Market surges as Govt stands firm on economic reforms

Key benchmark indices surged on the last trading session of the week, with the market sentiment boosted by the government on Thursday notifying the rules for allowing greater foreign investment in retail, aviation and broadcasting sectors. The government's announcement during trading hours today, 21 September 2012, of a reduction on taxes on overseas loans of local companies as well as announcement of a plan offering tax relief to retail equity investors, also boosted sentiment. Easing of political worries also aided rally on the domestic bourses after Samajwadi Party (SP) chief Mulayam Singh Yadav hinted at continuing giving outside support to the UPA, saying he does not want communal forces to come to power. The barometer index, BSE Sensex, reached its highest closing level in nearly 14 months. The S&P CNX Nifty attained its highest closing level in almost 14-1/2months. The Sensex jumped 403.58 points or 2.2%, off close to 115 points from the day's high and up about 340 points from the day's low. The market breadth was strong. Higher global markets also underpinned sentiment on the domestic bourses. Before today's rally, the Sensex had declined 193.06 points or 1.04% in two trading sessions to settle at 18,349.25 on Thursday, 20 September 2012, from a recent high of 18,542.31 on 17 September 2012. The Sensex has gained 1323.27 points or 7.59% in this month so far (till 21 September 2012). The Sensex has jumped 3297.91 points or 21.33% in calendar 2012 so far (till 21 September 2012). From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 3616.97 points or 23.89%. Coming back to today's trade, index heavyweight and cigarette maker ITC edged higher. Another index heavyweight Reliance Industries (RIL) also moved higher. Bank stocks rose across the board on speculation that as part of the renewed push to big bang economic reforms, the Manmohan Singh government is likely to clear a proposal to restructure the debt of state electricity boards (SEBs) and power distribution companies (discoms) to revive the ailing sector. HDFC Bank hit a record high. ICICI Bank hit a 52-week high. Capital goods stocks rose on renewed buying, with L&T hitting a 52-week high and Bhel surging over 7%. Reliance Anil Dhirubhai Ambani (ADA) Group shares surged. The market opened on a firm note after the government on Thursday formally notified its decision to allow greater foreign investment in retail, aviation and broadcasting sectors. The market extended initial gains to hit fresh intraday high in morning trade. The Sensex hit fresh intraday high in mid-morning trade. Key benchmark indices jumped in early afternoon trade as political worries eased after Samajwadi Party chief Mulayam Singh Yadav hinted at continuing giving outside support to the UPA saying he does not want communal forces to come to power. The market pared after striking fresh intraday highs in afternoon trade. The market regained strength in mid-afternoon trade. The market held firm in late trade. The BSE Sensex jumped 403.58 points or 2.2% to 18,752.83, its highest closing level since 25 July 2011. The index jumped 517.62 points at the day's high of 18,866.87 in early afternoon trade. The index rose 61.95 points at the day's low of 18,411.20 at the onset of the trading session. The S&P CNX Nifty jumped 136.90 points or 2.46% to 5,691.15, its highest closing level since 7 July 2011. The index hit a high of 5,720 and a low of 5,575.45 in intraday trade. The BSE Mid-Cap index rose 1.61% and the BSE Small-Cap index gained 1.46%. Both these indices underperformed the Sensex. BSE clocked turnover of Rs 2989 crore, higher than Rs 2042 crore on Thursday, 20 September 2012. The market breadth, indicating the overall health of the market, was strong. On BSE, 1,815 shares rose and 1,102 shares fell. A total of 123 shares were unchanged. Among the 30-share Sensex pack, 26 gained while only four of them declined. Index heavyweight and cigarette maker ITC advanced 1.77% to Rs 261. The stock had scaled a record high of Rs 272.50 in intraday trade on 14 September 2012. Index heavyweight Reliance Industries (RIL) rose 2.16%. DSP Merrill Lynch and Citigroup Global Markets India, who are the managers of RIL's buyback programme, have announced that RIL has purchased 3.90 crore shares and spent Rs 2794.73 crore (excluding brokerage, service tax, Securities Transaction Tax, Stamp Duty, Exchange Transaction Charges and Sebi fees) till 18 September 2012 under the company's 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. Capital goods stocks rose on renewed buying. BEML, Bhel, ABB, Thermax and Siemens rose by between 1.41% to 7.3%. L&T gained 3.95% to Rs 1581.20. The stock hit a 52-week high of Rs 1595 in intraday trade today. The company last week said it has restructured its IT and L&T Integrated Engineering Services businesses with a view to accelerate growth in the technology space. L&T Infotech has been reorganised around two business clusters, "industrial" and "services". L&T Integrated Engineering Services (IES) will be rebranded as L&T Technology Services. As a part of this strategy, three US-based professionals - Keshab Panda, Mukesh Aghi and Vivek Chopra will join as directors on the L&T Infotech board. L&T believes this restructure will help the company in growing these businesses, the company said in a statement. Bank stocks rose across the board on speculation that as part of the renewed push to big bang economic reforms, the Manmohan Singh government is likely to clear a proposal to restructure the debt of state electricity boards (SEBs) and power distribution companies (discoms) to revive the ailing sector. According to Reserve Bank of India data, the power sector has a total outstanding debt of Rs 344980 crore, or 7.94% of the banking sector's non-food credit as on 27 July 2012. State Bank of India jumped 4.29%. The bank said on Thursday, 20 September 2012, that it has decided to revise downwards its Base Rate by 25 basis points (bps) from 10% per annum to 9.75% per annum effective from September 20, 2012. Among other PSU bank stocks, Bank of India, Bank of Baroda and Punjab National Bank rose by between 4.11% to 5.64%. Axis Bank surged 7.56%. The bank said on Tuesday, 18 September 2012, Schroder Singapore Holding has acquired 25% stake in its subsidiary, Axis Asset Management Company (Axis AMC). The transaction provides Axis AMC access to Schroders' global distribution network and to advise overseas funds invested in Indian securities, Axis Bank said in a statement. The bank, however, did not disclose the deal value. Further, it enables Schroders to participate in the growth opportunity represented by the Indian mutual fund market through a strategic relationship with a leading private sector bank, it said. Longer term, in addition to distributing Axis AMC's funds internationally, there will be an opportunity to distribute Schroders funds in India through Axis AMC's distribution network, it added. Schroder Singapore Holding is a wholly-owned subsidiary of Schroders, which is UK's largest asset management company. It has operations in 26 countries. HDFC Bank rose 3.28% to Rs 626.80, which was also a record high for the stock. ICICI Bank gained 4.17% to Rs 1065.10. The stock hit a 52-week high of Rs 1085 in intraday trade today. Reliance Anil Dhirubhai Ambani (ADA) Group shares surged. Reliance Infrastructure, Reliance Broadcast Network, Reliance Capital, Reliance MediaWorks and Reliance Power gained by between 2.32% to 10.19%. Reliance Communications (RCom) jumped 8.34% on report the company has raised calling rates by 25% effective today, 21 September 2012, to improve its operating margins. According to the report, Reliance Communication revised call rates will initially affect new customers and will be extended to its existing users when the validity of their current tariff plans expire. The company has reportedly revised its base price from 1.2 paise per second to 1.5 paise and this has initially been implemented in Bihar, Madhya Pradesh, Gujarat and Himachal Pradesh and will be rolled out across the rest of the county within a month. Report suggested that the company aims to track average margin per user rather than average monthly revenue per user. RCom lost more than 13% of its mobile customers in July as it reportedly cut off inactive subscribers who have not used their phones for two months. The company's total mobile subscribers fell 13.25% to 134.11 million mobile subscribers at the end of July 2012, from 154.60 million in June 2012. IT stocks edged lower as the rupee rose to a four-month high against the dollar after the government cut taxes on overseas loans of local companies and approved a plan offering tax relief to retail equity investors. A firm rupee adversely affects operating profit margins of IT firms as the sector derives a lion's share of revenue from exports. India's largest software services exporter by revenues Tata Consultancy Services (TCS) fell 1.38%. The company announced during trading hours Tuesday, 18 September 2012, the official opening of the TCS Solutions Center - Minneapolis in Bloomington, Minnesota. The 50,000 square foot facility will be home t0 roughly 300 TCS employees. The center will serve as a hub for delivering technology services to customers in the region and is an integral part of TCS' Global Network Delivery Model. India's second largest software services exporter by revenues Infosys declined 0.8%. But, India's third largest software services exporter by revenues Wipro rose 1.33%. PSU OMCs gained on the recent steep slide in crude oil prices. BPCL (up 0.16%), Indian Oil Corporation (IOC) (up 1.81%) and HPCL (up 0.86%) gained. US crude oil futures for November delivery rose as much as 0.7% to $ 93.07 in electronic trading today after front- month prices slid 7.2% in the four days through yesterday, when the October contract expired. Meanwhile, the Centre today, 21 September 2012 removed all taxes on non-subsidised LPG cylinders. Announcing the decision, Finance Minister P Chidambaram said that there will zero customs duty and VAT on non-subsidised cylinders. The FM also welcomed the decision by some of the states to raise the cap on maximum number of subsidised LPG cylinders a family can buy in a year from six to nine. The government, in a slew of measures aimed at reducing the fiscal deficit and bringing the economy back on track, had announced a cap on the maximum number of subsidised LPG cylinders that a family can buy in a year. The government fixed the cap at six cylinders per family per annum. The Ministry of Petroleum & Natural Gas on Monday, 17 September 2012, said that PSU OMCs are currently (effective from 16 September 2012) incurring daily under-recovery of about Rs 498 crore on the sale of Diesel, PDS Kerosene and Domestic LPG. The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas reviewed international prices of crude oil and petroleum products during the 1st fortnight of September 2012. The under-recovery on High Speed Diesel (HSD) applicable for 2nd fortnight of September effective 16 September 2012 remains at high level of Rs 13.86 per litre despite last week's price hike, the Ministry of Petroleum & Natural Gas said in a statement. In case of PDS Kerosene and Domestic LPG the under-recoveries are Rs 32.70 a litre and Rs 347 per cylinder respectively for September 2012 as the same are reviewed on monthly basis, the Ministry of Petroleum & Natural Gas said. State-run oil marketing companies (PSU OMCs) incur under recoveries on domestic sale of diesel, LPG and kerosene at government controlled prices. The government has already freed pricing of petrol. The Cabinet Committee on Political Affairs (CCPA) raised price of heavily subsidised diesel by Rs 5 per liter on 13 September 2012 to balance government's fiscal deficit situation. The CCPA also restricted the supply of subsidized LPG cylinders to each consumer to six cylinders (of 14.2 kg) per annum. It kept kerosene prices unchanged. Power generation and distribution shares gained reports the cabinet may meet next week to take more reform steps such as improving the finances of power utilities. Lanco Infratech, JSW Energy, GMR Infrastructure, Adani Power, Tata Power (up 4.31%) and NHPC gained by between 1.92% to 10.64%. There has been speculation that as part of the renewed push to big bang economic reforms, the Manmohan Singh government is likely to clear a proposal to restructure the debt of state electricity boards (SEBs) and power distribution companies (discoms) to revive the ailing sector. According to Reserve Bank of India data, the power sector has a total outstanding debt of Rs 344980 crore, or 7.94% of the banking sector's non-food credit as on 27 July 2012. Report suggested that the discoms do not have enough money to buy power as a result of which even power surplus states such as Himachal Pradesh are suffering as well. The government's plan proposes to restructure a part of the loans given to discoms. Half of these loans would be transferred to the respective state government in lieu of which discoms would issue bonds. Under the arrangement, companies would reportedly have to service only the interest on reduced loans while state governments would service interest on the bonds. Banks and financial institutions are expected to reschedule the rest of the loans with a moratorium of up to three years on repayment of the principal amount, the report added. NTPC rose 2.68% after the company said it plans to add 14,038 megawatts (MW) of power generation capacity during the Twelfth Five Year Plan period (of which 2,160 MW has already been added) and maintain its position as the largest power generator in the country. The company's current installed capacity is 39,174 MW. Auto stocks rose on renewed buying. Maruti Suzuki India rose 2.37%. Tata Motors gained 1.03%. The company on Monday said its global wholesales, including Jaguar Land Rover, rose 13% to 97,225 units in August 2012 over August 2011. Cumulative wholesales for the fiscal are 475,381, higher by 11%, compared to the corresponding period in 2011-12. Global wholesales of all commercial vehicles - Tata, Tata Daewoo and the Tata Hispano Carrocera range – rose 4% to 50,084 units in August 2012 over August 2011. Cumulative wholesales for the fiscal were flat at 228,785 units. Global wholesales of all passenger vehicles rose 23% to 47,141 units in August 2012 over August 2011. Cumulative wholesales for the fiscal are 246,596 units, higher by 20%. Global wholesales of Tata passenger vehicles rose 35% at 23,081 units in August 2012 over August 2011. Cumulative wholesales for the fiscal are at 112,163 units, higher by 10%. Global wholesales of Jaguar Land Rover in August 2012 rose 13% at 24,060 vehicles in August 2012 over August 2011. Cumulative wholesales of Jaguar Land Rover for the fiscal are 134,433 units, higher by 31%. Jaguar wholesales for the month were 2,960 vehicles and cumulative wholesales were at 18,798 vehicles, while Land Rover wholesales in August 2012 were 21,100 vehicles and cumulative wholesales were 115,635 vehicles. Mahindra & Mahindra (M&M) rose 2.96%. The company Thursday unveiled the eagerly awaited all new compact and versatile sports utility vehicle (SUV) Quanto in Mumbai. Designed and developed in-house by Mahindra on the robust, proven and highly successful Ingenio platform, the Quanto is a direct outcome of customer insights pointing to the need for a compact and affordable SUV. The Quanto will be available nationally at Mahindra dealerships, with four distinct and attractive variants - C2, C4, C6 & C8. The Quanto price range starts from Rs 5.82 lakhs (ex-showroom Thane) for the base C2 model, to Rs 7.36 lakhs (ex showroom Thane) for the fully loaded top end C8 model. All the Quanto variants are powered by a 1.5 litre mCRlOO diesel engine giving a category best output of l00 bhp & a massive 240 nm of torque. The mCRlOO engine has India's first twin stage turbo technology for maximum power and excellent torque delivery. Two wheeler makers also gained. India's biggest bike maker by sales Hero MotoCorp (HMCL) rose 1.4%. Bajaj Auto gained 0.76%. Metal stocks rose on higher global commodity prices. Sterlite Industries, Bhushan Steel, JSW Steel, Tata Steel, Sail, Hindalco Industries, and Hindustan Zinc gained by between 1.58% to 7.68%. Shares of aviation firms jumped after the government on Thursday evening notified the norms for allowing 49% investment by foreign airlines in Indian carriers. Kingfisher Airlines, Jet Airways and SpiceJet surged by between 2.14% to 5.13%. The Cabinet Committee on Economic Affairs last week approved the proposal of the Department of Industrial Policy and Promotion for permitting foreign airlines to make foreign investment, up to 49% in scheduled and non-scheduled air transport services. Removing the existing restriction on investment by foreign airlines would assist in bringing in strategic investors into the civil aviation sector, the government said in a statement issued last week. Higher foreign investment inflows are necessary at the present juncture, in order to strengthen the sector, the government had said. Introduction of global best practices, concomitant with the induction of FDI from foreign airlines, is expected to lead to higher service standards, international best practices and induction of state-of-the-art technologies, in the air transport sector, the government had said. Media shares rose after the government on Thursday notified rules for greater foreign investment in some sections of the broadcasting sector. Balaji Telefilms, Zee News, NDTV, TV Today Network, and Sun TV Network gained by between 0.01% to 4.39%. Among cable TV and direct-to-home (DTH) service providers, Dish TV India, DEN Networks and Hathway Cable & Datacom rose by between 1.66% to 2.57% The Cabinet Committee on Economic Affairs (CCEA) last week announced increase in foreign investment limit from 49% to 74% in teleports (setting up up-linking HUBs/teleports), Direct to Home (DTH), Cable Networks (Multi-System-Operators operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability). In respect of Cable Networks (Other Multi-System-Operators not undertaking up-gradation of networks towards digitalization and addressability and Local Cable Operators), the existing limit of 49% foreign investment, under the automatic route, would continue. The CCEA also allowed foreign investment (FI) up to 74 percent in mobile TV. Zee Entertainment Enterprises lost 4.68% to Rs 176, with the stock reversing initial gains. The company on Thursday launched 24-hour Bangla Movie Channel -'Zee Bangla Cinema'. With a rich and varied film library, the Zee Bangla Cinema promises to offer a mixed bag of blockbusters from the golden era directors and the best masterpieces of Satyajit Ray, Mrinal Sen, Ritwick Ghatak, Tarun Mazumdar to the present movies of directors like Rituparno Ghosh, Raj Chakraborty and Anjan Dutta. The channel will go on-air on September 23rd and will telecast 2012's blockbuster movie 'Shatru' starring Jeet and Nusrot. Shares of organised retailers edged higher after the government notified the rules for allowing 51% foreign direct investment (FDI) in multi-brand retail. Pantaloon Retail (India), Trent and Shoppers Stop rose 0.2% to 4.69%. The permission for 51% FDI in multi-brand retail trading (MBRT) is subject to specified conditions. The policy provides that it would be the prerogative of the state governments to decide whether and where a multi-brand retailer, with FDI, is permitted to establish its sales outlets within the state. Therefore, implementation of the policy is not a mandatory requirement for all states, the government has said. Realty stocks gained as investors bet that retail real estate will get a boost from the entry of foreign supermarket chains in the country, with the government allowing up to 51% foreign direct investment in multi-brand retail trade. DLF, HDIL, Anant Raj Industries and Unitech gained by between 2.22% to 11.56%. Foreign institutional investors (FIIs) sold shares worth a net Rs 1.90 crore from the secondary equity market on Thursday, 20 September 2012, as per data from Securities & Exchange Board of India (Sebi). FIIs had made heavy purchases of Indian stocks recently. FIIs bought shares worth a net Rs 6267.30 crore from secondary markets during three sessions from 14 to 18 September 2012. The government today, 21 September 2012, approved the operational features of the Rajiv Gandhi Equity Savings Scheme, allowing an income-tax waiver of 50% on new equity investments of up to Rs 50,000 by retail investors who have annual income of less than Rs 10 lakh. The government had first made the announcement of the Rajiv Gandhi Equity Savings Scheme in the Union Budget for 2012-13 announced in March 2012. The tax-saving plan is part of the steps the government announced the Budget to encourage the flow of India's significant household savings into financial markets. The scheme is open to new retail investors, identified on the basis of their PAN numbers. This includes those who have opened the Demat account but have not made any transaction in equity and/or in derivatives till the date of notification of this scheme and all those account holders other than the first account holder who wish to open a fresh account. The maximum investment permissible under the Scheme is Rs 50,000 and the investor would get a 50% deduction of the amount invested from the taxable income for that year. To benefit the small investors, the investments are allowed to be made in installment in the year in which tax claims are made. Under the scheme, those stocks listed under the BSE 100 or CNX 100, or those of public sector undertakings which are Navratnas, Maharatnas and Miniratnas would be eligible. Follow-on public offers (FPOs) of the above mentioned companies would also be eligible under the scheme. IPOs of PSUs, which are getting listed in the relevant financial year and whose annual turnover is not less than Rs 4000 crore for each of the immediate past three years, would also be eligible. Exchange Traded Funds (ETFs) and Mutual Funds (MFs) that have RGESS eligible securities as their underlying and are listed and traded in the stock exchanges and settled through a depository mechanism have also been brought under RGESS. The total lock-in period for investments under the scheme would be three years, including an initial blanket lock-in period of one year, commencing from the date of last purchase of securities under RGESS. After the first year, investors would be allowed to trade in the securities in furtherance of the goal of promoting an equity culture and as a provision to protect them from adverse market movements or stock specific risks as well as to give them avenues to realize profits. Investors would, however, be required to maintain their level of investment during these two years at the amount for which they have claimed income tax benefit or at the value of the portfolio before initiating a sale transaction, whichever is less, for at least 270 days in a year. The calculation of 270 days includes those days pursuant to the day on which the market value of the residual shares/units has automatically touched the stipulated value after the date of debit. The general principle under which trading is allowed is that whatever is the value of stocks/units sold by the investor from the RGESS portfolio, RGESS compliant securities of at least the same value are credited back into the account subsequently. However, the investor is allowed to take benefits of the appreciation of his RGESS portfolio, provided its value, as on the previous day of trading, remains above the investment for which they have claimed income tax benefit. For the purpose of valuation of shares, the closing price as on the previous day of the date of trading will be considered so that new investors are certain about their debits and credits into the account. In case the investor fails to meet the conditions stipulated, the tax benefit will be withdrawn. The finance ministry today, 21 September 2012, announced reduction in the tax rate on the interest paid to overseas lenders by local companies to 5% from 20%. The rate is applicable from July 2012 until June 2015. "This lower rate of taxation will apply to interest paid to a non-resident by an Indian company for money borrowed in foreign currency from a source outside India, either under a loan agreement or by way of long-term infrastructure bonds," the Finance Ministry said in a statement. The tax reduction will encourage corporates to borrow more for funding expansion projects. Over the past few weeks, the Reserve Bank of India has eased curbs on overseas borrowing for companies in the manufacturing and infrastructure sectors to boost growth. The government on Thursday evening braved intense political opposition to notify the rules for allowing 51% foreign direct investment (FDI) in multi-brand retail. The government also notified on Thursday the relaxed conditions for single brand retail as well as the norms for allowing 49% investment by foreign airlines in Indian carries and permitted greater foreign investment in some sections of the broadcasting sector. Samajwadi Party chief Mulayam Singh Yadav has hinted at continuing giving outside support to the UPA saying he does not want 'communal forces' to come to power. The UPA government, which has been reduced to a minority after the Trinamool Congress decided to withdraw its support, can safely cross the half-way mark in the Lok Sabha with Samajwadi Party's support. Samajwadi Party has 22 MPs. "We are giving support to the Congress so as not to allow the communal forces to come to power," Mulayam said on Friday. When asked about his reactions to the government's policies, Mulayam said he was against the government's policies, but wanted to keep 'criminal forces' at bay. "We are against the policies of Congress. We are not in UPA, but we support them to keep criminal forces away," Mulayam said. However, Mulayam also endorsed a Third front for the next elections. "The third front will win next elections. Who will lead the Third front will be decided later, Mulayam said. The next general election is due in May 2014. Six ministers of Trinamool Congress are set to formally submit their resignation letters to President Pranab Mukherjee today, 21 September 2012. Trinamool Congress early this week decided to withdraw from the government due to a recent hike in diesel prices, the government's decision to cap subsidised LPG for households and to allow 51% FDI in multi-brand retail. As per media reports, Prime Minister Manmohan Singh will addresses the nation today, 21 September 2102, to explain the economic rationale behind the government's decisions to hike fuel prices and allow foreign supermarkets into the country. Coming back to economics, the outlook for winter crops has improved due to the annual monsoon rains' delayed withdrawal, which has provided crops with badly needed moisture after months of insufficient rainfall. The monsoon rains usually leave India by 1 September, but this year rainfall began to pick up in late August, after insufficient rain in preceding months forced four major agricultural states to declare a drought. The rains are now expected to begin departing from northwest regions by Monday, 24 September 2012, the state-run India Meteorological Department said on Wednesday, 19 September 2012. The overall rainfall deficit for the monsoon season has narrowed to 5% below the long-term average from around 13% in July and 29% in June. The late rain was unexpected. In fact, weather department had forecast that an El Nino would emerge in September. The weather event usually limits rainfall in India. Farm Secretary Ashish Bahuguna on Wednesday, 19 September 2012, said that the late rainfall would mitigate damage to summer crops caused by the earlier rain shortfall, but wouldn't result in a dramatic improvement. The government will release its latest crop estimate for the year that started on 1 July 2012 on Monday, 24 September 2012, Mr. Bahuguna said. The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. 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. The Reserve Bank of India Monday, 17 September 2012, announced a reduction of 25 basis points in the cash reserve ratio (CRR) of scheduled banks to 4.5% of their net demand and time liabilities (NDTL) effective the fortnight beginning 22 September 2012 from current 4.75% after mid-quarter review of monetary policy. The reduction in CRR will inject around Rs 17000 crore of primary liquidity into the banking system, RBI said in a statement. The RBI kept its policy rate viz. the repo rate unchanged at 8%, stating that inflationary pressures, both at wholesale and retail levels, remain strong. As inflationary tendencies have persisted, the primary focus of monetary policy remains the containment of inflation and anchoring of inflation expectations, RBI said. Finance Minister P. Chidambaram, Monday, 17 September 2012, said the government will unveil more measures to narrow fiscal deficit and to boost economic growth, which may encourage the central bank to cut interest rates at its next monetary policy review on 30 October 2012. He didn't elaborate on what the measures could be. RBI is scheduled to undertake Second Quarter Review of Monetary Policy - 2012-13 on 30 October 2012. The Cabinet Committee on Political Affairs (CCPA) raised price of heavily subsidised diesel by Rs 5 per liter on 13 September 2012 to balance government's fiscal deficit situation. The CCPA also restricted the supply of subsidized LPG cylinders to each consumer to six cylinders (of 14.2 kg) per annum. Finance Minister P. Chidambaram early this month said that India is making consistent efforts to check the abuse of a double-taxation-avoidance pact it has with Mauritius. India has in the past said it is considering a review of the treaty in an effort to boost tax revenue. An India-Mauritius joint working panel was set up in 2006 to put in place adequate safeguards for preventing the misuse of the double-taxation-avoidance agreement between the two countries. India, in the past, has said that Mauritius was unwilling to cooperate on this issue. Mauritius says it has taken India's concerns seriously. Traditionally, Mauritius has accounted for nearly 40% of India's foreign investment. Under the avoidance of double taxation treaty, companies that invest through Mauritius do not have to pay tax in India but only have to pay tax in the island. But capital gains tax is close to zero in Mauritius, making it a popular investment hub. India wants to renegotiate the double taxation treaty with Mauritius to check round-tripping, in which money is moved out of one country to another and brought back under the garb of foreign capital, taking advantage of tax breaks. Meanwhile, a committee appointed by the government to review the controversial general anti-avoidance rules (GAAR) early this month suggested deferring the implementation of anti-avoidance rules by three years. "Where Circular No. 789 of 2000 with respect to Mauritius is applicable, GAAR provisions shall not apply to examine the genuineness of the residency of an entity set up in Mauritius," the committee said. The committee has also recommended that the government should abolish the tax on gains arising from transfer of listed securities, whether in the nature of capital gains or business income, to both residents as well as non-residents. The panel has said the government might consider increasing the rate of Securities Transaction Tax (STT) appropriately to make the proposal tax neutral. At present, short-term capital gains on equities are taxable at the rate of 15%. Holding period of less than one year is considered as short term. There is no long term capital gains tax on sale of shares. Business income is taxed at 30%. Distinguishing capital gains and business income depends on several factors, and disagreements have resulted in numerous litigation cases between the Revenue Department and taxpayers, the committee said in its report. European stock markets rose on Friday, 21 September 2012, as Spain reportedly moved closer to asking for a bailout and resource firms tracked commodity prices higher. Key benchmark indices in Germany and France were up by 0.04% to 0.26%. UK's FTSE 100 fell 0.13%. European Union authorities are reportedly helping Spain to draft a plan for economic reforms focusing on measures that could be demanded by international lenders in a rescue program for Spain. The plan is expected to be revealed next Thursday, reports said. The Spanish government is expected to announce on Friday, 28 September 2012, the results of a review of its banking system, which will also include how much the European Stability Mechanism needs to recapitalize those banks Britain posted its biggest August budget deficit on record, heaping pressure on Chancellor of the Exchequer George Osborne as the recession hits tax revenue and pushes up spending on welfare. The shortfall excluding government support for banks was 14.4 billion pounds ($23.5 billion), the Office for National Statistics said in London today. Asian stocks rose, Friday as Apple Inc.'s iPhone 5 debut boosted information technology shares and energy companies advanced on higher crude prices. Key benchmark indices in China, Hong Kong, Japan, Indonesia, Singapore, South Korea and Taiwan rose by between 0.09% to 0.7%. The Japanese central bank moved to ease monetary policy Wednesday, saying it would buy more government bonds and other assets, following the United States Federal Reserve in a show of resolve to shore up a shaky economic recovery. The Bank of Japan will expand its asset purchase and loan program by 10 trillion yen, or $126 billion, to 80 trillion yen, the bank announced after a two-day board meeting that ended Wednesday. The purchase program was also extended six months, to the end of 2013. The program aims to stimulate economic growth by adding to bank reserves and driving down the cost of lending, prompting more money to flow through the economy. The Bank of Japan downgraded its assessment of the country's export-driven economy, citing slower global demand and fresh uncertainties caused by anti-Japan protests this week in China, a big trading partner. As expected, the bank kept its benchmark interest rate at a range of zero to 0.1 percent. Central banks have been stepping in with monetary-policy easing to limit weakness in the global economy, with bond-buying plans by the Federal Reserve last week and the Bank of Japan on Wednesday marking the latest efforts in this direction. Trading in US index futures indicated that the Dow could gain 33 points at the opening bell on Friday, 21 September 2012. US stocks ended Thursday's session little changed, as investors weighed more data pointing to an ongoing slowdown in the global economy. US manufacturing ended its weakest quarter of growth in three years this month, data showed on Thursday, while the Philadelphia Federal Reserve Bank said its business activity index in the U.S. mid-Atlantic region shrank in September for a fifth straight month, though the pace of contraction lessened. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012.