Infosys slumps after cutting FY 2013 guidance in dollar terms

Key benchmark indices fell for the second straight day to hit their lowest level in two weeks on weakness in global stocks and after IT major Infosys revised downwards both earnings and revenue growth guidance for the year ending March 2013 (FY 2013) in dollar terms after reporting disappointing Q1 June 2012 results before trading hours today, 12 July 2012. The barometer index, BSE Sensex, lost 256.59 points or 1.47%, up about 50 points from the day's low and off close to 100 points from the day's high. The market breadth was negative. From a recent high of 17,618.35 on 10 July 2012, the Sensex has declined 385.80 points or 2.18% in two trading sessions. The Sensex has fallen 197.43 points or 1.13% in this month so far (till 12 July 2012). The Sensex has jumped 1,777.63 points or 11.5% in calendar 2012 so far (till 12 July 2012). Coming back to today's trade, Infosys tumbled after the company revised downwards both earnings and revenue growth guidance for the year ending March 2013 (FY 2013) in dollar terms after reporting disappointing Q1 June 2012 results before trading hours. Infosys' guidance weighed on shares of two other IT majors -- Wipro and TCS. Index heavyweight Reliance Industries (RIL) edged lower in volatile trade. Index heavyweight and cigarette major ITC also declined. Capital goods stocks declined after the latest data showed capital goods production shrank 7.7% in May 2012 after a revised 19.5% contraction in April 2012. Auto shares dropped and PSU OMCs rose on reports the government is likely to raise diesel prices after presidential polls on July 19. BPCL hit 52-week high. Weak Q1 June 2012 results and downward revision in both earnings and revenue growth guidance for the year ending March 2013 (FY 2013) in dollar terms from IT major Infosys dragged key benchmark indices to their lowest level in nearly two weeks at the onset of the trading session. A bout of volatility was witnessed as key benchmark indices cut losses after hitting fresh intraday lows in morning trade. Volatility continued as the market weakened once again after staging intraday recovery in mid-morning trade. The market extended losses in early afternoon trade. Key benchmark indices hit fresh intraday lows in afternoon trade. The market trimmed losses in mid-afternoon trade. Intraday recovery witnessed in mid-afternoon trade proved short-lived. The market weakened once again in late trade. World stocks fell on Thursday as investors grappled with Federal Reserve minutes that did not provide hints of further stimulus as had been hopes and on concerns about slowing growth in Asia after the Bank of Korea delivered a surprise 0.25-percentage point cut to its benchmark rate and after official data from Australia showed the country's seasonally-adjusted unemployment rate increased 0.1 percentage points to 5.2% in June. The BSE Sensex lost 256.59 points or 1.47% to settle at 17,232.55, its lowest closing level since 28 June 2012. The index declined 307.97 points at the day's low of 17,181.17 in afternoon trade. The index fell 159.68 points at the day's high of 17,329.46 in early trade. The S&P CNX Nifty shed 71.05 points or 1.34% to settle at 5,235.25, its lowest closing level since 28 June 2012. The index hit a low of 5,217.70 and a high of 5,261.75 in intraday trade.. The BSE Mid-Cap index fell 0.59% and the BSE Small-Cap index declined 0.66%. Both these indices outperformed the Sensex. BSE clocked turnover of Rs 2181 crore, higher than Rs 2078 crore on Wednesday, 11 July 2012. The market breadth, indicating the overall health of the market, was negative. On BSE, 1,631 shares fell and 1,174 shares rose. A total of 112 shares were unchanged. From the 30-share Sensex pack, 21 stocks fell and the rest of them rose. Cipla, GAIL (India) and Tata Power Company rose by between 0.54% to 0.63%. India's second largest software services exporter by revenues, Infosys, tumbled 8.15% to Rs 2,265.25 after the company announced before market hours today that its consolidated net profit as per International Financial Reporting Standards (IFRS) declined 1.2% to Rs 2289 crore on 8.6% growth in revenue to Rs 9616 crore in Q1 June 2012 over Q4 March 2012. In dollar terms, the consolidated net profit declined 10.2% to $416 million on 1.1% decline in revenue to $1.752 billion in Q1 June 2012 over Q4 March 2012. The revenue in dollar terms fell short of Infosys' own guidance of revenue of between $1.758 billion to $1.776 billion for the quarter. Non-annualised earnings per American depository receipt (EPADS) matched the company's own projection of $0.73. In dollar terms, the company has revised downwards both earnings and revenue growth guidance for the year ending March 2013 (FY 2013). Infosys has forecast 5% growth in revenue to at least $7.343 billion for FY 2013, lower than its April guidance of 8% to 10% growth. The company has projected 1% growth in EPADS to at least $3.03 for FY 2013, lower than its April guidance of 4% to 5.7% growth. Thanks to deprecation of the rupee against the dollar, Infosys has revised upwards both earnings and revenue growth guidance in Indian currency for the year ending March 2013 (FY 2013). Infosys has forecast 19.7% growth in revenue to at least Rs 40364 crore for FY 2013, higher than its April guidance of 13.9% to 16% growth. The company has projected 14.4% growth in EPS to at least Rs 166.46 for FY 2013, higher that its April guidance of 9.1% to 10.9% growth. Infosys appears to have suspended quarterly guidance -- the company has not issued guidance for Q2 September 2012. Infosys CEO and Managing Director S. D. Shibulal said, "Our focus on Infosys 3.0 and building tomorrow's enterprise coupled with disciplined execution will help us deliver high-quality growth, despite challenges seen in the global economic situation resulting in slower IT spends by large corporations." Member of Infosys board and Chief Financial Officer V. Balakrishnan said, "Global currency volatility continues to be a big challenge for the industry. We are making the right investments, balancing the short-term needs with long-term opportunities." Infosys' guidance weighed on shares of other IT stocks. India's largest software services exporter by revenues, Tata Consultancy Services (TCS), declined 1.8%. The company announces Q1 results today, 12 July 2012. India's third largest software services exporter by revenue, Wipro, dropped 3.98%. The company announces Q1 results on 24 July 2012. Index heavyweight Reliance Industries (RIL) fell 0.62% to Rs 721.20. The stock was volatile. The scrip hit a high of Rs 729.50 and a low of Rs 717.45. The company last week said it has selected Technip as a technology supplier and engineering contractor to implement its Refinery Off-Gas Cracker (ROGC) project. This is part of the expansion project being executed at RIL's Jamnagar refinery and petrochemical complex in Gujarat. The ROGC plant will be amongst the largest ethylene crackers in the world and will be using refinery off-gas as feedstock, RIL said. The products from the plant will be utilised for the new downstream petrochemical plants being built at Jamnagar, RIL said. RIL has bought back 3.47 crore shares for about Rs 2484 crore till 10 July 2012 under its ongoing share buyback program. RIL has set maximum buyback price of Rs 870 per share. The company has set aside Rs 10440 crore for share buyback. The buyback program opened on 1 February 2012 and closes on 19 January 2013. Last month, RIL chairman Mukesh Ambani said at the company's Annual General Meeting in Mumbai that the company's buyback program represents a highly accretive use of cash by the company and it will supplement earnings growth from operations, for higher EPS (earnings per share), in the near future. Index heavyweight and cigarette major ITC fell 0.85% to Rs 251.75. The stock hit a high of Rs 256.85 and a low of Rs 251. Metal stocks dropped as metal prices dropped on the London Metal Exchange. Jindal Steel & Power, Hindalco Industries, Hindustan Zinc, Bhushan Steel, Sterlite Industries, and Tata Steel dropped by between 0.16% to 1.74%. Sail fell 1.13%. The company and Kobe Steel of Japan early this week signed a Memorandum of Agreement (MoA) for setting up a 0.5 million tonnes per annum iron nugget making plant using Kobe's patented ITmK3 technology at Sail's alloy steel plant in Durgapur, West Bengal, India. As per the agreement, Sail and Kobe Steel will be entitled to equal share of production from the plant for captive use. JSW Steel shed 1.95% as the stock turned ex-dividend today, 12 July 2012, for dividend of Rs 7.50 per share for the year ended 31 March 2012 (FY 2012). Oil exploration stocks rose after US crude futures rose on Wednesday after data showed US crude stockpiles fell last week, countering concern that global fuel demand will falter as manufacturing stagnates in Europe. Cairn India, Oil India and ONGC gained by between 0.82% to 1.42%. US crude oil futures for August 2012 delivery had surged $1.90 a barrel or 2.26% to settle at $85.81 a barrel on the New York Mercantile Exchange on Wednesday, 11 July 2012, its highest closing level since 9 July 2012. Higher crude oil prices will result in higher realization from crude sales for oil exploration firms. Castrol India rose 1.04%, with the stock extending Wednesday's 1.52% gains. The company said during market hours on Wednesday its board of directors will consider proposal for bonus share issue on 16 July 2012. PSU OMCs rose on renewed hopes the government will raise diesel prices after Presidential elections. Prime Minister Manmohan Singh has reportedly told the Congress party there is no option but to raise diesel prices by at least Rs 5 a litre after the Presidential election. HPCL and Indian Oil Corporation rose by between 1.89% to 3.05%. State-run oil marketing companies (PSU OMCs) suffer under-recoveries on domestic sale of diesel, LPG and kerosene at government controlled prices. The government has already freed pricing of petrol. BPCL rose 1.01% to Rs 784.90 ahead of record date for liberal 1:1 bonus issue. The stock hit a 52-week high of Rs 789.20 in intraday trade on today, 12 July 2012. BPCL has fixed 17 July 2012 as the book closure date for determining the eligibility of shareholders entitled to receive the 1:1 bonus shares. The company said during market hours today that Bharat PetroResources, a fully owned subsidiary of BPCL announced the successful completion of exploration program in ES-M-661 block, BM-ES-24 concession, in the Espirito Santo Basin, Offshore Brasil. Petroleo Brasileiro S.A (Petrobras), the national oil company of Brazil, is the operator of the block. Petrobras holds a 40% working interest, Anadarko holds a 30% working interest and IBV Brasil Petroleo Limitada, a 50:50 JV Company of Bharat PetroResources and Videocon Industries (VIL), holds the balance 30% working interest in the block. Meanwhile, BPCL and LG Chem (South Korea) have signed an MoU today for forming a Joint Venture to set up a petrochemical plant adjacent to its Kochi refinery complex. BPCL would be investing approximately Rs 14000 crore over the next five years for expansion of its Kochi refinery. As part of the expansion project, BPCL would be setting up a Petrochemical Fluid Catalytic Cracker (PFCC) which would generate 500 TMTPA of propylene, thereby, providing BPCL a launching pad for diversification into petrochemicals, BPCL said in statement. The petrochemical project would be set up in the JV mode at an additional cost of Rs 4000-6000 crore adjacent to the Kochi refinery and is slated for completion in the next four years dovetailed with the refinery expansion project, BPCL said. Capital goods stocks declined after the latest data showed capital goods production shrank 7.7% in May 2012 after a revised 19.5% contraction in April 2012. BEML, ABB, Thermax and Bhel shed by between 0.64% to 2.81%. India's largest engineering & construction firm by sales L&T fell 1.75% on profit taking after recent strong gains. The company said after trading hours today that it has inaugurated its manufacturing facility for switchgear products at Vadodara in Gujarat. The new switchgear facility is a part of L&T's Electrical & Automation (E&A) business. L&T said the new facility will manufacture Air Circuit Breakers (ACBs) and Moulded Case Circuit Breakers (MCCBs). A development centre to provide research, development and engineering for circuit breakers will also be located at this facility, L&T said. A smart mix of labour and automation has been deployed at the unit that would enhance productivity by 2.5 times, L&T said in a statement. The lines are equipped to produce circuit breakers of different frames and several ratings from 16A to 6300A. Speaking on the occasion, L&T Chairman and Managing Director A. M. Naik said, "The new Vadodara switchgear facility is an investment for the future. It forms part of the wide ranging initiatives we are taking forward in the run-up to our Platinum Jubilee. The facility at Vadodara will enable us to elevate switchgear manufacturing technology to the next level, and advance further in our goal to upgrade India's manufacturing capabilities." L&T early this week said that Malaysia based Tamco Switchgear, a wholly owned subsidiary of the company and part of its electrical & automation (E&A) business, has acquired Malaysia based Henikwon Corporation Sdn Bhd. Henikwon Corporation is a leading manufacturer of low voltage and medium voltage busduct systems. Henikwon brand is globally well recognized and offers high quality products under compliance to international quality standards. The Henikwon acquisition brings a strong customer base of large corporations to Tamco, L&T said. Auto stocks edge lower on reports government is likely to raise diesel prices after presidential polls on July 19, as the government attempts to cut the amount of money it pays out to PSU OMCs to keep prices lower. M&M fell 2.09% as the stock turned ex-dividend today, 12 July 2012, for dividend of Rs 12.50 per share for FY 2012. The company on Tuesday, 10 July 2012, said it has suspended its plans to develop a vehicle for the US market due to changes in the US regulatory and market situation. M&M said it will continue to monitor the US situation and remain flexible with its approach to this market. Ashok Leyland tumbled 4.26% after the stock turned ex-dividend today, 12 July 2012, for dividend of Re 1 per share for the year ended 31 March 2012. India's largest commercial vehicle maker by sales Tata Motors shed 1.97%. Global rating agency S&P on Monday, 9 July 2012, said it has raised its long-term corporate credit rating on Tata Motors and given it a positive outlook as it expects the company's cash flow to improve on account of strong sales at its UK-based unit Jaguar Land Rover Plc (JLR). S&P also said that it may further upgrade Tata Motors' ratings if JLR's risk profile improves or if Tata Motors is able to bring down its consolidated debt-to-operating profit ratio to 2.5. S&P raised Tata Motors' rating to BB from BB- previously and said it assesses the company's business risk as "fair." S&P said JLR's business risk profile has improved to fair from weak due to healthy vehicle sales -- particularly in emerging markets -- strong demand for Land Rover's sport-utility vehicles and introduction of the Evoque SUV. It said Evoque is expected to be the best-selling model for JLR in 2013. The rating agency said, however, that JLR still faces a challenge in repositioning the Jaguar brand in the competitive and technologically advanced luxury car market. JLR sells luxury sedans under the Jaguar brand. Renault SA last week introduced sport-utility vehicle (SUV) Duster in India as part of an aggressive strategy by the French auto maker to make deeper inroads in one of the world's biggest automobile markets. The Duster has a starting price of Rs 7.19 lakh for the base gasoline model and Rs 7.99 lakh for the base diesel model at New Delhi dealerships, pitching it in competition with SUVs from market leader Mahindra & Mahindra as well as Tata Motors and Force Motors. India's largest car maker by sales Maruti Suzuki India declined 0.67%. The company early last week said its total sales jumped 20.3% to 96,597 units in June 2012 over June 2011. Automobile industry body -- the Society of Indian Automobile Manufacturers (SIAM) – on Tuesday, 10 July 2012, cut its forecast of domestic car sales for the year through March 2013 to 9%-11% from 10%-12% earlier. But it raised the guidance for total domestic car and sport-utility vehicle (SUV) sales to 11%-13% from 10%-12% due to expectations of higher SUV sales, most of which run on diesel. Sales of diesel cars and SUVs are surging as the price of diesel in India remains cheaper than petrol. In New Delhi diesel is 39% cheaper than petrol. India's second largest motorcycle maker by sales Bajaj Auto declined 1.45%. As per recent reports, the company has cut prices of its products in Sri Lanka to bring back the volumes lost post the excise duty hike in that country. Bajaj Auto has reportedly cut retail prices of 3-wheelers by 10% and 2-wheelers to the tune of 5-14%, depending on the model, in Sri Lanka. The hit due to the price cut will be shared between the company and the dealers. Sri Lanka accounts for almost 5-7% of the total volumes of the company. It is one of the biggest markets for the auto major in terms of export and accounts for 17-18% of export sales. Bajaj Auto early last week said its total sales fell 6% to 3.45 lakh units in June 2012 over June 2011. The company's commercial vehicles sales plunged 39% to 26,785 units in June 2012 over June 2011 as three-wheeler exports to Sri Lanka and Egypt were disrupted in June 2012. Bajaj Auto expects sales to normalise from July 2012 onwards. But, Hero MotoCorp (HMCL) rose 0.88%. The company launched a 125 cubic-centimeter motorcycle Ignitor last week. The Ignitor motorcycle will be available in two versions, costing Rs 55,900 and Rs 57,900 at dealerships in New Delhi, the company said. The latest model follows the 110cc Maestro scooter, which was launched in March, and the 150cc Impulse motorcycle, introduced last October. The Ignitor will add to the Glamour and the Super Splendor -- the two 125cc motorcycle models sold currently by Hero MotoCorp. Hero MotoCorp sells motorcycles with 100cc to 225cc engines. It also sells two scooter models, including the Maestro. Hero MotoCorp's total sales rose 4.26% to 5,34,091 units in June 2012 over June 2011. With sales of 5,34,091 units in the month of June, HMCL's cumulative sales for the first quarter (April-June) of this financial year (2012-13) has touched 16,42,292 units -- its highest-ever sales in any single quarter. Airline stocks were mostly higher on reports government is working on a comprehensive package for the airline industry after the presidential polls. This will also include relaxation of norms for Foreign Direct Investment (FDI) in domestic airlines. Kingfisher Airlines and SpiceJet rose by between 0.58% to 1.34%. But, Jet Airways fell 1.22%. The Presidential election will be over with the counting of votes, scheduled for July 21. Currently, foreign airlines are not allowed to pick up equity in aviation companies while foreign investors and financial institutions can hold up to a 49% stake. Construction shares declined after Union Minister for Road Transport & Highways Dr. C.P. Joshi on Wednesday, 11 July 2012, said the performance of road sector in Q1 June 2012 was disappointing. IVRCL, NCC, Valecha Engineering, Patel Engineering, Gammon India, IRB Infrastructure Developers, and L&T fell by between 0.26% to 10%. Dr. Joshi said road projects bid out in the first quarter have not received the kind of response the ministry got last year, with some project getting no bidders at all. One of the reasons for this may be the tightening of the purse-strings from the lenders for funding of road projects. Dr. Joshi said the government is keen to ensure that road sector achieves success and that his ministry can not afford to take any chances. Buoyed by the success achieved in 2011-12, the Ministry of Road Transport & Highway has pegged the targets for the road sector to achieve 9,500 Kms of award and 3,500 Kms of completion 20012-13. A record length of 7957 Kms of roads was awarded for strengthening/up gradation and improvement and over 2,200 Kms were completed during the year 2011-12. Telecom stocks fell for the second straight day ahead of a meeting of the empowered group of ministers on spectrum pricing which is scheduled today, 12 July 2012, under its new head -- Home Minister P Chidambaram. MTNL, Tata Teleservices (Maharashtra), Reliance Communications, Idea Celluar and Bharti Airtel dropped by between 1.83% to 3.04%. On April 23, the Telecom Regulatory Authority of India (Trai) had recommended a base price of Rs 3622 crore for a megahertz of spectrum at pan-India level which is around 10 times higher than the price for 2G licences in 2008 when A Raja was the Telecom Minister. According to Trai recommendations, a minimum of 5 Mhz should be allotted which would mean that a pan-India spectrum in 1800 MHz band will cost Rs 18000 crore. The reserve price is five times the base price of Rs 3500 crore for 3G auction. However, telecom operators have been opposing the Trai recommendations, saying that it will hurt investment in the sector further and expansion of the industry in rural areas. Realty stocks extended recent strong gains triggered by the Competition Commission of India directing cement firms last month to cease and desist from indulging in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market. Cement is a key raw material in housing construction. DLF, Unitech and HDIL rose by between 0.24% to 4.12%. The Union Cabinet early this month approved the proposal for extending the scheme of interest subvention of 1% on housing loans upto Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh for the year 2012-13 and to amend the operational part of guidelines for release of funds. A budgetary provision of Rs 400 crore has been made for Financial Year 2012-13 for implementing the scheme. Consequent upon the extension of scheme, the limit of subsidy for an individual borrower would be Rs 14,912 for a loan of Rs 15 lakh and Rs 9,925 for a loan of Rs10 lakh. The extended scheme will benefit all house loans availed in Financial Year 2012-13. Bank stocks were mostly lower. India's second biggest private sector bank in terms of branch network HDFC Bank shed 1.23% to Rs 579.85. The stock hit a record high of Rs 593.55 in intraday trade on Wednesday, 11 July 2012. The bank announces Q1 results tomorrow, 13 July 2012. The bank reduced lending rates by 20 basis points with effect from 30 June 2012. The bank has cut base rate to 9.8% from 10% and the benchmark prime lending rate (PLR) to 18.3% from 18.5%. India's largest private sector bank by net profit ICICI Bank declined 0.96%. The country's biggest commercial bank in terms of branch network State Bank of India rose 0.04%. The bank has raised interest rate by 25 basis points to 9% on fixed deposits for the tenure of three years to less than five years with effect from 1 July 2012. This is applicable for deposits below Rs 15 lakh. Among other PSU bank stocks, Bank of India, Bank of Baroda and Punjab National Bank shed by between 1.15% to 2.18%. Housing finance major HDFC fell 0.57% with the stock extending Wednesday's 0.62% losses triggered by profit taking after the company reported good Q1 results during trading hours on Wednesday. The stock had witnessed a pre-result rally. The scrip had jumped 6.22% to settle at Rs 682.55 on Tuesday, 10 July 2012, from a recent low of Rs 642.55 on 26 June 2012. HDFC's net profit rose 18.63% to Rs 1001.91 crore on 29.29% growth in total income to Rs 4934.95 crore in Q1 June 2012 over Q1 June 2011. HDFC's loan book stood at Rs 1.48 lakh crore as on 30 June 2012 as against Rs 1.24 lakh crore in the previous year. This excludes loans sold during the preceding 12 months amounting to Rs 4978 crore to HDFC Bank. MRPL declined 0.57% as the stock turned ex-dividend today, 12 July 2012, for dividend of Rs 1 per share for FY 2012. Kingfisher Airlines clocked highest volume of 1.04 crore shares on BSE. SRS Real Infrastructure (69.38 lakh shares), OnMobile Global (55.65 lakh shares), Unitech (55.18 lakh shares) and Cals Refineries (44.20 lakh shares) were the other volume toppers in that order. Infosys clocked highest turnover of Rs 281.79 crore on BSE. SBI (Rs 98.96 crore), United Spirits (Rs 69.19 crore), TCS (Rs 60.94 crore) and CMC (Rs 43.31 crore) were the other turnover toppers in that order. Monsoon rains have covered the entire country but the amount is unlikely to improve until next week, with overall rainfall 23% less than a long-term average, L.S. Rathore, director-general of the state-run India Meteorological Department (IMD) said on Wednesday. There is a strong chance of an El Nino weather event this season and it will likely emerge in August 2012, he told reporters. El Ninos are usually associated with lower rainfall. Lower rainfall this year is intensifying concerns that output of summer-sown crops such as oilseeds, sugar and pulses will fall compared with record-high levels in the last couple of years, hitting farm income. Monsoon rainfall has been deficient in 62% of the country's crop area so far. Annual monsoon rainfall has improved in the past 10 days, speeding up sowing of key summer-sown crops like rice and cotton, Agriculture Minister Sharad Pawar said on Wednesday, 11 July 2012. Poor rainfall in cane and pulses growing Maharashtra and Karnataka is cause for concern, he said. Maharashtra is the top sugar producer and second-biggest producer of soybeans, while Karnataka is the No. 1 coffee producer. Sowing of crops other than coarse grains has been progressing well, Mr. Pawar said. With monsoon rains advancing to all regions, sowing of rice--the main summer staple--is expected to pick up in the next few weeks, the minister said. The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. Corporate affairs minister Veerappa Moily said in a newspaper interview published on Wednesday, 11 July 2012, that the government is hopeful of the passage of the pension bill in the monsoon session of parliament. The monsoon session of parliament begins on 7 August 2012. Prime Minister Dr. Manmohan Singh on Wednesday, 11 July 2012, said he had very fruitful discussions with the Prime Minister of Singapore Lee Hsien Loong who is on a visit to India. Singapore is not only India's foremost trading partner in ASEAN, but also a major source of FDI inflows into India, Dr. Singh said. Dr. Singh and Lee have agreed to expedite the conclusion of the ongoing second Review of the Comprehensive Economic Cooperation Agreement that would further facilitate trade in goods and services and investment between the two countries. Dr. Singh said in a statement that he has assured Lee of India's commitment to reinforce its status as an investment-friendly country and expressed hope that Singapore companies would look at India as a valued investment destination in the current scenario. An India-Mauritius joint panel will in August discuss a series of proposals to review the double taxation avoidance treaty between the two nations, Mauritius Foreign Minister Arvin Boolell said on Thursday, 5 July 2012. India has been looking to negotiate the double taxation avoidance agreement with Mauritius for the past few years to check so-called round tripping and other potential abuses. Round tripping entails moving money out of one country to another, and getting it back under the garb of foreign capital. Capital gains tax is close to zero in Mauritius and almost 40% of investments into India come through the island nation. Under the bilateral agreement, capital gains from sale of securities can be taxed only in Mauritius. India and Mauritius will discuss the renegotiation of the tax pact between 22-24 August in Mauritius. The India-Mauritius joint working group will also discuss the inclusion of a so-called limitation of benefit clause, similar to the Singapore tax treaty with India, to ensure only genuine Mauritius-based companies are benefited. India's tax agreement with Singapore says that only those companies that spend a minimum of $200,000 (about Rs 1 crore) in Singapore can avail the benefits of the treaty. Sanctity of tax residency certificates issued by a country to companies operating in its jurisdiction to enable the firms to claim tax benefits under various treaties is another issue between India and Mauritius. While India in this year's national budget said the certificates are a necessary but not sufficient condition, Mauritius wants those issued by it honoured. Draft guidelines issued by Indian government recently for implementing the controversial anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) state that GAAR provisions should be invoked on a foreign institutional investor (FII), if it chooses to take a treaty benefit, but would not in any case be invoked in the case of the non-resident investors of the FII. The draft guidelines suggested that the onus of proving wrongdoing should be on the authorities. Prime Minister Dr Manmohan Singh said in a newspaper interview last week that he has identified controlling the fiscal deficit, achieving clarity on tax matters, reviving the mutual funds and insurance industries, clearing a backlog of foreign investment proposals and boosting infrastructure as his focus areas in the short term. Singh said there will be no arbitrariness in tax matters. The statement assumes significance in the context of a raging controversy over the Income Tax amendment to re-open tax demands with retrospective effect from companies like Vodafone over acquisition of companies having operations in India but registered abroad to avoid taxes. Singh last month said he is chalking out plan for the country's economic revival. Singh last month took additional charge at the finance ministry after Pranab Mukherjee resigned as finance minister on 26 June 2012 to contest the presidential polls scheduled on 19 July 2012. Mr. Mukherjee is the leading contender in the July 19 presidential election, having been nominated by the Congress party-led United Progressive Alliance government for the largely ceremonial post. The next major trigger for the stock market is Q1 June 2012 corporate earnings. Investors and analysts will closely watch the management commentary that would accompany the result which could cause revision in their future earnings forecast of the company for the current year or the next year. A deceleration in top line growth of India Inc amid economic slowdown and slowdown in investment cycle will weigh on bottom line growth in Q1 June 2012 as the core operating profit margin could be negatively impacted by deceleration in top line growth. HDFC Bank declares its Q1 results tomorrow, 13 July 2012. Axis Bank announces Q1 results on 17 July 2012. Bajaj Auto reports Q1 results on 18 July 2012. Kotak Mahindra Bank, Hero MotoCorp and Dr Reddy's Laboratories unveil Q1 results on 19 July 2012. Asian Paints announces Q1 results on 20 July 2012. Hindustan Unilever, L&T and Cairn India unveil Q1 results on 23 July 2012. Wipro announces Q1 results on 24 July 2012. Power Grid Corporation of India announces Q1 results on 25 July 2012. Bhel announces Q1 results on 26 July 2012. Ambuja Cements announces Q2 June 2012 results on the same day. ICICI Bank announces Q1 results on 27 July 2012. Maruti Suzuki India announces Q1 results on 28 July 2012. Mahindra & Mahindra announces Q1 results on 8 August 2012. Ranbaxy Laboratories announces Q2 June 2012 results on 9 August 2012. BPCL announces Q1 results on 10 August 2012. Hindalco Industries announces Q1 results on 14 August 2012. Industrial production grew at a higher-than-expected pace of 2.4% in May 2012 driven by manufacturing output, government data showed on Thursday, 12 July 2012. Industrial production declined 0.9% in April 2012, with the government revising the figure downward from a provisional rise of 0.12% for the month. The government slightly revised upwards industrial production growth for February 2012 to 4.29% from 4.11% earlier. Manufacturing output, which has a 75.5% weight in the index of industrial production, grew 2.5% from a year earlier in May 2012. According to the revised numbers, it contracted 1.2% on year in April 2012, rather than the 0.1% rise reported earlier. Capital goods production shrank 7.7% in May 2012, following a revised 19.5% contraction in April 2012. India's industrial sector is growing well below trend through the second and third quarters of 2012, Moody's Analytics Inc. in a report released on Thursday, 12 July 2012. Inflation based on the wholesale price index (WPI) is seen rising further to 7.62% in June 2012 from 7.55% in May 2012, as per the median estimate of a poll of economists carried out by Capital Market. The CSO will announce data on WPI inflation for June 2012 at 11:30 IST on 16 July 2012. The Reserve Bank of India (RBI) announces first quarter review of the Monetary Policy 2012-13 on 31 July 2012. The RBI unexpectedly left its key lending rate unchanged at its last meeting in June 2012, citing inflationary concerns. European shares fell on Thursday, taking their cue from US and Asian markets, which declined after the minutes to the US Federal Reserve's June meeting dampened hopes for fresh risk-asset-boosting stimulus in the near term. Key benchmark indices in UK, France and Germany were down 0.56% to 1.21%. Industrial production across the 17-nation euro zone grew 0.6% in May, the European Union statistics agency Eurostat reported Thursday. Compared to the same month last year, production fell 2.8%. Italian government tests sentiment in debt markets with a bond sale scheduled tomorrow, 13 July 2012. Asian stocks fell on Thursday as a surprise rate cut in South Korea, lack of central bank policy action from Japan, and weak jobs data from Australia kept investors on edge a day before the release of a likely downbeat report on Chinese growth. Key benchmark indices in Hong Kong, Indonesia, Japan, Taiwan, South Korea and Singapore fell by between 0.58% to 2.24%. China's Shanghai Composite rose 0.46%. Chinese Premier Wen Jiabao said on Tuesday that the government's top priority was now stabilizing economic growth rather than long-term restructuring, with policies to include business-tax cuts and more targeted investment, according to state-run media reports. China is due to release Q2 June 2012 GDP growth data, along with industrial output and other June metrics, tomorrow, 13 July 2012. In first quarter this year, GDP growth slowed to a near-three-year low of 8.1% in the country, weighed upon by efforts to cool inflation and a lackluster global economy. Chinese banks issued more new loans in June from the levels in May and money supply growth as measured by M2 also showed a pick up in June from levels in May, according to reports. Financial institutions issued 919.8 billion yuan ($145.5 billion) in new loans for the month, accelerating from May's lending of 793.2 billion yuan. M2 money supply increased 13.6% at the end of June from a year earlier, picking up from May's 13.2% increase. The Bank of Japan (BoJ) left ultra-low interest rates unchanged at its policy meeting on Thursday. The BoJ reaffirmed its commitment to steadily increasing the size of its asset purchase program, but didn't announce any immediate increase in the overall size of the program. The Bank of Korea on Thursday unexpectedly cut borrowing costs for the first time in more than three years, joining an international push for monetary stimulus as Europe's debt crisis threatens to undermine global growth. Governor Kim Choong Soo and his board lowered the benchmark seven-day repurchase rate to 3% the first cut since February 2009, the central bank said in a statement in Seoul today. Australian employers unexpectedly reduced payrolls in June and the jobless rate rose, increasing speculation of a fifth interest-rate cut by the central bank in nine months as Europe's clouded outlook restrains global growth. The number of people employed fell by 27,000, led by a loss of full-time jobs and almost erasing a revised 27,800 job gain in May, the statistics bureau said in Sydney today. The jobless rate rose for a second month, to 5.2% from 5.1%. The World Bank on Thursday revised down its 2013 Indonesia growth forecast to 6.4% from 6.5% a month ago, but said a severe global downturn could send growth tumbling even further to 4%. Stefan Koeberle, the Indonesia country director for the World Bank, said that while Indonesia still enjoys robust growth compared to other emerging economies--thanks to the strength of domestic consumption and investment--it will not be spared the impact of a global downturn, especially if global commodity prices and demand from economies such as China were to be adversely affected. Shubham Chaudhuri, Indonesia lead economist of the World Bank, also reiterated the bank's estimate for Indonesian growth this year of 6.0%. Both were speaking at a joint press conference with the Indonesian Investment Board, known as BKPM. In its June global outlook summary the World Bank estimated that Indonesia would grow 6.5% in 2013, lower than the 6.8%-7.2% expansion suggested by the Indonesian finance minister in May 2012. Indonesia's economy grew 6.5% last year--its fastest since the 1997-1998 Asian crisis--with its vast domestic market helping shield it from the economic turmoil battering its more export-oriented neighbors. The Asian Development Bank said in a report released today, 12 July 2012, that weaker global demand is helping ease international oil and food prices in Asia, which is reducing inflationary pressures in the region. The bank trimmed its inflation forecast for developing Asia for this year to 4.4% from 4.6% previously. It cut its inflation forecast for China this year to 3.7% from 4% previously. Trading in US index futures indicated that the Dow could fall 101 points at the opening bell on Thursday, 12 July 2012. Lack of clarity from the US Federal Reserve on future easing measures sent US stocks lower on Wednesday. Minutes of Fed's June meeting showed that only a few central-bank officials thought more asset purchases would be necessary, fueling fears that policy makers are far from taking enough action to bolster the world's largest economy.