Eurozone back in black

Economic growth returned to the euro zone in the third quarter after five consecutive declining quarters, but the bounce was weaker than had been expected, leaving economists to question the strength and sustainability of the 16-nation region's recovery. Euro-zone gross domestic product (GDP) rose by 0.4% compared to the previous three months, the European Union statistics agency Eurostat said in a preliminary estimate. Compared to the same period last year, the September quarter's GDP fell by 4.1%. Economists had been looking for a 0.6% quarterly rise and a 3.9% year-on-year decline.

Germany and France reported further growth in the third quarter. Italy too started to expand for the first time in more than a year even as Spain and UK continue to struggle. Germany, France and Italy account for more than two-thirds of aggregate euro zone output, and the third quarter marked a turning-point for the common currency area, which spans 16 countries.

Germany and France, which both emerged from recession in the second quarter with 0.3% growth, posted quarterly expansion rates of 0.7% and 0.3% respectively in the three months to end-September. Italian GDP turned positive with a rise of 0.6% quarter over quarter, following five quarters of contraction. The national data indicated that improving exports helped lead the region back to growth, while consumers continued to keep a tight grip on their wallets.

TVS re-launches Twin Spark Plug "Flame"

TVS Motor Co. Ltd. re-launched the much awaited Twin Spark Plug "FLAME" motorcycle after obtaining all necessary permissions and clearances in accordance with law. This executive segment motorcycle, launched under the brand TVS Flame DS 125, is propelled by three valve CC-VTi technology, fired by twin spark plugs. Developed with AVL Austria, this 125 cc three valve engine is tuned to the ideal swirl-tumble port combination so that it delivers superior performance while simultaneously enhancing low, mid range power and delivering high fuel efficiency. TVS Flame DS 125 has a unique combination of three valves and two spark plugs. Packing in 10.5 bhp @ 7500 rpm, TVS Flame DS 125 has a top speed of 95 kmph. Priced at Rs. 49,200 ex-showroom, the TVS Flame DS 125 comes in dual tone colours of red and black.

Cox & Kings IPO price band at Rs316-330/share

Cox and Kings (India) Limited fixed the price band between Rs316 and Rs330 per share for its Initial Public Offering (IPO) of 18,496,640 equity shares of Rs. 10 each for cash at a price to be decided through a 100% Book-Building Process. The Bid/Issue opens on November 18, and closes on November 20. The company has been assigned a "CARE IPO GRADE 4" to the proposed IPO. CARE IPO Grade 4 indicates above average fundamentals. CARE assigns IPO grades on scale of Grade 5 to Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

The IPO consists of a Fresh Issue of 15,450,000 shares and an Offer for Sale of 3,046,640 shares by Lehman Brothers Opportunity Limited, Deutsche Securities Mauritius Limited and Merrill Lynch Capital Markets Espana, SA, SV. The IPO comprises of a net issue to the public of 18,296,640 shares and a reservation of up to 200,000 shares for the eligible employees on a competitive basis. The IPO and the Net Issue would constitute 29.40% and 29.08% respectively of the fully diluted post issue paid-up capital of the company.

Cipla launches Antiflu to combat flu pandemic

Cipla Ltd. announced that it has launched Oseltamivir under the brand name Antiflu to combat the flu pandemic. The only drug from India to be pre-qualified by the World Health Organisation (WHO), Antiflu would be sold under Schedule X category, like Virenza (Zanamivir), Cipla said in a statement. Antiflu and Virenza directly target the virus and block its replication. Best results are seen if the medicines are taken within 48 hours of the symptoms being visible. Clinical trials suggest that the drugs reduce suffering considerably and time usage also lowers chances of other health complications, Cipla said. Antiflu will be available both in capsules (10 Nos) and liquid form (75 ml) and will be priced at Rs485. Virenza (20 capsules) will be retailed at Rs800. As of now 800 chemists across India have got the special license to retail the drugs made by Cipla. This includes 25-30 chemists in Mumbai. The number is likely to go up as more chemists apply for the license to sell these drugs.

Nissan-Renault inks low-cost car pact with Bajaj Auto

Nissan-Renault and Bajaj Auto signed an agreement to design, develop, manufacture and market a low-cost car in India. Bajaj Auto will design and manufacture the car while Nissan-Renault will market it, Carlos Ghosn, Chairman & CEO of Renault-Nissan Alliance said in New Delhi. It will be the cheapest small car in India, Ghosn claimed, adding that the car will also be competitive on fuel efficiency. The companies had announced the formation of a joint venture (JV) in May 2007, to develop, produce and market a car code-named ULC. "We intend to bring this highly price-competitive and fuel-efficient product to the Indian market in 2012," Ghosn said at the conclusion of the India Economic Summit. "The design, engineering, manufacturing and supply-base expertise to create this all-new product will be executed by Bajaj Auto with the support of the Renault-Nissan Alliance. The marketing and distribution will be led by the Alliance, with the support of Bajaj Auto," he said.

L&T sells 2.3% stake in Mahindra Satyam Mahindra

Shares of Mahindra Satyam slipped after Larsen and Toubro (L&T) sold 2.72 crore shares in the company in two bulk deals at an average price of Rs 113.65 in opening trade on the BSE. Prior to the deal, L&T held a 6.9% stake or 8.11 crore shares in the Hyderabad-based IT company which it had acquired in two tranches at an average price of Rs 82 a share. L&T also made an abortive bid to acquire the company. However in April 2009 Tech Mahindra, part of the Mahindra group, acquired a controlling stake in the scam-tainted company, and renamed it Mahindra Satyam. L&T had 12.04% holding in Mahindra Satyam, which subsequently got diluted with fresh issue of shares to Tech Mahindra.

Infosys BPO to acquire McCamish Systems

Infosys BPO Ltd., the business processing outsourcing subsidiary of Infosys Technologies, announced the signing of a definitive agreement to acquire all of the outstanding interests of McCamish Systems LLC, a premier business process solutions provider, based in Atlanta, Georgia in the United States. The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions. The upfront consideration for the deal is US$38mn with up to an additional US$20mn payable to the sellers if McCamish Systems achieves certain financial targets in the future. The acquisition is expected to enhance Infosys’ capability to deliver end-to-end business solutions for the insurance and financial services industries. Founded in 1985, McCamish Systems provides innovative solutions to the insurance and financial services industries leveraging their proprietary VPAS, PMACS and Deferral platforms. The company counts half of the top 20 insurers among its many clients. For the year ended December 31, 2008, McCamish Systems reported revenue of US$38.2mn. The company has about 260 employees based in their Atlanta delivery center.

Govt mulls 33% hike in regulated gas price

The Petroleum Ministry proposed a 33% hike in the price of natural gas produced by ONGC and Oil India and gradually increase it to US$4.20 per mmBtu set for gas from Reliance Industries Ltd.'s (RIL) KG-D6 fields. The ministry circulated a Cabinet note for raising price of gas under administered pricing mechanism (APM) from Rs 3200 per thousand cubic metres (US$1.8 per mmBtu) to Rs 4,250 per thousand cubic metres (US$2.4 per mmBtu). Price of APM, or the gas produced from fields given to ONGC and OIL on nomination basis, is proposed to be raised in stages to Rs 7,500 per thousand cubic metres or US$4.2 per million British thermal unit by 2013. The price set for RIL's eastern offshore KG D-6 gas (US$4.2 per mmBtu) is being considered as the benchmark for market price of indigenously produced gas in the country. Producer price for ONGC is proposed at Rs 3,870 per thousand cubic metres from Rs 3,200 per thousand cubic metres. The consumer price would be 10% higher. For OIL, the producer price has been proposed at Rs 4,310 per thousand cubic metres.

October air passenger traffic up 13% YoY

Domestic air passenger traffic continued its growth momentum in October and witnessed a growth of 25% to nearly 4mn from 3.2mn during the same period last year. Compared with September this year, air passenger traffic grew by 13% in October. The total domestic passengers carried by the local Scheduled Airlines in October were 39.69 lakhs versus 35.05 lakhs in September.

Among the airlines, Jet Airways and its subsidiary JetLite, whose passenger count fell last month due to the pilot’s strike, emerged as the market leader at 27.7% followed by Kingfisher Airlines at 20.7%. The state-owned carrier Air India (Domestic) improved its market share to 18.6% from 17.5% last month. Among the low-cost carriers, IndiGo commanded the maximum share at 14.3% followed by SpiceJet at 13.2%, GoAir at 5.8% and Paramount at 2%.

The seat factor in October increased vis-à-vis September primarily due to onset of the tourist season. The overall cancellation rate of scheduled domestic airlines for the month has been 1.6%. Passengers carried by domestic airlines from January to October were 360.09 lakhs as against 348.51 lakhs in the corresponding period of 2008, thereby registering a growth of 3.32%.

GSM subscriber addition at 10.32mn in October

The GSM-based cellular service providers have reported subscriber additions of 10.32mn during October, as against addition of 9.03mn in September, the Cellular Operators Association of India (COAI) said. With this, the cumulative All India GSM subscriber base has now grown to 355.25mn in October, up from 344.93mn in September, the lobby group for GSM operators said. Among the companies, Vodafone Essar added 2.98mn new users in October, taking its total base to 85.82mn while market leader Bharti Airtel saw its total base rise by 2.7mn to 113.21mn. Idea Cellular added 1.9mn new customers, boosting its subscriber base to 53.35mn, while Aircel increased its base by 2.02mn to 27.75mn. BSNL added 0.6mn new customers, taking its reach to 53.96mn. Loop Mobile added 50,064 new subscribers, taking its total to 2.55mn. MTNL added 65,730 new customers, boosting its total base to 4.44mn. Bharti Airtel continues to be the top GSM operator in the country, with a market share of 31.87% followed by Vodafone Essar at 24.16%, BSNL at 15.19% and Idea at 15.02%.

Food inflation inches up to 13.68%

The Primary Articles index rose by 9.16% in the week ended October 31 versus 8.94% in the preceding week, the Government said. Inflation for the Food Articles group stood at 13.68% in the week under review as against 13.39% in the previous week. The index of Fuel & Power group declined by 1.71% in the last week of October compared to a drop of 6.2% in the week ended Oct. 24. From last week, the Government stopped releasing the weekly WPI data. The data for "All Commodities" for October was scheduled for release on November 12, but will now be released on Nov. 14, according to top officials in the Union Ministry for Commerce and Industry. In its mid-year review of the annual policy late last month, the Reserve Bank of India (RBI) raised the WPI inflation projection to 6.5% with an upside bias by end-March 2010, from 5% earlier.

India's Sept industrial output tops forecast

India’s Industrial Production in September rose by 9.1% as against 6% in the same month last year. Economists had expected IIP growth to come in at around 7-7.5%. The Government announced that it has revised August IIP growth from 10.4% to 11%. Manufacturing output in September stood at 9.3% versus 6.2% YoY. Electricity generation rose by 7.9% versus 4.4% YoY. Mining output expanded by 8.6% versus 5.8% YoY. Basic Goods output growth stood at 6.7% as against 5% in September 2008. Output of Intermediate Goods rose by 10.8% as against a drop of 2.5% in the same month last year. Capital Goods output growth declined to 12.8% from 20.8% YoY. Consumer Goods output grew by 8.2% versus 7.4% YoY. Consumer Durables output expanded by 22.2% as against 14.7% in the year ago period. Consumer non-durable output rose by 2.6% versus 4.8% YoY. Industrial production during the first six months of current fiscal grew by 6.5% as against 5% in the corresponding period of the last fiscal.

Weekly Newsletter - Nov 14 2009

Though the overall undertone remains positive over the longer term, in the near term the market will continue to be volatile and uncertain. Most indicators - economic or corporate - are throwing up mixed signals, which in turn adds to the anxiety about the future prospects. For every good news there is an equally disconcerting bad news. This has led to heightened volatility of late. Markets are struggling near annual highs but are unable to surge higher amid apprehensions that the ongoing recovery could get disrupted in the absence of the unprecedented government stimulus. Though most nations are yet to start reversing the extraordinary fire-fighting measures, and could delay the same in light of unconvincing data points, valuations are not cheap. Overseas inflows could taper off somewhat as we approach the end of the year. A major sell-off many not happen but even the upside doesn't appear to be too promising from here on.

Technically, 5000 is proving to be quite tough nut to crack for the bulls, as the Nifty hasn't managed to close above this level for a reasonably sustainable period. If it does manage to pierce this critical barrier in the near future, it could go as high as 5150. This could then turn out to be a major resistance, which if broken can take the Nifty up to 5350-5400. Of course, there could always be selling pressure at higher levels which means the higher end of the range will not be reached without any hiccups. On the way down, support is expected to kick in at around 4900 and 4850.

FM sees over 7% growth in FY11, 9% in FY12

Finance Minister Pranab Mukherjee said that he is hopeful of more than 7% growth in the fiscal year ending March 2011 and 9% growth in fiscal year 2012. He was speaking at the World Economic Forum's India Economic summit in New Delhi. India's economic growth slowed to 6.7% in the fiscal year ended March 2009 after three straight years of 9% plus expansion. Government officials and the Reserve Bank of India (RBI) are looking at a GDP growth rate of 6-6.5% this fiscal.

The Government will focus on driving domestic demand until key developed markets recover and will not exit fiscal stimulus measures until necessary, the Finance Minister said. "There is a need of generating strong domestic demand until the robust recovery all over the world, particularly the developed world takes place," he said. Mukherjee reiterated his pledge to pump massive investments in agriculture and infrastructure, and acknowledged that it would not be easy for Asia's third largest economy to compensate for the loss in exports through domestic demand.

"It is not easy for us to diversify the market overnight and make up the loss so we shall have to wait for some time," he said. "This cannot continue for a long period of time," Mukherjee said, referring to the exit from easy fiscal policy. "I have stated a number of times that in due course we shall have to take the corrective measures." He also said that he was not worried about the availability of foodgrains and the Government would continue to import food to meet any supply shortfall.

Govt outlines rationale behind PSU disinvestment

Disinvestment Secretary Sunil Mitra explained the Government's thinking on the proposed action plan for disinvestment of its equity in profit making Central PSUs in a media briefing held in New Delhi. The Government had approved the plan on November 5. He said that the proposal to list PSUs is aimed at unlocking greater shareholder value in them. Availability of good quality PSU shares for trading provides depth and liquidity to the market that has a stabilizing influence, Mitra said.

Direct "people ownership" effectively enables public to share the prosperity of PSUs while indirect "people ownership" is achieved through Mutual Funds and Insurance Companies’ participation in Public Offerings, Mitra said. The Department of Disinvestment will begin Inter-Ministerial consultations to identify PSUs for disinvestment.

In view of the deceleration of GDP growth due to global economic downturn coupled with the drought, the Centre could find it tough to raise the required budgetary resources. "To ensure this does not negatively impact the growth of the Indian economy, the Government has approved one-time exemption permitting full utilisation of disinvestment proceeds deposited in the NIF, over the current fiscal year and the next two financial years, in meeting the capital expenditure requirements of selected social sector programmes," Mitra said.

"The unlocking of the dormant wealth of our PSUs and their channelisation for capital expenditure in social sector schemes, will stimulate economic growth with benefits percolating to the masses," Mitra said in a statement.

The Centre has decided that all profitable listed central PSUs should meet the mandatory listing of 10% public ownership. In addition, all unlisted PSUs having positive networth, no accumulated losses and having a net profit in the three preceding consecutive years should get listed on the stock exchanges. The disinvestment proceeds would be channelised into the National Investment Fund (NIF). The corpus comprising deposits from April 2009 till March 2012 would be available in full for investment as capital expenditure in specific social sector schemes. The status quo ante of NIF will be restored from April 2012.