Market snaps two-day losses on Europe bailout hopes, China data

Key benchmark indices edged higher on Dhanteras, which marks the beginning of Diwali festivities, snapping a two-day losing streak, on news that euro-zone leaders are making progress toward agreeing measures to tackle the sovereign debt crisis. But, Indian stocks trimmed gains amid late volatility, as caution set in ahead of the central bank's monetary policy review tomorrow, 25 October 2011. The barometer index BSE Sensex failed to retain the psychological 17,000 level, which it had regained at the onset of the trading session. The market breadth turned negative from positive in late trade. The Sensex was up 153.64 points or 0.92%, off close to 165 points from the day's high and up about 40 points from the day's low.



The Sensex has risen 485.52 points or 2.95% in this month so far. The index has slumped 3,569.81 points or 17.4% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 4,169.36 points or 19.75%. From a 52-week low of 15,745.43 on 4 October 2011, the Sensex has risen 1,193.85 points or 7.58%.

Coming back to today's trade, index heavyweight Reliance Industries (RIL) rose. Oil exploration shares also rose on higher oil prices. Bike maker Bajaj Auto scaled record high. Cigarette major ITC rose after reporting strong Q2 results. Interest rate sensitive banking stocks reversed intraday gains in late trade. Engineering & construction major L&T extended Friday's (21 October 2011) losses triggered by the company cutting its order growth guidance for the current year.

The market opened on a firm note, with the barometer index BSE Sensex regaining the psychological 17,000 level. The market came off highs later. The market regained strength in mid-morning trade. The market once again pared gains later. A bout of volatility was witnessed in afternoon trade as key benchmark indices recovered after paring gains in early afternoon trade. Key benchmark indices pared gains in mid-afternoon trade as European stocks moved off initial highs. The Sensex fell below the psychological 17,000 level.

Stocks may remain volatile tomorrow, 25 October 2011, as traders roll over positions in the futures & options (F&O) segment from the near-month October 2011 series to November 2011 series. The near-month October 2011 derivatives contracts expire tomorrow, 25 October 2011.

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

The BSE Sensex was up 153.64 points or 0.92% to 16,939.28, its highest closing level since 19 October 2011. The index gained 319.24 points at the day's high of 17,104.88 in early trade. The index rose 112.96 points at the day's low of 16,898.60 in late trade.

The S&P CNX Nifty was up 48.40 points or 0.96% to 5,098.35, its highest closing level since 19 October 2011. The Nifty hit a high of 5,145.65 in intraday trade. The Nifty hit a low of 5,084.75 in intraday trade.

The BSE Mid-Cap index fell 0.33% and the BSE Small-Cap index declined 0.28%. Both these indices underperformed the Sensex.

The market breadth, indicating the overall health of the market, turned negative from positive in late trade. On BSE, 1,542 shares declined and 1,277 shares gained. A total of 113 shares were unchanged.

BSE clocked a turnover of Rs 1939 crore, lower than Friday's (21 October 2011) Rs 2342.96 crore.

From the 30 share Sensex pack, 23 rose while the rest declined. Coal India and Sun Pharmaceuticals fell 1.28% and 0.99% respectively.

Index heavyweight Reliance Industries (RIL) advanced 1.3% to Rs 846.25 after moving in a range of Rs 854.10 and Rs 842.15. 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. The company's gross refining margin (GRM) stood at $10.1 a barrel in Q2 September 2011, sharply higher than $7.9 a barrel in Q2 September 2010. The GRM was at $ 10.3 a barrel in Q1 June 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.

Oil exploration shares rose on higher oil prices. India's largest oil state-run oil exploration firm ONGC surged 4.09%. Cairn India rose 0.54% and Oil India gained 1.16%. Oil gained for a second day in row on Monday, 24 October 2011, as European leaders made progress with their debt rescue fund, while economic data from Asia signaled that growth is holding up in the region's two biggest crude consumers--China and Japan. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms.

India's largest cigarette maker by sales ITC rose 1.6% after the company announced during market hours today that 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.

Among other FMCG stocks, Hindustan Unilever, Britannia Industries and United Breweries rose by between 0.2% to 3.14%.

Interest rate sensitive banking reversed intraday gains in late trade ahead of RBI's policy review meet tomorrow, 25 October 2011. India's largest private sector bank by net profit ICICI Bank fell 0.12% to Rs 869.30, off day's high of Rs 897.10.

India's second largest private sector bank by net profit HDFC Bank shed 0.45% to Rs 484.10 after striking day's high of Rs 496.90. 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 bank by branch network State Bank of India (SBI) lost 2.11% to Rs 1907.55, retreating from day's high of Rs 1989.50. The stock 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.

Union Bank of India tumbled 11.56% after the state-run bank at the time of announcing Q2 earnings during market hours today, 24 October 2011, said the ratio of net non-performing assets rose to 2.04% as on 30 September 2011 from 1.18% as on 30 September 2010. The bank's net profit rose 16.12% to Rs 353 crore on 8.07% rise in net interest income to Rs 1661 crore in Q2 September 2011 over Q2 September 2010.

The government recently approved amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and debt recovery acts to enable banks to effectively deal with the menace of bad loans and also encourage them to disburse credit freely to home and corporate loan seekers. The Cabinet approved the introduction of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, in the next Winter Session of Parliament.

Information and Broadcasting Minister Ambika Soni said that suggested amendments will strengthen the ability of banks to recover debts due from the borrowers, enhance the ability of banks to extend credit to both corporate and retail borrowers, reduce the cost of funds for banks and their customers and reduce the level of non-performing assets.

India's largest engineering & construction firm by order book, L&T, lost 3.11% to Rs 1294.40 after sliding to a 52-week low of Rs 1,290.50 today, 24 October 2011. The company cut its order growth guidance for the current fiscal year to 5%, from 15% earlier at the time of announcing the company's second quarter results during trading hours on Friday, 21 October 2011. Order flow is being hampered by investment slowdown, project deferrals and higher competition, Chief Financial Officer R Shankar Raman told reporters

Reliance Communications lost 1.75%, in volatile trade, after the company said during market hours today that Reliance Telecom has today filed a writ petition in the Delhi Court, seeking quashing of the charges framed against the company by a Special Judge on 22 October 2011. Reliance Telecom has named the CBI, the DoT, the Ministry of Law and Justice and TRAI as respondents in the petition.

Shares of air carriers rose on reports the Union Cabinet will shortly consider a proposal to allow foreign airlines to invest in domestic carriers. SpiceJet (up 3.65%), Kingfisher Airlines (up 0.66%) and Jet Airways (India) (up 0.88%), edged higher.

According to reports, the industry ministry has circulated a draft cabinet note for inter-ministerial consultation after a nod from the Civil Aviation Ministry. Though the Aviation Ministry has given an in-principle approval, the sectoral cap will be decided by the Cabinet, reports added. Reports suggest that while the Department of Industrial Policy & Promotion (DIPP) favours a 26% cap on foreign airlines' holding, the Aviation Ministry wants it restricted to 24%. A holding above 25% gives the right to block a 'special resolution'.

Given the cash crunch at many domestic carriers, the DIPP had sent several letters to the Civil Aviation Ministry on the issue of allowing foreign airlines to invest in domestic carriers. Besides cash infusion, foreign airlines can also help in operational efficiency and connectivity improvement, the DIPP had noted. Currently, India allows up to 49% foreign direct investment (FDI) in domestic airlines through the automatic route while NRIs can invest up to 100%. Foreign airlines are, however, barred from investing in domestic airlines.

IT stocks advanced on recent steep slide in rupee against the dollar. The partially convertible rupee was at 49.81/82 per dollar, stronger from Friday's close of 50.02/03 when it had dipped to 50.32, a level not seen since 28 April 2009. 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 2.97%. During market hours today, 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 1.65%. 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 1.14%. The company announces its Q2 results on 31 October 2011.

Metal and mining shares advanced on improved Chinese manufacturing data. China is the world's largest consumer of aluminum and copper. Jindal Steel & Power, Sesa Goa, Sail, Hindalco Industries, Hindustan Zinc, Tata Steel, and JSW Steel rose by between 0.451% to 1.65%..

India's largest non-ferrous metals maker Sterlite Industries India rose 0.74%. During market hours today, 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 4.71% to $3,242.80 on Friday, 21 October 2011.

Auto stocks gained in anticipation of higher sales during Diwali, the festival of lights. India's largest small car maker by sales Maruti Suzuki India rose 1.46%. The stock extended Friday's gains triggered by end of labour strike at the company's Manesar plant. "The management and workers have signed the agreement in a spirit of cooperation and mutual respect, and look forward to work closely together for the benefit of all stakeholders of the company," Maruti said in a statement issued during trading hours on Friday, 21 October 2011.

India's largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) gained 0.96%. 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 bike maker by sales Hero MotoCorp rose 0.92%. 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 largest truck maker by sales Tata Motors jumped 4.44% and was the top gainer from the Sensex pack. Reportedly, the company is looking to raise $750 million through overseas borrowing to meet working capital requirements and reduce debt. 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 second largest bike maker by sales Bajaj Auto gained 3.12% to Rs 1691.70 after scaling a record high of Rs 1702.85 today, 24 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.

Grasim Industries rose 3.11% after consolidated net profit rose 29.2% to Rs 417.94 crore on 27.1% increase in net sales to Rs 5649.19 crore in Q2 September 2011 over Q2 September 2010.

GAIL (India) rose 1.75%. The company announced after market hours today 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.

Vaswani Industries clocked highest volume of 2.34 crore shares on BSE. Cals Refineries (1.02 crore shares), Shree Ashtavinayak Cine Vision (89.61 lakh shares), M and B Switchgears (56.49 lakh shares) and Birla Power Solutions (29.63 lakh shares) were the other volume toppers in that order.

M and B Switchgears clocked highest turnover of Rs 207.96 crore on BSE. SBI (Rs 139.06 crore), L&T (Rs 114.16 crore), Tata Motors (Rs 42.05 crore) and Vaswani Industries (Rs 41.58 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.

NTPC, Kotak Mahindra Bank and Dr. Reddy's Lab unveil Q2 results tomorrow, 25 October 2011. 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. 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.

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.

India's economy will grow at a rate less than the earlier government projection in 2011/12, Mukherjee said. "With the crude prices remaining where they are it will be a great challenge to maintain the fiscal deficit numbers to 4.6% this year," Mukherjee said.

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 Friday, 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 recently raised its borrowing target for the current fiscal year by Rs 52800 crore, surprising the market and 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.

Boosting farm output on a sustainable basis is the only long-term solution to address supply constraints and cool high commodity prices that have often hurt economic growth, Mukherjee said on 17 October 2011.

With inflation remaining at uncomfortably high level, the Reserve Bank of India (RBI) is seen delivering another rate hike at its half-yearly review of the monetary policy tomorrow, 25 October 2011. A 25 basis points hike in repo rate is expected from the central bank tomorrow. The annual rate of inflation in the food space increased in early October while inflation in the fuel group also edged up, data released by the government showed recently.

The Reserve Bank of India today, 24 October 2011, said in its second quarter review of Macroeconomic and Monetary Developments that the inflation challenge remains significant in India. RBI said high inflation is likely to persist over next couple of months before moderating as falling global commodity prices so far has been offset by rupee depreciation. Incomplete pass-through is likely to limit the impact of falling global commodity prices. Financialisation of commodities leaves future commodity price path uncertain, RBI said in a statement.

The central bank said domestic price pressures still remain significant and broad-based. Food inflation is likely to stay elevated due to demand-supply mismatches in non-cereals and large minimum support price (MSP) revisions from the government. The central bank said real wage inflation has extended into Q1 June 2011.

As per RBI's current assessment, GDP growth in 2011-12 is likely to moderate slightly from that projected earlier. Agriculture prospects remain encouraging with the likelihood of a record Kharif crop. However, moderation is visible in industrial activity and some services, RBI said. With the increasing linkage of domestic industrial growth with global industrial cycle, some further moderation is likely ahead, given the weak global purchasing managers indices (PMIs), RBI said. Capacity constraints seem to be easing in some manufacturing segments, especially cement, fertilizers and steel, RBI said. Construction activity has slowed and leading indicators suggest that going forward, services growth may slightly weaken.

The central bank said investment demand is softening as a result of combination of factors including monetary tightening, hindrances to project execution, deteriorating business confidence and slowing global economy. The pipeline of investment is likely to shrink, putting growth in 2012-13 at risk, RBI said. Corporate sales growth continues to be healthy, but profits are under pressure.

RBI said fiscal slippages during 2011-12 may complicate the task of aggregate demand management. Key to growth sustainability lies in supporting investment by rebalancing demand from government consumption to public and private investment. External sector outlook, although stable, warrants close monitoring, the central bank said. Capital flows are entering an uncertain phase with increased financial stress and worsening global growth prospects.

In the context of monetary and liquidity conditions, RBI said that monetary transmission from an effective increase of 500 basis points (bps) in policy rates and a 100 bps increase in the cash reserve ratio (CRR) effected since February 2010 is still unfolding and real interest rates remain low and non-disruptive to growth.

European stocks reversed initial gains on Monday, 24 October 2011. Key benchmark indices in France and Germany fell by between 0.36% to 0.42%. UK's FTSE 100 was up 0.07%.

European Union leaders said in Brussels on Sunday, 23 October 2011, that an agreement on a comprehensive package of measures to resolve the 2-year old euro-zone debt crisis is starting to take shape, though they provided few details. The package due to be announced on Wednesday, 26 October 2011, at a follow-up summit of European leaders is expected to center on recapitalizing European banks, addressing Greece's debt burden and boosting the firepower of the European Financial Stability Facility, the euro zone's rescue fund.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said at a joint press conference on Sunday, 23 October 2011, that a broad agreement is taking shape. Reports suggested that the European Financial Stability Facility (EFSF) could be used to provide insurance for debt holders of weaker European countries or could provide part of the financing for a special purpose vehicle that would buy the bonds of weaker countries. Those options could also be combined, the reports said.

Asian equity markets gained sharply on Monday, 24 October 2011, after European leaders indicated progress on a plan to resolve the region's debt crisis and preliminary data showed Chinese manufacturing is improving. Key benchmark indices in South Korea, Hong Kong, China, Taiwan, Singapore, Japan and Indonesia were up by between 1.79% to 4.14%.

Preliminary results from a monthly survey of Chinese manufacturing climbed to a five-month high of 51.1 points in October 2011, according to a survey released by HSBC today, 24 October 2011.

Japan's Finance Minister Jun Azumi said on Monday that the country would take action against any further "excessive" rise in the yen.

Most Asian equity markets had declined last week as caution prevailed ahead of weekend meetings aimed at fully resolving Europe's debt crisis.

Trading in US index futures indicated that the Dow could fall 3 points at the opening bell on Monday, 24 October 2011. A broad rally swept through the US stock markets on Friday after McDonald's and several other large companies reported solid earnings. Gains were also supported by the US Fed Vice Chairman Janet Yellen statement that a third round of large-scale securities purchases might become warranted to boost a US economy facing unemployment and financial turmoil.