Pharma stocks extend recent gains

Key benchmark indices fell for the second straight day as a downward revision in 2012 monsoon forecast from the state-run India Meteorological Department (IMD) on Thursday, 2 August 2012, hurt investor sentiment adversely. Nevertheless, a rally in European stocks helped Indian stocks stage strong intraday rebound. The market breadth was negative. The barometer index, BSE Sensex, lost 26.43 points or 0.15%, up close to 170 points from the day's low and off close to 10 points from the day's high. Pharma stocks extended their recent uptrend, with Sun Pharmaceutical Industries hitting a record high. European stocks surged after European Central Bank (ECB) president Mario Draghi on Thursday, 2 August 2012, said the ECB may soon step in to buy government bonds in the open market, possibly in unlimited quantities, and will consider other unconventional measures to lower exceptionally high borrowing costs of financially stressed euro-zone economies. From a recent high of 17,257.38 on 1 August 2012, the Sensex has declined 59.45 points or 0.34% in two trading sessions. The Sensex has jumped 1743.01 points or 11.27% in calendar 2012 so far (till 3 August 2012). The Sensex has gained 54.25 points or 0.31% so far (till 3 August 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 2,062.07 points or 13.62%. From a 52-week high of 18,523.78 on 22 February 2012, the Sensex has lost 1,325.85 points or 7.15%. Coming back to today's trade, index heavyweights ITC edged lower. But, another index heavyweight Reliance Industries (RIL) reversed intraday losses. IT stocks rose on a weak rupee. Marico dropped after reporting strong Q1 June 2012 results after the company said the healthy profit margins which the company achieved in Q1 June 2012 are unlikely to sustain during the remaining quarters of the current financial year. Sun TV Network fell on poor Q1 results. The market edged lower in early trade on weak Asian stocks. The market extended initial losses to hit fresh intraday low in morning trade. Weakness continued in mid-morning trade. Key benchmark indices pared intraday losses in afternoon trade after European stocks edged higher. A bout of volatility was witnessed as key benchmark indices weakened once again after staging a strong intraday rebound in mid-afternoon trade. The market once again staged a recovery in late trade. The BSE Sensex lost 26.43 points or 0.15% to settle at 17,197.93, its lowest closing level since 30 July 2012. The index fell 197.39 points at the day's low of 17,026.97 in mid-morning trade. The index declined 16 points at the day's high of 17,208.36 in late trade. The S&P CNX Nifty shed 12.85 points or 0.23% to settle at 5,215.70, its lowest closing level since 30 July 2012. The Nifty hit a low of 5,164.65 and a high of 5,220.20 in intraday trade. The BSE Mid-Cap index declined 0.18% and underperformed the Sensex. The BSE Small-Cap index fell 0.08% and outperformed the Sensex. BSE clocked turnover of Rs 1898 crore, higher than Rs 1750 crore on Thursday, 2 August 2012. The market breadth, indicating the overall health of the market, was negative. On BSE, 1,514 shares fell and 1,263 shares rose. A total of 126 shares were unchanged. From the 30-share Sensex pack, 17 stocks fell and the rest of them rose. Index heavyweight and cigarette maker ITC fell 0.77% to Rs 259.35. The stock had hit a record high of Rs 262.05 in intraday trade on Thursday, 2 August 2012. The company last week reported 20.21% growth in net profit 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. Marico dropped after reporting strong Q1 June 2012 results after the company said the healthy profit margins which the company achieved in Q1 June 2012 are unlikely to sustain during the remaining quarters of the current financial year. The stock was down 2.81% to Rs 188.70. Marico's consolidated net profit jumped 46% to Rs 124 crore on 22% growth revenue from operations Rs 1270 crore in Q1 June 2012 over Q1 June 2011. The growth in net profit was led by gross margin expansion and volume growth of 14% at a group level, the company said in a statement. Marico continues to focus on expanding its consumer franchise as is evident from this quarter's performance, the company said. Marico said the medium to longer term outlook for all the company's three businesses remains positive. Marico said that the company has positioned itself, strategically, in emerging markets viz. India, South Africa, Bangladesh, Vietnam, Egypt and the Middle East. Marico said that in emerging markets, focus on the long term is crucial. Long term success can be ensured only through stronger brands that enjoy loyal consumer franchises, Marico said. The company has therefore chosen to prioritise expansion of consumer franchise over expansion of margins, Marico said. Marico said its profit margins in Q1 June 2012 were higher than the band Marico intends to target. The company has decided to pass back some of the input cost benefit in Parachute to consumers and has initiated steps in select recruiter SKUs. Input prices for Saffola have remained firm, Marico said. Index heavyweight Reliance Industries (RIL) rose 0.47% to Rs 752.98, off the day's low of Rs 730.50. RIL has bought back 3.66 crore shares for about of Rs 2617.57 crore till 24 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. 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. State-run NTPC rose 1.84%, with the stock advancing for the second day in a row. NTPC's management said at a conference call held in Mumbai on Thursday, 2 August 2012, that the company has targeted capacity addition of 14,038 MW during the 12th Plan Five year plan (FY 2013 to FY 2017) post which the company's total capacity will increase to 51.05 Giga-Watt (GW). Sun TV Network declined 0.26% after the company said during market hours today its net profit fell 12.42% to Rs 164.31 crore on 6.8% decline in total income to Rs 438.98 crore in Q1 June 2012 over Q1 June 2010. Sun TV said that the reduction in revenues in Q1 June 2012 was largely an outcome of fall in cable revenue in Tamil Nadu. This subscription revenue will start increasing commenting from 1 August 2012 in view of the agreement executed by the company with Arasu Cable, Sun TV said. Arasu Cable is engaged in the business of proving signals to cable operators in Tamil Nadu. Sun TV Network said its advertisement revenue rose 5% to Rs 242.82 crore in Q1 June 2012 over Q1 June 2011. The recovery in advertisement spending was seen across all categories of advertisers -- national, regional and local and across a wide range of industries, the company said in a statement. Cairn India rose 1.29%, with stock gaining along with crude oil prices. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms such as Cairn India. US crude-oil futures recouped some losses in European electronic trading Friday after closing 2% on Thursday and ahead of key US non-farm payroll data due later in the day. Pharma stocks extended their recent uptrend. Cipla and Dr. Reddy's Laboratories gained by between 0.14% to 1.62%. Glenmark Pharmaceuticals jumped 5.44% to Rs 408.70 after the company's management said the firm is witnessing good growth in its businesses across geographies and it is confident of maintaining this trajectory in the coming quarters. The stock hit a 52-week high of Rs 413 in intraday trade today, 3 August 2012. Glenmark Pharmaceuticals' (GPL) consolidated net profit plunged 62.47% to Rs 78.27 crore on 19.83 % growth in revenue to Rs 1040.40 crore in Q1 June 2012 over Q1 June 2011. GPL said net profit for the quarter is not comparable due to out-licensing income of Rs 111.23 crore received in Q1 June 2011 and also due to marked-to-market (MTM) losses to the extent of Rs 55 crore recorded in Q1 June 2012. The company announced the first quarter results after market hours on Thursday, 2 August 2012. Commenting on the first quarter results, Glenn Saldanha, Chairman & Managing Director, Glenmark Pharmaceuticals said, "Both our generics and specialty business registered good growth. The US business did exceptionally well recording a growth in excess of 55% on the back of product launches in niche competition categories while the India business performed well and gained market share in focus segments. We are witnessing good growth in our businesses across geographies and are confident of maintaining this trajectory in the coming quarters". Ranbaxy Laboratories rose 1.73% after the company said it has entered into an in-licensing agreement with Gilead Sciences, Inc to promote access to generic versions of Gilead's HIV medicine in developing countries. Ranbaxy Laboratories said it has entered into an in-licensing agreement with Gilead Sciences, Inc to promote access to high-quality, low-cost generic versions of Gilead's HIV medicine emtricitabine (FTC) in developing countries including single tablet regimens containing emtricitabine, and fixed-dose combinations of emtricitabine co-formulated with other Gilead HIV medicines. Under the new agreements, Gilead will provide a technology transfer for the manufacture of emtricitabine, together with funding to assist with investment in process improvements to reduce manufacturing costs, Ranbaxy said in a statement. The new agreements will enable Ranbaxy to produce high volumes of FTC/TDF based therapies, thereby establishing sustainable price parity to alternative regimens, Ranbaxy said in a statement. Sun Pharmaceuticals Industries rose 0.55% to Rs 660.05. The stock hit a record high of Rs 663.60 in intraday trade today, 3 August 2012. IT stocks were mostly higher on weak rupee. A weak rupee boosts revenues of IT firms in rupee terms as IT companies earn a lion's share of revenue from exports. Tata Consultancy Services (TCS) rose 0.43%. The company on Thursday announced that Ziraat Bank, Turkey, has selected the TCS BaNCS corebanking platform for a multi-country implementation as part of its international growth strategy. This transformational engagement, which commenced in July 2012, follows a 'model office solution' approach towards the deployment across multiple countries in Europe. Wipro gained 2.04% and Infosys rose 0.16%. Oracle Financial Services Software surged 5.6% to Rs 2774.85. The stock hit a record high of Rs 2,842.95 in intraday today, 3 August 2012. The company on Thursday reported 90% growth in consolidated net profit to Rs 368.10 crore on 10% growth in revenue to Rs 946.30 crore in Q1 June 2012 over Q4 March 2012. The company signed licenses fees of $19 million in Q1 June 2012, Oracle Financial Services Software said in a statement. Mahindra Satyam jumped 6.34% to Rs 88.95 on strong Q1 results. The stock hit a 52-week high of Rs 91.85 in intraday trade today. Mahindra Satyam's consolidated net profit declined 34.1% to Rs 352 crore on 12.8% growth in revenue to Rs 1880 crore in Q1 June 2012 over Q4 March 2012. Earnings before interest, taxation, deprecation and amortization (EBITDA) jumped 39.8% to Rs 408 crore in Q1 June 2012 over Q4 March 2012. EBITDA margins rose sharply to 21.7% in Q1 June 2012 from 17.5% in Q4 March 2012. The sequential decline in bottom line was due to base effect. The company's bottom line in Q4 March 2012 was boosted by exceptional income of Rs 109 crore as also due to tax credit of Rs 94 crore. The merger of Tech Mahindra and Mahindra Satyam announced on 21 March 2012 is progressing on schedule, the company said in a statement. Commenting on the first quarter results, Vineet Nayyar, Chairman, Mahindra Satyam, said, "With this quarter, we have successfully ended our 3-year transformational journey, recording progress on the back of strong fundamentals, focus and investments. Global business realities continue to be unpredictable. However we are confident of taking forward our momentum". Speaking on the occasion, CP Gurnani, CEO, Mahindra Satyam, said, "We compete in the marketplace today with investments in services, markets and our differentiators. Our plans to convert some of these bullets into cannonballs is a reflection of our performance this quarter." L&T shed 0.51% to Rs 1,382.20, off the day's low of Rs 1353.05. The company's recurring profit after tax rose 19% to Rs 890 crore on 26% growth in gross revenue to Rs 12078 crore in Q1 June 2012 over Q1 June 2011. The company announced the first quarter results last month. L&T said the healthy revenue growth in Q1 June 2012 was on the back of a strong order book and good progress in execution of various jobs. International sales constituted 17% of the total revenue in Q1 June 2012, L&T said in a statement. L&T's order inflow jumped 21% to Rs 19594 crore in Q1 June 2012 over Q1 June 2011 despite weak investment sentiment and prevailing global uncertainties, the company said. The major orders came from infrastructure, buildings & factories and power transmission & distribution sectors, L&T said in a statement. L&T's order book stood at Rs 153095 crore as on 30 June 2012. With regard to future business outlook, L&T said that with its enhanced capacities and presence in the diverse sectors, the company is in a good position to harness the opportunities as they emerge. The superior execution capabilities and growing order book provide visibility to sustained revenue growth in the medium term, L&T said in a statement. On the international front, select markets in the Middle East, South East Asia and CIS countries hold promising prospects where the company is strengthening its presence, L&T said in a statement. State-run power equipment maker Bhel rose 0.72%, with the stock reversing initial losses. Bhel's net profit rose 12.92% to Rs 920.90 crore on 16.46% growth in total income to Rs 8805.28 crore in Q1 June 2012 over Q1 June 2011. The company announced the results on 26 July 2012. The company's order book position declined to Rs 132900 crore as on 30 June 2012 from Rs 134681 crore as on 31 March 2012. Sugar stocks advanced as sugar prices rallied sighting festive demand. Bajaj Hindusthan, Balrampur Chini Mills and Shree Renuka Sugars rose by between 3.12% to 5.75%. Shares of public sector oil marketing companies (PSU OMCs) dropped for the third day in a row on concerns of high under-recovery on domestic sale of diesel, kerosene and LPG at government controlled prices. BPCL (down 0.65%) and Indian Oil Corporation (down 0.21%), edged lower. But, HPCL rose 1.21%. The Petroleum Planning and Analysis Cell (PPAC), under the Ministry of Petroleum and Natural Gas, announced on Wednesday, 1 August 2012, that the under-recovery on HSD (High Speed Diesel) applicable for 1st fortnight of August effective 1 August 2012 increased substantially to Rs 12.13 per litre. This is higher than Rs 9.95/litre prevailing during previous fortnight. In case of PDS Kerosene also the under-recovery is higher at Rs 28.54/litre for the month of August 2012 than Rs 27.20/litre for July 2012. However under-recovery on Domestic LPG for August 2012, though fell to Rs 231/cylinder from Rs 319/Cylinder in July 2012, it continues to rule at high. OMCs are currently (effective 1 August 2012) incurring daily under-recovery of about Rs 402 crore on the sale of Diesel, PDS Kerosene and Domestic LPG. PSU OMCs on 1 August 2012 raised jet fuel or ATF rates by a steep 4.5% on firming international crude oil prices. The hike comes on back of a 1.7% hike in rates effected from 16 July 2012. State-run Coal India dropped 0.86%. The Children's Investment Fund Management LLP (TCI), a shareholder in Coal India has reportedly filed a petition in an Indian court seeking an increase in coal prices by the state-run company. According to reports, the UK-based hedge fund said in its petition to the Delhi High Court that India's coal ministry had illegally interfered in the setting of coal prices. In its petition, TCI asked the court to cancel an earlier coal ministry directive to revoke an increase in coal prices. In January, Coal India raised prices by an average 12.5%, but revoked the decision following the government's directive. TCI alleges that since the Indian regulation allows prices to be set independently by coal companies, the government's directive was illegal. The government holds 90% of the company. TCI has been pressing Coal India, the largest coal producer in the world, to change some of its policies, which it says are hurting the company's profit and the interests of the shareholders. TCI has written about this to Coal India executives, directors and officials in India's coal ministry over the past few months. TCI holds a 1.01% stake in Coal India. Metal stocks fell across the board as LMEX, a gauge of six metals traded on the London Metal Exchange dropped 1.35% on Thursday, 2 August 2012. Sterlite Industries, Bhushan Steel, JSW Steel, Tata Steel, Sail, Hindalco Industries, Jindal Steel & Power, and Hindustan Zinc shed by between 0.24% to 2.62%. Interest rate sensitive realty stocks declined as the Reserve Bank of India (RBI) kept repo rate unchanged at its first quarter review of the Monetary Policy 2012-13 early this week. Purchases of both residential and commercial property are largely driven by finance. DLF, D B Realty and HDIL dropped by between 0.41% to 0.97%. Unitech was flat. Interest rate sensitive auto stocks declined as the Reserve Bank of India (RBI) kept repo rate unchanged at its first quarter review of the Monetary Policy 2012-13 early this week. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. Tata Motors declined 1.03%. The company's total sales (including exports) of Tata commercial and passenger vehicles rose 15% to 73,491 vehicles in July 2012 over July 2011. The company's domestic sales of Tata commercial and passenger vehicles rose 18% to 68,627 units in July 2012 over July 2011. Cumulative sales (including exports) during April-July 2012 rose 2% to 2.62 lakh units from the year ago period. Ashok Leyland dropped 1.09%. The company's total sales jumped 25% to 9,785 units in July 2012 over July 2011. The company's light commercial vehicle (LCV) Dost which was launches last year clocked sales of 2,803 units in July 2012. Ashok Leyland's commercial vehicles sales, excluding LCV Dost, declined 11% to 6,982 units in July 2012 over July 2011. Mahindra & Mahindra (M&M) fell 1.44%. The company on 1 August 2012, said its total tractors sales declined 1.02% to 16,521 units in July 2012 over July 2011. Domestic tractor sales declined 1.29% to 15,495 units in July 2012 over July 2011. Exports rose 3.32% 1,026 units in July 2012 over July 2011. The company on 1 August 2012, announced 19% growth in total auto sales to 47,059 units in July 2012 over July 2011. Domestic auto sales jumped 15% to 42,799 units in July 2012 over July 2011. The Passenger Vehicles segment (which includes the UVs and Verito) has registered a growth of 27%, having sold 22,011 units in July 2012, as against 17,312 units during July 2011, M&M said in a statement. The company and Telephonics Corporation (Telephonics) on Wednesday 1 August 2012 announced the formation of a joint venture (JV). The JV to be called Mahindra Telephonics Integrated Systems will provide the Indian Ministry of Defence and the Indian civil sector with radar and surveillance systems, identification friend or foe (IFF) devices and communication systems. In addition, the JV intends to provide systems for air traffic management services, homeland security and other emerging surveillance requirements. Car major Maruti Suzuki declined 0.41%, with the stock extending recent losses after the company on Tuesday, 31 July 2012, said the management remains concerned about the safety and security of its employees and hence it is not in a position to take a decision on restarting operations as the Manesar plant in Haryana. The management will announce its decision to this effect only when it is assured of employee safety, Maruti said in a statement. The labour violence which rocked the plant on 18 July 2012 led to nearly 100 injured and one fatality. Maruti on 21 July 2012 declared lock-out at unit. Maruti on 1 August 2012 said it total sales rose 9.2% to 82,234 units in July 2012 over July 2011. Domestic sales rose 6.8% to 71,024 units and exports jumped 27.4% to 11,210 units in July 2012 over July 2011. Maruti last week said its net profit declined 22.8% to Rs 423.80 crore on 27.5% growth in net sales to Rs 10529.20 crore in Q1 June 2012 over Q1 June 2011. The car major said adverse yen-rupee exchange rate movement impacted profits adversely in Q1 June 2012. The company attributed strong sales growth to higher volumes, favourable product mix and higher export realization. Maruti said demand continued to be skewed in favour of diesel cars while petrol cars suffered a sharp de-growth in Q1 June 2012. Bajaj Auto declined 0.73%. The company on Thursday, 2 August 2012, said its total sales declined 5% to 3.44 lakh units in July 2012 over July 2011. Motorcycle sales declined 3% to 3.08 lakh units in July 2012 over July 2011. The company sold 5,600 units of Pulsar 200 NS and 14,400 units of Discover 125 ST in July 2012. Bajaj Auto's commercial vehicles sales dropped 23% to 35,292 units in July 2012 over July 2011. Bajaj Auto's exports declined 13% to 1.25 lakh units in July 2012 over July 2011. The company said there has been partial recovery in exports to Sri Lanka and Egypt and it expects further recovery in exports this month. The company at the time of Q1 June 2012 results last month said that it has undertaken proactive measures like rationalizing the end-user cost of vehicles in Sri Lanka and with these measures the company expects normalcy in exports to resume by end of Q2 September 2012. Bajaj Auto lost exports of about 20,000 units in Sri Lanka in Q1 June 2012 due to introduction of import barriers by that country. The company also lost export of about 25,000 commercial vehicles in Q1 June 2012 due to restrictions by importing countries and due to political unrest in Egypt, Bajaj Auto said in a statement. Hero MotoCorp (HMCL) declined 0.43%. The company's total sales declined 1.38% to 4.84 lakh units in July 2012 over July 2011. HMCL said new scooter, the recently-launched 110cc Maestro has already been contributing handsome volumes. Maestro, along with the Pleasure, has further strengthened the company's strong presence in the scooter segment, company said. Mr. Anil Dua, Senior Vice-President (Marketing & Sales), Hero MotoCorp said, "The two-wheeler industry in the country has been experiencing sluggish growth for past few months. We are strengthening our brand and saliency in midst of a challenging environment where a patchy monsoon, rising petrol prices and high interest rates have been affecting retail sales in both rural and urban markets. Our brand and models are salient on the current bilateral cricket series and Olympics. We continue to launch new models, air new campaigns and expand our network as we look forward to the commencement of the festive season with cautious optimism." The company announced at the time of Q1 June 2012 results last month that consumers in rural and upcountry markets could postpone buying of motorcycles if the monsoon remains weak. Hero MotoCorp's net profit rose 10.31% to Rs 615.46 crore on 9.95% growth in turnover to a record Rs 6247.28 crore in Q1 June 2012 over Q1 June 2011. Hero MotoCorp also said that currency volatility is a point of concern and the rupee depreciation is likely to impact the company's margins. Castrol India rose 3.04% to Rs 604.10. The stock hit a record high of Rs 606.80 in intraday trade today, 3 August 2012. The company's board last month announced a liberal 1:1 bonus. Interest rate sensitive banking stocks declined as the Reserve Bank of India (RBI) kept repo rate unchanged at its first quarter review of the Monetary Policy 2012-13 early this week. State Bank of India (SBI) dropped 0.45%. SBI said on Thursday, 2 August 2012, said it has decided to revise downwards the interest rate on domestic term deposits for tenors of 5 years and above to 8.5% from 7 August 2012. Punjab National Bank (PNB) rose 1.67%. The bank has decided to increase rate of interest on single domestic term deposit of less than Rs 1 crore from 8.75% to 9% for maturity of one year from August 02, 2012. The same shall also be applicable to NRE term deposits. Similarly, the interest rate of 9% will also be applicable to NRE term deposits of 1,111 days as applicable to domestic term deposits, PNB said. Among other PSU bank stocks, Canara Bank, Bank of India and Bank of Baroda dropped by between 0.84% to 2.75%. India's largest private sector bank by net profit ICICI Bank declined 1.98%. 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. But, India's second biggest private sector bank in terms of branch network HDFC Bank rose 1%. ACC declined 0.71% after the company on Thursday said its cement dispatches declined 6.46% to 1.88 million tones in July 2012 over July 2011. Production declined 8.37% to 1.86 million tones in July 2012 over July 2011. Marmagoa Steel clocked highest volume of 1.29 crore shares on BSE. Mahindra Satyam (1.03 crore shares), Deccan Chronicle Holdings (73.74 lakh shares), Indiabulls Infrastructure & Power (70.88 lakh shares) and Cals Refineries (51.52 lakh shares) were the other volume toppers in that order. United Spirits clocked highest turnover of Rs 94.95 crore on BSE. SBI (Rs 94.35 crore), Mahindra Satyam (Rs 92.47 crore), ICICI Bank (Rs 68.46 crore) and Jet Airways (Rs 48.44 crore) were the other turnover toppers in that order. India's services output growth held steady in July, helped by resilient demand, although a weak global economy and moderate growth in local industry could constrain expansion in the coming months, a survey showed on Friday, 3 August 2012. The seasonally adjusted HSBC Service Sector Business Activity Index, released by Markit, was 54.2 in July, little changed from June's 54.3. A figure below 50 indicates contraction. New orders at private sector companies rose steeply in July with services firms signaling a faster increase than those engaged in manufacturing. The HSBC India Composite Output Index fell to 54.4 in July from 55.7 in June. July's expansion is the slowest in three months, HSBC said. The India Meteorological Department (IMD) on Thursday, 2 August 2012, said the El Nino weather pattern is likely to reduce rains again in the second half of the June to September monsoon season. The IMD said rains over the entire June to September season are now expected to be less than 90% of long-term average. This is lower than IMD's previous forecast of 96%. Monsoon rains are considered deficient -- a drought in layman's terms -- if they fall below 90% of a 50-year average. Between June 1 and August 1, rainfall was about 19% below normal. The 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 said rainfall during August-September is expected to be 91% of the long-term average. The rainfall distribution has been erratic this year as major crop- growing regions such as Maharashtra, Karnataka, Gujarat, Punjab and Haryana have received scanty showers threatening the prospects of summer crops. With the monsoon season halfway through, India is staring at the possibility of a full-blown drought in some regions. A panel of Indian ministers early this 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. Insufficient rainfall could lead to higher food inflation. There will be an impact on foodgrain output, but it is too early to give any estimate, Farm Minister Sharad Pawar said early this week. Mr. Pawar said the government will raise subsidies for the supply of various seeds for alternate crops in affected areas. Rice sowing has picked up according to the latest data released by the Ministry of Agriculture. Rice was sown in 233.68 lakh hectares (lh) till Friday, 3 August 2012, compared with 191.06 lh a week back. Rice sowing so far has been below the normal area of 240.89 lh for the summer sown crop by this time of the year. Cumulative sowing of coarse cereals totaled 135.75 lh till 3 August 2012, compared with 117.48 lh a week back. It, however, remains much lower than 169.30 lh of normal area for the crop this time of the year. Sowing of pulses totaled 72.79 lh till 3 August 2012, compared with 62.99 lh a week back. It, however, remains lower than 84.15 lh of normal area for this time of the year. Sowing of oilseeds totaled 145.17 lh till 3 August 2012, compared with 138.33 lh a week back. It is almost equal to the normal area of 145.49 lh for oilseeds by this time of the year. Sowing of cotton totaled 100.14 lh till 3 August 2012, compared with 97.24 lh as on 27 July 2012. The normal cotton sowing area of 99.89 lh by this time of the year has already been surpassed. Sowing of jute and mesta totaled 8.40 lh as on 3 August 2012, exceeding the normal area of 8.22 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. A bad monsoon will have a larger impact on inflation than on growth as agriculture output constitutes a relatively small portion of India's economy, Indian central bank officials said on Wednesday, 1 August 2012, in a conference call following the release of its monetary policy review on Tuesday, 31 July 2012. The Reserve Bank of India (RBI) on Tuesday, 31 July 2012, kept its key policy rate viz. the repo rate unchanged at 8% after first quarter review of Monetary Policy 2012-13 in an effort to keep a lid on inflation and inflation expectations. The RBI, however, lowered banks' statutory liquidity ratio, or the part of deposits that must be invested mainly in government bonds, by a percentage point to 23% to ensure that liquidity pressures do not constrain the flow of credit to productive sectors of the economy. Principal adviser to the Planning Commission Pronab Sen last week said slowing investment due to weak confidence in the economy is hurting growth. Mr. Sen said Indian companies aren't facing any shortage of funds. Many of them are sitting on piles of cash and aren't even repatriating overseas borrowings, he added. The government should take steps to meet the fiscal deficit target set out in the budget and that would improve sentiment and revive investments, Mr. Sen said. He said the government should scale back its spending and slash subsidies on fuels, food and fertilizers to help check its budget deficit. Slowing growth in investment remains a cause for concern for India. Investment makes up 35% of India's economic activity. Prime Minister Dr. Manmohan Singh has 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 Monday, 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. Dr. 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. 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. Voting for the country's new vice president takes places on 7 August 2012 -- a day before the monsoon session of parliament kicks off. 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. Investors' focus is currently on Q1 June 2012 earnings. DLF and Steel Authority of India unveil Q1 results on Monday, 6 August 2012. Mahindra & Mahindra and Bharti Airtel unveil Q1 results on 8 August 2012. Tata Motors and Ranbaxy Laboratories unveil quarterly results on 9 August 2012. State Bank of India, Sun Pharmaceuticals Industries, Siemens and BPCL announce quarterly results on 10 August 2012. ONGC announces Q1 results on 11 August 2012. Tata Steel and Coal India unveil Q1 results on 13 August 2012. Hindalco Industries and IDFC will unveil Q1 results on 14 August 2012. European stocks rose on Friday, 3 August 2012, recouping from a sharp selloff the prior day, as European Central Bank (ECB) president Mario Draghi on Thursday, 2 August 2012, said the ECB may soon step in to buy government bonds in the open market, possibly in unlimited quantities, and will consider other unconventional measures to lower exceptionally high borrowing costs of financially stressed euro-zone economies. Key benchmark indices in UK, France and Germany were up by 1.39% to 2.48%. The ECB kept euro zone interest rates at a record low 0.75% but ECB President Mario Draghi said the council did consider a further rate cut on Thursday amid signs that an economic recession in peripheral European countries is spreading across the continent. Draghi indicated that any intervention would not come before September and only if governments activated the euro zone's bail-out funds to join the ECB in buying bonds. Draghi indicated that the ECB may buy government bonds in the open market under strict conditions and after stressed states submitted a request for aid. The Bank of England left its monetary policy unchanged on Thursday, judging that its July decision to expand purchases of government bonds is enough stimulus for now despite the danger of a prolonged slump. 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. Asian stocks dropped for a third day on Friday after European Central Bank (ECB) President Mario Draghi failed to deliver immediate action to stem the region's debt crisis. Key benchmark indices in Hong Kong, Japan, South Korea and Taiwan fell by between 0.12% to 1.13%. However, Singapore's Straits Times was up 0.5%. Indonesia's Jakarta Composite rose 0.16%. Mainland Chinese shares bucked a regional decline to rise in Friday trading -- with the Shanghai Composite Index up 1.02% after the country's financial regulator said it is trimming some stock fees, according to reports. The China Securities Regulatory Commission said it will cut some stock-trading fees for brokers, effective Sept. 1, with the state-run media agency saying the move was the third recent "large-scale reduction" in the fees. The publication reported separately that the CSRC was also considering a cut to the stamp duty on sales of stocks. Hopes of more policy stimulus in China also supported mainland Chinese stocks. People's Bank of China said in its quarterly monetary policy report released on Thursday that it will stabilizing economic growth a bigger priority. China's services firms regained some growth momentum in July, recovering from June's 10-month low, a private-sector survey showed on Friday. The China HSBC services purchasing managers index (PMI) rose to 53.1 in July from 52.3 in June, reflecting a rise in new orders even as sales prices and costs remained broadly unchanged. Earlier Friday, the official services PMI published by the National Bureau of Statistics showed the services industry slowing somewhat, to 55.6 in July from 56.7 in June, reflecting a slowdown in new orders and business activity sub-indexes. Trading in US index futures indicated that the Dow could gain 83 points at the opening bell on Friday, 3 August 2012. US and European shares slid on Thursday after the European Central Bank failed to take aggressive action to address the euro zone's debt problems. The latest response -- no change to interest rates nor an immediate restart of sovereign bond purchases -- fell short of ECB President Mario Draghi's pledge to do "whatever it takes" to preserve the euro. The influential US government data on non-farm payroll for July 2012 is due today, 3 August 2012. In June, the United States created 80,000 jobs, the third straight month of job growth of under 100,000. House and Senate leaders struck a deal early this week to fund the US government for six months, but the deal doesn't do anything to resolve the debt-ceiling or the fiscal cliff. While the agreement heads off the possibility of a government shutdown ahead of the November elections, it doesn't resolve issues related to hitting the US debt ceiling or the so-called fiscal cliff. That refers to expiring Bush-era tax cuts and spending reductions of about $1.2 trillion over 10 years split between defense and domestic programs. The US government is estimated to hit its $16.394 trillion debt ceiling sometime after the November elections. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012. The International Monetary Fund on Thursday called for a "policy game changer" in the euro zone to arrest the spread of the debt crisis it now says is clearly engulfing the entire currency bloc and its smaller neighbors. An IMF spillover report that looks at how the economic policies of the so-called systemic five economies -- the United States, China, euro zone, Japan and the United Kingdom -- affect each other and the rest of the world said the euro area crisis was by far the biggest concern weighing on policymakers' minds. The IMF said it had consulted 35 countries for the report including select number of emerging economies Brazil, Czech Republic, India, South Africa, Turkey, Russia, South Korea, Poland, Mexico and Saudi Arabia. "Despite progress in the face of constraints, the sense is that not enough has been done to stop the spread of stresses and attenuate fiscal-growth-banking feedback loops," the IMF said of the euro zone's policy actions so far. In a worst-case scenario simulated by the IMF, it found that euro zone output could be cut by five percentage points if policymakers did not act and the euro zone crisis worsened. If the euro zone crisis intensified, the IMF estimated that the impact to the world's poorest countries would be somewhere between mild to severe, and could push up their external financing needs by some $27 billion by the end of 2013. But the IMF said the euro zone was not the only global worry. Weighing possible spillovers elsewhere, the IMF also said the United States must remove the threat of a so-called "fiscal cliff" in 2013, with $4 trillion worth of expiring tax cuts and automatic government spending reductions next year, and not enough fiscal adjustments over the medium term.