Market opens firm on positive Asian stocks; Maruti Suzuki slumps

The key benchmark indices open on a firm note on higher Asian stocks. The BSE Sensex was up 112.27 points or 0.65%. The market breadth was strong. Index heavyweights Reliance Industries (RIL) and ITC gained in early trade. India's largest car maker by sales Maruti Suzuki India lost close to 5% after the company stopped production at its Manesar, Haryana factory on Wednesday, 18 July 2012, after workers attacked managers at the plant and set fire to company property. Telecom stocks were mostly higher. Asian stocks rose on Thursday after strong US housing data overnight and after broadly reassuring comments from Federal Reserve Chairman Ben Bernanke in his second day of testimony to Congress on Wednesday, 18 July 2012. At 09:28 IST, the BSE Sensex was up 112.27 points or 0.65% to 17,297.28. The index jumped 132.55 points at the day's high of 17,317.56 at the onset of the trading session, its highest level since 13 July 2012. The index rose 89.85 points at the day's low of 17,274.86 in early trade. The S&P CNX Nifty was up 37.40 points or 0.72% to 5,253.70. The index hit an intraday high of 5,257.75, its highest level since 13 July 2012. The Nifty hit an intraday low of 5,245.95. The market breadth, indicating the overall health of the market, was strong. On BSE, 808 shares rose and 214 shares fell. A total of 26 shares were unchanged. The total turnover on BSE amounted to Rs 219 crore by 09:25 IST From the 30-share Sensex pack, 26 stocks gained and only four of them fell. Sterlite Industries India (up 2.08%), Bhel (up 1.83%) and Infosys (up 1.71%) edged higher from the Sensex pack. Bajaj Auto (down 0.80%) and Hero MotoCorp (down 0.18%) edged lower from the Sensex pack. Index heavyweight and cigarette maker ITC rose 0.55% to Rs 256.15. Index heavyweight Reliance Industries (RIL) gained 0.48% to Rs 718.80. Minister of Petroleum & Natural Gas Mr. S. Jaipal Reddy has promised expeditious clearance of four investment proposals of RIL. The representatives of the RIL and BP Shri PMS Prasad and Shri Sashi Mukundan met the Mr. Reddy on 13 July 2012 and represented for speedy clearances in four of the Blocks (NEC 25, KGD6, two in Cauvery basin) being operated by RIL-BP joint venture. It was agreed at the meeting to recommend to the competent authority on two issues viz. the Declaration of Commerciality of certain wells in the NEC 25 and KG D6. The Ministry of Petroleum & Natural Gas will consider extension of appraisal period to facilitate the declaration of commerciality at an early date. It was also agreed that quicker approvals for two blocks in the Cauvery Basin as per the extant Government Policy would be given, the Ministry of Petroleum & Natural Gas said in a statement issued on Tuesday, 17 July 2012. The Ministry of Petroleum & Natural Gas also told RIL that denial of access to its records by RIL to the Comptroller and Auditor General (CAG) was adversely commented upon in previous audit by the CAG. It was also brought to their notice that CAG recommended withholding of sanction to work plans and budgets if access to records is denied to CAG. India's largest car maker by sales Maruti Suzuki India lost 4.85% after the company stopped production at its Manesar, Haryana factory on Wednesday, 18 July 2012, after workers attacked managers at the plant and set fire to company property. At least 40 managers and executives were sent to hospital with injuries, Maruti said in a statement, following a protest by the workers' union at the factory over a disciplinary issue with an employee. "To resolve the issue amicably, members of the senior management met the union. During the talks, the workers attacked the members of the senior management, executives and managers. The attackers also set fire to property and damaged facilities," Maruti said in the statement issued late on Wednesday. Telecom stocks were mostly higher on reports the empowered group of ministers (EGoM) looking into the rules that will govern the upcoming auction of second-generation (2G) telecom spectrum, has suggested stricter roll-out obligations for successful bidders. The panel has, however, once again postponed the crucial decision on the base price for the spectrum to be auctioned. The decision on the reserve price for the spectrum to be auctioned is likely to be taken at the next meeting, expected to take place on Friday, 20 July 2012. The EGoM is also expected to decide on the spectrum usage charge to be paid by successful bidders at the next meeting. Idea Cellular (down 0.06%) and Bharti Airtel (down 0.62%) declined. Reliance Communications (up 0.31%), MTNL (up 0.81%), and Tata Teleservices (Maharashtra) (up 2.39%) gained. The EGoM has asked the department of telecommunications (DoT) to prepare a matrix of various levels of reserve price and spectrum usage charge at every Rs 1000 crore difference in descending order and the effect that will have on tariffs for the end-consumer and the revenue accrued to the government. In its earlier meeting, held on 12 July, the EGoM had decided to allow mortgaging of spectrum by winning bidders. It also approved the proposal to let banks auction mortgage spectrum in case the operator defaults on the loans. Another key decision, taken at the last meeting, was to ask the Supreme Court for a second extension in the deadline to auction the spectrum. 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. Asian Paints rose 0.42%. The company on Wednesday said that net profit of Berger International (BIL), Singapore, an indirect subsidiary of the company listed on the Singapore Stock Exchange, rose 11.01% to Rs 2.52 crore on 1.4% growth in total revenue to Rs 126.55 crore in the quarter ended June 2012 over the quarter ended June 2011. Foreign institutional investors (FIIs) are buying Indian stocks this month. FIIs bought shares worth a net Rs 276.40 crore on Wednesday, 18 July 2012, as per provisional data released by the stock exchanges. Earlier, FIIs bought shares worth a net Rs 4644.50 crore from the secondary equity markets during 11 trading sessions from 3 July 2012 to 17 July 2012, as per data from Securities & Exchange Board of India (Sebi). Election for the country's new president takes places today, 19 July 2012, in what is a direct contest between ruling United Progressive Alliance (UPA) candidate Pranab Mukherjee and opposition-backed Purno Sangma. On the macro front, provisional annual inflation rate based on all India general consumer price index (CPI) (Combined) for June 2012 on point to point basis (June 2012 over June 2011) stood at 10.02%, lower than 10.36% (final) for May 2012, data released on Wednesday, 18 July 2012, by the Ministry of Statistics and Programme Implementation showed. The corresponding provisional inflation rates for rural and urban areas for June 2012 stood at 9.74% and 10.44%, respectively. Inflation rates (final) for rural and urban areas for May 2012 stood at 9.57% and 11.52%, respectively. Decline in the inflation rate for the urban areas in June 2012 as compared to May 2012 is attributed to the higher base of the housing group index for June 2011 as compared to May 2011, the Ministry of Statistics and Programme Implementation said in a statement. Housing group includes items such as house rent, water charges and repair charges. Housing group index for June 2011 included the rent index compiled using the rent data for the period January 2011 to June 2011, which was the first six months period after the base year of January 2010 to December 2010, it said. CSO will announce data on consumer price index (agricultural labourers/rural labourers) for June 2012 tomorrow, 20 July 2012. The annual rate of inflation based on monthly wholesale price index (WPI) eased to 7.25% (provisional) for the month of June 2012 (over June, 2011) from 7.55% (provisional) for the previous month and 9.51% during the corresponding month of the previous year. Build up inflation in the financial year so far (April-June 2012) was 1.99% compared to a build up of 2.41% in the corresponding period of the previous year, the Ministry of Commerce & Industry said in a statement. The official WPI for All Commodities for the month June 2012 rose 0.2% to 164.2 (provisional) from 163.9 (provisional) for the previous month, it said. Inflation is way above the desired threshold level of Reserve Bank of India, central bank governor D Subbarao said early this week. He added that the RBI stance of monetary policy is aimed at restraining demand and managing inflation expectations. "There is a threshold level of inflation. Below the threshold, may be, there is a trade-off between growth and inflation. But above the threshold, there is definitely no trade-off between growth and inflation," he said. "The Reserve Bank of India is sacrificing growth only in the short-term and there is no growth-inflation trade off in the medium term," he said. The RBI's threshold level for inflation is around 5%, he said. However , the governor did issue a disclaimer that his statements did not imply RBI's decision in its July 31 policy. India's potential growth rate may have fallen to around 7.5% as the uncertainty surrounding economic activity has increased after the financial crisis of 2008-09, Subbarao said in a speech on Tuesday. 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. Rainfall in the country till July 15 was 22% short of the long-term average, raising concerns that farm output may be hurt and could lead to a rise in food prices. It is a challenge for farmers to maintain the same performance compared with the last two years, Farm Minister Sharad Pawar said on Monday, 16 July 2012. The key agricultural states of Karnataka, Maharashtra and Andhra Pradesh have experienced the worst shortage of rain, Mr. Pawar said. Maharashtra is the country's largest producer of sugar and second-biggest producer of soybeans, while Karnataka is the largest coffee producer and Andhra Pradesh one of the biggest rice producers. The government has prepared contingency plans to help farmers increase output, Mr. Pawar said. The agriculture ministry has sent seeds for late sowing to areas that have received insufficient rain, he said. Steps have also been taken to provide sufficient quantities of seeds of rabi pulses to compensate for any loss in pulses production in the kharif season, he said. According to data released by the Ministry of Agriculture, rice was sown in 96.79 lakh hectare (ha) till 13 July 2012, compared with 55.4 lakh ha a week back, but it still remains lower than 111.63 lakh ha during the corresponding period last year. Cumulative sowing of coarse cereals totaled 39.76 lakh ha as on 13 July 2012, sharply lower than 79.82 lakh ha during the corresponding period last year. Sowing of pulses totaled 20.54 lakh ha as on 13 July 2012, much lower than 32.88 lakh ha during the corresponding period last year. Sowing of oilseeds totaled 67.7 lakh ha, lower than 78.33 lakh ha during the corresponding period last year. Sugarcane and cotton have been sown in more area than the area covered by these crops this time last year. 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. Prime Minister Dr. Manmohan Singh last week approved the constitution of an expert committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) to undertake stakeholder consultations and finalise the guidelines for GAAR by 30 September 2012. Foreign direct investments in India fell 38% in the April-May period, according to central bank data which reflect the battering the country's appeal has taken in the past few months. FDI flows into India in the first two months of the fiscal year which began April 1 dropped to $3.2 billion from $5.15 billion a year earlier. In May alone, net foreign direct investment more than halved from a year earlier to $1.38 billion, adding to worries about India's current account deficit. India depends on capital inflows to finance its current account deficit, which widened to a record 4.5% of gross domestic product in the January-March period. India's trade deficit narrowed in June, helped by a sharp fall in imports, director-general of foreign trade Anup Pujari said on Friday, 13 July 2012. The trade deficit was $10.3 billion during the month, down from $14.4 billion a year earlier. Exports in June fell 5.45% from a year earlier to $25.1 billion while imports declined 13.46% to $35.3 billion due slide in crude oil prices. An India-Mauritius joint panel will discuss a series of proposals to review the double taxation avoidance treaty between the two nations on 22-24 August in Mauritius. 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. 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 for implementing the controversial anti-avoidance tax proposal viz. the 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 this month 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 today, 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 monsoon session of the parliament will begin on 8 August 2012 and the session will conclude on 7 September 2012, Parliamentary Affairs Minister Pawan Kumar Bansal said on Wednesday, 18 July 2012. The government hasn't yet finalized the agenda for the session, but the expectation is that Prime Minister Dr. Manmohan Singh -- who took charge of the finance ministry after Mr. Pranab Mukherjee resigned to contest the presidential elections -- will try and push through long-pending legislations. These could include the Direct Tax Code and the insurance, pension and banking bills. The government would also place before lawmakers the first demand for additional spending for this fiscal year which began April 1. Corporate affairs minister Veerappa Moily said in a newspaper interview published on 11 July 2012 that the government is hopeful of the passage of the pension bill in the monsoon session of parliament. The first quarter June 2012 earnings season has just begun. In the next one month, investors and analysts will closely watch the management commentary that would accompany the result to see if there is any 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. Reliance Industries and Asian Paints unveil Q1 results tomorrow, 20 July 2012. Hindustan Unilever, L&T and Cairn India unveil Q1 results on 23 July 2012. Wipro, Sesa Goa and Jindal Steel & Power unveil Q1 results on 24 July 2012. GAIL (India) and Power Grid Corporation of India unveil Q1 results on 25 July 2012. HCL Technologies announces Q4 June 2012 results on the same day. ITC, Bhel and Sterlite Industries (India) unveil Q1 results on 26 July 2012. Cement majors ACC and Ambuja Cements unveil Q2 June 2012 results on the same day. ICICI Bank, Grasim Industries, NTPC and Punjab National Bank unveil 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. Asian stocks rose on Thursday after strong US housing data overnight and after broadly reassuring comments from Federal Reserve Chairman Ben Bernanke in his second day of testimony to Congress on Wednesday, 18 July 2012. Key benchmark indices in Taiwan, South Korea, Indonesia, Japan and Hong Kong, Singapore and China were up by 0.03% to 1.72%. Chinese Premier Wen Jiabao on Tuesday said that expanding employment is a top priority for the government as the country's employment situation is set to grow more challenging. Jiabao had said recently said that China's economic rebound isn't yet stable and hardship may continue for a period of time, according to a state-media report. Wen also pointed to China's actions to address the economic deceleration. The economic growth rate is still within the government target range set early this year, and stabilization policies are working, Wen was quoted as saying in a Xinhua news agency report. China's second-quarter economic growth slowed to 7.6% from a year earlier, compared to 8.1% in the first quarter,. It was the weakest rate of growth in more than three years. The Bank of Japan released the minutes of its latest interest rate meeting on Wednesday which showed that the bank remains focused on providing stability to the financial system and that it continues to conduct monetary policy in an appropriate manner. The Bank of Japan (BoJ), last week, left ultra-low interest rates unchanged at its policy meeting. 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 Asian Development Bank said in a report released on 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. The World Bank last week 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%. US stocks edged higher on Wednesday as corporate profits from bellwethers Intel and Honeywell lifted investor sentiment. The Dow Jones Industrial Average gained 103.16 points, or 0.81%, to 12,908.70. The Standard & Poor's 500 index rose 9.11 points, or 0.67%, to 1,372.78 and the Nasdaq Composite index added 32.56 points, or 1.12%, to 2,942.60. The US Fed chairman Ben Bernanke reiterated the central bank's resolve to breathe more life into the US economy if things get worse. Bernanke doesn't expect a double-dip recession in the US. However, the Fed Beige Book survey says the US economy slowed in June and early July. A report from Federal Reserve Bank of Philadelphia is due for release on Thursday, 19 July 2012. Microsoft Corp. and Google Inc. report Q2 results on Thursday, 19 July 2012. General Electric Co. reports Q2 results on Friday, 20 July 2012. The International Monetary Fund early this week reduced its outlook for 2013 global growth to 3.9% from an April forecast of 4.1% Spanish borrowing costs dropped sharply as the country's government on Tuesday sold 3.56 billion euros ($4.37 billion) of 12-month and 18-month bills at an auction, exceeding its 3.5 billion euro target, according to media reports. Yields on the 12-month bill averaged 3.918%, down from 5.074% from the previous auction in June, while the bid-to-cover ratio improved to 2.23 from 2.16. For the 18-month bill, the average yield dropped to 4.242% from 5.107% at a June auction. The bid-to-cover ratio fell to 3.66 from 4.42. The short-term debt sale comes before key auctions of up to 3 billion euros of medium- and longer-dated bonds from the Treasury on Thursday, 19 July 2012, when the Spanish government will sell bonds maturing in 2014, 2017, and 2019. The auction comes ahead of a meeting of European officials scheduled on Friday, 20 July 2012, to hammer out the final details of the Spanish bank bailout. The French government is scheduled to hold bond auction on Thursday, 19 July 2012. Germany's Federal Constitutional Court will announce a decision on lawsuits challenging the country's participation in the permanent euro-zone rescue fund, the European Stability Mechanism, and the fiscal pact on 12 September 2012. The court held a public hearing earlier this month to examine complaints that participation in the fund and the fiscal pact violated German law by taking some authority over the national budget away from parliament.