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Friday, March 05, 2010
Tata Motors Feb sales surge by 58% YoY
Tata Motors said that the total sales (including exports) of Tata commercial and passenger vehicles in February 2010 were 69,427 vehicles, a growth of 58% over 43,811 vehicles sold in February 2009. The company’s domestic sales of Tata commercial and passenger vehicles for February 2010 were 66,190 nos., a 56 % growth over 42,493 nos. sold in February last year. Cumulative sales for the April-February 2009-10 period stood at 567,535 nos., recording a growth of 28 % over 444,095 nos. sold last year.
Private banks hike rates on auto, home loans
ICICI Bank raised auto loan rates by 25-50 basis points (bps) for different tenors and segments, effective from March 5. ICICI Bank also discontinued its special home loan rate of 8.25% for two years. The bank will now charge 8.75% for loans up to Rs3mn, 9% for loans of Rs3mn to Rs5mn and 9.5% for loans over Rs5mn. HDFC Bank and Kotak Mahindra also raised rates on home and auto loans.
HDFC's home loan rates have reverted to 8.75% for loans up to Rs3mn, 9% for loans between Rs3mn and Rs5mn and 9.25% for loans over Rs5mn. Till last month, it was offering loans at a fixed rate of 8.25% up to March 31, 2012, after which the loan would revert to the prevailing floating rate.
Last month, Kotak Mahindra discontinued the fixed rate home loan scheme which was introduced in December. The bank last month also increased rates on its floating rate home loans by 50 bps. It is now in the range of 8.50-9%. The rates on personal loans also went up by 50 bps to around 18.5%.
These private banks raised lending rates by as much as 100 basis points, following the hardening of market rates even as the RBI has refrained from tinkering with the policy rates till now. In its last policy meeting in January, the central bank raised the cash reserve ratio (CRR) by 75 basis points. Banks are raising lending rates to maintain their profitability after they increased deposit rates in the last few months to attract funds.
Food inflation hovers around 18%
India’s Food Inflation rose to 17.87% in the week ended February 20, as compared to 17.58% in the previous week, data released by the Government showed. The WPI index for the Food Articles group declined by 0.4% to 285 points, as nearly all key items including cereals, vegetables and fruit became cheaper. Inflation for the Primary Articles group declined marginally to 15% in the week under review against 15.84% in the previous week. Inflation for the Non-Food Articles group rose to 13.77% from 12.78% in the previous week.
Finance Minister's decision to hike duties on petroleum products prompted India Inc. to raise prices. Truck operators increased freight rates while companies belonging to the Steel, Airlines and Cement sectors too followed suit. Analysts expect the fuel price hike to raise food prices further in the near future, especially those of the perishable items.
For the week ended February 20, inflation for the Fuel & Power group was partially lower at 9.59%, compared to 9.89% a week ago. The effect of the hike in fuel prices will be visible in a fortnight's time. The WPI-based monthly inflation is expected to touch double-digits by March-end. It has already overshot the RBI's FY10-end forecast of 8.5%.
Meanwhile, yields on the benchmark 10-year government bond spurted to inch closer to the 8% mark. Traders expect the Government borrowing schedule for the fiscal year 2010-11 to provide direction for the bond market in the near term. It may be recalled that the Finance Minister announced record borrowing of Rs4.57 trillion while unveiling the Union Budget, on Feb. 26. Traders also expected cash outflows towards advance tax payments in mid March to squeeze liquidity. About Rs400-500bn are expected to flow out from the banking system when companies make the tax payments.
Weekly Newsletter - March 5 2010
The Budget-day rally managed to extend for a couple of more sessions before the bulls ran out of steam. This was mainly to profit taking and partly due to lingering global concerns. What also weighed on the sentiment was an imminent spike expected in inflation on the back of a hike in petrol and diesel prices. However, the Government seemed to be convinced that higher fuel prices won't have that much of an impact on headline inflation. But, even without the fuel price hike, monthly inflation could touch the double digit mark in a few weeks. The latest monthly inflation numbers will be released in the middle of this month.
Meanwhile, the economic data to watch out for next week will be the IIP report. We expect robust growth in industrial production. Growth in services sector too appears to be on a firm wicket. The only missing piece from the jigsaw puzzle is agriculture, which is suffering due to a poor monsoon. In this context, southwest monsoon will assume significance. Another bad monsoon could put paid to any hopes of returning to the high growth path and might disrupt the Government's finances too. In the near-term though, the market might advance if the momentum in FII inflows persists. Valuations are not cheap and external headwinds still threaten to derail the fragile global recovery. Look for opportunities at a more opportune time.
Hike in fuel duties...Govt backs FM to the hilt
The Government continued to bear the brunt of the opposition ire as fuel prices increased in the wake of the Finance Minister's proposal to hike duties on petroleum products in the Union Budget. However, despite stiff resistance from both, opposition and UPA allies, Pranab Mukherjee stuck to his stand and refused to rollback the increase in duties on petro products. Mukherjee told his party colleagues and key UPA partners that the step (hike in duties on fuels) would have negligible inflationary impact. The congress leadership closed ranks on the issue and accused the opposition of resorting to "political opportunism". Justifying the fuel price hike, party spokesman Manish Tewari said that concessions in excise duty were given in June 2008 when price of crude oil was US$133 per barrel and now with the prices coming down, the Government has partially gone back to the 1998 excise regime.
Tewari said that the impact of the fuel price hike will lead to only 0.4% rise in the wholesale price index (WPI) and claimed that the opposition had attacked the government without even analyzing its implications. The Congress party spokesman asked the opposition to adopt a constructive approach towards such sensitive issues related to the economy. The opposition should introspect before resorting to such political opportunism, he said. "They (NDA) raised prices of petrol 21 times, that of diesel 24 times and that of LPG five times when the NDA was in power," he added. "There is an economic reality articulated clearly by the Finance Minister in the budget and outside in details. That lays the roadmap... I have nothing to add or subtract to that," Tewari said. Backing the Finance Minister's budget proposals, Congress chief Sonia Gandhi stated that fuel price hike was needed to pump money into the social sector.
Indian economy to grow by 8% in FY11: PM
Prime Minister Dr. Manmohan Singh said that the Indian economy would grow by at least 8% in the fiscal year that ends in March 2011. Asia's third largest economy would expand by 7.2-7.5% in 2009-10, he told parliament. The Rabi winter crop prospects are very encouraging, but the country needs to pay farmers a good price for their produce to boost output further, the Prime Minister said. Dr. Singh said that the Government would take all practical measures to bring down food prices.
Rising prices of essential commodities was a byproduct of global inflation and that his government was sensitive towards the issue, the Prime Minister said, speaking on the motion of thanks to President Pratibha Patil for her address to the joint session of parliament. "I will be the last one to deny that the behaviour of food prices in the last one year is something which doesn't worry us. We have been worried. The house has my assurance that if any practical methods can further bring relief to our people our government will always be sensitive to the concerns of the house," Dr. Singh said.
"There is first the effect of international commodities prices which have gone up and India is no longer a closed economy.... In years of shortage we depend on import of sugar, pulses.... And when international prices of these commodities rise, I think there is inevitably an impact on our country," he said. The Prime Minister said that the fundamentals of the Indian economy were sound and there was no barrier that could prevent India from achieving the elusive double-digit growth target.
Meanwhile, the Government sought parliamentary approval to spend an extra Rs317.8bn (US$6.94bn) for the fiscal year ending this month, which it plans to fund through savings. Of the total spending, Rs120bn would be spent on oil subsidy, Rs80bn on fertiliser subsidy and Rs24.59bn on food subsidy, among others. The Centre also sought parliament's nod for Rs13.67 trillion for debt repayment in 2009-10. Separately, the country's Revenue Secretary Sunil Mitra said today that the Government would introduce a bill for the implementation of the proposed Direct Tax Code (DTC) in the monsoon session of parliament
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