Market surges as WPI inflation slows to 32-month low

Key benchmark indices edged higher for the second straight day and attained their highest closing level in nearly 22 weeks after the latest data showed the rate of growth in inflation based on the wholesale price index (WPI) fell to the slowest pace in nearly three years in July 2012, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. Index heavyweight and cigarette maker ITC scaled a record high. Another index heavyweight Reliance Industries (RIL) also edged higher. The barometer index, BSE Sensex, jumped 94.75 points or 0.54%, off close to 25 points from the day's high and up 155 points from the day's low. The market sentiment was also boosted by data showing continuation of buying of Indian stocks by foreign funds and firm global stocks. From a recent low of 17557.74 on 10 August 2012, the Sensex has jumped 170.46 points or 0.97% in two trading sessions. The Sensex has gained 492.02 points or 2.85% in this month so far (till 14 August 2012). The Sensex has jumped 2,273.28 points or 14.7% in calendar 2012 so far (till 14 August 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 2,592.34 points or 17.12%. From a 52-week high of 18,523.78 on 22 February 2012, the Sensex has lost 795.58 points or 4.29%. The stock market remains closed tomorrow, 15 August 2012, on account of Independence Day. Coming back to today's trade, Hindalco Industries slipped after reporting weak Q1 results. Reliance Infrastructure rose after announcing Q1 result. Engineering and construction major L&T rose for second day in a row. M&M rose for second day in a row after declaring strong consolidated results. India's largest state-run oil exploration firm by sales ONGC extended Monday's gains triggered by strong Q1 results. The market breadth, indicating the overall health of the market, was positive. Bank stocks gained after the latest data showed the rate of growth in inflation based on the wholesale price index (WPI) slowed in July 2012, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. PSU OMCs declined as US crude oil futures snapped two days of losses on speculation that inventories declined for a third week in the US, the world's biggest crude consumer. Tata Motors rose after the company said during market hours today that it has appointed Mr. Karl Slym as Managing Director. Tata Steel gained after consolidated net profit jumped in Q1 June 2012 over Q4 March 2012. Coal India gained after Q1 June 2012 results. HDIL fell on weak Q1 results. Reliance Power gained on strong Q1 results. Wockhardt hit a record high. A bout of volatility was witnessed in early trade as key benchmark indices cut initial losses. Volatility continued as key benchmark indices alternately swung between gains and losses in morning trade. The market weakened in mid-morning trade after director-general of foreign trade Anup Pujari said India's exports in July fell 14.8% from a year earlier to $22.4 billion. Key benchmark indices rebounded sharply from intraday low to scale fresh intraday high in early afternoon trade after the latest data showed the rate of growth in inflation based on the wholesale price index (WPI) slowed in July 2012, building hopes that it would give the central bank some space to ease monetary policy next month. The market remained firm in afternoon trade. The market pared gains after hitting fresh intraday high in mid-afternoon trade. The market sentiment boosted by data showing continuation of buying of Indian stocks by foreign funds. Foreign institutional investors (FIIs) bought shares worth a net Rs 357.20 crore from the secondary equity markets on Monday, 13 August 2012, as per data from Securities & Exchange Board of India (Sebi). FIIs bought shares worth a net Rs Rs 4185.40 crore from the secondary equity markets in nine trading sessions from 1 to 13 August 2012. The inflow this month comes on the top of substantial purchases last month. FIIs bought shares worth net Rs 9691 crore from the secondary equity markets in July 2012. European stock markets advanced on Tuesday, 14 August 2012, underpinned by better-than-expected German and French gross domestic product data. Asian stocks rose on Tuesday, 14 August 2012, as Bank of Japan minutes showed policy makers are considering steps to boost the economy, and before US retail sales data expected to signal demand is recovering in the world's biggest economy. The BSE Sensex jumped 94.75 points or 0.54% to 17,728.20, its highest closing level since 14 March 2012. The index jumped 119.98 points at the day's high of 17,753.43 in mid-afternoon trade. The index fell 61.11 points at the day's low of 17,572.34 in early afternoon trade. The S&P CNX Nifty was up 32.45 points or 0.61% to 5,380.35, its highest closing level since 15 March 2012. The Nifty hit an intraday high of 5,387.05 and a low of 5,328.80 in intraday trade. The BSE Mid-Cap index rose 0.3% and the BSE Small-Cap index gained 0.25%. Both these indices underperformed the Sensex. The total turnover on the BSE amounted to Rs 2143 crore, higher than Rs 1857.97 crore on Monday, 13 August 2012. The market breadth, indicating the overall health of the market, was positive. On BSE, 1,412 shares gained and 1,385 shares declined. A total of 136 shares were unchanged. From the 30-share Sensex pack, 21 stocks rose and rest of them fell. Index heavyweight and cigarette maker ITC rose 0.34% to Rs 267.75 after scaling a record high of Rs 269.25 in intraday trade today, 14 August 2012. The company's net profit jumped 20.21% to Rs 1602.14 crore on 15.34% growth in net sales to Rs 6652.21 crore in Q1 June 2012 over Q1 June 2011. Despite series of tax hikes, ITC's performance in cigarettes business remains robust and displays pricing power for the company. FMCG major Hindustan Unilever (HUL) rose 0.91% to Rs 495.05. The stock had hit a record of Rs 498.90 in intraday on Friday, 10 August 2012. The company's net profit jumped 112.3% to Rs 1331.19 crore on 13.7% growth in net sales to Rs 6250.15 crore in Q1 June 2012 over Q1 June 2011. Index heavyweight Reliance Industries (RIL) rose 1.43% to Rs 798.75. The stock hit a high of Rs 802.10 and a low of Rs 785.40 so far during the day. RIL last week said it has bought back 3.88 crore shares for about of Rs 2776.78 crore till 7 August 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. RIL chairman Mukesh Ambani said at the company's Annual General Meeting in June 2012 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. India's largest oil exploration firm by sales ONGC advanced 1.82%, with the stock extending Monday's gains triggered by strong Q1 results. The company on Saturday, 11 August 2012, said its net profit jumped 48.42% to Rs 6077.70 crore on 23.87% growth in income from operations (net) to Rs 20177.78 crore in Q1 June 2012 over Q1 June 2011. ONGC gave a subsidy discount of Rs 12346 crore in Q1 June 2012, higher than Rs 12046 crore in Q1 June 2011. This impacted the profit before tax (PBT) by Rs 10583 crore and profit after tax (PAT) by Rs 7149 crore in Q1 June 2012. State-run upstream oil firms share part of the under-recoveries of state-run oil refining-cum-market firms arising from the government-imposed price caps on three key fuels -- diesel, LPG for domestic use and kerosene sold through the public distribution system. ONGC said in a statement that while carrying out development drilling in D1 Field, the company discovered a new pool of reserves which may catapult D1 to become the third largest field in Western Offshore after prolific Mumbai high and Heera. Earlier, the D1 was known to have IOIP (Initial Oil In-place) to the order of 600 million barrel (82.20 million tonne oil equivalent). After the discovery of the new pool, its total IOIP is expected to be in excess of One Billion Barrel (140 mtoe). D1, primarily an oil producing field, is situated about 200 km West of Mumbai city in Deep Continental Shelf at a water depth of 85m-90m. The Field comprises of 4 blocks viz. D1-4, D1-12, D1-14 and D1-2/5. Apart from D-1, ONGC has notified three more discoveries in the past one month, ONGC said. Hindustan Copper fell 0.16%. The company said after market hours today, 14 August 2012, its net profit fell 20.52% to Rs 48.01 crore on 14.69% growth in total income to Rs 336.27 crore in Q1 June 2012 over Q1 June 2011. MMTC declined 0.54%. The company said after market hours today, 14 August 2012, its net profit jumped 86.39% to Rs 12.06 crore on 73.52% fall in total income to Rs 5408.86 crore in Q1 June 2012 over Q1 June 2011. IDFC rose 2.59%. The company said after market hours today, 14 August 2012, its consolidated net profit rose 21.06% to Rs 379.78 crore on 35.55% rise in total income to Rs 1842.17 crore in Q1 June 2012 over Q1 June 2011. PSU OMCs declined as US crude oil futures snapped two days of losses on speculation that inventories declined for a third week in the US, the world's biggest crude consumer. HPCL declined 1%. BPCL fell 1.63%. Indian Oil Corporation was unchanged at Rs 254. Higher crude oil prices could increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol. The Minister of Petroleum and Natural Gas Mr. S. Jaipal Reddy informed the Rajya Sabha in a written reply today, 14 August 2012, that based on actual under-recoveries in Q1 June 2012 and projected under-recoveries for the remaining three quarters of the current financial year, PSU OMCs are expected to incur an under-recovery of Rs 155074 crore at current prices in the year ending 31 March 2013 (FY 2013). Based on the refinery gate price effective 1 August, 2012, PSU OMCs are currently incurring under-recovery of Rs 12.06 per litre on diesel, Rs 28.54 per litre on PDS kerosene and Rs 231.00 per cylinder on domestic LPG. Given the large under-recoveries, reduction in the price of diesel, PDS kerosene and domestic LPG is not feasible at present, Mr. Reddy said. Meanwhile, BPCL said after trading hours today, 14 August 2012, its wholly owned subsidiary -- Bharat PetroResources (BPRL) -- has announced the successful completion of exploration program in Madanam3(NMAB) well of NELP IV block CY-ONN-2002/2 in Cauvery Onland Basin in Tamil Nadu. ONGC is the operator of the block. BPRL holds 40% working interest and ONGC holds 60% working interest in the block. Hindalco Industries fell 0.91% after net profit fell 34.04% to Rs 424.77 crore on 1.93% increase in total income to Rs 6,329.37 crore in Q1 June 2012 over Q1 June 2011. The result was announced during trading hours today, 14 August 2012. Hindalco's revenue from operations were almost flat at Rs 6028 crore in Q1 June 2012 from Rs 6031 crore in Q1 June 2011. Revenue from operations for the quarter was maintained at the same level as Q1 June 2011 on the back of improved mix, better premium and mark-up, despite lower volumes and realisation, the company said in a statement. During the quarter, Hindalco's PBITDA (profit before interest, taxes, depreciation and amortization) stood at Rs 765 crore in Q1 June 2012 from Rs 1045 crore in Q1 June 2011. Surge in input costs, mainly in coal, caustic soda and carbon products affected earnings by nearly Rs 200 crore in Q1 June 2012. Further, the operational results were also impacted due to the planned shutdown of the copper production facility and lower volume due to certain operation disturbances in the aluminium plants. These have since taken care of and currently the operations are under full ramp up, the company added. With regard to future business outlook, Hindalco said input cost surge, availability of quality bauxite and coal coupled with volatile commodity prices pose significant challenges. However, the company said it is confident of sustaining its performance given the wide downstream, presence and the emphasis on operational efficiencies and cost control. Private sector steel major Tata Steel rose 2.63%. Tata Steel's consolidated net profit jumped 38.1% to Rs 598 crore on 0.52% decline in turnover to Rs 33821 crore in Q1 June 2012 over Q4 March 2012. Tata Steel's earnings before interest, taxation, depreciation and amortization (EBITDA) rose 4.73% to Rs 3581 crore in Q1 June 2012 over Q4 March 2012. The company announced the results after market hours on Monday, 13 August 2012. The group's steel deliveries declined 8.7% to 5.68 million tonnes in Q1 June 2012 over Q4 March 2012. Tata Steel's consolidated net debt at the end of June 2012 increased to Rs 54020 crore from Rs 47657 crore at the end of March 2012. Commenting on the first quarter results, Tata Steel Managing Director Mr HM Nerurkar said: "Indian operations posted robust performance against the backdrop of weakening demand and increased competition. Market challenges have made us focus on tightening of costs, improving product-mix and ensuring that the ramp up of our brownfield expansion takes place by the year-end. Downstream linkages of Indian operations are expected to provide the required depth to our business. South East Asian operations are being strengthened on the back of operational and marketing initiatives, leading to better results". Tata Steel Europe MD & CEO Dr Karl-Ulrich Köhler said: "Our financial performance continued to improve as raw material cost pressure eased further and strategic cost initiatives yielded further benefits. At Port Talbot, the blast furnace rebuild is progressing on schedule and other operational problems that arose early in 2012 were largely resolved. European steel demand is lower than expected and prices have weakened. We continue to seek to mitigate the effects of this with tight cost control and emphasis on increased product differentiation". Coal India gained 1.64%. The state-run coal miner aftermarket hours on Monday said its consolidated net profit rose 7.9% to Rs 4469.26 crore on 13.8% growth in net sales to Rs 16500.59 crore in Q1 June 2012 over Q1 June 2011. The company's coal production rose 6.4% to 102.47 million tonnes in Q1 June 2012 over Q1 June 2011. Coal offtake rose 6.39% to 113.04 million tonnes in Q1 June 2012 over Q1 June 2011. Coal India, which accounts for more than 80% of India's total coal production, aims to produce 464.10 million tonnes of coal this fiscal year. It is also looking for coal assets overseas to bridge the local shortfall and may import 20 million tonnes of the dry fuel this fiscal year. State-run National Aluminium Company (Nalco) rose 0.37%. The company's net profit declined 40.8% to Rs 223.08 crore on 0.02% rise in total income to Rs 1888.37 crore in Q1 June 2012 over Q1 June 2011. The result was announced during market hours today, 14 August 2012. Bank stocks gained after the latest data showed the rate of growth in inflation based on the wholesale price index (WPI) fell to the slowest pace in nearly three years in July 2012, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. India's largest bank by branch network State Bank of India rose 0.24%. SBI's net profit surged 136.91% to Rs 3751.56 crore on 16.89% increase in total income to Rs 32415.49 crore in Q1 June 2012 over Q1 June 2011. The surge in net profit was mainly due to a sharp fall in provisions and contingencies in Q1 June 2012. It may be recalled that SBI's provisions and contingencies had risen sharply in Q1 June 2011. The result was announced during trading hours on 10 August 2012. SBI's ratio of net non-performing assets to net assets rose to 2.22% as on 30 June 2012, from 1.82% as on 31 March 2012, and 1.61% as on 30 June 2011. SBI's ratio of gross non-performing assets (NPA) to gross advances stood at 4.99% of gross advances as on 30 June 2012, higher than 4.44% as on 31 March 2012 and 3.52% as on 30 June 2011. Among other PSU bank stocks, Canara Bank, Bank of India, Bank of Baroda and Punjab National Bank rose by between 1.15% to 1.84%. India's second biggest private sector bank in terms of branch network HDFC Bank rose 0.06% to Rs 607.75. The stock had struck a record high of Rs 609.70 on Monday, 13 August 2012. During market hours on Monday, 13 August 2012, the bank said it has issued on a private placement basis unsecured, redeemable, non-convertible, subordinated bonds towards Tier-II capital bonds for an amount aggregating Rs 3477 crore. India's largest private sector bank by net profit ICICI Bank gained 2.05%. The bank's profit after tax jumped 36% to Rs 1815 crore on 32% growth in net interest income to Rs 3193 crore in Q1 June 2012 over Q1 June 2011. ICICI Bank's net interest margin (NIM) improved to 3.01% for Q1 June 2012, from 2.61% for Q1 June 2011. The bank announced the results on 27 July 2012. Mahindra & Mahindra's (M&M) rose 0.99%, with the stock extending Monday's rise. M&M's consolidated profit after deducting minority interest jumped 55% to Rs 1026.40 crore on 23.7% growth in gross Revenue plus other income to Rs 17670.80 crore in Q1 June 2012 over Q1 June 2011. During the quarter, some of the major group companies like Mahindra Finance, Mahindra Satyam and Mahindra Lifespace Developers significantly improved their performance, M&M said in a statement. M&M announced the consolidated results during trading hours on Monday, 13 August 2012. As on 30 June 2012, the M&M group comprised of 115 subsidiaries, 6 joint ventures and 11 associates. A full summation of gross revenues and other income of all the group companies taken together for the three months ended 30 June 2012 is Rs 20476.90 crore and profits before minority interest is Rs 1405.30 crore, M&M said in a statement. Tata Motors advanced 2.85%. The company said during market hours today, 14 August 2012, that it has appointed Mr. Karl Slym as Managing Director (MD). Mr. Slym will lead all operations of Tata Motors in India and international markets including South Korea, Thailand, Spain, Indonesia and South Africa, Tata Motors said in a statement. Jaguar Land Rover will continue to be managed independently, Tata Motors said. Mr. Slym is expected to take over his responsibilities as MD on 1 October 2012. Mr. Slym has been the Executive Vice President and Board Member of SGMW Motors, China (a General Motors joint Venture). Prior to this, he was President, Managing Director and Board Member of General Motors (GM) in India. He has had a 17 year career in GM in various positions in various geographies. Mr. Slym succeeds Mr. P M Telang who superannuated from Tata Motors in June this year. Engineering and construction major L&T rose 0.97%. The stock turned ex-dividend today, 14 August 2012, for dividend of Rs 16.50 per share for the year ended 31 March 2012. The company said during market hours on Monday, 13 August 2012, that its construction division has won new orders valued at over Rs 2008 crore across various business segments in July and August 2012. Reliance Infrastructure rose 1.53% after consolidated net profit rose 2% to Rs 412 crore on 4% growth in total operating income to Rs 5383 crore in Q1 June 2012 over Q1 June 2011. The company announced the results during trading hours today, 14 August 2012. The order backlog of Reliance Infrastructure's (RInfra) engineering, procurement, and construction (EPC) business stood at Rs 15560 crore as on 30 June 2012, with book to bill ratio of 1.4. RInfra provides EPC for developing power and road projects. RInfra said it is conservatively financed, with debt to equity ratio of 0.74 as on 30 June 2012. During Q1 June 2012, RInfra commenced two road projects totaling 200 kilometers (KM) viz. Salem-Ulunderpet (136 KM) and Gurgaon-Faridabad (66 KM). The company also commenced operations of sixth transmission line of 220 KM during the quarter. Totally, 715 KM of lines are operational, RInfra said in a statement. Reliance Power gained 0.87% after consolidated net profit rose 22% to Rs 240 crore on 110% surge in operating revenues to Rs 1136 crore in Q1 June 2012 over Q1 June 2011. The result was announced during trading hours today, 14 August 2012. Commenting on the first quarter results, J P Chalasani, Chief Executive Officer, Reliance Power, said, "Our performance Q1 June 2012 has been highly satisfactory both in terms of revenue as well as profit growth. The 1,200 MW Rosa plant in Uttar Pradesh has been operating at a high operational efficiency and the plant generated over 2 billion units of electricity this quarter. I am happy that the 40 MW solar photovoltiac plant that we have built in Rajasthan has contributed to the bottom line in the first quarter. Work at the Sasan UMPP in Madhya Pradesh and the associated coal mines is in full swing. Coal production is set to begin before the commissioning of the first unit of the Sasan UMPP." India's largest pharma company by market capitalisation Sun Pharmaceutical Industries dropped 2.1% to Rs 667.70. The stock turned ex-dividend today, 14 August 2012, for interim dividend of Rs 4.25 per share for the year ended 31 March 2012. Wockhardt rose 3.21% to Rs 1,237.70 after scaling a record high of Rs 1244.90 in intraday trade today, 14 August 2012. The company said it has received final approval from the United States Food and Drug Administration for marketing 10 milligram extended release tablets of Alfuzosin hydrochloride in the US. The company made this announcement during trading hours today, 14 August 2012. DLF fell 0.8%. DLF after market hours on Monday, 13 August 2012, said that the company along with its three wholly-owned subsidiaries -- DLF Cyber City Developers, DLF Universal and Jawala Real Estate (Jawala) have entered into an agreement with Lodha Developers for divesting the entire stake held by DLF, DLF Cyber City Developers and DLF Universal in Jawala for an enterprise value estimated to be Rs 2700 crore subject to final adjustments at completion. The completion of the transaction is expected by the end of October 2012. After completion of the divestment, which is subject to fulfillment of certain conditions precedent by the parties and payment of amounts due under the agreement by Lodha, Jawala will cease to be a subsidiary of the company. DLF said the proposed divestment is in line with the company's objective of divesting its non-strategic assets. Housing Development and Infrastructure (HDIL) fell 2.5% after consolidated net profit fell 44.37% to Rs 105.38 crore on 59.53% decline in total income to Rs 210.58 crore in Q1 June 2012 over Q1 June 2011. The company announced the results during trading hours today, 14 August 2012. HCL Technologies rose 1.43% to Rs 549.85 after striking a 52-week high of Rs 550 in intraday trade today, 14 August 2012. Tech Mahindra rose 0.03% to Rs 816.35 after striking a 52-week high of Rs 819.90 in intraday trade today, 14 August 2012. The company's consolidated net profit rose 12% to Rs 338 crore on 9% growth in revenue to Rs 1543 crore in Q1 June 2012 over Q4 March 2012. Tech Mahindra's operating profit jumped 38% to Rs 330 crore in Q1 June 2012 over Q4 March 2012. The result was announced after market hours on Thursday, 9 August 2012. Mahindra Satyam declined 0.59% to Rs 93.15 after striking a 52-week high of Rs 94 in intraday trade today, 14 August 2012. Zee Entertainment rose 0.94% to Rs 172.40 after striking a 52-week high of Rs 173.80 in intraday trade today, 14 August 2012. Bharti Airtel rose 0.21%, with the stock extending Monday's gain. The company has increased the tariffs for fixed-line broadband Internet services by 5%-8%, citing regulatory changes and higher input costs. Bharti's telemedia division provides fixed-line services, including Internet, and it accounts for 7% of the company's total revenue. At the end June, this division had 3.3 million subscribers and 1.4 million of them were broadband Internet users as well. Intense competition has made it tough for Bharti to take price raises for its wireless telephone services, from where the company gets the bulk of its revenue, and to look at other businesses to increase tariffs and support its financial performance. Shares of gas distribution firms rose across the board. Gujarat State Petronet, Gujarat Gas Company, GAIL (India), Indraprastha Gas and Petronet LNG gained by between 0.07% to 3.63%. Kingfisher Airlines clocked highest volume of 1.79 crore shares on BSE. SpiceJet (89.78 lakh shares), Suzlon Energy (65.34 lakh shares), Vikas Wsp (63.69 lakh shares), and Cals Refineries (54.59 lakh shares) were the other volume toppers in that order. SBI clocked highest turnover of Rs 140.69 crore on BSE. United Spirits (Rs 99.05 crore), RIL (Rs 65.97 crore), Tata Steel (Rs 58.94 crore) and Vikas Wsp (Rs 46.56 crore) were the other turnover toppers in that order. The official Wholesale Price Index (WPI) for 'All Commodities' for the month July 2012 rose by 0.4 percent to 164.8 (Provisional) from 164.2 (Provisional) for the previous month, the Ministry of Commerce & Industry said in a statement today, 14 August 2012. The annual rate of inflation, based on monthly WPI, stood at 6.87% (Provisional) for the month of July 2012 (over July 2011) as compared to 7.25% (Provisional) for the previous month and 9.36% during the corresponding month of the previous year. Build up inflation in the financial year so far was 2.36% compared to a build up of 3.14% in the corresponding period of the previous year. For the month of May 2012, both the final index and inflation based on final Wholesale Price Index for 'All Commodities' remained unchanged at its provisional level of 163.9 and 7.55% respectively as reported on 14 June 2012. The WPI inflation fell below the 7% level for the first time since November 2009, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. However, weak rainfall this year and a possibility that the government may allow local fuel retailers to raise prices could drive up inflation. Seasonal rainfall this year has been about 17% below normal. Further, core inflation, also known as non-food manufacturing inflation, has accelerated, indicating overall price pressures haven't ebbed enough. Core inflation, which strips off volatile food and fuel prices, picked up to 5.5% on year in July from 5% in June. Ahead of the data Reserve Bank of India Governor D Subbarao on Monday, 13 August 2012, said high inflation leaves no room for easing policy to counter a potential external shock to Asia's third-largest economy. Unlike during the global financial crisis of 2008-09, "there is just no space for fiscal or monetary responses," Subbarao said in a speech to a conference organized by a body which advises the state government of Kerala on economic policy. "Inflation is high, oil prices are at elevated levels, the external sector is under stress," he added. The RBI last cut rates by 0.5 percentage point to 8% from 8.5% in April, its first move to reverse a 20-month rate-tightening cycle. It then held rates steady in June and at its last rate-setting meeting on July 31, saying that a cut would exacerbate inflationary pressures. Mr. Subbarao said wholesale price inflation--the mostly closely watched inflation gauge in India--remains above the central bank's tolerance level. The RBI is scheduled to undertake a mid-quarter review of the monetary policy on 17 September 2012. The Central Statistics Office (CSO) will unveil data on consumer price index (Agricultural Labourers/ Rural Labourers) on Friday, 17 August 2012. India's trade deficit widened in July, dragged by weaker exports which fell at a much quicker pace than imports. The trade deficit was $15.5 billion during the month, compared with $14.8 billion a year earlier. The data will increase worries that the wide trade gap could hurt the local currency and worsen the country's balance-of-payment situation. Exports in July fell 14.8% from a year earlier to $22.4 billion, while imports declined 7.6% to $37.9 billion, Anup Pujari, director-general of foreign trade, told reporters on Tuesday, 14 August 2012. A contraction in demand in the US and Europe is hurting exports, Trade Secretary S.R. Rao said. Prime Minister Dr. Manmohan Singh last week said the fundamentals of the economy remain strong. "We have the highest savings and investments rate in the world," Dr. Singh said. This year we will see better than 6.5% (gross domestic product) growth of last year, he said. Union Finance Minister P. Chidambaram last week said that a path of financial consolidation will be unveiled shortly. Government finances are under pressure as expenses exceed revenue, mainly because of subsidies doled out for cheaper supplies of food, fuel and fertilizer. Mr. Chidambaram said that the fiscal-deficit target for the current financial year will be reassessed after a mid-year review later this financial year depending on the pace of expenditure and the resource position of the government. The government is aiming to restrict spending on subsidies, the finance minister said. The government has already taken some steps to reduce expenditure. In late May, the finance ministry asked government departments to reduce their non-plan spending -- expenditure that won't create long-term assets -- by 10% this fiscal year as part of its efforts to keep the fiscal deficit under check. The government intends to fine tune policies and procedures that will facilitate capital flows into India, Mr. Chidambaram said last week. Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance to investors, Mr. Chidambaram said. The government has recently appointed two committees -- one to examine anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) legal provisions and guidelines and the other to review taxation of the IT sector and Development Centres. Mr. Chidambaram said he has also directed a review of tax provisions that have a retrospective effect in order to find fair and reasonable solutions to pending as well as likely disputes between the Tax Departments and the Assessees concerned. Mr. Chidambaram said that the government has received requests to put off plans to implement the General Anti-Avoidance Rules (GAAR) which aim to check tax avoidance. The implementation of GAAR was postponed by one year in order to provide an opportunity of wider consultation before such a legislation is implemented, Mr. Chidambaram said in the lower house of parliament while replying to lawmakers' questions. The provisions of GAAR are directed toward preventing tax avoidance by way of aggressive tax planning, he added. The implementation of GAAR proposal introduced in the Union Budget 2012-13 in March 2012 by then-finance minister Pranab Mukherjee has been deferred to 1 April 2013. This came after heavy criticism from foreign investors who fear that GAAR would give the authorities arbitrary powers to examine any deal that they feel is designed to avoid tax. Prime Minister Dr. Manmohan Singh last month constituted 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. Dr. Singh last month also decided to refer the issue of implications on FIIs and portfolio investors of the amendment made to the Income Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India to the Expert Committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR). "It is necessary to have clarity on the tax liability of portfolio investors and foreign institutional investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment", the Prime Minister's Office (PMO) said in a statement issued on 30 July 2012. Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR, the PMO said. In the next few weeks, the government will announce a number of decisions to attract more people to invest in mutual funds, insurance policies and other well-designed instruments, Mr. Chidambaram said last week. The India Meteorological Department (IMD) expects normal rains in August -- a critical month for summer crops. It expects rainfall to be 5-6% below average in September due to the possibility of El Nino. The weather office expects rainfall during August-September to be 91% of the long-term average. The monsoon has been less than average during the current year. Quantitatively, monsoon season rainfall for the country as a whole was deficient by 17% till 7 August 2012, with large deficit ranging from 21% to 59% or more in Nagaland, Manipur, Mizoram, Tripura, Gangetic West Bengal, Bihar, West Uttar Pradesh, Haryana, Chandigarh, Delhi, Punjab, Himachal Pradesh, Jammu & Kashmir, West Rajasthan, East Rajasthan, Gujarat, Saurashtra & Kutch, Madhya Maharashtra, Marathwada, Tamilnadu, Puduchery, North Interior Karnataka, South Interior Karnataka and Kerala. A panel of Indian ministers last week approved steps to contain the impact of a near-drought situation. The steps include providing a diesel-price subsidy to farmers, increasing the subsidy on seed supplies and removal of the import tax on oilmeals. Rice sowing has picked up according to the latest data released by the Ministry of Agriculture. Rice was sown in 264.39 lakh hectares (lh) till Thursday, 9 August 2012, compared with 233.68 lh until 3 August 2012. Rice sowing so far has been below the normal area of 272.58 lh for the summer sown crop by this time of the year. Cumulative sowing of coarse cereals totaled 140.89 lh till 9 August 2012, compared with 135.75 lh until 3 August 2012. Sowing of coarse cereals remains much lower than 181.24 lh of normal area for the crop this time of the year. Sowing of pulses totaled 74.48 lh till 9 August 2012, compared with 72.79 lh until 3 August 2012. Sowing of pulses remains lower than 92.81 lh of normal area for this time of the year. Sowing of oilseeds totaled 151.82 lh till 9 August 2012, compared with 145.17 lh until 3 August 2012. It is slightly lower than the normal area of 153.39 lh for oilseeds by this time of the year. Sowing of cotton totaled 109.23 lh till 9 August 2012, compared with 100.14 lh until 3 August 2012. The normal cotton sowing area of 99.9 lh by this time of the year has already been surpassed. Sowing of jute and mesta totaled 8.41 lh as on 9 August 2012, exceeding the normal area of 8.23 lk for the crop by this time of the 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. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year. 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. European stock markets advanced on Tuesday, 14 August 2012, underpinned by better-than-expected German and French gross domestic product data. Key benchmark indices in France, Germany and UK were up by 0.29% to 0.79%. German gross domestic product rose 0.3% on a seasonally-adjusted basis in the second quarter of 2012, compared to the first quarter, the federal statistics office, Destatis, reported on Tuesday, 14 August 2012. Compared to the same quarter a year ago, GDP rose 0.5% on an unadjusted basis and 1% on a calendar-adjusted basis. French gross domestic product was unchanged in the second quarter of 2012, compared to the first quarter, statistics agency Insee reported on Tuesday, 14 August 2012. Household consumption expenditure dipped 0.2%, while gross fixed-capital formation rose 0.6%. Domestic demand, excluding changes in inventories, contributed 0.1 point to growth in the quarter, the agency said. Euro-zone gross domestic product contracted by 0.2% in the second quarter of 2012 compared to the previous quarter, according to a preliminary reading published by Eurostat on Tuesday 14 August 2012. In first quarter of 2012 the growth rate for the currency bloc was flat. Compared with the same quarter in 2011, gross domestic product for the euro area dropped by 0.4%. The country-specific readings showed that GDP fell the most in Portugal, down 1.2%, while Spain's economy contracted by 0.4% in second quarter. The ZEW economic sentiment indicator, a closely-watched measure of German investor sentiment, dropped to minus 25.5 in August from minus 19.6 in July, the Mannheim-based Center for European Economic Research, or ZEW, said on Tuesday, 14 August 2012. The index measures investors' expectations over the next six months. The ZEW current-conditions index fell to 18.2 from 20.1 in July. The index readings are based on a survey of 262 financial analysts, the ZEW said. Britain's annual consumer price index rose 2.6% in July from 2.4% in June, boosted largely by upward pressure on transport costs, particularly air fares, and prices for clothing and footwear, the UK Office for National Statistics reported on Tuesday, 14 August 2012. Prices saw a 0.1% monthly rise in July. Spanish banks' level of borrowing from the European Central Bank (ECB) rose to a record high in July as tensions mounted in the weeks following the announcement of a 100 billion euro ($122 billion) bailout for the country's financial industry. Data released on Tuesday by the Bank of Spain showed that net borrowing rose to euro 375.55 billion, up from euro 337.21 billion in June. It was the tenth month in a row of increases. Over the past year Spanish banks have sharply increased their funding from the ECB as investors in the private sector have sought to reduce their exposure to banks in Europe's fiscally frail southern economies. A group led by German Professor Markus Kerber has reportedly filed in a lawsuit to the German constitutional court aiming to delay the approval of the European Stability Mechanism (ESM) -- a permanent bailout fund for financially troubled countries in the 17-nation euro zone. The ESM needs to be ratified by all euro zone nations. It has already been backed by Germany's parliament. Germany's President Joachim Gauck is yet to sign it into law, pending several challenges with Germany's constitutional court. Germany's Federal Constitutional Court has said it will decide by September 12 whether the legislation is compatible with Germany's constitution. That date may have to be pushed back following the new complaint, reports suggest. Asian stocks rose on Tuesday, 14 August 2012, as Bank of Japan minutes showed policy makers are considering steps to boost the economy, and before US retail sales data expected to signal demand is recovering in the world's biggest economy. Key benchmark indices in China, Singapore, Indonesia, Japan, Taiwan, South Korea and Hong Kong were up by between 0.30% to 1.27%. Trading in US index futures indicated that the Dow could gain 26 points at the opening bell on Tuesday, 14 August 2012. US shares ended mostly lower on Monday, with the move ending the longest winning streak for the S&P 500 index since December 2010. The Dow Jones Industrial Average dropped 38.52 points, or 0.3%, to 13169.43. The S&P 500 slipped 1.76 points, or 0.1%, to 1404.11. The Nasdaq Composite Index added 1.66 points, or 0.1% to 3022.52. Data on US retail sales for July 2012 is due for release today, 14 August 2012. The data will be watched closely as an indicator of economic health in the world's biggest economy. US retailer Home Depot Inc. unveils its quarterly results today, 14 August 2012. Data on US July consumer-price index and the August Empire State index will be out tomorrow, 15 August 2012. The NY Empire State Index is a regional economic indicator published by the Federal Reserve Bank of New York. It is considered to be an indicator of economic conditions in one of the most populated states in the US. The National Association of Home Builders will also release its August housing market index -- a measure of home builder confidence tomorrow, 15 August 2012. The July housing starts report and the August Philadelphia Fed index will be released on Thursday, 16 August 2012. Data on initial weekly jobless claims will be released on the same day. US retailer Wal-Mart Stores Inc. unveils its quarterly results on Thursday, 16 August 2012. The University of Michigan will release its preliminary consumer sentiment survey for August on Friday, 17 August 2012. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012.