PSU OMCs slide on concerns about high under-recovery

Key benchmark indices edged lower after the latest data showed that the nation's GDP growth languished around its lowest in three years in Q1 June 2012. The 50-unit S&P CNX Nifty reached its lowest closing level in four weeks. The barometer index, BSE Sensex, reached its lowest closing 3-1/2 weeks. The Sensex lost 112.08 points or 0.64%. Index heavyweight Reliance Industries (RIL) declined. PSU OMCs extended their recent losses triggered by concerns about high under-recovery. Index heavyweight and cigarette maker ITC edged lower. GlaxoSmithkline Consumer Healthcare, Marico and Procter & Gamble Hygiene and Health Care hit record high. Metal stocks dropped. Sugar stocks gained as sugar futures rose to 3 week high driven by rising demand in spot markets and on output concerns. Capital goods stocks extended recent losses on worries slowdown in the economy could crimp new orders. Shares of power generation and power distribution companies edged lower. Interest rate sensitive auto stocks declined as higher-than-expected Q1 GDP growth data could bolster the case for the central bank to refrain from lowering interest rates for now. The market breadth was negative. The market slipped into the red after positive start. The market trimmed losses after hitting fresh intraday low in morning trade. A bout of volatility was witnessed as key benchmark indices weakened once again after staging intraday recovery after hitting fresh intraday lows in mid-morning trade after the latest data showed that India's economy grew at a faster-than-expected pace of 5.5% in Q1 June 2012 from a year earlier, picking up from 5.3% growth in Q4 March 2012. The data hit the market at 11:00 IST. Volatility continued as key benchmark indices weakened once again after trimming most of the intraday losses in early afternoon trade. Weakness continued on the bourses in afternoon trade. The market trimmed losses after hitting fresh intraday low in mid-afternoon trade. The 50-unit S&P CNX Nifty trimmed losses after hitting its lowest level in 4 weeks. The Sensex trimmed losses after hitting its lowest level in 3-1/2 weeks. The BSE Sensex lost 112.08 points or 0.64% to 17,429.56, its lowest closing level since 6 August 2012. The index tumbled 204.03 points at the day's low of 17,337.61 in mid-afternoon trade. The index rose 15.98 points at the day's high of 17,557.62 in opening trade. The S&P CNX Nifty lost 56.55 points or 1.06% to 5,258.50, its lowest closing level since 3 August 2012. The index hit a low of 5,238.90 and a high of 5,303.25 in intraday trade. BSE clocked turnover of Rs 1837 crore, lower than Rs 2592 crore on Thursday, 30 August 2012. The market breadth, indicating the overall health of the market, was negative. On BSE, 1,419 shares fell and 1,380 shares rose. A total of 131 shares were unchanged. From the 30-share Sensex pack, 25 stocks fell and rest of them rose. Index heavyweight Reliance Industries (RIL) lost 1.28% to Rs 771.95. RIL early this week said it has scheduled a planned maintenance turnaround of one of the diesel hydrotreater units of the DTA refinery at its Jamnagar, Gujarat complex for a period of approximately two and half weeks starting 28 August 2012. This opportunity will also be utilised to carry out other maintenance and inspection jobs during the shutdown period, RIL said in a statement. During the period the other diesel hydrotreating unit of the DTA refinery along with other units including crude processing levels are planned at normal levels, RIL said. RIL bought back 3.89 crore shares for about of Rs 2788.83 crore till 21 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. Shares of offshore oil services were up across the board. Great Offshore and Aban Offshore rose 1.03% to 2.73%. Index heavyweight and cigarette maker ITC declined 0.83% to Rs 267.55. The stock had scaled a record high of Rs 271.50 in intraday trade on Thursday, 30 August 2012. The company reported strong results last month. ITC'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. Some FMCG stocks rose on revival of monsoon rains this month. FMCG firms derive substantial sales from rural India. Marico rose 1.32% to Rs 199.65. The stock hit an intraday high of Rs 201.80, matching its record high hit on 23 August 2012. GlaxoSmithkline Consumer Healthcare rose 1.86% to Rs 2966. The stock scaled a record high of Rs 2989 in intraday trade today, 31 August 2012. Procter & Gamble Hygiene and Health Care gained 3.5% to Rs 2460. The stock scaled a record high of Rs 2470 in intraday trade today, 31 August 2012. Shares of power generation and power distribution companies edged lower. Tata Power Company, Torrent Power, NTPC, JSW Energy, and Reliance Power shed by between 0.13% to 1.9%. Among power distribution stocks, Reliance Infrastructure and Power Grid Corporation of India declined by between 0.48% to 1.44%. Power Minister Veerappa Moily said on Wednesday, 29 August 2012, that the government plans to amend the Electricity Act 2003 to prevent a repeat of two power failures in July 2012 that affected more than 600 million people. A key push of the proposals will be to give regulators more authority to revise charges as well as prevent states from drawing too much electricity from the national supply network, which was cited as a major factor for the July 30 and July 31 outages. "We need to give more autonomy to the regulators so that they can freely fulfill the responsibility of enforcing the discipline on state utilities," he said. Mr. Moily said the government plans to table the proposals during the winter session of parliament. The government has drawn up a plan to improve the finances of the country's mostly state-run electricity distribution companies by regular power-tariff increases and by state governments taking over some of the debt on the books of the distribution companies. Mr. Moily said this proposal, which was sent for inter-ministerial consultations in July, will be taken up by the federal cabinet soon. Aviation shares were mostly higher. Jet Airways (India) and Kingfisher Airlines rose by between 0.46% to 10.43%. However, SpiceJet declined 0.8%. Sugar stocks gained as sugar futures rose to 3 week high today driven by rising demand in spot markets and on output concerns. Bajaj Hindusthan, Balrampur Chini Mills and Shree Renuka Sugars rose by between 0.83% to 3.77%. Metal stocks declined. Jindal Steel & Power, Sterlite Industries, Bhushan Steel and Tata Steel shed by between 0.45% to 1.99%. Hindalco Industries declined 2.07% to Rs 103.90 as the stock turned ex-dividend today, 31 August 2012, for dividend of Rs 1.55 per share for the year ended 31 March 2012 (FY 2012). The stock hit 52-week low of Rs 102.35 in intraday trade. JSW Steel fell 0.32%, with the stock reversing initial gains. The company announced after trading hours Thursday, 30 August 2012, that the company's board of directors will meet on 1 September 2012 to consider a proposal for restructuring and reorganisation of certain business and undertakings of the group, including that of JSW Ispat Steel. Shares of JSW Ispat Steel rose 0.42% Capital goods stocks extended recent losses on worries slowdown in the economy could crimp new orders. BEML, Siemens, Bhel, Thermax and L&T shed by between 0.74% to 3.01%. Interest rate sensitive auto stocks declined as higher-than-expected Q1 GDP growth data could bolster the case for the central bank to refrain from lowering interest rates for now. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing. Auto companies will start announcing their August 2012 sales data starting from tomorrow, 1 September 2012. India's largest commercial vehicle maker by sales Tata Motors shed 1.46%. The Supreme Court last week issued notice to Tata Motors on the West Bengal state government's appeal challenging a Calcutta high court judgment quashing a state law for returning land acquired from farmers for the aborted Nano small car factory in Singur. A bench of Justices H L Dattu and C K Prasad issued notice to the car manufacturer and said the high court directed stay on operation of the law will continue. A division bench of the high court on June 22 annulled the law enacted by the Trinamool Congress government in West Bengal to wrest control of the land acquired for setting up the Nano car factory at Singur by Tata Motors. The court had ruled that the Singur Land Rehabilitation and Development Act, 2011 was unconstitutional and void. Prior to this, the single judge of the high court had upheld the Act. India's largest tractor maker by sales M&M dropped 0.73%. The central government has reportedly approved a Rs 23000 crore plan to spur electric and hybrid vehicle production over the next eight years. M&M manufactures Mahindra Reva, India's only electric-focused carmaker. Minister of State for Petroleum and Natural Gas Mr. R.P.N. Singh informed the Lok Sabha in a written reply last week the that Ministry of Petroleum & Natural Gas (MoP&NG) has written to the Ministry of Finance for levying additional excise duty on diesel cars. Mr. Singh said Petroleum Planning and Analysis Cell (PPAC) in association with the public sector Oil Marketing Companies (OMCs) commissioned an All India Study on sectoral demand of diesel and petrol based on 2011-12 diesel consumption. He emphasized that in view of the uniform pricing of diesel (HSD) except for local levies, subsidy on diesel is available to all sectors of consumption. Mr. Singh also said that the Ministry of Petroleum & Natural Gas (MoP&NG) in its Budget Proposal to the Ministry of Finance had proposed to levy additional excise duty on diesel cars. Subsequently, MoP&NG has also written to the Ministry of Finance for levying additional excise duty on diesel cars, gensets and mobile towers. India's largest car maker by sales Maruti Suzuki India declined 0.67%. The company's chairman R.C. Bhargava said at the company's annual meeting early this week that the company may raise its capacity to manufacture diesel engines beyond its initial plan of 7 lakh units a year by 2014. Maruti currently has a capacity to make 3 lakh diesel engines. It also sources another one lakh from Fiat S.p.A. Maruti is investing Rs 1700 crore to set up a new diesel-engine plant that is expected to start production by the middle of 2013. Diesel is subsidized in India due to its big impact on inflation and is cheaper than petrol, which costs 73% more. Because of the huge price gap, demand for diesel-run cars is strong though auto sales are tepid overall due to a slowing local economy, high interest rates on loans as well as steep petrol prices. Mr. Bhargava said 700 of 1,000 workers at the company's Manesar plant in Haryana have joined work and that the company is sure of resuming full production in the shortest period of time. Shares of two-wheeler makers dropped. TVS Motor Company, Hero MotoCorp and Bajaj Auto shed by between 0.92% to 3.02%. IT stocks edged lower across the board. India's second largest software services exporter by revenues Infosys fell 0.74%. India's third largest software services exporter by revenues Wipro declined 1.76%. India's largest software services exporter by revenues Tata Consultancy Services (TCS) fell 1.75% to Rs 1341.10. The stock had hit a record high of Rs 1,378.50 in intraday trade Thursday, 30 August 2012. Pharma stocks extended their recent gains. Cipla rose 1.64% to Rs 378.15. The stock hit a record high of Rs 383 in intraday trade today, 31 August 2012. Glenmark Pharmaceuticals gained 2.16% to Rs 442.65. The stock hit a 52-week high of Rs 449.75 in intraday trade today, 31 August 2012. Ranbaxy Laboratories gained 0.35%. Bank stocks were mixed. India's second biggest private sector bank in terms of branch network HDFC Bank fell 0.02%. India's largest private sector bank by net profit ICICI Bank declined 0.92%. State Bank of India (SBI) rose 0.26%. Bank of Baroda and Punjab National Bank shed by between 0.13% to 0.42%. Bank of India rose 0.08%. The government has advised state-run banks to take a number of new initiatives to increase the pace of recovery and manage non-performing assets (NPA), which include appointment of Nodal officers for recovery, to conduct special drives for recovery of loss assets, to put in place early warning system, to replace system of post dated cheques with Electronic Clearance System (ECS) and to proactively pursue the loan issues with State Governments. This information was given by the Minister of State for Finance, Mr. Namo Narain Meena in written reply to a question in Rajya Sabha on Thursday, 30 August 2012. Banks are required to monitor their NPAs and take steps to bring them down through recovery/other channels. Reserve Bank of India also monitors the NPA levels in banks. This aspect is reviewed during Annual Financial Inspections of Banks and monitored on an ongoing basis through regulatory returns submitted by banks and periodical meetings with banks. The channels of recovery available to banks include recourse to Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Debt Recovery Tribunals, Lok Adalats etc. The ratio of gross NPAs to gross advances of state-run banks as on 30 June 2012 was 3.48% as against 2.12% for private sector banks. Cement stocks dropped ahead of the announcement of August 2012 dispatches data starting tomorrow, 1 September 2012. ACC, India Cements, UltraTech Cement and Ambuja Cements shed by between 0.24% to 4.57% Jaiprakash Associates fell 0.69%. The company on Wednesday, 29 August 2012, said it has priced a $150 million FCCB (foreign currency convertible bonds) issue which has been fully subscribed. The conversion price for the FCCB issue has been set at Rs 77.50 per share, subject to certain adjustments, Jaiprakash Associates said. The company said that the proceeds of the FCCB issue will be utilized to part finance the repayment of the existing FCCBs of the company maturing on 12 September 2012, Jaiprakash Associates said. Jaiprakash Associates had raised $400 million from issue of Zero Coupon Foreign Currency Convertible Bonds on 11 September 2007. A reserve aggregating to Rs 779.63 crore has been created up to 31 March 2012 for the redemption premium on these outstanding FCCBs, Jaiprakash Associates said in its annual report for 2011-12. Telecom stocks were mixed after recent losses after the government on Thursday, 30 August 2012, removed the restriction on SMSs through mobile phone with immediate effect which was earlier imposed to check circulation of objectionable content. Idea Cellular rose 0.2%. Bharti Airtel rose 1.22% to Rs 245.70. The stock had hit a 52-week low of Rs 238.50 in intraday trade Thursday, 30 August 2012. Reliance Communications declined 0.51% to Rs 48.60. The stock had hit a record low of Rs 46.60 in intraday trade Thursday, 30 August 2012. India's largest dedicated housing finance firm by revenue HDFC rose 1.31% to Rs 733.35. The stock hit a 52-week high of Rs 738.80 in intraday trade today, 31 August 2012. PSU OMCs extended their recent losses triggered by concerns about high under-recovery. BPCL, HPCL and Indian Oil Corporation dropped by between 1.01% to 3.43%. The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas has reviewed international prices of crude oil and petroleum products during the first fortnight of August 2012. Accordingly, the under-recovery on HSD (High Speed Diesel) applicable for the 2nd fortnight of August effective 16 August 2012 is higher at Rs 13.76/litre compared to Rs 12.06/litre during previous fortnight, the Ministry of Petroleum & Natural Gas said in statement on 16 August 2012. PSU OMCs are currently (effective 16 August 2012) incurring daily under-recovery of about Rs 405 crore on the sale of diesel, PDS kerosene and domestic LPG, the Ministry of Petroleum & Natural Gas said. PSU OMCs incurred under-recovery of Rs 47811 crore in Q1 June 2012. Their under-recovery totaled Rs 138541 crore in the year ended 31 March 2012 (FY 2012). Neyveli Lignite Corporation (NLC) rose 1.67%. The Finance Ministry has issued an advertisement for appointing merchant bankers for divestment of 5% government stake in the company. The government intends to sell 5% stake in NLC through the stock exchanges mechanism. The government currently holds 93.56% stake in NLC. India's gross domestic product (GDP) rose 5.5% in Q1 June 2012, data released by the government today, 31 August 2012, showed. The services sector grew 6.9%, industry grew 3.6% and agriculture sector grew 2.9%. Manufacturing output rose 0.2% while mining sector grew 0.1% in Q1 June 2012. The economic activities which registered significant growth in Q1 June 2012 are construction at 10.9%, 'financing, insurance, real estate and business services' at 10.8% and 'community, social and personal services' at 7.9%. The key indicators of construction sector viz. production of cement increased by 11% and consumption of finished steel registered growth rate of 8.8% in Q1 June 2012, Ministry of Statistics & Programme Implementation said in a statement today, 31 August 2012. India's economy has slowed sharply over the past year due to weak industrial activity as high interest rates crimped demand and made it hard for corporates to finance expansion plans. Reacting to the first quarter GDP growth data, Finance Minister P. Chidambaram said that after the continuous reduction in the growth rate in successive quarters beginning in the fourth quarter of 2010-11, this is the first time when quarterly growth rate has exceeded the growth rate in the previous quarter. The decline in the growth of fixed investment (0.7 per cent in Q1 of 2012-13 as against 14.7 per cent in Q1 of 2011-12) is a source of concern to government, Mr. Chidambaram said. It emphasizes once again the need to take quick decisions to accelerate investments, especially removing all bottlenecks to investments in the manufacturing sector, the Finance Minister said. At the same time, there are also encouraging signs such as the growth of the construction sector at 10.9 per cent (Q1 of 2012-13) as against 3.5 per cent in Q1 of 2011-12, Mr. Chidambaram said. Foreign institutional investors (FIIs) bought shares worth massive Rs 2501.40 crore from the secondary equity markets on Thursday, 30 August 2012, as per data from Securities & Exchange Board of India (Sebi). FIIs made substantial purchases of Indian stocks in August 2012. Their inflow into the secondary equity market totaled Rs 9258.90 crore during 20 trading sessions from 1 to 30 August 2012. FIIs had bought shares worth net Rs 9691 crore from the secondary equity markets in July 2012. The Supreme Court today, 31 August 2012, ordered two Sahara Group companies to refund Rs 17400 crore to investors. The apex court told Sahara India Real Estate Corp. and Sahara Housing Investment Corp. to deposit the money with 15% interest within the next three months. The ruling follows an appeal by the Sahara Group companies against a Securities Appellate Tribunal order on Oct. 18 2011, after Securities & Exchange Board of India (Sebi) said the fund-raising by the two Sahara Group firms was illegal. The court asked the two Sahara Group firms to submit details of the investors within the next 10 days, and said that Sebi will have the final say on the issue. The court said Sebi will pass the money on to the 23 million investors. If the Sahara Group units don't comply with the court's orders, Sebi will have the authority to seize their assets and freeze their bank accounts. Sebi will also have the final jurisdiction on investment instruments such as optionally fully convertible debentures, the apex court said. Both houses of parliament were again disrupted on Friday, 31 August 2012, as the Bharatiya Janata Party (BJP) kept up the offensive and created a ruckus demanding the resignation of Prime Minister Manmohan Singh over coal block allocation. Both Lok Sabha and Rajya Sabha were adjourned till Monday, 3 September 2012. Outside parliament, the Samajwadi Party, the Telugu Desam Party and the Left parties staged a demonstration over the coal blocks. The parties have been demanding that Parliament be allowed to function and that Prime Minister Manmohan Singh be allowed to speak. Prime Minister Dr. Manmohan Singh early this week denied allegations of impropriety in coal-block allocations and termed "clearly disputable" the Comptroller and Auditor General of India's (CAG) observations that the process followed to allot them deprived the government billions of dollars in revenue. In its report on the allocation of coal blocks, CAG said the government lost a maximum of Rs 1.86 lakh crore by allocating licenses for 57 coal-mining blocks between 2004 and 2011 to state-owned and private companies without a transparent auction. Dr. Singh said the CAG's calculation of about Rs 1.86 lakh crore of financial gain to private parties can be questioned on a number of technical points. Dr. Singh also said since that the coal blocks were allocated to private companies only for captive purposes for specified end-uses, it will not be appropriate to link the allocated blocks to the price of coal set by CIL. Dr. Singh said it is true that the private parties that were allocated captive coal blocks could not achieve their production targets. This could be partly due to cumbersome processes involved in getting statutory clearances, an issue which the government is addressing separately, Dr. Singh said. Dr. Singh said that the government has initiated action to cancel the allocations of allottees who did not take adequate follow-up action to commence production. Moreover, CBI is separately investigating the allegations of malpractices, on the basis of which due action will be taken against wrongdoers, if any, Dr. Singh said. Trade Minister Anand Sharma on 23 August 2012 said that a deadlock in parliament over allegations of irregularities over the allocation of coal blocks is delaying the government's move to push ahead with reforms to stimulate economic growth. The government has very limited time to take economic reform measures given that assembly elections in Gujarat and Himachal Pradesh (HP) are scheduled in December this year. It will difficult for the government to enact controversial measures close to the assembly polls. After elections in Gujarat and HP, assembly elections are planned in a total of 10 states during the period from March 2013 to January 2014. The next general election is due in May 2014. The Union Cabinet last week deferred a decision on changes proposed in a draft land acquisition law that is aimed at streamlining the land acquisition process for projects. Reserve Bank of India (RBI) governor D Subbarao early this week said India's inflation is still a challenge, but its growth story remains intact. "India has no space for a policy response to a crisis, we are more vulnerable," Subbarao said at an event in Cornell University in the United States. The country, he said, had room to react through monetary policy to the 2008-09 crisis, but this time around a litany of challenges--including moderating growth, persistent and high inflation, stress on balance of payments and twin deficits in the country's current account and fiscal budget--have left the central bank little room to negotiate the global slowdown. He noted that despite the depreciation of the Indian rupee by nearly 20% since last August, there has been no improvement in the country's current account deficit. He blamed the government's policy of fuel subsidies for protecting consumers from the effect of global commodity price rises. He noted despite higher prices, imports of oil into the country continue to increase due to rise in consumption, as consumers are protected from these price hikes. He added investors still should be confident of India's growth story and look at the positives including its attractive demographics, its growing middle-class and high savings rate. But he acknowledged there was a lot left to be done by various stakeholders to make the growth story happen. "India needs to grow at 10% for the next 15 years just to catch up," he said. 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. The RBI is scheduled to undertake a mid-quarter review of the monetary policy on 17 September 2012. A late pick-up in monsoon rains this month will lead to a recovery in yields in summer-sown crops including rice and oilseeds, lessening the severity of a drought in several parts of the country following scanty rains for much of this year's June-September monsoon. Prolonged rains would also improve the prospects for winter-sown crops due to better soil moisture. An El Nino weather event, which usually disrupts rainfall, is expected to emerge at the tail-end of the monsoon in September. Farm Secretary Ashish Bahuguna Wednesday, 29 August 2012, said the El Nino may not impact rainfall in September due to build-up of another weather phenomenon called the Indian Ocean Dipole. Rice sowing picked up in August 2012 following revival of monsoon rains. According to data released by the Ministry of Agriculture, rice was sown in a total area of 347.10 lakh hectare (lh) till 31 August 2012, compared with 329.19 lh as on 24 August 2012. Rice sowing has exceeded the normal area of 331.85 lh for the summer sown crop by this time of the year. Cumulative sowing of oilseeds totaled 167.15 lh till 31 August 2012, compared with 164.29 lh as on 24 August 2012. Sowing of oilseeds remains lower than the normal area of 168.36 lh by this time of the year. Sowing of cotton totaled 112.83 lh till 31 August 2012, compared with 111.53 until 24 August 2012. The normal cotton sowing area of 106.91 lh for the cotton crop by this time of the year has already been surpassed. Cumulative sowing of coarse cereals totaled 167.87 lh till 31 August 2012, compared with 165.34 lh until 24 August 2012. Sowing of coarse cereals remains lower than 196.77 lh of normal area for the crop this time of the year. Sowing of pulses totaled 97.70 lh till 31 August 2012, compared with 88.30 lh until 24 August 2012. Sowing of pulses remains lower than 101.31 lh of normal area for this time of the year. Sowing of jute and mesta totaled 8.78 lh until 31 August 2012. Sowing of jute and mesta remains lower than 9 lh of normal area for this time of the year. Rainfall up to 29 August 2012 was 12% below normal, reflecting a significant improvement from 29% below normal at end-June and 19% below normal at end-July. In area-wise distribution, 55% area of the country received excess/normal rainfall. Remaining 45% area received deficient/scanty rainfall. 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. Finance Minister P. Chidambaram early this week said that the proposed direct-tax code (DTC) may require a fresh look. The DTC, which aims to simplify tax procedures and improve compliance, was placed in parliament more than a year ago, and the government had earlier said it would implement it on April 1, 2013. The DTC has already undergone several changes. Mr. Chidambaram also said tax laws needed to be friendly but firm. Mr. Chidambaram said the government will be able to achieve its indirect tax revenue target of Rs 5.05 lakh crore for the current fiscal year that began April 1. Meeting the target is crucial for the government, which is struggling to control its fiscal deficit as heavy spending is straining its finances. Weakening tax revenue amid a sharp slowdown in the economy has put further stress on the government's financial health. Authorities will also begin a campaign to improve compliance to tax laws and widen the service tax net, Mr. Chidambaram said. Mr. Chidambaram last week said that the goods and services tax (GST) is a more effective and efficient substitute for a plethora of indirect taxes. The Finance Minister said that he is hopeful that the GST Bill would be passed before the end of the current financial year. The Finance Minister further said that though there are still some issues relating to GST and its Network (GSTN) to be resolved, yet they are not insurmountable. Markit Economics will unveil HSBC India Manufacturing Managers' Index (PMI) for August 2012 on 3 September 2012. On 5 September 2012, Markit Economics will unveil HSBC India Services PMI for August 2012. Foreign direct investment (FDI) in India slumped 78% to $1.24 billion in June 2012 from $5.65 billion in June 2011, government data showed on Friday 24 August 2012. For the April-June period--the first quarter of the fiscal year--FDI fell 67% to $4.42 billion. The Indian government last week eased rules governing overseas borrowing, hoping to ease borrowing by local companies and spur capital inflows. In one of the most significant elements of the change, the government raised by 50% the limit on rupee loans that infrastructure and manufacturing companies are allowed to refinance through overseas borrowings. Such companies will be able to refinance these loans by up to 75% of their average foreign-exchange earnings over the past three years, up from the previous limit of 50%, the finance ministry said. Union Minister of Commerce, Industry & Textiles Mr. Anand Sharma said 16 August 2012 that the government will come out with announcements pertaining to industrial environment that will address the subdued sentiment in the industry. Speaking after the fourth meeting of the Government-Industry Task Force Mr. Sharma said that there is a shared concern over the declining industrial production, particularly the manufacturing sector. Prime Minister Dr. Manmohan Singh said in his Independence Day speech on 15 August 2012 that at a time when the global economy is passing through a difficult phase, India must make every effort to resolve the problems inside the country so that the nation's economic growth and the creation of employment opportunities in the country are again speeded up. If we do not increase the pace of the country's economic growth, take steps to encourage new investment in the economy, improve the management of government finances and work for the livelihood security of the common man and energy security of the country, then it most certainly affects our national security, Dr. Singh said. The prime minister said the government has recently taken new measures to accelerate infrastructure development. Ambitious targets have been fixed in roads, airports, railways, electricity generation and coal production. The government will take steps to increase investment for infrastructure development with the help of the private sector, Dr. Singh said. "To attract foreign capital, we will have to create confidence at the international level that there are no barriers to investment in India", Dr. Singh said. Union Finance Minister P. Chidambaram said early this month 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 early this month. 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 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. 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). Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR, the Prime Minister's Office (PMO) said in a statement issued on 30 July 2012. European stocks rose on Friday, 31 August 2012, as investors awaited a speech by Federal Reserve Chairman Ben S. Bernanke. Key benchmark indices in France, UK and Germany rose by 0.31% to 1.29%. The annual rate of consumer price inflation in the 17-nation euro zone accelerated to 2.6% in August from 2.4% in July, European Union statistics agency Eurostat reported Friday in a preliminary estimate. Separately, Eurostat said the unemployment rate in the euro zone stood at 11.3% in July, unchanged from an upwardly revised reading in June and in line with forecasts. German Chancellor Angela Merkel has asked Italian Prime Minister Mario Monti to hold off on a request for a bailout, according to a report in Spanish daily El Mundo on Friday, 31 August 2012. Merkel reportedly made the request to Monti at their meeting in Berlin on Wednesday, and the newspaper said she would make the same request of Spanish Prime Minister Mariano Rajoy when they meet next Thursday, 6 September 2012. The efforts by Merkel are reportedly aimed at calming an internal crisis at the Bundesbank, whose central bank chief, Jens Weidmann, is strongly opposed to any action by the European Central Bank to buy Spanish or Italian government bonds. German newspaper Bild reported in its online edition on Friday that Weidmann has been considering his resignation in recent weeks. European Central Bank (ECB) holds its monthly policy meeting on euro area interest rates on 6 September 2012. The ECB slashed its interest rates to an all-time low in July. The ECB is expected to continue its easing cycle, probably as soon as in September, to help the economic recovery of recession- and crisis-ridden members of the euro zone. UK's central bank -- the Bank of England -- holds its monthly meeting on interest rates on 6 September 2012. The results of a detailed audit on the capitalisation needs of Spain's banks are expected in mid-September 2012. Germany's constitutional court will decide on 12 September 2012 whether the European Stability Mechanism (ESM) -- the proposed permanent successor to the euro-zone's current emergency lender viz. the European Financial Stability Mechanism -- violates German law and the Maastricht Treaty's 'no bailout' clause. Asian shares edged lower on Friday, 31 August 2012, as investors worried ahead of Federal Reserve Chairman Ben Bernanke's speech later in the global day that central banks won't step in to support the global economy. Key benchmark indices in China, Hong Kong, South Korea and Japan fell by between 0.07% to 1.60%. Key benchmark indices in Indonesia, Singapore and Taiwan rose by 0.35% and 0.86%. The latest showed an unexpected drop in Japanese industrial output in July, although household spending for the same month was stronger than expected Japan's central bank, Bank of Japan, next meets on Sept. 18 and 19 to review monetary policy. South Korea's industrial production fell for a second month in July as Europe's debt crisis crimped demand for exports. Bank of Indonesia Governor Darmin Nasution today, 31 August 2012, said the central bank sees no need to raise its benchmark interest rate from a record-low 5.75%, as monetary tightening wouldn't address the fundamental problem of a widening current-account deficit. Indonesia has run a current-account deficit for three straight quarters and recently posted its widest-ever monthly trade gap. Nasution also said that the central bank will continue to seek ways to reduce rupiah volatility. Nasution said on-year inflation in Indonesia in August is likely to come in slightly above 4.5%, within the bank's 2012 target range of 3.5% to 5.5%. Trading in US index futures indicated that the Dow could gain 48 points at the opening bell on Friday, 31 August 2012. US stocks joined in with global stock losses Thursday, as investors worried that central banks won't step in to support the global economy ahead of Bernanke's speech at Jackson Hole, Wyo. Federal Reserve Chairman Ben Bernanke is scheduled to give a speech today, 31 August 2012 at the Kansas City Federal Reserve Bank's annual symposium in Jackson Hole, Wyo. Investors are looking for guidance as to the timing of possible easing measures from the Fed. The Federal Open Market Committee (FOMC) holds a two-day meeting on US interest rates on September 12-13. Data on Chicago PMI is due for release on Friday, 31 August 2012. US market remains closed on Monday, 3 September 2012, for Labor Day holiday. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012. China on Thursday said it plans to continue buying European sovereign debt, but urged further measures be taken to prevent a worsening of the debt crisis, according to reports. Chinese Premier Wen Jiabao told visiting German Chancellor Angela Merkel at a state function in Beijing on Thursday, 30 August 2012, that his main concerns were whether Greece would exit the single currency and whether Italy and Spain would undertake steps necessary to prevent a worsening of the sovereign debt crisis. Wen also said China remained confident in the future of the single currency and would seek closer ties with the European Central Bank.