Sensex, Nifty retract from 3-1/2-week highs

Key benchmark indices edged lower as index heavyweight Reliance Industries (RIL) fell almost 4% on reports the firm will suspend oil and gas drilling operations for an unspecified time until an internal valuation of its exploration and production strategy. The barometer index BSE Sensex settled above the psychological 17,000 mark, after alternately moving above and below that mark in intraday trade. The Sensex shed 57.60 points or 0.34%, up close to 95 points from the day's low and off about 160 points from the day's high. The market breadth was negative. The breadth alternately swung between positive and negative zone since early afternoon trade.



The Sensex has risen 571.33 points or 3.47% in this month so far. The index has slumped 3,484 points or 16.98% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 4,083.55 points or 19.34%. From a 52-week low of 15,745.43 on 4 October 2011, the Sensex has risen 1,279.66 points or 8.12%.

Coming back to today's trade, auto major Tata Motors jumped more than 4% on strong monthly sales data. Capital goods and power stocks declined. Housing finance major HDFC and media conglomerate Zee Entertainment Enterprises rose after posting good Q2 results. Interest rate sensitive automobile, banking and realty stocks extended their recent gains triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month.

The market pared gains after hitting its highest level in more than 3-1/2 weeks at the onset of the trading session. The market regained positive zone after slipping into the red for a brief period in morning trade. The market dropped amid a bout of volatility to hit fresh intraday low in mid-morning trade as index heavyweight Reliance Industries (RIL) extended initial losses. The market trimmed losses after hitting fresh intraday low in early afternoon trade. The intraday recovery gathered steam in afternoon trade as European markets opened higher. The market came off highs in mid-afternoon trade.

The BSE Sensex lost 57.60 points or 0.34% to 17,025.09, its lowest closing level since 13 October 2011. The index jumped 105.86 points at the day's high of 17,188.55 in early trade, its highest level since 21 September 2011. The index fell 154.31 points at the day's low of 16,928.38 in early afternoon trade.

The S&P CNX Nifty was down 14.05 points or 0.27% to 5,118.25, its lowest closing level since 13 October 2011. The Nifty hit a high of 5,160.20 in intraday trade, its highest level since 21 September 2011. The Nifty hit a low of 5,084.50 in intraday trade.

The BSE Mid-Cap index fell 0.01%. BSE Small-Cap index rose 0.22%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2080 crore, lower than Rs 2207.75 crore on Friday, 14 October 2011.

The market breadth, indicating the overall health of the market, was negative. The breadth alternately swung between positive and negative zone since early afternoon trade. On BSE, 1,423 shares fell and 1,337 rose. A total of 128 shares were unchanged. The breadth was strong at the onset of the trading session.

From the 30-share Sensex pack, 18 rose and the rest declined.

Interest rate sensitive automobile stocks extended recent gains triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Automobile purchases, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.

India's largest tractor and sports utility vehicles maker Mahindra & Mahindra (M&M) rose 0.61%. 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.

M&M's total auto sales rose 25% to a record 44,137 units in September 2011 over September 2010. The company's domestic sales stood at 41,136 units during September 2011, as against 33,866 units during September 2010, an increase of 21%. M&M's Passenger Vehicles segment (which includes the Utility vehicles and Verito) registered a growth of 11%, having sold 19,447 units in September 2011, as against 17,537 units during September 2010. The 4-wheeler commercial segment which includes the passenger and load categories registered a phenomenal growth of 45%.

India's second largest bike maker by sales Bajaj Auto rose 1.27%. The company's total sales rose 18% to a record 4,17,686 units in September 2011 over September 2010. Motorcycle sales rose 18% to a record 3,71,208 units. Commercial vehicle sales rose 21% to 46,478 units in September 2011 over September 2010. The company said it achieved record three-wheeler sales in September 2011. Exports rose 39% to 1,41,913 units in September 2011 over September 2010.

India's largest truck maker by sales, Tata Motors, gained 4.28% after company on Friday, 14 October 2011, said its global sales rose 24% 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. It said 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.

India's largest car maker by sales Maruti Suzuki India rose 2.39% to Rs 1053.05, rebounding from a 52-week low of Rs 1,010.45 hit in intraday trade today, 17 October 2011, said the company today, 17 October 2011, said it has resumed vehicle production at its Manesar factory in Haryana, two days after striking workers vacated the plant premises. The auto maker has started operations at a weld shop at the Manesar factory by utilizing trained workers who haven't joined the strike.

There hasn't been any production at Maruti's Manesar factory since 7 October 2011, afternoon after workers, demanding reinstatement of 44 colleagues who were not taken back after a 33-days long impasse, struck work and started to protest in the plant premises. A court had on Thursday, 13 October 2011, asked the striking workers to vacate the Manesar factory and not to protest within 100 meters of the plant.

India's largest bike maker by sales Hero MotoCorp was flat. The company's total sales jumped 26.75% to 5.49 lakh units in September 2011 over September 2010. Hero MotoCorp's total sales increased 20.10% to 15.44 lakh units in Q2 September 2011 over Q2 September 2010. The company expects sales growth to continue into the festive season.

Interest rate sensitive realty stocks rose on hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Purchases of both residential and commercial property are largely driven by finance. DLF, Orbit Corporation, Ackruti City and D B Realty rose by between 0.15% to 7%.

Interest rate sensitive banking stocks extended recent gains triggered by hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. India's second largest private sector bank by net profit HDFC Bank rose 0.78%, extending a six-day rally. India's largest private sector bank by net profit ICICI Bank gained 0.89%, with the stock gaining for the fourth straight day.

India's largest bank by branch network State Bank of India (SBI) rose 0.49%, extending recent strong gains triggered by hopes of capital infusion from the Government of India, its majority shareholder. Financial Services Secretary D.K. Mittal last week said that the government will inject Rs 3000 crore to Rs 4500 crore in SBI this fiscal year to help improve its capital base. "The capital infusion in SBI may happen by December-end, but definitely before March 31," Mittal said. His comments came after Moody's Investors Service recently cut its rating on SBI's financial strength to D+ from C- and lowered its hybrid debt rating on the bank to Ba3 (hyb) from Ba2 (hyb), flagging concerns over capital and deteriorating loan quality.

Mittal said that the rating downgrade was "shocking" and "unfair", and that some banks in developed countries were rated higher despite their asset quality being inferior to SBI's, He also said that the capital infusion may not be through a rights issue or a public share sale as market conditions weren't right for that, but through other methods. He didn't elaborate.

The government last week 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.

Index heavyweight Reliance Industries (RIL) declined 3.88% on profit taking as the firm's second quarter results came in line with market expectations. The stock was the top loser from the Sensex pack. The RIL stock had witnessed a pre-results rally. The stock had jumped 12.97% in the preceding six sessions to Rs 866.80 on 14 October 2011, from a recent low of Rs 767.25 on 5 October 2011.

RIL's net profit rose 15.84% growth in net profit to Rs 5703 crore on 34.73% rise in turnover to Rs 80790 crore in Q2 September 2011 over Q2 September 2010. The result was announced on Saturday, 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.

Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries said, "Our first half financial performance has been consistent. The increase in profits was largely driven by improved performance in the refining and petrochemicals business. All our manufacturing facilities operated at record levels with refineries achieving operating rates of 110%. RIL has strong balance sheet and sustained earning base to pursue growth opportunities."

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 will reportedly suspend oil and gas drilling pending an internal valuation of its exploration and production strategy. The CAG last month criticised RIL and the government over development of the gas field in the Krishna Godavari (KG) basin and called for revamping profit-sharing arrangements from oil and gas blocks.

Capital goods stocks edged lower. BEML, L&T, Bhel, Siemens, ABB fell by between 1.19% to 2.23%.

Power stocks, too, declined in a weak market. Power Grid Corporation of India, Tata Power Company, GVK Power & Infrastructure, and Reliance Infrastructure shed by between 0.15% to 2.3%. Sate-run coal giant, Coal India, today, 17 October 2011, said it has resumed normal supplies of coal to power plants, a move which will help lift electricity production and reduce power outages across the country. Power generation was adversely impacted over the past few days due to shortage of coal.

National Thermal Power Corporation fell 2.63%. The company announced after market hours today that a joint venture company under the name 'Pan-Asian Renewables Private Limited' has been incorporated on 14 October 2011 amongst NTPC (NTPC), Asian Development Bank (ADB) and Kyuden International Corporation, a wholly owned subsidiary of Kyushu Electric Power Company Inc. (Kyushu). NTPC, ADB and Kyushu will initially contribute in the ratio of 50:25:25 in the equity share capital of the joint venture. The joint venture company has been incorporated to develop renewable energy projects and initially establish over a period of three years a portfolio of about 500 megawatts (MW) of renewable power generation resources in India, NTPC said in a statement.

Housing Development Finance Corporation rose 0.95% after company announced during market hours today that net profit rose 20.20% to Rs 970.70 crore on 40.36% increase in total income to Rs 4169.14 crore in Q2 September 2011 over Q2 September 2010. HDFC said it utilised Rs 254.68 crore from the additional reserve to meet the increased provision required consequent to changes in provisioning norms mainly on standard assets prescribed by NHB.

As at 30 September 2011, the loan book stood at Rs 126992 crore as against Rs 106287 crore in the corresponding period of the previous year. This is after considering the loans sold during the preceding 12 months amounting to Rs 4989 crore.

Zee Entertainment Enterprises rose 0.98% after company announced during market hours today that consolidated profit after tax (PAT) rose 26.7% to Rs 160 crore on 1% rise in operating revenue to Rs 718.40 crore in Q2 September 2011 over Q2 September 2010. Zee said operating revenues and expenditure for Q2 September 2011 are not comparable to those for Q2 September 2010 because of the change in accounting treatment of domestic subscription revenues, which are now being reported net of expenses. This change has been necessitated due to the formation of Media Pro, a joint venture, which pays subscription revenues to Zee net of expenses.

Commenting on the results, Mr. Punit Goenka, Managing Director and Chief Executive Officer, Zee, commented, "Zee Entertainment has a wide portfolio of television channels and we have seen some gains and some losses in our market shares during the quarter. We are confident that we would continue to grow our business profitability in a sustained manner. During the quarter, we have seen a healthy increase in our operating margins, partly due to lower sports losses and partly due to better cost efficiency measures. Though advertising spends are better sequentially, overall trends remain subdued and FY 2012 does look to be a year of tepid growth in advertising spends on television. Our strategy during the last few years has been to create a formidable entertainment enterprise and invest in the business in a focused disciplined way".

Speaking about the outlook for the business, Mr. Goenka said, "We are working towards correcting the loss in market shares in some of our businesses and look forward to further increase in those where we have gained. Media Pro, our joint venture for subscription revenues, has started operations during the quarter and we are very confident of good performance going forward. With digitization mandate being passed, it will further be able to create value for the business. I am confident that these initiatives will play an important part in helping deliver value and significantly higher returns in the future.”

Oil exploration stocks rose along with crude oil prices. Cairn India and ONGC rose by between 1.07% to 3.74%. But, Oil India fell 1.23%. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms.

Shares of offshore oil services providers gained as oil prices rose. Jindal Drilling, Dolphin Offshore, Aban Offshore, and Deep Industries gained by between 0.2% to 4.63%.

Shares state-run oil-marketing companies (PSU OMCs) fell as crude oil prices rose. Indian Oil Corporation (IOC), HPCL and BPCL fell by between 3.25% to 4.3%. Higher crude oil prices will increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices.

Oil extended gains from the highest close in almost a month after investors increased bullish bets on crude and as European leaders pledged to deliver a plan to keep their debt crisis from sapping demand for fuel. Crude oil futures rose 0.61% to $87.33 a barrel in Asian electronic trading today, adding to last week's 4.6% climb.

Sugar stocks rose on firm sugar prices. Bajaj Hindusthan, Balrampur Chini and Shree Renuka Sugars rose by between 0.61% to 4.61%.

Metal stocks were mixed as the latest data showed inflation remains at uncomfortably high levels in China, the world's largest consumer of aluminum and copper. Jindal Saw, Sail, Jindal Steel & Power, NMDC, Nalco, and JSW Steel dropped by between 0.4% to 4.14%. Sesa Goa, Sterlite Industries, Hindalco Industries and Hindustan Zinc rose by between 0.07% to 1.51%. LMEX, a gauge of six metals traded on the London Metal Exchange gained 2.1% on Friday, 14 October 2011.

Tata Steel, the world's seventh-largest steelmaker, rose 0.19%. The company said on Friday, 14 October 2011, that sales from its Indian operations fell 1% in the July-September period to 1.65 million tonnes. The Indian operations account for about a quarter of the group's total annual global capacity of about 28 million tonnes, which includes unit Corus, Europe's second-largest steelmaker. Sales of flat products, used in cars and consumer goods, rose 3% from a year ago, the company said, but did not give any details about sales of long-steel products, used mostly in construction industry. The company's crude steel production in India stood at 1.74 million tonnes for the quarter, up 1%, it said in a statement.

Consumer durables stocks rose on expectations of good demand during Diwali festival. Videocon Industries, Rajesh Exports, Gitanjali Gems and Titan Industries gained by between 0.57% to 3.12%.

IT stocks were mixed after recent strong gains triggered by good Q2 results by IT bellwether Infosys, which also revised its full year earnings guidance. Infosys rose 0.09% to Rs 2747.25, extending 9.38% gains in preceding three trading sessions triggered by good Q2 results. Infosys announced before market hours on 12 October 2011 that its 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.

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.

Infosys has forecast 15.4% to 1.7.5% growth in non-annualised earnings per share (EPS) at Rs 38.51 to Rs 39.20 in Q3 December 2011 over Q2 September 2011. The company has forecast 8.97% to 11.2% growth in revenue at Rs 8826 crore to Rs 9012 crore in Q3 December 2011 over Q2 September 2011.

Thanks to a recent steep fall in rupee against the dollar, Infosys has sharply revised upwards EPS guidance for FY 2012. The company has projected 19.7% to 21.6% growth in EPS at Rs 143.02 to Rs 145.26 in FY 2012 over FY 2011. The company has also revised FY 2012 revenue guidance upwards. Infosys has projected 21.8% to 24% growth in revenue at Rs 33501 crore to Rs 34088 crore in FY 2012 over FY 2011.

India's third largest software services exporter Wipro declined 1.76% after surging 3.98% on Friday, 14 October 2011. The company announces its Q2 results on 31 October 2011.

India's largest software services exporter TCS fell 1.3%, reversing initial gains ahead of its Q2 results today, 17 October 2011.

The rupee rose to its strongest in nearly three-weeks on Monday, 17 October 2011, propelled by the euro's jump to a one-month high that helped offset impact of negative domestic equities. The partially convertible rupee was 48.85/86 per dollar, stronger from Friday's close of 49.0175/0275. It had earlier touched 48.7150--a level last seen on 29 September 2011. A firm rupee adversely affects operating profit margin of IT firms as the sector derives a lion's share of revenue from exports.

Onelife Capital clocked highest volume of 2.4 crore shares on BSE. Cals Refineries (94.59 lakh shares), IRB Infrastructure Developers (65.03 lakh shares), Jaypee Infratech (65.03 lakh shares), and Tata Motors (44.66 lakh shares) were the other volume toppers in that order.

Onelife Capital clocked highest turnover of Rs 356.60 crore on BSE. IRB Infrastructure Developers (Rs 112.47 crore), SBI (Rs 109.52 crore), RIL (Rs 95.28 crore) and Tata Motors (Rs 83.97 crore) were the other turnover toppers in that order.

The Q2 results season has started on a positive note, with good results from IT bellwether Infosys last week. The company also revised upwards its full year earnings guidance in both dollar and rupee terms. Index heavyweight Reliance Industries' Q2 results announced on Saturday, 15 October 2011 were inline with market expectations. Stock-specific activity may dominate trade in the near-term as earnings trickle 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. Jindal Steel & Power, Hero MotoCorp and HCL Technologies unveil quarterly results on Tuesday, 18 October 2011. HDFC Bank and Biocon unveil Q2 results on Wednesday, 19 October 2011.

Bajaj Auto, Cairn India, UltraTech Cement, Exide Industries and Thermax unveil quarterly results on Thursday, 20 October 2011. Engineering & construction major L&T, Idea Cellular, paints major Asian Paints, JSW Steel and Godrej Consumer Products reveal Q2 results on Friday, 21 October 2011. Axis Bank, Power Grid Corporation and Grasim unveil Q2 results on Saturday, 22 October 2011. Cigarette major ITC, Sterlite Industries and Titan Industries unveil Q2 results on 24 October 2011.

NTPC, Kotak Mahindra Bank and Dr. Reddy's Lab unveil Q2 results on 25 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) and BPCL unveil Q2 results on 31 October 2011. Cement majors ACC and Ambuja Cements and Aditya Birla Nuvo unveil quarterly results on 1 November 2011. Infrastructure Development Finance Company and ABB unveil results on 8 November 2011. Ranbaxy Laboratories unveils quarter results on 9 November 2011. Jet Airways (India) unveils Q2 results on 11 November 2011. Mahindra & Mahindra and India Cements unveil Q2 results on 14 November 2011.

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.

Industrial output in the month of August 2011 rose a slower-than expected 4.1% from a year earlier, data released by the government on 12 October 2011 showed. Industrial output growth for July was revised upwards to 3.84% from a provisional reading of 3.28%. Manufacturing output, which constitutes about 76% of the industrial production rose an annual 4.5% in August versus 2.3% in July. The government also revised upwards the industrial production growth for May 2011 to 6.15% from 5.91% reported earlier.

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.

Atsi Sheth, a New York-based vice president and senior analyst at Moody's Investors Service said in a media interview recently that Moody's is unlikely to change its rating outlook on India for now, though the extent of the increase in the government's borrowing target is a surprise. The possibility of fiscal slippage is, however, already factored into the sovereign rating, Sheth said.

Standard & Poor's Ratings Services on 3 October 2011 said it is maintaining its view that India will struggle to meet its fiscal deficit target. Takahira Ogawa, director of Sovereign and International Public Finance Ratings at S&P said India must prove its intent to continue with the process of fiscal consolidation in the medium term.

India remains firmly on track to achieve annual economic growth of 8%-9% in the medium-term, Finance Minister Pranab Mukherjee said on Monday, 17 October 2011. But the country needs to stay alert and respond to emerging global challenges, Mr. Mukherjee said at a conference. Like many other countries, food security and volatility in prices have been a matter of concern for India, he added.

The latest data showed that inflation in India remains uncomfortably high. Inflation, as measured by the wholesale price index (WPI), rose 9.72% in September 2011, compared with a 9.78% rise in August 2011, data released by the government on 14 October 2011, showed. WPI inflation for July 2011 was revised upwards to 9.36% from the provisional reading of 9.22%. Five out of nine economists polled by Capital Market before the latest WPI data expect a 25 basis points hike in repo rate from the Reserve Bank of India at its half-yearly review of the monetary policy on 25 October 2011. The rest four expect a status quo on rates.

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 today, 17 October 2011. Rangarajan on 14 October 2011 said that monetary policy has a role to play in containing demand pressures as long as inflation remains above 9%.

While its tolerance of inflation has gone up with rising income levels, the Reserve Bank of India (RBI) will raise rates further if high inflation persists, central bank deputy governor Subir Gokarn said on 12 October 2011. On the same day, RBI governor D Subbarao reiterated that controlling inflation is the main focus of monetary policy.

RBI said at a monetary policy review on 16 September 2011 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. The RBI raised repo rate by 25 basis points on 16 September 2011.

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 in its 16 September 2011 policy statement. The overall tone of the RBI's September policy was softer than the previous policy announcement which was extremely hawkish.

RBI said on 16 September 2011 that corporate margins moderated across several sectors in Q1 June 2011 compared to levels in Q4 March 2011. However, barring a few sectors, significant pass-through of rising input costs is still visible, RBI said.

India's services sector contracted for the first time in more than two years as new business dried up and expectations weakened amid concern over a flagging world economy, a survey showed on 5 October 2011. The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of around 400 firms, plunged in September to 49.8 -- its lowest reading since April 2009 -- and below the 50 mark which separates growth from contraction.

The slowdown in growth has continued to broaden with the service sector seeing a further slowdown in economic momentum, HSBC economist Leif Eskesen said. The new business sub-index sank to a 28-month low of 51.6 in September, down from 54.9 in August. The weak expansion in new business -- the main cause of the stagnation in activity -- meant employment levels fell for a third consecutive month. Despite harsh conditions firms were able to pass on rising input costs to customers, albeit at a slightly lower pace than in August.

The growth in manufacturing sector nearly stalled in September 2011, hitting its weakest spot since March 2009 on slowing output and orders growth following a series of interest rate hikes, data showed on 3 October 2011. The HSBC Markit India Manufacturing PMI fell more than two points to 50.4 in September 2011 from 52.6 in August 2011, very close to the 50 mark which divides growth and contraction. The output index plunged by its biggest amount in one month since November 2008, to 51.1 from 56.

European stock markets rose on Monday, 17 October 2011, buoyed by hopes that euro-zone officials are working hard to devise a plan to tackle the sovereign-debt crisis. Key benchmark indices in UK, France and Germany were up by 0.06% to 0.66%.

The gains Monday came after euro-zone officials reiterated their commitment to finding a solution to the region's debt crisis at the Group of 20 meeting over the weekend. This is a crucial week for the euro zone, with European leaders due to meet on Sunday, 23 October 2011, for a summit, where they're expected to present a comprehensive package of measures.

Asian shares rose on Monday, 17 October 2011, on hopes that a crucial week for the euro zone crisis will see policymakers finally come up with a comprehensive plan to resolve the region's debt woes and recapitalize its banks. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.37% to 2.01%.

China unveils third-quarter gross domestic product data on Tuesday, 18 October 2011.

Trading in US index futures indicated that the Dow could gain 11 points at the opening bell on Monday, 17 October 2011. US stocks scored their first back-to-back weekly gains since early July on Friday, 14 October 2011, on earnings from Google and as investors kept riding the optimism for a solution to the euro zone's debt crisis. Stronger-than-expected retail sales data added to the upbeat mood Friday. US retail sales rose 1.1% in September from a month earlier, a report showed. Sales growth during August was revised upward to 0.3%.