Market snaps two-day winning streak

Key benchmark indices edged lower amid intraday volatility as European stocks declined and US index futures edged lower ahead of a parliamentary vote in Slovakia on changes to the euro zone's rescue fund and ahead of the release of minutes from the Federal Reserve's latest meeting. The market snapped two-day winning streak. The 50-unit S&P CNX Nifty settled below the psychological 5,000 mark, having alternately swung above and below that level in intraday trade. The barometer index BSE Sensex lost 20.76 points or 0.13%, off close to 235 points from the day's high and up about 25 points from the day's low. The market breadth was positive. Small-cap and mid-cap indices rose on BSE rose.



From a 20-month closing low of 15792.41 on Wednesday, 5 October 2011, the Sensex had jumped 764.82 points or 4.84% in two trading sessions to settle at 16,557.23 on Monday, 10 October 2011. Before the two-day rebound, the Sensex had lost 905.66 points or 5.42% in four trading sessions to a 20-month closing low of 15792.41 on Wednesday, 5 October 2011 from a recent high of 16,698.07 on 29 September 2011.

The Sensex has gained 82.71 points or 0.5% in this month so far. The index has slumped 3,972.62 points or 19.37% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 4,572.17 points or 21.66%. From a 52-week low of 15,745.43 on 4 October 2011, the Sensex has risen 791.04 points or 5.02%.

Coming back to today's trade, IT stocks fell on profit taking ahead of IT bellwether Infosys' Q2 results. Index heavyweight Reliance Industries (RIL) edged lower in volatile trade. Interest rate sensitive auto stocks rose on hopes a slowing economy could prompt the Reserve Bank of India to pause on rate increases this month. FMCG stocks edged lower. Telecom stocks rose for the second straight day after the government on Monday, 10 October 2011, unveiled draft of the new telecom policy.

The market was volatile. The market surged in early trade to scale its highest level in more than 2-1/2-weeks. The market trimmed gains in morning trade as index heavyweight Infosys dropped. A bout of volatility was witnessed in mid-morning trade as key benchmark indices further pared gains from 2-1/2 week highs to hit fresh intraday lows. The market hit fresh intraday low in early afternoon trade, with Nifty falling below the psychological 5,000 level. The Nifty alternately swung above and below the 5,000 level in afternoon trade. The market slipped into the red to hit fresh intraday low in mid-afternoon trade. The market hit fresh intraday low in late trade.

The BSE Sensex lost 20.76 points or 0.13% to settle at 16,536.47, its lowest closing level since 7 October 2011. The index jumped 216.89 points at the day's high of 16,774.12 in early trade, its highest level since 22 September 2011. The index declined 46.52 points at the day's low of 16,510.71 in late trade.

The S&P CNX Nifty was down 5.25 points or 0.11% to settle at 4,974.35, its lowest closing level since 7 October 2011. The Nifty hit a high of 5,045.10 in intraday trade, its highest level since 22 September 2011. The Nifty hit a low of 4,964 in intraday trade.

The BSE Mid-Cal index rose 0.49% and the BSE Small-Cap index gained 0.22%. Both these indices outperformed the Sensex.

BSE clocked turnover of Rs 2701 crore, higher than Rs 2214.13 crore on Monday, 10 October 2011.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,566 shares rose and 1,239 fell. A total of 108 shares were unchanged. The breadth was much stronger earlier in the day.

From the 30-share Sensex pack, 16 rose and the rest fell.

Index heavyweight Reliance Industries (RIL) fell 0.25% to Rs 825.85. The stock hit a high of Rs 841.05 and low of Rs 820.10. The stock had jumped 7.9% during the preceding two trading session on expectations of good Q2 results. RIL's advance tax payment rose 37.6% to Rs 1800 crore in Q2 September 2011 over Q2 September 2010, hinting at good Q2 results from the diversified firm. RIL unveils Q2 results on Saturday, 15 October 2011.

BP PLC recently said it expects its partnership with RIL to boost natural gas output at the D6 block in the Krishna Godavari basin, off India's east coast. BP Chief Executive Robert Dudley and RIL Chairman Mukesh Ambani met trade minister Anand Sharma in New Delhi on 28 September 2011. RIL is fighting a decline in gas output at the D6 block. BP and RIL on 28 September 2011, pitched for permission from the government to develop satellite fields adjacent to the D6 block.

RIL, last month, closed a deal with UK-based BP to sell a 30% stake in its 21 oil and gas exploration blocks in India. RIL recently denied inflating costs on its D6 gas field in the Krishna-Godavari (KG) basin. RIL made the clarification after CAG said in its final report submitted to the parliament on 8 September 2011 that RIL initially estimated capital expenditure of D-1 and D-3 gas discovery at $2.4 billion, which it later revised to $8.8 billion.

India's largest power generation firm by capacity NTPC advanced 3.49%. The company today, 11 October 2011, said that coal shortage has affected operations at many of its power generating units, forcing it to lower electricity supplies. India's largest power producer by capacity said that coal supply has been disrupted by heavy rainfall and due to a workers' strike at Coal India on Monday, 10 October 2011.

Shutdowns due to protests in a southern India region demanding a separate state also impacted operations at the company's power stations, NTPC said. Other local protests and shutdowns in the coal mining region also disrupted supplies. The state-run company said that coal supply from units of Coal India are about 70% of the contracted quantity and that it is left with coal stock of only two to three days.

Anil Dhirubhai Ambani Group shares edged higher. Reliance Infrastructure, Reliance MediaWorks and Reliance Power gained by between 0.37% to 1.1%.

Reliance Capital rose 1.5%, extending Monday's 4.59% surge triggered by the company concluding the transaction for sale of a 26% stake in Reliance Life Insurance to Nippon Life Insurance. The entire transaction proceeds of Rs 3062 crore (USD 680 million) from Nippon Life Insurance have been received. The transaction pegs the total valuation of Reliance Life Insurance at approximately Rs 11,500 crore ($ 2.6 billion).

Capital goods stocks edged higher. Thermax, Siemens, L&T and Praj Industries rose by between 0.61% to 3.25%.

Oil exploration stocks were mixed as crude oil prices gained. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms. Cairn India rose 0.65%. ONGC and Oil India fell 1.88% and 1.76%, respectively.

Shares state-run oil-marketing companies (PSU OMCs) fell as crude oil prices rose. HPCL and Indian Oil Corporation (IOC) declined 1.91% and 1.12%, respectively. BPCL gained 0.6%. 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. The government has already freed pricing of petrol. PSU OMCs, last month, raised petrol prices by Rs 3.14 to Rs 3.32 a litre recently in a bid to pass on the impact of a depreciating rupee, which has resulted in higher import cost. That was the ninth increase since petrol prices were decontrolled in June 2010.

Airline stocks declined after oil prices rose. SpiceJet, Kingfisher Airlines and Jet Airways fell by between 0.13% to 4.86%. Aviation turbine fuel, or jet fuel constitutes more than 50% of operating cost for airliners. Prices of jet fuel are directly linked to crude oil prices. State-run oil marketing companies--Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation revise jet fuel prices on the 1st and 16th of every month based on the average international crude price in the preceding fortnight.

US crude oil futures rose sharply on Monday, 10 October 2011 reaching their highest closing mark since 21 September 2011. Supported by a weaker dollar and hopes for a resolution to the European sovereign debt crisis, November crude oil rose $2.43, or 2.9% to end at $85.41 a barrel on that day.

Consumer durables stocks edged higher in a firm market. Blue Star, Gitanjali Gems and Titan Industries gained by between 0.71% to 2.51%.

Rajesh Exports rose 5.83% after the company said it has secured an export order worth Rs 621 crore for branded gold jewellery from Excel Gold Smiths, Dubai.

Metal stocks rose as LMEX, a gauge of six metals traded on the London Metal Exchange, gained 1.66% on Monday, 10 October 2011. Sail, JSW Steel, Sesa Goa, NMDC and Hindalco Industries, rose by between 1.04% to 3.76%.

Sterlite Industries fell 1.41% on profit taking after two-day 12.34% rally. The company last week reported production and sales data. Mined domestic zinc metal production was 210,000 tonnes in Q2 and 398,000 tonnes in half year ended September 2011 (H1), up 2% and 3%, respectively, as compared with the corresponding prior periods, reflecting near normal production at Rampura Agucha following the maintenance shutdown in Q1.

During Q2, the Tuticorin copper smelter produced 87,000 tonnes of copper cathode, 28% higher than the corresponding prior quarter. Production in the prior year period was lower on account of a planned bi-annual maintenance shut-down. During H1, production of copper cathode was up 11% at 161,000 tonnes. Aluminium production at Balco was 60,000 tonnes in Q2 and 121,000 tonnes in H1, lower by 8% and 5% respectively, as compared with the corresponding prior periods. The company sold 1,748 million units of power in Q2 as compared with 463 million units in the corresponding prior quarter. The company sold 3,415 million units of power in H1, compared to 943 million units in the corresponding prior period.

Jindal Steel & Power gained 2.71% on reports the company's subsidiary has sought a no-objection certificate for its proposed thermal power plant.

Tata Steel was flat. The company on Monday said it is investing 2 million pounds in its UK-based Hartlepool tube plant to build a facility for fabricating structures for wind turbines.

Shares of India's largest coal miner Coal India rose 0.58% as workers of the state-run coal giant resumed work on Tuesday, 11 October 2011, after a one-day strike demanding higher annual bonus. Coal India replaced Reliance Capital in the 50-unit S&P CNX Nifty index from Monday, 10 October 2011.

Interest rate sensitive banking stocks extended their recent rally 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 0.68%, with the stock gaining for the third straight day. Axis Bank rose 0.52%, extending two-day 9.95% rally.

India's largest bank by branch network and net profit State Bank of India (SBI) rose 0.6% to Rs 1765.10, with the stock gaining for the third straight day. The stock had tumbled last week after a downgrade from rating agency Moody's Investors Service on 4 October 2011. Moody's cut bank financial strength rating (BFSR), or stand-alone rating of SBI, to D+ from C- because of concerns over its capital situation and deteriorating asset quality. The SBI stock had hit 52-week low of Rs 1,708.55 in intraday trade on 5 October 2011. SBI's non-performing assets were at a three-year high as of 30 June 2011, at 3.5% of loans, Moody's said on 4 October 2011. This will likely increase the bank's potential credit costs in the near-term, it said.

"Our expectations that non-performing assets are likely to continue rising in the near term--due to higher interest rates and a slower economy--have caused us to adopt a negative view of SBI's creditworthiness," Beatrice Woo, vice president and senior credit officer, Moody's Investors Service said, in a statement. Moody's also lowered its hybrid debt rating on the bank to Ba3 (hyb) from Ba2 (hyb), following the reduction in financial strength rating. The revised standalone rating carries a stable outlook and the hybrid rating a negative outlook, Moody's said.

SBI Chairman Pratip Chaudhuri last week said that the bank has no immediate plan to tap overseas debt markets but hopes to receive as much as Rs 10000 crore in equity capital infusion from the government by the end of the fiscal year through March 2012. SBI expects to get between Rs 3000 crore and Rs 10000 crore from the government to help shore up its capital base, Chaudhuri added. He also said that the bank does not see any need to pass on interest rate increases to customers as the bank's margins are strong. The Reserve Bank of India (RBI) last month raised key lending rate for the 12th time in the last 18 months to fight near double-digit inflation.

India's largest private sector bank by net profit ICICI Bank fell 1.36% to Rs 832.95, off the day's high of Rs 861. The stock had hit a 52-week low of Rs 762.05 in intraday trade on 5 October 2011.

Telecom stocks rose for the second straight day after the government on Monday, 10 October 2011, unveiled draft of the new telecom policy. Bharti Airtel (up 3.18%), Idea Cellular (up 3.14%), Reliance Communications (up 0.27%), MTNL (up 0.32%) and Tata Teleservices (Maharashtra) (up 0.29%) edged higher.

Telecom minister Kapil Sibal on Monday, 10 October 2011, unveiled draft of new telecom policy. The new policy seeks to do away with roaming charges--a fee users pay for operating mobile phones outside their home territories, and aims to issue telecom licenses and spectrum bandwidth separately rather than bundling them, as is now the practice. The new policy also proposes to sell bandwidth at market-determined prices. A major point of controversy after the 2008 spectrum sale was the government pricing of the frequencies.

Under the proposed policy, which is likely to be in place by the end of this year, the government plans to create a "one-nation one-license" rule, indicating operators will have to forgo roaming charges that currently account for nearly 10% of their total revenue. In a bid to make more spectrum available for new technologies, the draft proposes to move users of existing bandwidth to another frequency band. The government will audit the use of spectrum periodically to ensure it is being used efficiently and will allow pooling, sharing and trading of bandwidth, Sibal said Monday.

On pricing of spectrum, Sibal said the government is awaiting the opinion of the industry regulator, the Telecom Regulatory Authority of India. That agency had previously proposed that the price of spectrum be linked to market value and mobile-phone operators be charged a market-determined fee for the bandwidth they hold beyond a certain limit.

The proposals were unveiled on a day when the Central Bureau of Investigation, the government's chief investigation agency, said it has filed corruption-related charges against former telecom minister Dayanidhi Maran for allegedly rigging the granting of telecom licenses.

FMCG stocks edged lower. ITC, Hindustan Unilever and Nestle India shed by between 0.25% to 1.76%.

Interest rate sensitive auto stocks rose on hopes a slowing economy could prompt the Reserve Bank of India to pause on rate increases this month. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. Tata Motors rose 3.64%, extending last three days' 15.82% jump triggered by easing of euro-zone debt worries. UK unit, Jaguar Land Rover, generated 57% of Tata Motors' revenue for the year ended 31 March 2011, up from 53% a year earlier.

Tata Motors on Friday, 7 October 2011, introduced its Manza sedan and Prima range of trucks in South Africa at the Johannesburg International Motor Show. "We see Africa as a region of tremendous potential for the group," Noel Tata, managing director of Tata International, the trading arm of Tata Group, said in a statement. "In South Africa, the auto industry is making giant strides and we are happy to contribute to this growth." Tata Motors sells its passenger vehicles and light trucks in South Africa through a local joint venture between group company Tata Africa Holding and South Africa's Associate Motor Holdings. Other trucks and buses are sold through a wholly owned subsidiary of Tata Africa, Tata Automobile Corporation South Africa (Pty).

Tata Motors' total sales rose 22% to 78,786 units in September 2011 over September 2010. The homegrown firm's total passenger vehicles sales in the domestic market stood at 26,319 units in September, up 10.22% from 23,877 units in the same month last year. The company's total exports grew by 23% to 6,220 units in September 2011 over September 2010.

Bajaj Auto rose 1.74%. 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.

Bike maker Hero MotoCorp gained 0.5%. 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.

India's largest car maker by sales Maruti Suzuki India rose 0.14% on bargain hunting after Monday's 3.58% losses triggered by labour unrest at Manesar, Haryana unit. Maruti said striking workers at the Manesar plant have damaged property, resulting in a "grave" law and order situation. The strike at Maruti Suzuki began on Friday, 7 October 2011, after regular workers at Manesar unit demanded the reinstatement of 44 suspended colleagues who weren't taken back after a 33-day impasse with the management ended Oct. 1.

Maruti on Sunday, 9 October 2011, dismissed 10 employees, suspended as many and terminated five trainees who it alleged were involved in violence at the Manesar plant. Workers from three other plants at Manesar owned by Suzuki Motorcycle India, Suzuki Motor Powertrain India and Suzuki Castings have also halted work in support of their peers at Maruti. The unrest at Suzuki Powertrain led to a complete halt in supplies of diesel engines and transmissions to Maruti, forcing the auto maker to curtail car production at its Gurgaon factory, also in Haryana, to about 1,800 cars Monday, 10 October 2011, against normal output of 2,800 cars.

Mahindra & Mahindra (M&M) fell 0.94%, reversing initial gains. The company on Monday said its Rudrapur, Uttarakhand plant has resumed operations after curfew imposed by authorities in the area was relaxed.

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%.

Speaking on the monthly numbers, Rajesh Jejurikar, Chief Executive, Automotive Division, Mahindra & Mahindra said, "We are delighted with the 28% growth that we have clocked for the first half of FY 2012 (year ending March 2012), and the record sales of 44,137 that we have clocked in September 2011. We are also very excited with the initial response to our global SUV the XUV5OO and do hope to further consolidate our position in the SUV market with this launch".

India's second largest software services exporter Infosys lost 3.17% to Rs 2509.20 and was the top loser from the Sensex pack. The stock declined on profit taking ahead of its Q2 results tomorrow, 12 October 2011. The stock had jumped 17.9% to settle at Rs 2,591.30 on Monday, 10 October 2011, from a recent low off Rs 2,197.75 on 12 September 2011. Analysts expect Infosys to raise its earnings and revenue guidance in rupee terms for the year ending March 2012 (FY 2012) following a steep decline in rupee against the dollar recently. A weak rupee boosts revenue of IT firms in rupee terms as the IT sector derives a lion's share of revenue from exports. The rupee was hovering at 49.32/33 per dollar today, 11 October 2011, whereas Infosys' FY 2012 guidance issued in July 2011 was based on rupee dollar rate of 44.50.

India's software industry will be able to meet its 16%-18% export revenue growth target for this financial year through March as global businesses continue to spend on technology, Infosys' executive co-Chairman S. Gopalakrishnan said on 4 October 2011. Gopalakrishnan said he is optimistic about the Indian software industry's growth prospects in the medium- to long-term though there would be "challenges" in the short-term. He didn't elaborate.

Other IT stocks also fell. India's largest software services exporter TCS declined 2.26%. India's third largest software services exporter Wipro shed 2.04%.

Power sector finance firms rallied. Rural Electrification Corporation jumped 6% and Power Finance Corporation rose 3.07%.

Cals Refineries clocked highest volume of 1.45 crore shares on BSE. Dhanlaxmi Bank (1.26 crore shares), IRB Infrastructure Developers (85.87 lakh shares), Shree Ashtavinayak Cine Vision (64.31 lakh shares) and K S Oils (46.94 lakh shares) were the other volume toppers in that order.

SBI clocked highest turnover of Rs 179.20 crore on BSE. IRB Infrastructure Developers (Rs 141.82 crore), RIL (Rs 97.01 crore), Dhanlaxmi Bank (Rs 81.23 crore) and Infosys (Rs 72.98 crore) were the other turnover toppers in that order.

The near-term major trigger for the market is Q2 September 2011 results. The results are expected to be muted-to-weak due slower volume growth due to slowdown in domestic demand, higher input costs, rising wages, higher interest rates and slowdown in investment growth. Advance tax data from top 100 companies corroborates this view. The advance tax payment by top 100 companies rose a modest 9.9% in Q2 September 2011 from a year ago against 19% growth in Q1 June 2011, suggesting corporate profit growth is likely to be muted in the second quarter.

Among the big companies that have paid lower advance tax, indicating a drop in profits, include State Bank of India (SBI), Maruti Suzuki India and state-run Neyveli Lignite Corporation. SBI's advance tax payment declined 14.2% to Rs 1650 crore in Q2 September 2011. Maruti's tax payment fell 55.8% to Rs 120 crore. Neyveli Lignite tax payment plunged 50.1% to Rs 66 crore. But, Reliance Industries' (RIL) advance tax payment jumped 37.6% to Rs 1800 crore, hinting at good Q2 results from the diversified firm.

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. IT bellwether Infosys kickstarts the Q2 September 2011 earnings season on 12 October 2011. Reliance Industries unveils Q2 results on 15 October 2011. IT major TCS, housing finance major HDFC and media major Zee Entertainment Enterprises unveil Q2 results on 17 October 2011. Jindal Steel & Power, Jet Airways (India), Hero MotoCorp and HCL Technologies unveil quarterly results on 18 October 2011. HDFC Bank unveils Q2 results on 19 October 2011.

Bajaj Auto, Cairn India, Biocon, UltraTech Cement, Exide Industries and Thermax unveil quarterly results on 20 October 2011. Engineering & construction major L&T, paints major Asian Paints, JSW Steel and Godrej Consumer Products reveal Q2 results on 21 October 2011. Axis Bank unveils Q2 results on 22 October 2011. Titan Industries unveils Q2 results on 24 October 2011.

NTPC, Kotak Mahindra Bank and Dr. Reddy's Lab unveil Q2 results on 25 October 2011. Maruti Suzuki reports Q2 results on 29 October 2011. ICICI Bank, Dabur India, Colgate Palmolive (India) and BPCL unveil Q2 results on 31 October 2011. Cement major ACC and Aditya Birla Nuvo unveil quarterly results on 1 November 2011. ABB unveils results on 8 November 2011. Ranbaxy Laboratories unveils quarter results on 9 November 2011.

Industrial production is seen rising 5% in August 2011, according to median estimates of a poll of economists carried out by Capital Market. Industrial output growth had slumped to 3.3% in July 2011, its weakest annual pace in nearly two years. The poll also expects 9.7% inflation for September 2011, compared with a reading of 9.78% for August 2011. Five out of nine economists polled by Capital Market 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.

Lower global commodity prices may ease pressure on corporate profit margins arising from higher raw material prices and at the macro level it could help ease inflation pressure. However, a weak rupee will offset the benefit of the recent steep fall in global commodity prices triggered by global growth worries. Most commodities imported by India, particularly oil, are denominated in dollars making these expensive for India. The rupee slumped 8.8% percent in July to September 2011 to 48.97/98, its largest quarterly fall since the same period in 2008. The Standard & Poor's GSCI Index of 24 commodities, hit a 10-month low last week. Commodity prices have since recovered along with global equities.

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.

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.

Rangarajan on 29 September 2011 said there has to be definite signs of inflation falling before the Reserve Bank of India can reverse its current policy. Reserve Bank of India (RBI) deputy governor Subir Gokarn on 28 September 2011 said poor supply responses to rising demand for protein-rich food aren't helping to lower the inflation rate. His comment underscores the central bank's growing dismay over the government's loose fiscal stance that is diluting monetary policy moves and weakening its battle against inflation. "Energy prices have remained very steady. I think (it) is a huge problem to deal with because it certainly reduces the space that monetary policy has," Mr. Gokarn said at a conference.

Food inflation accelerated in the week ended 24 September 2011, reflecting prolonged inflationary pressures and mounting pressure on the central bank to continue its rate increase cycle. Wholesale price index-based inflation quickened to 9.41% from a year earlier, compared with 9.13% the previous week, according to data issued on Friday, 7 October 2011, by the Ministry of Commerce and Industry. On a week-on-week basis, the food articles index rose a marginal 0.2% to 197.7, recording the eighth successive week of rising prices.

Data on industrial production for August 2011 due on Wednesday, 12 October 2011 and that on wholesale price index for September 2011 due on Friday, 14 October 2011, could provide cues on the Reserve Bank of India's likely monetary policy stance at the half-yearly review of the monetary policy on 25 October 2011.

Industrial production is seen rising 5% in August 2011, according to median estimated of a poll of economists carried out by Capital Market. Industrial output growth had slumped to 3.3% in July 2011, its weakest annual pace in nearly two years. The poll also expects 9.7% inflation for September 2011, compared with a reading of 9.78% for August 2011. Five out of nine economists polled by Capital Market 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.

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 latest policy was softer than the previous policy announcement which was extremely hawkish.

Inflation in India remains high and will probably remain in a range of 9% to 10% until November 2011, Gokarn said last month. 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.

Exports jumped 44.25% to $24.3 billion in August 2011 from a year earlier, while imports for the month rose 41.82% to $38.4 billion, leaving a trade deficit of $14 billion, the latest government data showed.

European stocks slipped on Tuesday, 11 October 2011, ahead of a crucial vote in Slovakia on plans to expand the euro-zone rescue fund, and as investors also awaited the start of earnings season in the US. Key benchmark indices in UK, Germany and France were down by between 0.72% to 0.9%.

The amended euro-zone rescue fund faces a key test Tuesday afternoon when lawmakers in Slovakia--the poorest country in the currency club and its fiercest opponent to bailouts--vote on the European Financial Stability Facility (EFSF). The issue of the euro 440 billion EFSF, designed to purchase sovereign debt on secondary markets and serve as the lender of last resort for euro-area banks, has rocked the Slovak political scene and caused divisions within the four-party coalition government.

If the EFSF plan is not passed by Slovakia's parliament on Tuesday, the country could still hold a second vote, the Financial Times reported. All 17 euro-zone members have to approve it for the EFSF to take effect. Slovakia is the last euro-zone member to vote on EFSF plan.

The sovereign debt crisis has become systemic and risks to the economy are increasing swiftly, European Systemic Risk Board Chairman Jean-Claude Trichet said on Tuesday. Trichet, who heads the European Central Bank as well as the continent's super-watchdog on financial stability, said the euro zone bailout fund should be made as flexible as possible, but without involving the ECB in leveraging it. Trichet called for governments and European authorities to act together to solve the crisis, adding that delay would be disastrous.

Hong Kong stocks led gains for Asian markets on Tuesday, 11 October 2011, as financial shares surged after a state-backed investment fund boosted its holdings in some of China's biggest banks. Key benchmark indices in Hong Kong, China, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.16% to 2.59%. Banking shares soared in Hong Kong after China's state-run Central Huijin Investment bought shares in the country's "big four" banks in an effort to stabilize the financial system.

The rally in Asian stocks on Tuesday followed a 3% rally for US stocks on Monday, where sentiment got a boost from pledges made by German and French leaders over the weekend to support Europe's banks. The plan is due to be unveiled by the end of the month.

Indonesia's central bank after a policy review on Tuesday, 11 October 2011, cut its benchmark overnight rate by 25 basis points to 6.5%, as it is concerned about the impact of the global slowdown on its economy and deems that inflationary pressures are receding.

Trading in US index futures indicated that the Dow could fall 51 points at the opening bell on Tuesday, 11 October 2011. US earnings season begins on Tuesday with results from Alcoa Inc.

Minutes from the Federal Open Market Committee's September meeting will be released later in the global day today, 11 October 2011.