Sensex, Nifty scale 3-week highs as Infy Q2 results cheer market

Good Q2 results from IT bellwether Infosys, which also revised upwards its full year earnings guidance, firm global stocks and data showing buying by the foreign funds recently, helped key benchmark indices scale 3-week closing highs. The 50-unit S&P CNX Nifty regained the psychological 5,000 mark. The barometer index BSE Sensex jumped 421.92 points or 2.55%, off close to 30 points from the day's high and up about 350 points from the day's low. The market breadth was strong.



The Sensex has risen 504.63 points or 3.06% in this month so far. The index has slumped 3,550.70 points or 17.31% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 4,150.25 points or 19.66%. From a 52-week low of 15,745.43 on 4 October 2011, the Sensex has risen 1,212.96 points or 7.7%.

Coming back to today's trade, IT stocks rose across the board after IT bellwether Infosys reported good Q2 results and as the company also revised upwards its full year earnings guidance. Infosys jumped close to 7%. Interest rate sensitive realty and 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. State Bank of India (SBI) advanced more than 6% on hopes of capital infusion from the Government of India, the majority shareholder in the bank. Index heavyweight Reliance Industries (RIL) rose close to 3%.

The market opened on a firm note as IT bellwether Infosys reported good Q2 results before trading hours. The market trimmed gains after hitting fresh intraday high in morning trade. A bout of volatility was witnessed in mid-morning trade as key benchmark indices pared gains soon after surging to their highest level in nearly three weeks. The market regained strength in early afternoon trade. Volatility ruled the roost as the Sensex trimmed gains soon after hitting fresh 3-week high in early afternoon trade. The market regained strength and hit fresh 3-week high in mid-afternoon trade as European shares reversed initial losses. The market surged in late trade.

Data showing buying by foreign funds recently underpinned sentiment. Foreign institutional investors (FIIs) bought shares worth Rs 114.15 crore on Tuesday, 11 October 2011, as per provisional figures on the stock exchanges. FII inflow totaled Rs 817.41 crore in three trading sessions from 7 October 2011 to 11 October 2011, as per data from stock exchanges. The three-day inflow came after heavy outflow recently. FIIs had dumped shares worth a net Rs 2806.19 crore in the first three trading sessions from 3 October to 5 October 2011.

The BSE Sensex was up 421.92 points or 2.55% to settle at 16,958.39, its highest closing level since 21 September 2011. The index jumped 450.59 points at the day's high of 16,987.06 in late trade. The index rose 72.10 points at the day's low of 16,608.57 in afternoon trade.

The S&P CNX Nifty was up 125.05 points or 2.51% to settle at 5,099.40, its highest closing level since 21 September 2011. Nifty hit a high of 5,109.80 and a low of 4,997.65 in intraday trade.

The BSE Mid-Cap index rose 1.4% and the BSE Small-Cap index gained 1.18%. Both these indices underperformed the Sensex.

BSE clocked turnover of Rs 2706 crore, lower than Rs 2710.42 crore on Tuesday, 11 October 2011.

The market breadth, indicating the overall health of the market, was strong. On BSE, 1,851 shares rose and 975 fell. A total of 110 shares were unchanged.

From the 30-share Sensex pack, 27 gained, with software pivotals dominating gainers.

IT bellwether Infosys jumped 6.83% and was the top gainer from the Sensex pack after company announced before market hours today, 12 October 2011, that its consolidated net profit as per International Financial Reporting Standards (IFRS) rose 10.68% to Rs 1906 crore on 8.2% growth in revenue to Rs 8099 crore in Q2 September 2011 over Q1 June 2011.

Infosys has forecast 9.72% to 11.11% growth in non-annualized earnings per American Depositary Share at $0.79 to $0.80 in Q3 December 2011 over Q2 September 2011. It has forecast 3.2% to 5.3% growth in revenue at $1.802 to $1.84 billion in Q3 December 2011 over Q2 September 2011.

The company has for the second quarter in a row revised upwards its dollar earnings guidance for the year ending March 2012 (FY 2012). The company expects 15.3% to 16.8% growth in earnings per American Depositary Share at $3.02 to $3.06 in FY 2012 over the year ending March 2011 (FY 2011). However, the company has revised downwards dollar revenue growth guidance for FY 2012. The company expects 17.1% to 19.1% growth in revenue at $7.08 billion to $7.20 billion in FY 2012 over FY 2011.

Infosys has forecast 15.4% to 1.7.5% growth in non-annualised earnings per share (EPS) at Rs 38.51 to Rs 39.20 in Q3 December 2011 over Q2 September 2011. The company has forecast 8.97% to 11.2% growth in revenue at Rs 8826 crore to Rs 9012 crore in Q3 December 2011 over Q2 September 2011.

Thanks to a recent steep fall in rupee against the dollar, Infosys has sharply revised upwards EPS guidance for FY 2012. The company has projected 19.7% to 21.6% growth in EPS at Rs 143.02 to Rs 145.26 in FY 2012 over FY 2011. The company has also revised FY 2012 revenue guidance upwards. Infosys has projected 21.8% to 24% growth in revenue at Rs 33501 crore to Rs 34088 crore in FY 2012 over FY 2011.

Infosys added 45 clients in Q2 September 2011. Commenting on the second quarter results Infosys CEO and Managing Director S. D. Shibulal said, "The global macroeconomic environment is still uncertain. It is and should be a concern for the IT industry. In this scenario, clients are looking for new opportunities for growth, accelerated innovation and increased returns on investments. Our strategic initiatives and organization structure will enable us to build long term partnerships with our clients and help them drive their business objectives."

Infosys Chief Financial Officer and Member of the Board V. Balakrishnan said, "The global currency market continues to remain highly volatile on the back of weak economic recovery in most of the developed markets. Our continued focus on adding measurable value to clients, coupled with our flexible financial model will enable us to make the right investments without compromising on high-quality growth."

Infosys' good Q2 results boosted two other IT pivotals. India's largest software services exporter TCS rose 3.66%. India's third largest software services exporter Wipro gained 2.71%.

Index heavyweight Reliance Industries (RIL) gained 2.86% 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.

ONGC gained 0.8% after ONGC Videsh today, 12 October 2011, said it has signed a three-year pact with PetroVietnam for long-term cooperation in the oil and gas industry as it seeks to increase investments in Vietnam for exploration and production. Both the state-run companies will explore investments in the petroleum sector, exchange information on the oil and gas industry and expand exploration and production operations including refining, transportation and supply in Vietnam, India and other countries, ONGC Videsh (OVL) said in a statement. OVL is the overseas investment arm of ONGC.

Capital goods stocks edged higher in firm market. ABB, Bhel, Thermax, Siemens, and Praj Industries rose by between 1.79% to 5.64%.

L&T rose 2.39% after its general insurance arm--L&T General Insurance Company--announced the launch of its first health insurance product targeted at both individuals as well as families.

Consumer durables stocks, too, gained. Videocon Industries, Blue Star, and Titan Industries gained by between 0.76% to 3.24%.

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 2.08%, with the stock gaining for the fourth straight day. Axis Bank rose 4.09%, extending three-day 10.52% rally. India's largest private sector bank by net profit ICICI Bank rose 3.24%.

State Bank of India (SBI) jumped 6.07% after Financial Services Secretary D.K. Mittal on Tuesday, 11 October 2011, said that Indian government will inject Rs 3000 crore to Rs 4500 crore in SBI this fiscal year to help improve its capital base. "The capital infusion in SBI may happen by December-end, but definitely before March 31," Mittal said. His comments come after Moody's Investors Service last week cut its rating on SBI's financial strength to D+ from C- and lowered its hybrid debt rating on the bank to Ba3 (hyb) from Ba2 (hyb), flagging concerns over capital and deteriorating loan quality.

Mittal said that the rating downgrade was "shocking" and "unfair", and that some banks in developed countries were rated higher despite their asset quality being inferior to SBI's, He also said that the capital infusion may not be through a rights issue or a public share sale as market conditions weren't right for that, but through other methods. He didn't elaborate.

Interest rate sensitive realty 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. Purchases of both residential and commercial property are largely driven by finance. DLF, HDIL, Indiabulls Real Estate, and Unitech rose by between 3% to 3.93%.

Metal stocks gained as global commodity prices rose. Sail, JSW Steel, Sesa Goa, NMDC, Nalco, Hindustan Zinc, JSW Steel, Tata Steel and Hindalco Industries rose by between 1.06% to 2.98%. Jindal Steel & Power jumped 6.08%, extending Tuesday's 2.71% gains.

Sterlite Industries rose 3.63% after company announced during market hours today that the Special Leave Petition (SLP) filed by the company in the Supreme Court in relation to the operations of the Tuticorin Copper Smelter of the company was listed on 11 October 2011 in Supreme Court for 'Interim Directions'. The court has directed Tamil Nadu Pollution Control Board (TNPCB) to issue directions, within two weeks from the date of the order, to the copper smelter unit of the company to implement the improvements measures suggested by National Environment Engineering Research Institute (NEERI), Central Pollution Control Board (CPCB) and TNPCB. The court has further directed TNPCB to decide on the time-frame for compliance of the improvement measures.

India's largest coal miner by capacity Coal India lost 1.71%. Reportedly Coal Mines Officers' Association of India, the only body representing the management cadre of the state-owned company, has written to the chairman that its members may go on mass leave on 15 November 2011 followed by indefinite strike any day thereafter if their set of demands are not met. The union starts its agitation programme on 14 October 2011, including demonstration at all the offices of its subsidiaries, followed by a three-day relay hunger strike between 17 and 19 October 2011 in front of Coal India head office in Kolkata.

Interest rate sensitive automobile stocks rose on hopes a slowing economy could prompt the Reserve Bank of India (RBI) to pause on rate increases this month. Automobile purchases, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. India's largest truck maker by sales Tata Motors rose 2.6%, extending 20.03% gains in the preceding four trading sessions. The recent rally in the counter was triggered by easing of euro-zone debt worries. UK unit, Jaguar Land Rover, generated 57% of Tata Motors' revenue during the year ended 31 March 2011, up from 53% a year earlier.

Tata Motors last week 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.

India's second largest bike maker by sales Bajaj Auto rose 0.36%. 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.

India's largest bike maker by sales Hero MotoCorp gained 1.57%. 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 tractor and sports utility vehicles maker Mahindra & Mahindra (M&M) gained 1.2%. The company early this week 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%.

Commenting 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".

Maruti Suzuki India, the country's largest car maker by sales rose 1.03%, reversing initial losses. The company said Tuesday its factory in Manesar in Haryana remains idle as about 1,500 workers are still laying siege to the facility. The strike began Friday after workers at the Manesar factory demanded the reinstatement of 44 suspended colleagues who weren't taken back after a 33-day impasse with the management ended on 1 October 2011. The Manesar plant remains "captive in the hands of striking workers," the local unit of Suzuki Motor Corp. said. Workers at three other Suzuki units in Manesar--Suzuki Motorcycle India, Suzuki Powertrain India and Suzuki Castings--have also halted work since Friday in support of their peers at Maruti.

Cement stocks gained across the board on expectations of pick up in demand post monsoon. ACC, India Cements, Ambuja Cements, Jaiprakash Associates and UltraTech Cement gained by between 0.6% to 4.34%.

Telecom stocks fell on profit taking after recent rally triggered by the government unveiling draft of the new telecom policy early this week. Bharti Airtel (down 0.2%), Idea Cellular (down 0.1%), and MTNL (down 2.08%) edged lower. Reliance Communications rose 3.5%.

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, filed corruption-related charges against former telecom minister Dayanidhi Maran for allegedly rigging the granting of telecom licenses.

Anil Dhirubhai Ambani Group shares edged higher. Reliance Infrastructure, Reliance Communications, Reliance Capital, Reliance MediaWorks and Reliance Power gained by between 1.72% to 3.5%.

FMCG stocks rose on expectations of higher rural sales after good rains this year. ITC, Hindustan Unilever, United Spirits, Dabur India, Marico and Nestle India gained by between 0.25% to 2.38%.

Media Matrix clocked highest volume of 1.13 crore shares on BSE. Cals Refineries (54.75 lakh shares), Resurgence Mines (49.13 lakh shares), Dhanlaxmi Bank (41.11 lakh shares) and Pipavav Defence (40.64 lakh shares) were the other volume toppers in that order.

Infosys clocked highest turnover of Rs 255.29 crore on BSE. SBI (Rs 234.60 crore), Jubilant FoodWorks (Rs 122.70 crore), Gravita India (Rs 103.39 crore) and RIL (Rs 68.65 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. 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, Idea Cellular, paints major Asian Paints, JSW Steel and Godrej Consumer Products reveal Q2 results on 21 October 2011. Axis Bank and Grasim unveil Q2 results on 22 October 2011. Cigarette major ITC and Titan Industries unveil 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, Wipro, Dabur India, Colgate Palmolive (India) and BPCL unveil Q2 results on 31 October 2011. Cement majors ACC and Ambuja Cements 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.

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.

Industrial output in the month of August 2011 rose a slower-than expected 4.1% from a year earlier, data released by the government today, 12 October 2011, showed. Industrial output growth for July was revised upwards to 3.84% from a provisional reading of 3.28%. Manufacturing output, which constitutes about 76% of the industrial production rose an annual 4.5% in August versus 2.3% in July. The government also revised upwards the industrial production growth for May 2011 to 6.15% from 5.91% reported earlier.

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.

While its tolerance of inflation has gone up with rising income levels, the Reserve Bank of India (RBI) will raise rates further if high inflation persists, central bank deputy governor Subir Gokarn said Wednesday, 12 October 2011. The RBI will discuss domestic growth and inflation at its board meeting on Thursday, 13 October 2011, central bank governor D Subbarao added at a joint panel discussion, as he reiterated that controlling inflation is the main focus of monetary policy. Rangarajan today, 12 October 2011, said the September inflation data will be key in shaping the RBI's next rate move.

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 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. A Capital Market poll of economists 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.

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 stock markets turned higher on Wednesday, 12 October 2011, recovering from an initial drop as miners, technology companies and car makers also rose. Key benchmark indices in UK, Germany and France were up by between 0.47% to 1.5%.

Slovakia's parliament on Tuesday rejected plans to expand the European Financial Stability Facility. The failure brought down the government, but a deal to expand the rescue fund is still expected to be reached this week as the major opposition party is likely to support the proposals in a second vote.

Greece should be able to avoid defaulting on its debts if European countries implement the decisions taken at the July 21 EU summit, European Central Bank President Jean Claude Trichet said in an interview conducted Tuesday.

Major Asian equity markets rose on Wednesday, 12 October 2011, with gains for Chinese banks working to offset losses connected to weak results from US aluminum giant Alcoa and a snag for Europe's bailout-fund expansion. Key benchmark indices in China, Hong Kong, Indonesia, Singapore and South Korea rose by between 0.81% to 3.04%. Key benchmark indices in Japan and Taiwan fell 0.4% and 0.22%.

Trading in US index futures indicated that the Dow could gain 104 points at the opening bell on Wednesday, 12 October 2011.

World stocks have risen this week after France and Germany recently pledged to support the European banking sector and as China's sovereign-wealth fund bought up shares in selected banks.