said the firm is pursuing the coal ministry to get more coal blocks to mine the fossil fuel for its exclusive consumption. Earlier this year, the coal ministry canceled allocation of some coal blocks to NTPC due to delays in developing the assets. The power producer has an installed generation capacity of 34,854 megawatt and is confident of achieving its capacity-addition target of 4,980 MW in the current financial year through March.

State-run power equipment maker Bhel declined 0.81% to Rs 1643.85. The stock hit 52-week low of Rs 1630.65 today.

Metal stocks rose in a firm market. Sterlite Industries, Sesa Goa, Hindustan Zinc, Bhushan Steel, Tata Steel, JSW Steel, Sail, and Jindal Steel & Power, Hindalco Industries gained by between 0.2% to 4.31%.

Realty stocks rose on bargain hunting after recent losses. DLF, Indiabulls Real Estate, HDIL, Unitech, Sunteck Realty, and Orbit Corporation rose by between 0.26% to 5.68%.

Interest rate sensitive banking stocks rose across the board. India's largest private sector bank by net profit ICICI Bank gained 2.65%. ICICI Bank's advance tax payment reportedly remained unchanged at Rs 600 crore in Q2 September 2011 over Q2 September 2010.

India's largest bank by branch network and net profit State Bank of India (SBI) rose 3.78% to Rs 1989.05. The stock had hit a 52-week low of Rs 1,812.90 in intraday trade on 14 September 2011. SBI's advance tax payment reportedly fell 10% at Rs 1700 crore in Q2 September 2011 over Q2 September 2010.

Punjab National Bank, Bank of India and Bank of Baroda gained by between 1.29% to 2.73%.

India's second largest private sector bank by net profit HDFC Bank rose 1.33%. HDFC Bank's advance tax payment reportedly rose 33% to Rs 800 crore in Q2 September 2011 over Q2 September 2010.

Axis Bank gained 3.11%. The private sector bank said on Friday, 16 September 2011, that its board has considered and unanimously approved the transfer of the financial services business of Enam Securities whereby the Enam Financial Services business will be demerged from Enam into the bank under a Scheme of Arrangement. Enam shareholders will get 5.7 equity shares of Axis Bank for every one equity share of Enam. Upon completion aforesaid transaction, the bank will sell the Enam Financial Services business to ASSL, its wholly owned subsidiary. ASSL will pay the bank a cash consideration of approximately Rs 274 crore, which represents the book value of the Enam Financial Services Business, Axis Bank said. A total of 1.37 crore shares of Axis Bank will be issued to Enam shareholders.

IT stocks rose on a weak rupee. The Indian rupee hit its weakest level in two years on Tuesday, 20 September 2011. The partially convertible rupee hit a low 48.24 in intraday trade--a level last seen on 25 September 2009. The rupee had closed at 47.815/825 on Monday, 19 September 2011. A weak rupee boosts revenue of IT companies in rupee terms as the sector derives a lion's share of revenue from exports.

India's largest software services exporter Wipro rose 2.74%. The company recently entered into a strategic alliance with Saab AB to develop and market protective software for the Swedish major's Land Electronic Defence System (LEDS). LEDS provides protection to light and medium combat vehicles and main battle tanks against rocket-propelled grenades, anti-tank missiles, mortars and artillery shells.

India's second largest software services exporter Infosys rose 3.22%. The company is reportedly close to acquiring the health care business of Thomson Reuters in a $700-750 million deal. If the deal goes through, it will be the largest acquisition by Infosys. Thomson Reuters' health care business provides data, analytics and performance benchmarking solutions and services to companies, government agencies and health care professionals.

India's largest software services exporter TCS gained 3.94%. The company said during market hours on Monday that Deutsche Bank has selected the company as a strategic partner for its production management transformation initiative within their capital market business unit. TCS's advance tax payment reportedly jumped 111.11% to Rs 570 crore in Q2 September 2011 over Q2 September 2010.

HCL Technologies rose 2.92%, with the stock gaining for the second straight day. The company announced during market hours today that it has set up a software delivery center in Dublin. The company had on Monday announced that its business transformation division HCL AXON has undertaken a major implementation of the SAP® Customer Relationship Management (SAP CRM) application and an upgrade of SAP® for Utilities solutions at Sacramento Municipal Utility District (SMUD), a community-owned electric utility serving more than 1.4 million people. This is the 25th utility transformation program HCL has executed during the years in North America.

Anil Dhirubhai Ambani Group shares gained in a firm market. Reliance Infrastructure, Reliance MediaWorks, Reliance Capital, and Reliance Power gained by between 2.69% to 4.8%.

Reliance Communications (RCom) jumped 4.01% on reports private equity firms Blackstone Group and Carlyle Group L.P. are interested in making a joint bid for RCom's telecom tower unit.

Tata Motors, India's biggest auto maker by revenue, rose 2.94%. Tata Motors on Monday, 19 September 2011, said its Jaguar Land Rover luxury car unit will invest 355 million British pounds to build a new engine plant in the UK. The facility will produce a new range of four-cylinder gasoline and diesel engines with lower emissions that will power the future of Jaguar Land Rover, the Mumbai-based automaker said. The plant at i54 South Staffordshire, a business park near Wolverhampton in the UK's Midlands, is expected to create up to 750 direct jobs at Jaguar Land Rover and thousands more indirectly, it said.

Tata Motors' global vehicle sales in August rose 3% from a year earlier to 87,459 units. Sales at its UK-based luxury car unit, Jaguar Land Rover, jumped 31% to 21,242 vehicles during the month. Sales of Land Rover sport-utility vehicles surged 43% to 17,833 units, but Jaguar sedan sales fell 10% to 3,409 autos. Global sales of all trucks and buses rose 17% to 48,023 units, the company said. Tata Motors' advance tax payment reportedly remained unchanged at Rs 90 crore in Q2 September 2011 over Q2 September 2010.

Maruti Suzuki India rose 1.21%, reversing initial losses. The labour crisis at the car major reportedly aggravated on Monday when the bail plea of three union leaders arrested on Sunday was rejected by a court. Late Sunday, the police had arrested three main leaders representing the workers--president Sonu Gujjar, general secretary Shiv Kumar and Ravinder Kumar, an executive committee member of Maruti Suzuki Employees Union. The three will continue to be in judicial remand at Bhondsi jail for 14 days as the court dismissed their bail plea. They are likely to file new bail applications on Tuesday.

There has been trouble at the Manesar plant since 29 August 2011 when the company had asked employees to sign a 'good conduct bond' before they could enter the factory after the company said it discovered "serious and deliberate" quality problems and suspended and dismissed some employees.

Mahindra & Mahindra (M&M) rose 1.78% after Ssangyong Motor, in which M&M is a majority shareholder with a 70.03% stake, outlined its mid-term plans to develop new cars and to launch its models in emerging markets. Ssangyong today, 20 September 2011, said it aims to sell 300,000 vehicles a year by 2016. South Korea's fifth-largest car maker by sales said in a statement it will develop four new models--a large-sized sedan, a mid-sized sport-utility vehicle and two compact SUVs--over the next five years. It didn't elaborate on how much it plans to invest on the new models.

It also plans to launch five revamped models by 2013 to help achieve KRW7 trillion ($6.1 billion) in revenue in 2016. It sold 81,747 units in 2010 and posted a revenue of KRW2.071 trillion. As part of its strategy to enter emerging markets, Ssangyong said it will start selling its vehicles in South Africa in early 2012 through M&M's sales network. Ssangyong will bring knockdown units of the Korando and the Rexton SUVs from its South Korean plants to assemble them into complete cars in India and Egypt beginning next year, it said.

M&M's board recently approved divestment of up to 8.09% stake in its subsidiary Mahindra Holidays & Resorts India (MHRIL) in one or more tranches at the best available price through a recognised stock exchange by June 2013 to enable increase of MHRIL's public shareholding and free float in the stock market. M&M currently holds 83.09% of the equity of MHRIL.

India's second largest two wheeler maker by sales Bajaj Auto rose 1.62% to Rs 1627.45. The stock had hit a record peak of Rs 1694.90 in intraday trade on 6 September 2011. The company's advance tax payment reportedly rose 4.17% to Rs 250 crore in Q2 September 2011 over Q2 September 2010. The company's total sales rose 16% to a record 3.82 lakh units in August 2011 over August 2010. Motorcycle sales jumped 17% to a record 3.38 lakh units in August 2011 over August 2010.

India's largest two-wheeler maker by sales Hero MotoCorp rose 0.22% to Rs 2205.80. The stock had scaled a record high of Rs 2,231.70 in intraday trade on 9 September 2011. The company's sales rose 19% to 5.03 lakh units in August 2011 over August 2010.

The latest petrol price hike may adversely impact sales of cars and two-wheelers during the festive season. The timing of the latest petrol price hike has been bad for auto firms. The festive season started early this month and it will last until Diwali, the festival of lights, at the end of October 2011. Sales normally pick up during the festive season every year.

Capital goods stocks also edged higher. BEML, Praj Industries, Punj Lloyd, Larsen & Toubro and Thermax rose by between 0.21% to 4.37%.

Cement stocks edged higher on hopes of improved demand as monsoon nears end. ACC, Jaiprakash Associates, Ambuja Cements, UltraTech Cement, and India Cements rose by between 0.69% to 2.7%.

Aviation stocks edged higher. SpiceJet and Kingfisher Airlines rose by between 0.58% to 1.87%. Jet Airways rose 1.81%, extending Monday's gains triggered by the company's announcement that it had increased fuel surcharge by Rs 200 from Saturday, 17 September 2011.

Cals Refineries clocked highest volume of 1.49 crore shares on BSE. SRS (70.49 lakh shares), Parsvnath Developers (44.49 lakh shares), K S Oils (39.78 lakh shares) and Unitech (38.76 lakh shares) were the other volume toppers in that order.

SBI clocked higher turnover of Rs 125.72 crore on BSE. Gravita India (Rs 83.58 crore), RIL (Rs 80.67 crore), VIP Industries (Rs 56.85 crore) and Larsen & Toubro (Rs 45.53 crore) were the other turnover toppers in that order.

The Sensex has risen 422.53 points or 2.53% in this month so far. The index has slumped 3,409.81 points or 16.62% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 4,009.36 points or 18.99%. From a 52-week low of 15,765.53 on 26 August 2011, the Sensex has risen 1,333.75 points or 8.45%.

Finance Minister Pranab Mukherjee early last week said central banks in emerging economies have been forced to raise interest rates repeatedly as they battle high inflation, exposing them to volatile capital flows. "An issue of immediate concern for emerging economies is managing large capital flows," he said. "Large and volatile capital flows to emerging markets can be destabilizing as they lead to high exchange rate volatility and in some cases make it incumbent to maintain high levels of foreign exchange reserves as an insurance against sudden and large-scale flight of international capital."

A recent India investor survey report prepared by J P Morgan Asset Management-ValueNotes expects benchmark Sensex to trade between 20,000 and 22,000 by end of this year. According to the report, the investment sentiment is affected by concerns such as recession, frequent hikes in interest rates and volatility in the domestic investment environment. Despite witnessing a 4.2-point decline from the last quarter, the 'Retail Investor Confidence Index' ranks the highest at 137.5 points. Retail investors' activity in mutual funds has improved 11% since the last quarter, the survey said. The survey was carried out from 22 July to 4 August 2011.

The survey also shows that investors are becoming cautious as preserving capital emerges as a popular investment strategy among retail investors (40%). However, 40% of investors, in comparison to 57% in March 2011, are expected to turn "somewhat aggressive" about their investment strategy over the coming six months.

At the time of announcing a 25 basis points rate hike, the Reserve Bank of India (RBI) on Friday, 16 September 2011, said that it is imperative to persist with the current anti-inflationary stance because a premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions.

In recent weeks, as a result of global risk aversion, the rupee has depreciated, which may have adverse implications for inflation, the RBI said. Inflation remains high, generalised and much above the comfort zone of the Reserve Bank of India, it said. The central bank said that Friday (16 September 2011)'s repo rate hike is expected to reinforce the impact of past policy actions to contain inflation and anchor inflationary expectations. As monetary policy operates with a lag, the cumulative impact of policy actions should now be increasingly felt in further moderation in demand and reversal of the inflation trajectory towards the later part of 2011-12, RBI said.

Going forward, the stance of the monetary will be influenced by signs of downward movement in the inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments, RBI said.

Although India's exports have performed extremely well in the recent period, this trend is unlikely to be sustained in the face of weakening global demand, RBI said. This, combined with the slowing down of domestic demand, to which the monetary policy stance is also contributing, suggests that risks to the growth projection for 2011-12 made in the July 2011 monetary policy review are on the downside, RBI said.

Corporate margins in Q1 June 2011 moderated across several sectors compared to levels in Q4 March 2011. However, barring a few sectors, significant pass-through of rising input costs is still visible, RBI said.

The central government's fiscal imbalances widened during April-July of 2011 reflecting, primarily, the impact of decline in revenue receipts coupled with pressures from non-plan revenue expenditures on account of higher petroleum and fertiliser subsidies. Fiscal deficit at 55.4% of the budget estimates in the first four months of the current fiscal was significantly higher than that of 42.5% during the corresponding period last year (when adjusted for the more than budgeted spectrum proceeds).

Reacting to the RBI's latest rate hike, Navneet Munot, Chief Investment Office (CIO), SBI Mutual Fund said, "The lag effect of past actions and global environment would moderate the domestic demand and inflation trajectory going forward, in our view. Our sense is that RBI is likely to take a pause after today's rate action. This should be viewed positively by bond and equity markets. Sentiments in equity markets should improve on evident signs of peaking of rate cycle. Markets would closely watch global developments and movement in commodity prices".

Bank of America Merrill Lynch said in a research note after the RBI's latest hike that it continues to believe that the Indian rate cycle is peaking with growth likely to slip below 7.5% during the second half of 2011 and inflation set to come off to 7% in Q1 2012. The RBI will pause after a final 25 basis points (bps) policy rate hike on 25 October 2011 and cut rates by 100 bps from April 2012 onwards, it said.

Reacting to RBI's latest rate hike, Dhawal Dalal, Senior Vice President and Head Fixed Income, DSP Black Rock Mutual Fund, said the RBI is likely to increase the repo rate by another 25 bps at its next policy review on 25 October 2011. "We expect the RBI to pay a lot more attention to the inflation trajectory going forward with focus on core inflation. The RBI has not been unduly worried about the prospective slowdown in the GDP numbers and is confident of the resilient nature of economy", Dalal said.

Economic Affairs Secretary R. Gopalan on Thursday, 15 September 2011, said that the government has raised the limit of overseas borrowing for companies to $750 million from $500 million. Indian companies can also now raise loans up to $1 billion in Chinese yuan, Mr. Gopalan added. The relaxation of overseas borrowing rules will help Indian companies tap cheaper cash abroad amid rising credit costs in the local market. US and European countries have near-zero interest rates in a bid to support weak economic growth.

The government on Thursday, 15 September 2011, cleared the ambitious $90-billion Delhi-Mumbai industrial corridor. The Delihi-Mumbai industrial corridor project will set up nine mega industrial zones of about 200-250 square kilometre (km) along with a 1,500 km high speed freight line connecting the two cities. It will include three ports and six airports, as well as a six-lane intersection-free expressway connecting the two cities and a 4,000 megawatts (MW) power plant and also set up seven new cities.

The public private partnership (PPP) approval committee approved projects worth Rs 18000 crore on Thursday, 15 September 2011, that include a housing project for para-military forces and a road project among others.

A memorandum of understanding (MoU) was signed last week between India Infrastructure Finance Company (IIFCL), LIC and IDFC with respect to the Takeout Finance Scheme (TFS). Under the MoU, the project lender(s) will offer eligible infrastructure projects to IIFCL for availing takeout financing. Finance Minister Pranab Mukherjee said he expects this mechanism will help financing to the tune of Rs 30000 crore, adding this will facilitate banks to take more exposure in new projects, which in turn will help in bridging the gap in infrastructure financing.

Given the lackluster initial FII response to the government's sharply raising the ceiling of FII investment in long-term corporate bonds issued by the companies in the infrastructure sector in March 2011, the government on 12 September 2011, further relaxed the norms on FII investment in such bonds. The Finance Ministry said in a statement that FIIs can now invest in long-term infra bonds, subject a ceiling of $5 billion limit, which have an initial maturity of five years or more at the time of issue and residual maturity of one year at the time of first purchase by FIIs. These investments are subject to a lock-in period of one year. FIIs can trade amongst themselves in these bonds but cannot sell to domestic investors during the lock-in period of one year.

FIIs can also now invest, subject to a ceiling of $17 billion, in long-term infra bonds which have an initial maturity of five years or more at the time of issue and residual maturity of three years at the time of first purchase by FIIs. These investments are subject to a lock-in period of three years. During the three-year lock-in period, FIIs can trade amongst themselves but cannot sell to domestic investors. The Securities & Exchange Board of India (Sebi) is expected to issue notifications incorporating these changes in the scheme by 15 October 2011.

Sebi had in early August 2011 allowed Qualified Foreign Investors (QFIs) to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of $3 billion within the total ceiling of $25 billion.

Planning Commission deputy chairman Montek Singh Ahluwalia on Monday, 12 September 2011, said at a conference that private funding has to make up half of the infrastructure investment of $1 trillion planned for in the five years during 2012-2017. Prime Minister Manmohan Singh said at the conference that to overcome the fund crunch for infrastructure projects, the government has proposed to set up a $11 billion fund to help finance infrastructure projects. "We have also constituted a high-level committee to suggest measures necessary for financing our ambitious program in infrastructure development," Mr. Singh said.

Prolonged rainfall in the latter part of the season has helped ease concerns that this year's monsoon might drop below the long-term average after a brief lull in July, when the country usually receives a third of its monsoon rains. The first advance estimates for the 2011-12 kharif season point to a record production of rice, oilseeds and cotton, while the output of pulses may decline.

A good monsoon season can typically boost rural farm incomes and have an impact on the wider economy through increased spending on consumer goods as well as reduced prices of food items. But food prices may not necessarily fall if delayed and excess rains in some regions affect crop yields.

Moody's Investors Services affirmed its Baa3 rating for India's foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released early this month. The ratings firm assigned a positive outlook to India's rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.

The report was upbeat about India's ability to weather a global economic downturn. "While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors," the report said. It noted that India's foreign currency reserves equal four times its foreign debt obligations.

A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India's revenues annually. However, "Moody's expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio," the report said.

European stock markets rose on Tuesday, 20 September 2011, buoyed by expectations that Greece will receive the next aid tranche from international creditors as well as hopes that the Federal Reserve may announce fresh measures to stimulate the economy. Key benchmark indices in UK, France and Germany were up by 1.23% to 1.95%.

The Greek finance ministry today, 20 September 2011, said a "productive and substantive discussion" took place late Monday between Greek officials and representatives from the so-called troika of official creditors--the International Monetary Fund, the European Commission and the European Central Bank. Another conference call with the troika will take place today, 20 September 2011. The expectation is that Greece will receive the next disbursement of aid and thus avoid default at least in the short term. European stocks had dropped on Monday, 19 September 2011, on Greece default fears.

Credit rating agency Fitch today, 20 September 2011, said the Greek government may default on its debts. The rating agency said that Greece is unlikely leave the euro zone. Concerns over the risk of a break-up of the euro zone are greatly exaggerated, the ratings agency said. Fitch also said it does not expect any systematically important financial institution or sovereign to be allowed to default.

Italian stocks shrugged of a downgrade by Standard & Poor's on Monday, 19 September 2011. S&P cut its long-term and short-term sovereign credit ratings on Italy by one notch, citing weaker growth prospects and complications of a fragile governing coalition.

Asian stocks reversed initial losses on Tuesday, 20 September 2011. Key benchmark indices in China, Hong Kong, Singapore, Taiwan and South Korea rose by between 0.16% to 0.94%. Key benchmark indices in Indonesia and Japan fell by between 0.08% to 1.61%.

US index futures reversed initial losses. Trading in US index futures indicated that the Dow could gain 74 points at the opening bell on Tuesday, 20 September 2011. US stocks fell on Monday but staged a late comeback after fears of a looming Greek debt default diminished on news of a possible deal to advance new bailout funds to Greece. President Barack Obama laid out a $3 trillion plan to cut US deficits by raising taxes on the rich, but Republicans mocked it as a political stunt, signaling the proposal has little chance of becoming law.

A two-day policy meeting of the Federal Open Market Committee (FOMC) on US interest rates begins today, 20 September 2011. There are expectations that the Federal Reserve will announce fresh measures to stimulate the economy as the US unemployment rate remains above 9%. Among the options that the Fed may consider include another round of quantitative easing or QE3, the Operation Twist which is the purchase of long-term verses selling short-term bonds so as to lower long-term yields, and lowering the rate on excess reserves held by banks at the Fed in order to increase the monetary aggregates.