Auto, metal shares lead rally

Key benchmark indices gained for the second straight day to scale 11-1/2-week closing highs after the Reserve Bank of India (RBI) said at a policy review today, 25 October 2011, that a likely moderation in inflation from December 2011 will provide some room for monetary policy to address growth risks in the short run. The barometer index BSE Sensex regained the psychological 17,000 mark, as the central bank hinted at pause in its rate hike cycle after announcing a 25 basis points hike in its key policy rate today, 25 October 2011. The Sensex jumped 315.58 points or 1.86%, up about 355 points from the day's low and off about to 70 points from the day's high.



The Sensex has risen 801.10 points or 4.86% in this month so far. The index has slumped 3,254.23 points or 15.86% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 3,853.78 points or 18.25%. From a 52-week low of 15,745.43 on 4 October 2011, the Sensex has risen 1,509.43 points or 9.58%.

Coming back to today's trade, index heavyweight L&T jumped more than 3%. Another index heavyweight Reliance Industries (RIL) also surged more than 3%. IT stocks advanced on recent steep slide in rupee against the dollar. Interest rate sensitive auto stocks rose after RBI hinted that a pause in interest rate hikes is likely at its December meeting, with Bajaj Auto and M&M hitting record highs. Another trigger for the rally in auto stocks was the government's announcement of increase in minimum support prices (MSP) for Rabi crops.

Bank stocks edged lower after the RBI today, 25 October 2011, announced deregulation of savings bank interest rates. Kotak Mahindra Bank gained after decent Q2 results. NTPC also gained after good Q2 results. Cigarette major ITC hit record high.

A bout of volatility was witnessed at the onset of the trading session as the Sensex pared gains after a firm opening. The market moved off lows later. Volatility continued in morning trade as the Sensex regained strength after hitting fresh intraday low. Immense volatility was witnessed in mid-morning trade as key benchmark indices pared gains immediately after a sharp surge in mid-morning trade. The volatility in mid-morning trade came after RBI announced a 25 basis points hike in its key policy rate viz. the repo rate by 25 basis points (bps) to 8.5% after half-yearly review of the monetary policy which was announced at about 11:00 IST.

Volatility continued in early afternoon trade as key benchmark alternately moved between positive and negative terrain after recovering from intraday lows. The market regained strength in afternoon trade. The market held firm in mid-afternoon trade. The market extended gains in late trade.

A special Muhurat trading session is being held from 16:45 IST to 18:00 IST tomorrow 26 October 2011 on account of Diwali. There is no regular trading session tomorrow. The market also remains closed on Thursday, 27 October 2011 on account of Diwali, the festival of lights.

The BSE Sensex jumped 315.58 points or 1.86% to settle at 17,254.86, its highest closing level since 5 August 2011. The index jumped 382.85 points at the day's high of 17322.13 in late trade. The index fell 39.02 points at the day's low of 16,900.26 in mid-morning trade.

The S&P CNX Nifty surged 93.25 points or 1.83% to settle at 5,191.60, its highest closing level since 5 August 2011. The Nifty hit a high of 5,211 in intraday trade. The Nifty hit a low of 5,085.55 in intraday trade.

The BSE Mid-Cap index rose 0.4%. The BSE Small-Cap index fell 0.07%. Both these indices underperformed the Sensex.

BSE clocked turnover of Rs 2425 crore, higher than Rs 2026.13 crore on Monday, 24 October 2011.

The market breadth, indicating the overall health of the market, was almost even. On BSE, 1,375 shares rose and 1,374 fell. A total of 129 shares were unchanged.

From the 30 share Sensex pack, 26 rose and the rest fell.

Index heavyweight Reliance Industries (RIL) advanced 3.4%, extending Monday's 1.3% gains. RIL's net profit rose 15.84% to Rs 5703 crore on 34.73% rise in turnover to Rs 80790 crore in Q2 September 2011 over Q2 September 2010. Operating profit rose just 5% to Rs 9844 crore in Q2 September 2011 over Q2 September 2010. The core operating profit margin (OPM) declined sharply to 12.5% in Q2 September 2011 from 16.3% in Q2 September 2010. The result was announced on 15 October 2011.

RIL said its Infotel Broadband Services unit is in the process of setting up a 4G broadband wireless network and finalizing arrangements with global players.

RIL recently concluded a $7.2 billion deal with BP PLC under which it sold a 30% stake in 21 oil-and-gas exploration blocks to the British explorer. RIL said it has received all the payments that were due from BP, with the final installment of Rs 14690 crore received on 3 October 2011. It said all the production-sharing contracts under the deal with BP have been revised and submitted to the government for approval. "The integration process is currently under way, and the joint teams are evolving strategies to operate across the gas value chain in India from exploration, development, distribution and marketing," RIL said.

Meanwhile, RIL has neither confirmed nor denied media reports of a likely suspension of oil and gas drilling operations. RIL said on 17 October 2011 that RIL has always communicated any material event to the stock exchanges first before disseminating to the media. Media reports had suggested recently that RIL may suspend oil and gas drilling operations for an unspecified time until an internal valuation of its exploration and production strategy.

India's largest engineering & construction firm by order book, L&T, rose 3.27% on bargain hunting after a recent slide triggered by the company cutting its order growth guidance for the current fiscal year to 5%, from 15% earlier at the time of announcing second quarter results on Friday, 21 October 2011. The stock recovered after hitting a 52-week low of Rs 1,268.40 in early trade today, 25 October 2011. Order flow is being hampered by investment slowdown, project deferrals and higher competition, Chief Financial Officer R Shankar Raman said at the time of announced the second quarter results last week.

GAIL (India) rose 0.06% in volatile trade. The company announced after market hours on Monday, 24 October 2011, that net profit rose 18.5% to Rs 1094.41 crore on 18.89% rise in total income to Rs 9842.40 crore in Q2 September 2011 over Q2 September 2010.

Dr Reddy's Laboratories rose 2.27% after the company said its adjusted profit after tax on consolidated basis rose 8% to Rs 310 crore on 21.3% rise in revenue to Rs 2270 crore in Q2 September 2011 over Q2 September 2010. The result was announced during trading hours today.

NTPC gained 1.43% after company announced during market hours that net profit rose 15.03% to Rs 2424.12 crore on 6.57% rise in total income to Rs 16386.87 crore in Q2 September 2011 over Q2 September 2010

IT stocks advanced on recent steep slide in rupee against the dollar. The rupee had hit a 30-month low below 50 against the dollar on 21 October 2011. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

India's largest software services exporter by sales Tata Consultancy Services (TCS) gained 1.65%. During market hours on Monday the company said that Scotwest and Capital Credit Unions chose the company's BaNCS Core Banking as their IT platform to transform their infrastructure to address emerging opportunities in Community Banking in the United Kingdom.

After market hours on 17 October 2011, TCS reported a 4.7% fall in consolidated net profit to Rs 2301 crore on 7.7% growth in revenue to Rs 11633 crore in Q2 September 2011 over Q1 June 2011. The company's operating profit rose 11.4% to Rs 3143 crore in Q2 September 2011 over Q1 June 2011.

Commenting on the results TCS Chief Executive Officer and Managing Director N Chandrasekaran said, "Our domain-rich solutions and disciplined execution helped us capture business across major markets and deliver stellar growth in international revenues. We see strong momentum for our full services strategy from customers who are looking for agility and growth. We have created a nimble organization on the ground to stay close and stay relevant to our customers as there are ambiguities in the external environment in the short term".

India's second largest software services exporter Infosys gained 3.1%. The company's consolidated net profit as per International Financial Reporting Standards (IFRS) rose 10.68% to Rs 1906 crore on 8.2% growth in revenue to Rs 8099 crore in Q2 September 2011 over Q1 June 2011. The company announced the results on 12 October 2011.

Infosys has forecast 9.72% to 11.11% growth in non-annualized earnings per American Depositary Share at $0.79 to $0.80 in Q3 December 2011 over Q2 September 2011. It has forecast 3.2% to 5.3% growth in revenue at $1.802 to $1.84 billion in Q3 December 2011 over Q2 September 2011.

The company has for the second quarter in a row revised upwards its dollar earnings guidance for the year ending March 2012 (FY 2012). The company expects 15.3% to 16.8% growth in earnings per American Depositary Share at $3.02 to $3.06 in FY 2012 over the year ending March 2011 (FY 2011). However, the company has revised downwards dollar revenue growth guidance for FY 2012. The company expects 17.1% to 19.1% growth in revenue at $7.08 billion to $7.20 billion in FY 2012 over FY 2011.

India's third largest software services exporter Wipro rose 4.29%. The company announces its Q2 results on 31 October 2011.

Interest rate sensitive auto stocks rose after RBI hinted that a pause in interest rate hikes is likely at its December meeting. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. Another trigger for the rally in auto stocks was the government's announcement of increase in minimum support prices for Rabi crops.

The Cabinet Committee on Economic Affairs today approved increase in MSP of wheat, barley, gram, masur, rapeseed, and mustard by 15-39% for Rabi crop of 2011-12 season to be marketed in 2012-13.

India's largest small car maker by sales Maruti Suzuki India rose 3.46%. The stock extended recent gains triggered by end of labour strike at the company's Manesar plant last week. Maruti announces Q2 results on Saturday, 29 October 2011.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) jumped 5.49% to Rs 853.20. The stock hit record high of Rs 856.90 today. M&M plans to raise monthly production of its new sport-utility vehicle--XUV500--by half to 3,000 units in January and more than double it to 5,000 units in June to meet robust local demand. The company currently produces 2,000 units of XUV500 a month. M&M recently said it has received more than 8,000 bookings for the vehicle in the first 10 days of the launch, forcing it to halt taking fresh orders.

India's largest truck maker by sales Tata Motors gained 3.17%. Recently, the company reported 24% rise in global sales to 1,07,258 units in Q2 September 2011 over Q2 September 2010. Global sales of Jaguar Land Rover were up 42% to 27,639 vehicles in September 2011 over September 2010. The total passenger vehicles sales stood at 55,539 units in September 2011, up 21% from the corresponding period last year. Commercial vehicles sales were up by 28% to 51,719 units in Q2 September 2011 over Q2 September 2010. The company unveils its Q2 results on 14 November 2011.

India's largest bike maker by sales Hero MotoCorp gained 1.06%, reversing initial losses. After market hours on 18 October 2011, the company reported 19.38% rise in net profit to Rs 603.62 crore on 28.06% growth in total net operating income to Rs 5829.32 crore in Q2 September 2011 over Q2 September 2010. The company's core operating profit margin or OPM surged to 15.76% in Q2 September 2011 from 13.35% in Q2 September 2010.

The company said the total net operating income of Rs 5829.32 crore in Q2 September 2011 was a record quarterly figure. Hero MotoCorp said that with the company registering record sales of over 3 million units for six months period April-September 2011, it is comfortably placed to surpass the initial guidance of 6 million units for the year ending March 2012 (FY 2012).

India's second largest bike maker by sales Bajaj Auto rose 3.46% to Rs 1750.15. The stock scaled a record high of Rs 1762 today, 25 October 2011. The company's net profit increased 6.41% to Rs 725.80 crore on 20.70% increase in net sales to Rs 5046.48 crore in Q2 September 2011 over Q2 September 2010. The company incurred a mark-to-market (MTM) loss of Rs 95.41 crore on forward derivative contracts in the foreign exchange market. The company said this is a notional loss, which would reverse over the contract period. The company announced Q2 results during market hours on 20 October 2011.

Bank stocks edged lower after RBI today, 25 October 2011, announced deregulation of savings bank interest rates. Following the deregulation of the low-cost savings bank rates, established banks may have to raise interest rates on saving deposits from the current 4% as new age private sector banks are likely to aggressively target low cost deposits, which traditionally has been the prerogative of the larger banks. Banks are currently required to calculate interest paid on savings deposits on a daily basis.

RBI has announced deregulation of savings bank interest rate with immediate effect. RBI said each bank will have to offer a uniform interest rate on savings bank deposits up to Rs 1 lakh, irrespective of the amount in the account within this limit. For savings bank deposits over Rs 1 lakh, a bank may provide differential rates of interest, if it so chooses. However, there should not be any discrimination from customer to customer on interest rates for similar amount of deposit, RBI said in a statement.

India's largest bank by branch network State Bank of India (SBI) declined 3.52% to Rs 1840.45, off the day's high of Rs 1960. State Bank of India is not in a hurry to raise interest rates now, its Chairman Pratip Chaudhuri said on Tuesday. "We don't see pressure now. Banks are comfortable with the liquidity now. Banks will not be desperate to raise rates," Chaudhuri said at a post policy bankers' meeting with media.

The SBI stock had surged recently on hopes of capital infusion from the Government of India, its majority shareholder. The finance ministry has ruled out a rights issue for SBI in this financial year. However, it assured the lender that its capital requirements would be met by March 31, 2012.

The finance ministry will have to opt for supplementary demand for grants to meet the capital needs of five-six public sector banks, including SBI, in the current financial year. This capital is pegged at Rs 10000 crore to Rs 20000 crore in this financial year, against Rs 6000 crore provided in the Union Budget 2011-2012.

India's second largest private sector bank by net profit HDFC Bank dropped 3.17% to Rs 468.75, off the day's low of Rs 449. The bank's net profit rose 31.48% to Rs 1199.35 on 37.4% rise in total income to Rs 7929.38 crore in Q2 September 2011 over Q2 September 2010. The result was announced during market hours on 19 October 2011.

HDFC Bank's portfolio quality as of 30 September 2011 remained healthy, with gross non-performing assets (NPA) at 1% of gross advances and net non-performing assets at 0.2% of net advances (as against 1.2% gross NPAs and 0.3% net NPA ratios as on 30 September 2010). The bank's provisioning policies for specific loan loss provisions remained higher than the minimum regulatory requirements. The NPA provision coverage ratio (excluding write-offs, technical or otherwise) was at 81.3% as of 30 September 2011. Total restructured assets were 0.4% of the bank's gross advances as of 31 September 2011. Of these, restructured advances categorized as standard assets were 0.1% of the bank's gross advances.

HDFC Bank's CASA ratio stood at 47.3% as of 30 September 2011. The CASA (current and savings account) ratio is the ratio of deposits in the current and savings accounts of a bank to its total deposits. A high CASA ratio indicates that a higher portion of the banks' deposits come from current and savings accounts. This means that the bank is getting money at low cost, since no interest is paid on the current accounts and the interest paid on savings account is usually low.

The bank's total capital adequacy ratio (CAR) as at 30 September 2011 as per Basel II guidelines was at 16.5%, as against regulatory minimum of 9%. Tier I CAR was at 11.4% as at 30 September 2011.

India's largest private sector bank by net profit ICICI Bank rose 0.91% in volatile trade.

Kotak Mahindra Bank jumped 5.23% after the bank announced during market hours today that consolidated net profit rose 19% to Rs 433 crore on 7% fall in total income to Rs 2740.83 crore in Q2 September 2011 over Q2 September 2010.

Bank of Baroda fell 2.3% after the state-run bank said during market hours today that Ministry of Finance, Government of India, has informed that they have decided to raise the Govt. of India's holding in the bank by infusing a sum of Rs 775 crore, by way of preferential issue of equity shares or warrants. The meeting of the board of directors of the bank will be held on 31 October 2011, to consider issuance of equity shares/warrants on preferential basis in favour of Government of India.

With regard to credit offtake, RBI today, 25 October 2011, said that although non-food credit growth decelerated from 22.6 per cent on a y-o-y basis in April to 19.3 per cent on October 7, 2011, it was still running higher than the indicative projection of 18 per cent set out in the First Quarter Review of Monetary Policy 2011-12. Disaggregated data on a financial year basis (April-September) show that credit growth to industry decelerated to 7.5 per cent from 8.1 per cent in the previous year, with credit to infrastructure decelerating sharply. There was also deceleration in credit growth in services and personal loans. However, growth of housing loans accelerated.

The estimated total flow of financial resources from banks, non-banks and external sources to the commercial sector during the first half of 2011-12 was around Rs 500000 crore, up from Rs 480000 crore during the same period of last year. The deceleration in bank credit was more than offset by higher flows from non-bank and external sources, particularly foreign direct investment and external commercial borrowings, reflecting still buoyant demand for financial resources.

Metal and mining shares rose after improved Chinese manufacturing data. China is the world's largest consumer of aluminum and copper. Jindal Steel & Power, Sesa Goa, JSW Steel, Nalco, Sail, Hindalco Industries, Tata Steel, and Jindal Saw rose by between 0.81% to 7.02%.

India's largest non-ferrous metals maker Sterlite Industries India rose 4.23%, extending Monday's 0.74% gains. During market hours on Monday, 24 October 2011, the company reported 1.01% fall consolidated in net profit to Rs 997.78 crore on 67.57% rise total income to Rs 10195.70 crore in Q2 September 2011 over Q2 September 2010.

LMEX, a gauge of six metals traded on the London Metal Exchange, jumped 5.88% to $3433.60 on Monday, 24 October 2011.

India's largest cigarette maker by sales ITC rose 1.91% to Rs 210.85, extending Monday's 1.6% gains triggered by good Q2 results. The stock hit a record high of Rs 212.80 today. Net profit rose 21.46% to Rs 1514.31 crore on 18.22% rise in total income to Rs 6266.02 crore in Q2 September 2011 over Q2 September 2010. The company announced the results during trading hours on Monday.

Interest rate sensitive realty stocks reversed initial losses after RBI hinted that a pause in interest rate hikes is likely at its December meeting. Purchases of both residential and commercial property are largely driven by finance. HDIL, Unitech, DLF, and Indiabulls Real Estate rose by between 1.14% to 3.54%.

Cement shares rose on renewed buying. ACC rose 4.13% to Rs 1181.15. The stock hit a 52-week high of Rs 1197 today. Among other cement stocks, Ambuja Cements, Jaiprakash Associates, India Cements and UltraTech Cement gained by between 0.46% to 5.88%.

Oil exploration stocks rose along with crude oil prices. Cairn India ONGC and Oil India rose by between 0.16% to 2.39%. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms.

Cals Refineries clocked highest volume of 74.91 lakh shares on BSE. Vaswani Industries (47.90 lakh shares), M and B Switchgears (47.63 lakh shares), Delta Corp (35.65 lakh shares), and Resurgence mines (31.98 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 284.68 crore on BSE. M and B Switchgears (Rs 154.08 crore), L&T (Rs 104.38 crore), ICICI Bank (Rs 74.42 crore) and RIL (Rs 74.22 crore) were the other turnover toppers in that order.

Stock-specific activity may dominate trade in the near-term as earnings flow in. Investors will closely watch the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook.

Indian Hotels unveils Q2 results on 28 October 2011. Maruti Suzuki and LIC Housing Finance report Q2 results on 29 October 2011. ICICI Bank, Wipro, Hindustan Unilever, Dabur India, Colgate Palmolive (India), Bank of Baroda, NMDC and BPCL unveil Q2 results on 31 October 2011

Cement majors ACC and Ambuja Cements, Punjab National Bank, HPCL and Aditya Birla Nuvo unveil quarterly results on 1 November 2011. Sun TV Network, Ashok Leyland and TVS Motor report Q2 results on 3 November 2011. ONGC, Bharti Airtel and GlaxoSmithKline Pharmaceuticals unveil quarterly results on 4 November 2011.

Infrastructure Development Finance Company and ABB unveil results on 8 November 2011. Ranbaxy Laboratories, Indian Oil Corporation, GMR Infrastructure and Power Finance Corporation unveil quarterly results on 9 November 2011. Tata Steel, Hindalco and Mahindra Satyam unveil Q2 results on 10 November 2011. Jet Airways (India) and Tata Chemicals unveil Q2 results on 11 November 2011. Coal India and Shipping Corporation of India report Q2 results on 12 November 2011. Tata Motors, Mahindra & Mahindra and India Cements unveil Q2 results on 14 November 2011. Tata Power unveils Q2 results on 15 November 2011.

RBI today, 25 October 2011, cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably. RBI said that economic growth is moderating on account of the cumulative impact of past monetary policy actions as well as some other factors.

The central bank said that the likelihood of a rate action in the December mid-quarter review is relatively low. Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted, the central bank said in a statement. However, as always, actions will depend on evolving macroeconomic conditions, it added.

While the impact of past monetary actions is still unfolding, it is necessary to persist with the anti-inflationary stance, RBI said. The stance of the monetary policy is intended to maintain an interest rate environment to contain inflation and anchor inflation expectations. The stance of the monetary policy is also intended to stimulate investment activity to support raising the trend growth. The stance of the monetary policy is also intended manage liquidity to ensure that it remains in moderate deficit, consistent with effective monetary transmission.

RBI said that several factors--structural imbalances in agriculture, infrastructure capacity bottlenecks and distorted administered prices of several key commodities and the pace of fiscal consolidation--have combined to keep medium-term inflation risks in the economy high. These risks can only be mitigated by concerted policy actions on several fronts, RBI said. In the absence of progress on these, over the medium term, RBI's monetary policy stance will have to take into account the risks of inflation surging in response to even a moderate growth recovery.

Finance Minister Pranab Mukherjee on 19 October 2011 said that the government is concerned about the volatility of FII flows. Mukherjee said loose monetary policies adopted by central banks in advanced economies have added to global liquidity, driving investments into better off emerging economies and fueling inflation in these countries.

The falling rupee could bloat India's already mammoth import bill and further strain government finances as the fuel subsidy burden swells, Finance Secretary R.S. Gujral said Friday, 21 October 2011. The rupee hit a near 30-month low below 50 against the dollar on 21 October 2011. Elevated crude oil prices are likely to push the government to spend an additional Rs 40000 crore on fuel subsidies in the current year.

Meanwhile, the new takeover code regulations notified by the market regulator Sebi last month became effective from Saturday, 22 October 2011. With these rules coming into force, both promoter and public shareholders of a listed company would now get the same price for their shares being purchased by an acquirer. At the same time, an acquirer would have to make an open offer for purchase of a minimum 26% stake from public shareholders, as against 20% earlier.

The new rules would also help the listed companies to get more investment from private equity players and other investors who are not interested in a takeover, as the trigger point for an open offer has been raised to 25%, from 15% earlier. Now, an entity needs to make an open offer only if its holding reaches threshold limit of 25%, as against 15% earlier. The new regulations replace the takeover rules that were in force since 1997

The market regulator Securities and Exchange Board of India recently set a minimum net worth of Rs 100 crore for companies that wish to issue structured products or market-linked debentures to raise funds. Sebi also set the minimum size for such issues at Rs 10 lakh. Market-linked debentures are hybrid products which have the features of usual debt securities, but offer market-linked returns like an exchange-traded derivative. The issuer company will have to appoint a third party, a credit-rating company registered with the regulator, which will provide the value of the security at least once a week, Sebi said in a circular.

The government last month 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.

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. 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.

The government has raised its borrowing target for the current fiscal year by Rs 52800 crore, fueling worries that it may even overshoot the new estimate because of muted revenue growth amid a slowing economy and swelling subsidies. The government will borrow Rs 2.2 lakh crore during October 2011-March 2012 period, or the second half of the fiscal year, compared with the target of Rs 1.67 lakh crore announced in budget in February 2011. C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council on 29 September 2011 said it is going to be difficult to achieve fiscal deficit target of 4.6% of GDP for the year ending March 2012.

The government's new borrowing programme may crowd out private borrowers who come into the market in the second half of the year. Credit growth normally picks up after October every year when the busy season starts.

The Union Cabinet today, 25 October 2011 approved a national manufacturing policy, the first of its kind in the country, to increase manufacturing's share of national output as it aims to create millions of jobs and add capacity to sustain brisk economic growth through the next decade. The policy targets raising the share of manufacturing to 25% of gross domestic product by 2022 from the current 16% -- a level that has remained stagnant since 1980.

The new policy proposes developing National Investment and Manufacturing Zones, or mega-industrial parks, that will reduce the compliance burden on industry, the government said in a statement. The policy also aims to create 100 million additional jobs over the next decade, Commerce and Industry Minister Anand Sharma said. The government has identified seven locations across India to set up such industry parks, the government statement said.

Under the policy, a special company will be established that will be a one-stop shop for all clearances for businesses interested in setting up operations in the industry parks, the statement said. Small- and medium-sized companies will be offered tax breaks to entice them to the parks.

European stocks were mixed on Tuesday, a day ahead of a second summit of European leaders, where a deal is expected to be reached over the nature of a plan to resolve the sovereign debt crisis in the euro zone. Key benchmark indices in UK and Germany were up by 0.31% to 1.08%. France's CAC 40 fell 0.21%.

Asian shares were mixed on Tuesday, 24 October 2011, ahead of a crucial statement on Wednesday, 25 October 2011, on Europe's plans to stem its debt crisis. Key benchmark indices in China, Hong Kong, Indonesia, Singapore, and Taiwan were up by between 0.28% to 1.66%. Key benchmark indices in Japan and South Korea fell by between 0.51% to 0.92%.

On Monday, global stocks hit a seven-week high and commodities rallied, boosted by reports of plans to recapitalize European banks and possible moves to strengthen euro-zone bailout fund. Europe is set to unveil a full set of measures to tackle its sovereign-debt crisis at a summit on Wednesday, 25 October 2011. Ahead of that announcement, reports suggested there may be substantial pain ahead for Greek bond holders. The Financial Times newspaper cited officials as saying holders of Greek debt have been asked to take a 60% haircut on the face value of their bonds.

Trading in US index futures indicated that the Dow could gain 45 points at the opening bell on Tuesday, 25 October 2011.

US stocks rose on Monday, as a flurry of merger activity and strong earnings from Caterpillar boosted investor sentiment and kept the three-week rally intact.