Market falls for fourth straight week

The key benchmark indices logged declines for the fourth consecutive week as Finance Minister Pranab Mukherjee's Union Budget 2012-13 failed to give any roadmap about the reform process and plans to revive the economy. The market rose on three of five trading sessions. Volatility was high as slew of events were lined up during the week.

The Sensex fell 37.04 points or 0.21% to 17,466.20 in the week ended Friday, 16 March 2012. The S&P CNX Nifty slipped 15.65 points or 0.29% to 5,317.90



The BSE Mid-Cap index outperformed the Sensex, rising 0.5%. The BSE Small-Cap index underperformed the Sensex, falling 0.66%.

Foreign institutional investors (FIIs) have made substantial purchases of Indian stocks recently. Their inflow totaled Rs 5271.28 crore in five trading sessions from 9 to 15 March 2012, as per provisional data from the stock exchanges.

Trading for the week began on upbeat note as the key benchmark indices edged higher on Monday, 12 March 2012 after the Reserve Bank of India (RBI) after market hours on 9 March 2012 announced a reduction of 75 basis points in banks' cash reserve ratio (CRR) requirement to ease liquidity situation in the banking system. The BSE Sensex advanced 84.43 points or 0.48% to settle at 17,587.67.

The market edged higher on Tuesday, 13 March 2012 as firm global stocks boosted sentiment. World stocks rose on optimism of a Greece bailout. The BSE Sensex surged 225.95 points or 1.28% to settle at 17,813.62.

Firm global stocks helped markets extend gains for the fourth consecutive trading session on Wednesday, 14 March 2012.

Profit booking derailed a four-day rally on the bourses on Thursday, 15 March 2012 after the Reserve Bank of India (RBI) in a mid-quarter policy review said risks to inflation have increased due to higher crude prices, the large fiscal deficit and a weakening currency. The BSE Sensex shed 243.45 points or 1.36% to settle at 17,675.85.

Key benchmark indices declined in highly volatile trade on Friday, 16 March 2012 after Finance Minister Pranab Mukherjee in Union Budget 2012-13 set only modest targets for trimming a ballooning fiscal deficit and as there was lack of any big-bang reform announcement in the Budget. The BSE Sensex was down 209.65 points or 1.19% to 17,466.20.

Among the 30-member Sensex pack, 15 gained while the rest 15 declined.

GAIL (India) gained 5.25% to Rs 367.05 for the week and was the top gainer among the Sensex pack. The stock rose on bargain hunting after falling to a 52-week low of Rs 346.10 on 6 March 2012.

Hindalco Industries (up 4.27%), Tata Motors (up 2.69%), and Hindustan Unilever (up 2.2%), edged higher from the Sensex pack.

Bharti Airtel (down 3.51%), DLF (down 3.68%), and TCS (down 3.22%), edged lower from the Sensex pack.

India's largest pharma firm by market capitalisation Sun Pharmaceutical Industries lost 4.37% to Rs 545.05 and was the top loser from the Sensex pack.

State-run oil exploration firm ONGC fell 3.38% to Rs 273.30. The government raised cess on crude petroleum oil production to Rs 4,500 per metric tonne from Rs 2,500 per tonne in Union Budget 2012-13. ONGC would lose about Rs 5500 crore on hike in cess on crude oil by Rs 2000 per tonne.

As per annual report, ONGC produced about 27278278 tonne of crude oil in FY 2010-11. Assuming no increase in crude oil production, the incremental cess on crude oil produced by ONGC is about Rs 5455 crore based on production for FY 2010-11. Similarly, Oil India produced about 3598305 kilolitre of crude oil in FY 2010-11. This translates into incremental cess on crude oil of nearly Rs 720 crore for Oil India, based on production for FY 2010-11. As crude oil prices are priced based on the landed cost of imports, upstream oil producers may have to absorb the hike in cess on crude oil produced domestically.

Index heavyweight Reliance Industries (RIL) shed 0.23% to Rs 771.95.

Cigarette maker ITC rose 3.74% to Rs 216.10. The stock high a record high of Rs 224.95 in intraday trade on Friday, 16 March 2012. The FM proposed an increase in excise duty on 'demerit' goods such as certain cigarettes, hand-rolled bidis, pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco.

Small-car maker Maruti Suzuki India rose 2.37% to Rs 1373.65 after the government proposed increase in excise duty on large cars in Union Budget 2012-13. The stock hit a 52-week high of Rs 1428.20 in intraday trade on Friday, 16 March 2012

Finance Minister Pranab Mukherjee's Union Budget 2012-13 presented in parliament on Friday, 16 March 2012 failed to give any roadmap about the reform process and plans to revive the economy. The were no indications on implementing goods and services tax or on subsidy cuts in Budget while the Direct Tax Code has been deferred. He gave relief in income tax rates, but increased service tax and excise duty.

The finance minister raised services tax and excise duty to 12% from 10%. The FM said all services will be taxed except those in the negative list.

The government projected its budget deficit for the year ending March 2013 at 5.1% of gross domestic product. For the current fiscal year ending March 2012, the deficit is estimated at 5.9%, sharply higher than the initial forecast of 4.6%, Finance Minister Pranab Mukherjee said while presenting the union budget in parliament.

Announcing major sops for the farmers, rural sector, aviation and power sector, Mukherjee raised the income tax exemption limit from the current level of Rs 1.8 lakh to Rs 2 lakh. He announced new income tax slabs in the budget. However, corporate tax rate and peak customs duty were left unchanged

Pranab Mukherjee announced reduction a 20% reduction in Securities Transaction Tax (STT) on delivery transactions to 0.1% in Union Budget 2012-13.

The FM announced Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50 per cent to new retail investors, who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh. The scheme will have a lock-in period of 3 years. The finance minister (FM) also said that qualified foreign investors will be allowed to invest in corporate debt markets.

Implementation of the Direct Tax Code (DTC), the proposed reforms in the direct tax system, will miss the deadline of 1 April 2012, Finance Minister Pranab Mukherjee said Friday. The government was taking steps for early implementation of the policy, he said. However, the finance minister did not give any time-frame for the implementation of the proposed reform.

Mukherjee also said that the government was working for the early implementation of proposed reforms in the indirect tax system -- Goods and Services Tax (GST). The finance minister said the government would set up a GST network by August 2012 that will facilitate access to information in a transparent manner.

The FM said that the government intends to bring down subsidy to 1.75% of GDP in the next 3 years. The government has proposed to keep the subsidy bill under 2% of GDP in 2012-13. The FM said that direct transfer of subsidy for kerosene into bank accounts of beneficiaries has been initiated in Alwar district of Rajasthan and will be rolled out in other areas gradually.

The FM has set a target of raising Rs 30000 crore from disinvestment in 2012-13. The finance minister reiterated that the government will retain at least 51% cent ownership and management control in state-run firms.

The Budget identified five objectives to be addressed effectively in the coming fiscal year. These will include focus on domestic demand driven growth recovery, create conditions for revival of high growth in private investment, address supply bottlenecks in agriculture, energy and transport sectors and intervene decisively to address the problem of malnutrition in 200 high burden districts.

The Reserve Bank of India (RBI) kept its policy rate viz. the repo rate steady at 8.50% at a mid-quarter policy review on Thursday, 15 March 2012 saying that the risks to inflation have increased due to higher crude prices, the large fiscal deficit and a weakening local currency. RBI said recent growth-inflation dynamics prompted the central bank to indicate that no further tightening is required and that future actions will be towards lowering the rates. However, notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions, RBI said. It added that there continues to be significant suppressed inflation in fuel, fertilizer and power as administered prices do not fully reflect the costs of production.

The Economic Survey 2011-12 was presented by Finance Minister Pranab Mukherjee in the Lok Sabha, on Thursday, 15 March 2012.

Union Railway Minister Dinesh Trivedi presented the Railway Budget 2012-13 in the Lok Sabha on Wednesday, 14 March 2012, stressing safety would be the top priority. He announced the setting up of a Railway Safety Committee as a statutory regulatory body as recommended by the Kakodkar Committee. Trivedi said the focus and long term goals of the Railways are safety, consolidation, decongestion & capacity augmentation, and modernization.

Trivedi said the operating ratio of the railways -- amount spent on running the network against revenues -- will be lowered to 74% from the current 95% in the terminal year of the 12th five year plan.

Trivedi said the plan outlay of Rs 60100 crore proposed for 2012-13 is the highest ever. The railways has set a target of 725 km new lines, 700 km doubling, 800 km gauge conversion and 1100 km electrification in 2012-13. The Railways has decided aligning the annual plan investment with five focus areas identified by Kakodkar and Pitroda Committees viz. rail tracks, bridges, signalling & telecommunication, rolling stock and stations & freight terminals.

The rail minister announced a small increase in passenger fares. The railways is also contemplating Fuel Adjustment Component (FAC) in fares. The passenger fare has been increased by 2 paise per km for suburban and ordinary second class, by 3 paise per km for mail/express second class and by 5 paise per km for sleeper class. The fare has been raised by 10 paise per km for AC Chair Car and AC 3 tier and First Class. The fare for AC 2 tier has been raised by 15 paise per km and for AC I the fare has been raised by 30 paise per km.

The wholesale price index (WPI) rose a faster-than-expected 6.95% in February from a year earlier, mainly driven by a surge in food prices, government data showed on Wednesday, 14 March 2012. The annual reading for December 2011 was revised upwards to 7.74% from 7.47%. WPI inflation stood at 6.55% in January 2012.

The Reserve Bank of India (RBI) after market hours on Friday, 9 March 2012, surprised the markets by slashing the cash reserve ratio (CRR) by 75 basis points to 4.75% from 5.5% to ease liquidity situation. The CRR cut, effective the fortnight beginning 10 March 2012, will inject around Rs 48000 crore of primary liquidity into the banking system. At the 3rd quarter policy review in late January 2012, RBI had announced a cut of 50 basis points in CRR, thereby injecting Rs 32000 crore into the cash-strapped system.

Industrial production grew 6.8% in January 2012 from a year earlier, sharply higher than a revised 2.5% rise in December 2011, helped by a strong rebound in manufacturing output, data on Monday, 12 March 2012 showed. Manufacturing output, which has a 75.5% weight in the index of industrial production, rose 8.5% from a year earlier in January. It had risen a revised 2.6% on year in December. Electricity production increased 3.2% from a year earlier in January while capital goods output shrank 1.5%.