IT, FMCG stocks advance

Key benchmark indices eked out small gains in choppy trade as euro zone debt worries eased after German Chancellor Angela Merkel on Thursday, 16 August 2012, said Germany will do whatever it can to keep the euro. The market sentiment was also boosted by data showing that foreign funds remained buyers of Indian stocks on Thursday, 16 August 2012. The barometer index, BSE Sensex, advanced 33.87 points or 0.19%, off 110.31 points from the day's high and up 68.46 points from the day's low. FMCG stocks rose on renewed buying, with Hindustan Unilever (HUL) and Bajaj Corp scaling record high and Tata Global Beverages hitting 52-week high. Index heavyweight and cigarette maker ITC recovered from Thursday's slide. IT stocks rose after tech-heavy Nasdaq Composite index rose 1% on Thursday, 16 August 2012. The Sensex has gained 454.90 points or 2.63% in this month so far (till 17 August 2012). The Sensex has jumped 2,236.16 points or 14.46% in calendar 2012 so far (till 17 August 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 2,555.22 points or 16.88%. From a 52-week high of 18,523.78 on 22 February 2012, the Sensex has lost 832.70 points or 4.49%. Coming back to today's trade, power generation stocks declined after the Comptroller and Auditor General of India's (CAG) said in a report that the government lost about Rs 1.85 lakh crore in potential revenue by giving away coal mining permits to private companies without auctions and after another CAG report on power sector pulled up the government for alleged favouritism towards certain companies in awarding bids for mega power projects. Reliance Power (RPower) dropped after CAG said the power generation firm unduly gained Rs 29033 crore from the government's decision on coal-block allocations and asked the government to review the allotment of an extra block to the company. GMR Infrastructure dropped after the CAG in yet another report criticized the government for allowing the private operator of Delhi's international airport to get hold of a major airport for 60 years and several hundred acres of land at a low price. Interest rate sensitive auto and banking stocks rose as data released early this week showed the rate of growth in inflation based on the wholesale price index (WPI) fell to the slowest pace in nearly three years in July 2012, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. Hindalco Industries dropped for the third day in a row after reporting weak Q1 results. State-run oil marketing companies (PSU OMCs) were mostly higher as crude oil prices dropped. Offshore oil services stocks rose across the board as crude future hit 3-month high on Thursday. Wockhardt hit a record high. UltraTech Cement scaled a record high. Key benchmark indices edged higher in early trade as euro zone debt worries eased after German Chancellor Angela Merkel on Thursday, 16 August 2012, said Germany will do whatever it can to keep the euro. The market extended initial gains in morning trade. Firmness continued on the bourses in mid-morning trade. The market held firm in early afternoon trade. A bout of volatility was witnessed as key benchmark indices pared gains after hitting fresh intraday highs in afternoon trade after CAG reports on coal, power and aviation were tabled in Rajya Sabha. Volatility ruled the roost as the key benchmark indices regained positive zone after slipping into the red in mid-afternoon trade. The market sentiment was boosted by data showing that foreign funds remained buyers of Indian stocks on Thursday, 16 August 2012. Foreign institutional investors (FIIs) bought shares worth net Rs 134.90 crore from the secondary equity markets on Thursday, 16 August 2012, as per data from Securities & Exchange Board of India (Sebi). FIIs bought shares worth a net Rs 4608.80 crore from the secondary equity markets in 11 trading sessions from 1 to 16 August 2012. The inflow this month comes on the top of substantial purchases last month. FIIs bought shares worth net Rs 9691 crore from the secondary equity markets in July 2012. The BSE Sensex advanced 33.87 points or 0.19% to settle at 17,691.08, its highest closing level since 14 August 2012. The index jumped 144.18 points at the day's high of 17,801.39 in afternoon trade, its highest level since 16 March 2012. The index fell 34.59 points at the day's low of 17,622.62 in mid-afternoon trade, its lowest level since 14 August 2012. The S&P CNX Nifty advanced 3.35 points or 0.06% to settle at 5,366.30, its highest closing level since 14 August 2012. The Nifty hit a high of 5,399.95 in intraday trade, its highest level since 16 March 2012. The Nifty hit a low of 5,341.70 in intraday trade, its lowest level since 14 August 2012. The market breadth, indicating the overall health of the market, was negative. On BSE, 1,512 shares declined and 1,377 shares gained. A total of 141 shares were unchanged. The BSE Mid-Cap index rose 0.05% and the BSE Small-Cap index gained 0.02%. Both these indices underperformed the Sensex. The total turnover on the BSE amounted to Rs 2146 crore, lower than Rs 2188 crore on Thursday, 16 August 2012. From the 30-share Sensex pack, 16 stocks gained and rest of them declined. FMCG major Hindustan Unilever (HUL) rose 1.31% to Rs 501.05. The stock had hit a record of Rs 504.35 in intraday on Friday, 10 August 2012. The company's net profit jumped 112.3% to Rs 1331.19 crore on 13.7% growth in net sales to Rs 6250.15 crore in Q1 June 2012 over Q1 June 2011. The company announced the results last month. Index heavyweight and cigarette maker ITC rose 1.53% to Rs 262.10. The stock had lost 3.59% to Rs 258.15 on Thursday after an adverse court ruling in Australia for cigarette makers. Tobacco giants failed in their bid to overturn an Australian law forcing them to remove virtually all branding from cigarettes packets, giving a boost to other countries planning similar steps. The legal challenge was brought also by British American Tobacco PLC, Imperial Tobacco Group PLC and Japan Tobacco Inc. The court ruling is a major blow for the companies, which are concerned other countries may be emboldened to push through similar measures. Norway, India, France and Canada are already considering curbs on cigarette marketing, while both New Zealand and the UK are looking specifically at introducing plain-packaging laws. The World Health Organization, which backs the plain-packaging measures, estimates that 5 million people worldwide die annually from diseases linked to tobacco, a figure it expects to climb to 9 million by 2030. Shares of ITC had scaled a record high of Rs 269.25 on 14 August 2012. The company reported strong results month. ITC's net profit jumped 20.21% to Rs 1602.14 crore on 15.34% growth in net sales to Rs 6652.21 crore in Q1 June 2012 over Q1 June 2011. Despite series of tax hikes, ITC's performance in cigarettes business remains robust and displays pricing power for the company. Tata Global Beverages rose 0.97% to Rs 134.90 after striking a 52-week high of Rs 137.75 in intraday trade today, 17 August 2012. The company through its overseas subsidiary has completed the acquisition of the balance 49% of the Grand business in Russia by exercising the option it had to acquire this stake at the time of the original acquisition. Russia continues to be a key market for expanding the company's tea and coffee businesses, Tata Global Beverages said in a statement issued on Thursday, 16 August 2012. Bajaj Corp gained 2.75% to Rs 173.95. The stock hit a record high of Rs 175.95 in intraday trade today, 17 August 2012. Among other FMCG stocks, Dabur India (up 0.76%), Godrej Consumer Products (up 0.89%), Nestle India (up 0.66%), Britannia Industries (up 0.57%) and Marico (up 0.68%) edged higher. Index heavyweight Reliance Industries (RIL) shed 0.25% to Rs 813. The stock was volatile. The scrip hit a high of Rs 824.95 and a low of Rs 809.60. RIL last week said it has bought back 3.88 crore shares for about of Rs 2776.78 crore till 7 August 2012 under its ongoing share buyback program. RIL has set maximum buyback price of Rs 870 per share. The company has set aside Rs 10440 crore for share buyback. The buyback program opened on 1 February 2012 and closes on 19 January 2013. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in June 2012 that the company's buyback program represents a highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future. State-run oil marketing companies (PSU OMCs) were mostly higher as crude oil prices dropped. HPCL rose 1.05% and Indian Oil Corporation gained 0.68%. But, BPCL fell 0.80%. Crude oil futures for September delivery were 44 cents lower, or 0.46% at $95.16 a barrel. The contract rose 1.4% on Thursday, 16 August 2012, to the highest in three months. The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas has reviewed international prices of crude oil and petroleum products during the first fortnight of August 2012. Accordingly, the under-recovery on HSD (High Speed Diesel) applicable for the 2nd fortnight of August effective 16 August 2012 is higher at Rs 13.76/litre compared to Rs 12.06/litre during previous fortnight, the Ministry of Petroleum & Natural Gas said in statement on Thursday, 16 August 2012. PSU OMCs are currently (effective 16 August 2012) incurring daily under-recovery of about Rs 405 crore on the sale of diesel, PDS kerosene and domestic LPG, the Ministry of Petroleum & Natural Gas said. PSU OMCs incurred under-recovery of Rs 47811 crore in Q1 June 2012. Their under-recovery totaled Rs 138541 crore in the year ended 31 March 2012 (FY 2012). Offshore oil services stocks rose as US crude futures hit 3-month high on Thursday. Gains in oil prices triggered expectations that oil firms will step up exploration and production activities, which in turn could boost demand for offshore oil services activities. Great Offshore (up 16.40%), Dolphin Offshore Enterprises (India) (up 4.59%), Global Offshore Services (up 1.49%), Shiv-Vani Oil & Gas Exploration Services (up 0.66%), Aban Offshore (up 4.34%) and South East Asia Marine Engineering & Construction (up 0.81%), edged higher. Interest rate sensitive auto shares rose as data released early this week showed the rate of growth in inflation based on the wholesale price index (WPI) fell to the slowest pace in nearly three years in July 2012, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. Lower interest rates may help revive demand for vehicles. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. Car major Maruti Suzuki India rose 0.39%. Maruti after market hours on Thursday, 16 August 2012, announced that the lock-out at its Manesar facility in Haryana will be lifted on 21 August 2012. The company had declared a lock-out at the Manesar plant on 21 July 2012 following large scale violence by workmen on 18 July 2012. In the violence a General Manager, Mr. Awanish Kumar Dev, was burnt to death inside the plant facilities and 96 supervisors and managers were injured/hospitalized. The re-start of production at the Manesar Plant would be gradual and will be taken up in phases, Maruti said in a statement. In accordance with the declared policy to not employ contract workers provided by contractors on the direct production line, the company has started the process of directly hiring them. The schedule of recruitment has been communicated to all the existing contract workers through the contract agencies and recruitment would start from 2 September 2012, Maruti said in a statement. Tata Motors gained 2.27%. The company's global sales jumped 21% to 1,01,605 units in July 2012 over July 2011. The company's passenger vehicles sales stood at 53,829 units in July 2012, a jump of 45% from the same month last year. Commercial vehicle sales were up by 1% to 47,776 units from the same month last year. Sales of luxury brands from Jaguar Land Rover were at 26,921 units in July 2012, up 41% from the same month last year. While sales of luxury sedans of Jaguar brand stood last month at 4,064 units, Land Rover sales were at 22,857 units. The Tata Motors group's global sales comprise Tata, Tata Daewoo and Hispano Carrocera range of commercial vehicles, Tata passenger vehicles, along with the distributed brands in India, Jaguar and Land Rover. Mahindra & Mahindra's (M&M) rose 0.52%. M&M's consolidated profit after deducting minority interest jumped 55% to Rs 1026.40 crore on 23.7% growth in gross Revenue plus other income to Rs 17670.80 crore in Q1 June 2012 over Q1 June 2011. During the quarter, some of the major group companies like Mahindra Finance, Mahindra Satyam and Mahindra Lifespace Developers significantly improved their performance, M&M said in a statement. M&M announced the consolidated results early this week. As on 30 June 2012, the M&M group comprised of 115 subsidiaries, 6 joint ventures and 11 associates. A full summation of gross revenues and other income of all the group companies taken together for the three months ended 30 June 2012 is Rs 20476.90 crore and profits before minority interest is Rs 1405.30 crore, M&M said in a statement. India's largest motorcycle maker by sales Bajaj Auto gained 0.58%. The company on 2 August 2012 said its total sales declined 5% to 3.44 lakh units in July 2012 over July 2011. Motorcycle sales declined 3% to 3.08 lakh units in July 2012 over July 2011. The company sold 5,600 units of Pulsar 200 NS and 14,400 units of Discover 125 ST in July 2012. Bajaj Auto's commercial vehicles sales dropped 23% to 35,292 units in July 2012 over July 2011. Bajaj Auto's exports declined 13% to 1.25 lakh units in July 2012 over July 2011. The company said there has been partial recovery in exports to Sri Lanka and Egypt and it expects further recovery in exports this month. The company at the time of Q1 June 2012 results last month said that it has undertaken proactive measures like rationalizing the end-user cost of vehicles in Sri Lanka and with these measures the company expects normalcy in exports to resume by end of Q2 September 2012. Bajaj Auto lost exports of about 20,000 units in Sri Lanka in Q1 June 2012 due to introduction of import barriers by that country. The company also lost export of about 25,000 commercial vehicles in Q1 June 2012 due to restrictions by importing countries and due to political unrest in Egypt, Bajaj Auto said in a statement. India's largest motorcycle maker by sales Hero MotoCorp rose 0.04%. IT stocks rose after tech-heavy Nasdaq Composite index rose 1% on Thursday, 16 August 2012. India's second largest software services exporter by revenues Infosys gained 1.52%. India's third largest software services exporter by revenues Wipro rose 1.39%. India's largest software services exporter by revenues Tata Consultancy Services (TCS) rose 0.98%. The company announced after market hours on Thursday, 16 August 2012, it has entered into a definitive agreement to acquire 100% equity of Computational Research Laboratories (CRL), a wholly owned subsidiary of Tata Sons, for a cash consideration of Rs 188 crore. The acquisition of CRL, a pioneering start-up firm in the arena of High Performance Computing solutions in India, will enable TCS to extend its suite of solutions and offer integrated High Performance Computing (HPC) application and Cloud services to its large base of customers, TCS said in a statement. HPC applications are finding increasing relevance and use among large enterprises, as they look to solve complex business problems like reducing their time-to-market. This is driving an increase in adoption of HPC based applications for modeling, simulations, visualization and big data analysis across the business, TCS said. TCS' global base of customers across multiple industries including automotive, aerospace, and energy are investing in the use of HPC applications and services. CRL's core strength in creating and managing HPC environments enriches TCS capabilities in Infrastructure Management, Engineering and Industrial Services and strengthens the focus on creating cloud based industry platforms, TCS said in a statement. "CRL's core capabilities in designing and building high performance environments coupled with our strong focus on Cloud-based, domain-rich industry platforms makes TCS very relevant to address the customers' growing requirement of HPC applications," said N Chandrasekaran, MD and CEO of TCS HCL Technologies was almost unchanged for the day at Rs 557 after striking a 52-week high of Rs 560 in intraday trade today, 17 August 2012. Tech Mahindra was unchanged at Rs 845.60 after striking a 52-week high of Rs 859 in intraday trade today, 17 August 2012. The company's consolidated net profit rose 12% to Rs 338 crore on 9% growth in revenue to Rs 1543 crore in Q1 June 2012 over Q4 March 2012. Tech Mahindra's operating profit jumped 38% to Rs 330 crore in Q1 June 2012 over Q4 March 2012. The result was announced on Thursday 9 August 2012. Mahindra Satyam advanced 1.60% to Rs 98.30 after striking a 52-week high of Rs 100.30 in intraday trade today, 17 August 2012. The company after market hours on Thursday announced the launch of the Motor Vehicle Enterprise Solution (MOVES) for modernizing Department of Motor Vehicles' business (DMV) operations. MOVES addresses the needs of financially constrained state and local governments to move into the future with a proven software platform that not only delivers a better DMV customer experience but also reduces the risk of implementation, Mahindra Satyam said in a statement. Bank stocks rose as data released early this week showed the rate of growth in inflation based on the wholesale price index (WPI) fell to the slowest pace in nearly three years in July 2012, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. India's largest bank by branch network State Bank of India rose 0.23%. SBI's net profit surged 136.91% to Rs 3751.56 crore on 16.89% increase in total income to Rs 32415.49 crore in Q1 June 2012 over Q1 June 2011. The surge in net profit was mainly due to a sharp fall in provisions and contingencies in Q1 June 2012. It may be recalled that SBI's provisions and contingencies had risen sharply in Q1 June 2011. The result was announced during trading hours on 10 August 2012. SBI's ratio of net non-performing assets to net assets rose to 2.22% as on 30 June 2012, from 1.82% as on 31 March 2012, and 1.61% as on 30 June 2011. SBI's ratio of gross non-performing assets (NPA) to gross advances stood at 4.99% of gross advances as on 30 June 2012, higher than 4.44% as on 31 March 2012 and 3.52% as on 30 June 2011. India's largest private sector bank by net profit ICICI Bank gained 0.48%. Before market hours on Thursday, 16 August 2012, the bank said it has successfully priced an issuance of 5.5 year fixed rate notes in aggregate principal amount of $750 million. The offering had an order book of $5.7 billion with interest from over 312 investors. The 5.5 year fixed rate notes carry a coupon of 4.7% and were offered at an issue price of 99.813%, which is spread of 364 basis points over equivalent London Interbank Offered Rate (Libor). India's second biggest private sector bank in terms of branch network HDFC Bank fell 0.89% to Rs 595. The stock had struck a record high of Rs 609.70 on Monday, 13 August 2012. During market hours on Monday, 13 August 2012, the bank said it has issued on a private placement basis unsecured, redeemable, non-convertible, subordinated bonds towards Tier-II capital bonds for an amount aggregating Rs 3477 crore. IndusInd Bank rose 0.26%. The private sector bank on Thursday launched its foreign currency pre-paid travel card -- Indus Forex Card. The Indus Forex card will be available in US dollar, euro, sterling pound, Singapore dollar, Australian dollar and Saudi Riyal. Power generation stocks declined after the the Comptroller and Auditor General of India's (CAG) said in a report that the government lost about Rs 1.85 lakh crore in potential revenue by giving away coal mining permits to private companies without auctions and after another CAG report on power sector pulled up the government for alleged favouritism towards certain companies in awarding bids for mega power projects. Lanco Infratech (down 1.60%), Adani Power (down 3.45%), and JSW Energy (down 2.08%) edged lower. Delay in introduction of the process of competitive coal bidding has rendered the existing process beneficial to the private companies, the CAG said in a report. A part of this financial gain could have been accrued to the national exchequer by operationalizing the decision taken years earlier to introduce competitive bidding for allocation of coal blocks, it said. The report said the government made a net allocation of 142 coal blocks from July 2004 to end-March 2011, to various state-owned and private companies without competitive bidding. This allocation lacked transparency and objectivity, it said. Reliance Power dropped 5.65%. The company unduly gained Rs 29033 crore from the government's decision on coal-block allocations, the Comptroller and Auditor General of India (CAG) said on Friday, 17 August 2012, and asked the government to review the allotment of an extra block to the company. RPower had won rights to build a 4,000-megawatts power project at Sasan in central India in 2007 and was initially given two blocks to mine coal to run the plant. The government gave it one more block later and subsequently allowed the company to use excess coal from the block for another project. RPower in a statement said it had no role in the allotment of coal reserves to the power project. Tata Power Company lost 3.36%. The company has decided to issue Unsecured, Subordinated, Listed, Rated Securities in the form of Non-Convertible Debentures of Rs 1500 crore. These Debentures have a maturity of 60 years and there is a call option with the company which can be exercised at the end of 10 years from deemed date of allotment and at the end of every year thereafter. The coupon (which may be deferred at the company's option) on the debentures is set at 10.75% per annum payable semi-annually, with a step up provision if the debentures are not called after 10 years. These debentures rank senior only to the share capital of the company. GMR Infrastructure lost 3.3% after the CAG in yet another report criticized the government for allowing the private operator of Delhi's international airport to get hold of a major airport for 60 years and several hundred acres of land at a low price. A consortium of companies led by GMR Infrastructure and including Malaysia Airports Holdings Berhad and Fraport AG holds a 74% stake in Delhi International Airport, the airport's operator. The remaining stake is with state-run Airports Authority of India The CAG said in an audit report tabled in parliament that the government handed over assets running into several billions of dollars to the consortium that paid just Rs 1813 crore. The Airport Authority of India's equity contribution to Delhi International Airport was Rs 637 crore. The report said a total equity contribution of Rs 2450 crore by the private consortium and the Airport Authority of India fetched Delhi International Airport a brown-field airport for 60 years and commercial rights of land valued at Rs 24000 crore. It said according to Delhi International Airport's own estimates, the potential earning capacity of this land was Rs 1.63 lakh crore over 58 years. Metal stocks declined. Sail (down 2.01%), Sterlite Industries (India) (down 0.87%), Tata Steel (down 0.93%), Sesa Goa (down 0.35%), JSW Steel (down 3.68%) and Jindal Steel & Power (down 4.17%) edged lower. Hindustan Zinc rose 1.68%. Hindalco Industries fell for third day in a row after reporting weak Q1 results. The stock was down 2.52%. Hindalco Industries' net profit fell 34.04% to Rs 424.77 crore on 1.93% increase in total income to Rs 6,329.37 crore in Q1 June 2012 over Q1 June 2011. The result was announced during trading hours on Tuesday, 14 August 2012. L&T fell 1.59% at Rs 1,451 on profit booking after the stock rose 4.81% in the preceding five sessions to Rs 1474.50 on 16 August 2012, from a recent low of Rs 1406.85 on 8 August 2012. L&T early this week said its construction division secured new orders valued over Rs 2008 crore across various business segments in July and August 2012. UltraTech Cement rose 0.82% to Rs 1730 after striking a record high of Rs 1736.90 in intraday trade today, 17 August 2012. Wockhardt rose 2.15% to Rs 1,299.65 after scaling a record high of Rs 1,303 in intraday trade today, 17 August 2012. During market hours on Thursday, 16 August 2012, the company said it has received final approval from the United States Food & Drug Administration (US FDA) for marketing 75mg tablets of Clopidogrel bisulfate and a tentative approval for the tablets containing 300mg Clopidogrel bisulfate, which are used to help reduce risk of heart attack or stroke. Clopidogrel is the generic name for the brand Plavix which is marketed in the United States by Bristol-Myers Squibb. Wockhardt is launching the product immediately in the US market, the company said in a statement. According to IMS Health data, the total market for this product in the US is over $6.5 billion. In the US generic pharmaceutical market, Wockhardt has been consistently growing market shares for all its products. In many instances, Wockhardt, by virtue of being amongst the few players to market technically challenging products has reaped the advantage of being an early entrant. Wockhardt said it will manufacture the Clopidogrel bisulfate active pharmaceutical ingredients (API) in its facility at Ankleshwar, India and the tablets of Clopidogrel at its facility in Aurangabad, India. The technology for the API and the tables was developed in-house by Wockhardt, the company said in statement. SBI was the top traded counter on the BSE with turnover of Rs 112.11 crore followed by United Spirits (Rs 93.95 crore), Tata Motors (Rs 52.47 crore), RIL (Rs 40.16 crore) and SKS Microfinance (Rs 37.69 crore). Kingfisher Airlines clocked highest volume of 97.09 lakh shares on BSE. Alok Industries (68.52 lakh shares), JM Financial (52.26 lakh shares), Cals Refineries (50.77 lakh shares) and Deccan Chronicle Holdings (48.36 lakh shares) were the other volume toppers in that order. The stock market remains closed on Monday, 20 August 2012, on account of Ramzan Id. The Prime Minister's Economic Advisory Council (PMEAC) headed by Dr. C. Rangarajan, today, 17 August 2012, projected 6.7% growth GDP in 2012/13. The GDP is projected to grow at 6.7% in 2012/13 due to the impact of weak monsoon on agriculture and the current reservoir storage position in 2012/13, PMEAC said in a statement. PMEAC said deficient monsoon will likely have an adverse impact on the prices of primary food items, especially on those where the ability of government stocks to play a moderating role is not there. PMEAC has forecast inflation rate to be within the range of 6.5% to 7% at the end of 2012-13. The PMEAC said that containment of the fiscal imbalance at the Centre rests on the government's management of the subsidy bill, especially that on refined petroleum products and by increasing the tax-GDP ratio. Introduction of the General Sales Tax on Goods & Services (GST) would be a very important milestone in the path of tax reform, it said. Introduction of GST requires considerable negotiations, bargaining and preparatory work in relation to both the structure and operation of the tax, it said. Given the huge subsidy projection for the current financial year, priority consideration may be given to a suitable increase in the price of diesel in one or more steps and on capping the level of consumption of subsidised domestic LPG close to what is currently being consumed by poorer households, i.e., 4 cylinders. There is need to specifically focus and address the apprehensions that have been occasioned by perceptions of arbitrary actions on tax and other fronts, the PMEAC said. Outstanding payments for infrastructure projects need to be cleared on time, it said. There is a need to take steps to contain high inflation in primary food which is mostly linked to the antiquated system of marketing and absence of modern handling and storage facilities for perishable products, the PMEAC said. Reforms in agriculture sector need focused attention on liberalizing tenancy arrangements, reforming domestic markets for agricultural produce and, reducing input subsidies, the PMEAC said. Significant improvement required in the approach of government to a number of issues to make IT-related export business much more competitive, the PMEAC said. The annual rate of inflation based on the Wholesale Price Index (WPI) eased to 6.87% (Provisional) for the month of July 2012 (over July 2011) from 7.25% (Provisional) in June 2012. Build up inflation in the financial year so far was 2.36% compared to a build up of 3.14% in the corresponding period of the previous year. The WPI inflation fell below the 7% level for the first time since November 2009, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. However, weak rainfall this year and a possibility that the government may allow local fuel retailers to raise prices could drive up inflation. Seasonal rainfall this year has been 15% below normal. Further, core inflation, also known as non-food manufacturing inflation, has accelerated, indicating overall price pressures haven't ebbed enough. Core inflation, which strips off volatile food and fuel prices, picked up to 5.5% on year in July from 5% in June. Due to deficient rainfall this year, total Kharif area sown is 802.09 lakh hectares against the normal of 854.86 lakh hectares as on 8 August 2012, Minister of State for Agriculture and Food Processing Industries Mr. Harish Rawat said early this week. Mr. Rawat on Thursday, 16 August 2012, said Rajasthan and Karnataka have declared drought in some areas of the respective states and are seeking relief from the central government. Rainfall across the country has been 15% below the long-term average so far this monsoon season, which started June 1. Mr. Rawat said a shortage of rainfall has also affected the cultivation of summer-sown crops in other parts of the country. Punjab and Haryana as well as parts of Maharashtra and Gujarat haven't declared drought yet, but are facing very dry conditions, he said. But he added that, overall, crops will likely fare better this year than during the country's last drought, in 2009, the worst drought the country suffered in nearly four decades. Coarse cereals, including corn, have been hit hardest by poor rainfall, he said. A panel of Indian ministers last week approved steps to contain the impact of a near-drought situation. The steps include providing a diesel-price subsidy to farmers, increasing the subsidy on seed supplies and removal of the import tax on oilmeals. The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year. Ahead of the WPI inflation data Reserve Bank of India Governor D Subbarao on Monday, 13 August 2012, said high inflation leaves no room for easing policy to counter a potential external shock to Asia's third-largest economy. Unlike during the global financial crisis of 2008-09, "there is just no space for fiscal or monetary responses," Subbarao said in a speech to a conference organized by a body which advises the state government of Kerala on economic policy. "Inflation is high, oil prices are at elevated levels, the external sector is under stress," he added. The RBI last cut rates by 0.5 percentage point to 8% from 8.5% in April, its first move to reverse a 20-month rate-tightening cycle. It then held rates steady in June and at its last rate-setting meeting on July 31, saying that a cut would exacerbate inflationary pressures. Mr. Subbarao said wholesale price inflation--the mostly closely watched inflation gauge in India--remains above the central bank's tolerance level. The RBI is scheduled to undertake a mid-quarter review of the monetary policy on 17 September 2012. The Central Statistics Office (CSO) will unveil data on consumer price index (Agricultural Labourers/ Rural Labourers) today, 17 August 2012. Union Minister of Commerce, Industry & Textiles Mr. Anand Sharma on Thursday, 16 August 2012, said that the government will come out with announcements pertaining to industrial environment that will address the subdued sentiment in the industry. Speaking after the fourth meeting of the Government-Industry Task Force on Thursday, 16 August 2012, Mr. Sharma said that there is a shared concern over the declining industrial production, particularly the manufacturing sector. "We have also looked at other concerns of the industry so that steps are taken to improve the investors' confidence as well as the climate of investment.... I have said so earlier that the government will take decisions which are the expectations of the industry and the investors... We hope that in the next three weeks there will be decisions by the government which will bring about a positive improvement," Mr. Sharma said. Mr. Sharma recently said the prolonged crisis in the Euro Zone has cast a long shadow on the exports and measures takes by the government in June 2012 are likely to have a positive impact on exports from September. The minister said that efforts are on to bring down the transaction cost. His comments came after data early this week showed that India's exports 14.8% in July 2012. Prime Minister Dr. Manmohan Singh said in his Independence Day speech on Wednesday, 15 August 2012, that at a time when the global economy is passing through a difficult phase India must make every effort to resolve the problems inside the country so that the nation's economic growth and the creation of employment opportunities in the country are again speeded up. If we do not increase the pace of the country's economic growth, take steps to encourage new investment in the economy, improve the management of government finances and work for the livelihood security of the common man and energy security of the country, then it most certainly affects our national security, Dr. Singh said. The prime minister said the government has recently taken new measures to accelerate infrastructure development. Ambitious targets have been fixed in roads, airports, railways, electricity generation and coal production. The Government will take steps to increase investment for infrastructure development with the help of the private sector, Dr. Singh said. "To attract foreign capital, we will have to create confidence at the international level that there are no barriers to investment in India", Dr. Singh said. Dr. Singh said that almost all the villages in the country have now been electrified. The government's next target is to provide electricity to each and every household in the country in the next 5 years and to also improve the supply of electricity, Dr. Singh said. The National Skill Development Council has formulated a major scheme for skill development in which 8 crore people will be trained in the next 5 years, Dr. Singh said. Union Finance Minister P. Chidambaram last week said that a path of financial consolidation will be unveiled shortly. Government finances are under pressure as expenses exceed revenue, mainly because of subsidies doled out for cheaper supplies of food, fuel and fertilizer. Mr. Chidambaram said that the fiscal-deficit target for the current financial year will be reassessed after a mid-year review later this financial year depending on the pace of expenditure and the resource position of the government. The government is aiming to restrict spending on subsidies, the finance minister said. The government has already taken some steps to reduce expenditure. In late May, the finance ministry asked government departments to reduce their non-plan spending -- expenditure that won't create long-term assets -- by 10% this fiscal year as part of its efforts to keep the fiscal deficit under check. The government intends to fine tune policies and procedures that will facilitate capital flows into India, Mr. Chidambaram said last week. Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance to investors, Mr. Chidambaram said. The government has recently appointed two committees -- one to examine anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) legal provisions and guidelines and the other to review taxation of the IT sector and Development Centres. Mr. Chidambaram said he has also directed a review of tax provisions that have a retrospective effect in order to find fair and reasonable solutions to pending as well as likely disputes between the Tax Departments and the Assessees concerned. Mr. Chidambaram said that the government has received requests to put off plans to implement the General Anti-Avoidance Rules (GAAR) which aim to check tax avoidance. The implementation of GAAR was postponed by one year in order to provide an opportunity of wider consultation before such a legislation is implemented, Mr. Chidambaram said in the lower house of parliament while replying to lawmakers' questions. The provisions of GAAR are directed toward preventing tax avoidance by way of aggressive tax planning, he added. The implementation of GAAR proposal introduced in the Union Budget 2012-13 in March 2012 by then-finance minister Pranab Mukherjee has been deferred to 1 April 2013. This came after heavy criticism from foreign investors who fear that GAAR would give the authorities arbitrary powers to examine any deal that they feel is designed to avoid tax. Prime Minister Dr. Manmohan Singh last month constituted an expert committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) to undertake stakeholder consultations and finalise the guidelines for GAAR by 30 September 2012. Dr. Singh last month also decided to refer the issue of implications on FIIs and portfolio investors of the amendment made to the Income Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India to the Expert Committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR). "It is necessary to have clarity on the tax liability of portfolio investors and foreign institutional investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment", the Prime Minister's Office (PMO) said in a statement issued on 30 July 2012. Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR, the PMO said. An India-Mauritius joint panel will discuss a series of proposals to review the double taxation avoidance treaty between the two nations on 22-24 August in Mauritius. India has been looking to negotiate the double taxation avoidance agreement with Mauritius for the past few years to check so-called round tripping and other potential abuses. Round tripping entails moving money out of one country to another, and getting it back under the garb of foreign capital. Capital gains tax is close to zero in Mauritius and almost 40% of investments into India come through the island nation. Under the bilateral agreement, capital gains from sale of securities can be taxed only in Mauritius. The India-Mauritius joint working group will also discuss the inclusion of a so-called limitation of benefit clause, similar to the Singapore tax treaty with India, to ensure only genuine Mauritius-based companies are benefited. India's tax agreement with Singapore says that only those companies that spend a minimum of $200,000 (about Rs 1 crore) in Singapore can avail the benefits of the treaty. Sanctity of tax residency certificates issued by a country to companies operating in its jurisdiction to enable the firms to claim tax benefits under various treaties is another issue between India and Mauritius. While India in this year's national budget said the certificates are a necessary but not sufficient condition, Mauritius wants those issued by it honoured. Draft guidelines issued by Indian government for implementing the controversial anti-avoidance tax proposal viz. the GAAR state that GAAR provisions should be invoked on a foreign institutional investor (FII), if it chooses to take a treaty benefit, but would not in any case be invoked in the case of the non-resident investors of the FII. The draft guidelines suggested that the onus of proving wrongdoing should be on the authorities. European stock markets were firmer on Friday, led by banks and tracking gains for Asia and overnight on Wall Street after German Chancellor Angela Merkel said her country was committed to doing all it could to preserve the euro. Key benchmark indices in France, Germany and UK rose by between 0.06% to 0.22%. Bad debts held by Spanish banks surged in June to its highest level on record and there were further outflow of deposits as the economy sank deeper into recession and worries about the health of the banking industry mounted. Data from the Bank of Spain published Friday showed that non-performing loans grew by 8.39 billion euros ($10.36 billion) in the month of June, to 164.36 billion euros, or 9.42% of total outstanding loans compared to 8.95% in May. The previous high for bad loans was recorded in February 1994, when they peaked at 9.2% of total loans. The euro-zone's current account surplus continued to rise in June, against expectations for a fall, due to an expanding trade surplus, European Central Bank data published Friday showed. The current account surplus rose to 12.7 billion euros ($15.63 billion) in June from 10.3 billion euros in May. The ECB revised the surplus reading for May slightly downward from a first estimate of 10.9 billion euros published in July. The data are adjusted for seasonal effects and take account of the number of working days in each month. A deficit for current transfers was more than offset by surpluses in the trade of goods, services and in income, the ECB said. Greek Prime Minister Antonis Samaras is set to meet German Chancellor Angela Merkel in Berlin on Friday, 24 August 2012, and will visit French President François Hollande on Saturday, 25 August 2012. Samaras is reportedly prepared to sound out Merkel on his call to stretch the implementation of new austerity measures over four years rather than the two years agreed as part of second bailout for Greece. Greek news reports, however, said Samaras wouldn't formally request an extension until a meeting of European Union leaders in October 2012. Samaras campaigned on that pledge as his center-right New Democracy party eked out a first place finish in June's parliamentary elections over the left-wing Syriza party, which had vowed to tear up the austerity provisions altogether. A group led by German Professor Markus Kerber has reportedly filed in a lawsuit to the German constitutional court aiming to delay the approval of the European Stability Mechanism (ESM) -- a permanent bailout fund for financially troubled countries in the 17-nation euro zone. The ESM needs to be ratified by all euro zone nations. It has already been backed by Germany's parliament. Germany's President Joachim Gauck is yet to sign it into law, pending several challenges with Germany's constitutional court. Germany's Federal Constitutional Court has said it will decide by September 12 whether the legislation is compatible with Germany's constitution. Asian markets were mostly higher on Friday, 17 August 2012, as euro zone debt worries eased after German Chancellor Angela Merkel on Thursday, 16 August 2012, said Germany will do whatever it can to keep the euro. Key benchmark indices in Japan, Hong Kong and Indonesia were up by between 0.45% to 0.77%. Key benchmark indices Singapore, Taiwan and South Korea were down by 0.03% to 0.58%. Mainland Chinese shares dropped as weak economic data remained as a weight on sentiment, with investors also shrugging off recent remarks from Chinese Premier Wen Jiabao suggesting more monetary policy action. The Shanghai Composite index rose 0.13% China might not be able to cut interest rates if the yuan weakens further, according to Moody's, which says the end of the strong Chinese currency era could limit Beijing's policy actions. Markets are coming around to the view that the Chinese currency could now be near its fair value -- instead of moderately undervalued, as maintained by the International Monetary Fund -- according to Moody's analyst Alaistair Chan. The Chinese yuan has depreciated 0.9% against the US dollar since the start of the year. China's foreign direct investment (FDI) in July contracted 8.7% from a year earlier, marking its weakest level in two years and signalling lower foreign confidence in the mainland economy's prospects. China reported FDI inflows of $7.6 billion for the month, bringing total inflows for the first seven months of the year to $66.7 billion, according to data released Thursday by the Commerce Ministry. Chinese Premier Wen Jiabao on Wednesday, 15 August 2012, said that he sees growing room for monetary policy action. Trading in US index futures indicated a flat opening of US stocks on Friday, 17 August 2012. Federal Reserve Chairman Ben Bernanke is scheduled to talk on 31 August 2012 at the Kansas City Federal Reserve Bank's annual symposium in Jackson Hole, Wyo. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012.