Sensex Index Swings Between Gains and Losses on Monsoon Forecast, Greece

India’s benchmark stock index was little changed after swinging between gains and losses. A forecast of a below normal monsoon outweighed optimism that Greece may avoid a default on its debt.

Hindustan Unilever Ltd. (HUVR), India’s biggest home-products maker, dropped the most in five months. Monsoon rain in India will be below normal for the second time in three years, the weather office said yesterday, potentially lowering farm output and stoking inflation which is the highest among Asia’s major economies. Infosys Ltd., a software exporter that earns 22 percent of its revenue from Europe, rose the most in two weeks. Greek Prime Minister George Papandreou secured a parliamentary confidence vote, sparking a rally in global equities.

The Bombay Stock Exchange Sensitive Index, or Sensex, was little changed at 17,550.63 at the 3:30 p.m. close in Mumbai. The S&P CNX Nifty Index on the National Stock Exchange climbed less than 0.1 percent to 5,278.30 and its June futures settled at 5,283. The BSE 200 Index fell 0.2 percent to 2,178.43.

“A weak monsoon will lead to a further spike in inflation, which is being driven by rising commodity and crude oil prices,” said Gaurang Shah, assistant vice president at Geojit BNP Paribas Financial Services Ltd. (GBNP)

Hindustan Unilever lost 3.6 percent to 310.75 rupees, its biggest slide since Jan. 27.

Rainfall will be 95 percent of the 50-year average in the June-September season, the weather office said yesterday after the markets closed. That compares with 98 percent predicted by the state-owned forecaster in April. A variation of 4 percent from the long-term average is deemed normal by the agency.

Record Harvests

Prime Minister Manmohan Singh is relying on adequate rain to harvest record quantities of food grain and oilseeds for a second year and cool inflation, which has led the central bank to raise rates 10 times since mid-March 2010. Farming makes up almost 14 percent of the economy and a reduced farm output can also lower rural incomes, hurting sales of tractors and cars.

Infosys increased 1 percent to 2,755.05 rupees and its June futures settled at 2,760 rupees.

The MSCI Asia Pacific Index rose 0.8 percent. A total of 155 lawmakers supported the motion in the 300-seat parliament in Athens, bolstering Papandreou’s chances of pushing through austerity measures to secure international financial aid for Greece. The International Monetary Fund, contributor of a third of the bailout money for the nation, has warned EU leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.”

“Markets may see a dead-cat bounce on good news from Greece but it will not sustain in the long term,” Geojit BNP’s Shah said.

‘Gloomy Horizon’

The Sensex has declined 14 percent in 2011, the worst performer in Asia. The stocks on the gauge are valued at 14.2 times estimated earnings, compared with 10.8 for the MSCI Emerging Markets Index.

“The horizon is still gloomy,” said Deepak Chatterjee, managing director of SBI Funds Management Pvt., which manages $9.3 billion in assets. “Inflation doesn’t seem to be tamed and we’re not at the end of the rate-increase regime. The government has to try to fix the structural problems. It is a question of sentiment rather than fundamentals.”

The central bank raised the repurchase rate to 7.5 percent from 7.25 percent on June 16, extending the longest streak of tightening in a decade, joining its peers from China to South Korea in stepping up the fight against surging living costs.

Rising borrowing costs have begun to crimp demand and hurt corporate earnings. India’s $1.4 trillion economy expanded 7.8 percent in the three months through March 31, the slowest pace in five quarters. Some 33 percent of companies in the Sensex reported profits that missed analysts’ estimates in the March quarter, compared with less than a quarter last year.

Overseas investors sold a net 5.51 billion rupees ($122.7 million) of Indian stocks on June 21, taking their total withdrawals from equities this year to 21.5 billion rupees, according to data fromthe Securities and Exchange Board of India.

To contact the reporter on this story: Santanu Chakraborty in Mumbai atschakrabor11@bloomberg.net

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net

PM says economy eager to absorb FDI

India is eager to absorb foreign direct investment, Prime Minister Manmohan Singh said on Thursday in the Chinese town of Sanya in a statement at the BRICS summit, which included China, Brazil, Russia and South Africa.

Singh also said the economy was well positioned to achieve annual long-term growth of 9 percent or more.

The Prime Minister said the health of India's financial and capital markets was sound.

The economy is expected to grow 8.6 percent in the fiscal year that ended in March.

(Reporting by Abhijit Neogy; Editing by Ken Wills)

http://in.reuters.com

BRICS to use own currencies for credit, grants

In a first-of- its-kind step, Brazil, Russia, India, China and South Africa (BRICS) will be signing an agreement on Thursday under which they would be able to give credit and grants to each other in their own currency instead of dollars.

The Summit, to be attended by Prime Minister Manmohan Singh in Chinese resort city of Sanya, will discuss a whole range of issues related to global financial and economic situation besides matters related to energy security, food security and challenges posed by terrorism.

At the Summit, South Africa will join as the new member, making it a five-nation grouping of fastest growing economies. BRICS will be discussing the reform of the international financial system, National Security Adviser Shivshanker Menon told journalists accompanying the Prime Minister to Sanya.

"We (BRICS) are making a beginning... An agreement will be signed under which BRICS countries will be able to issue credit or grants to each other in own currency," Menon said, noting that it was first such step.

Asked about India''s position on Chinese efforts to make its currency Yuan as an alternate to dollar for trade, the NSA said there was no such proposal before the BRICS to make Yuan as a reserve currency.

When pressed further, he said it was a larger issue related to reform of the international monetary system and could not be settled by five countries. Commerce and Industry Minister Anand Sharma said: "we have not reached a stage to make a definite statement" on this issue.

Sharma said the BRICS countries, which are fastest growing economies and projected to contribute 48 per cent to the global economy in the next decade, would discuss their role in addressing the international financial and economic crisis.

As part of the evolution process of BRICS, the Trade and Economy Ministers would be meeting for the first time to take stock of the international economic situation and their inputs would go to the Summit on Thursday.

The BRICS countries have been pushing for restructuring of the global financial architecture to make it more representative. Sharma said the BRICS countries would discuss how to coordinate to enhance their trade and economic relations and contribute to the global economy.

In the context of India, he said it was trying to increase exports as it aspires to have a trade volume of USD 450 billion by 2014 with the world. The trade volume stood at USD 200 billion in 2010-11 and touched USD 208 billion in February last.

To increase commerce, India recently signed trade- opening Comprehensive Economic Partnership Agreements (CEPA) with Japan and Malaysia and was fast-tracking negotiations on such pacts with Indonesia, Thailand and Canada.

Moneycontrol

Industrial Output Growth in India Unexpectedly Slows to 3.6% in February

India’s industrial production growth unexpectedly slowed in February, a deceleration that may be insufficient to stop the central bank from raising interest rates further.

Output at factories, utilities and mines rose 3.6 percent from a year earlier after a revised 3.95 percent gain in January, the government said in a statement in New Delhi today. The median estimate of 30 economists in a Bloomberg News survey was for a 5.1 percent increase.

While production growth moderated, other data including the purchasing managers’ index, car sales and credit expansion have signaled that consumer demand is stoking price risks. Inflation probably accelerated to 8.36 percent last month, exceeding the central bank’s 8 percent forecast, according to the median estimate in another Bloomberg News survey.

“Although the output data are volatile, consumer demand remains strong,” said Meghna Patel, a Mumbai-based economist at STCI Primary Dealer Ltd. “We think the RBI will need to tighten rates more to gain control over inflation.”

She expects the central bank to raise borrowing costs by a quarter of a percentage point at the next monetary policy announcement scheduled for May 3. The Ministry of Commerce and Industry is due to release inflation data on April 15.

The Bombay Stock Exchange’s Sensitive Index fell 1 percent, extending losses for a fifth day. The yield on the 8.13 percent note due September 2022 rose 5 basis points to 8.17 percent as of 3:49 p.m. in Mumbai, the highest level since Feb. 11, while the rupee weakened 0.6 percent to 44.35 to the dollar.

Growth Momentum

Manufacturing rose 3.5 percent in February from a year earlier, slower than the 3.6 percent gain in January, today’s report showed. Mining gained 0.6 percent, while electricity output rose 6.7 percent. Capital goods production slid 18.4 percent.

“Even as industrial production continues to be volatile, other indicators, such as the latest purchasing managers’ index, direct and indirect tax collections, merchandise exports and bank credit, suggest that the growth momentum persists,” the central bank said in a March 17 statement.

India’s industrial output has fluctuated since May, when it registered a 12.2 percent expansion. The growth eased to 7.2 percent in June, rebounded to 15.1 percent in July, slid to 4.9 percent in September and then recovered in October, according to government data.

Rate Increases

The slowdown in factory output is a “concern,” and the March reading is likely to be even lower,Kaushik Basu, chief economic adviser to the ministry of finance told reporters in New Delhi today. It may pick up from April, he said.

Reserve Bank Governor Duvvuri Subbarao raised rates on March 17 for the eighth time in a year, boosting the repurchase rate by a quarter point to 6.75 percent after raising the inflation forecast twice since late January. The price gauge will reach 8 percent at the end of March compared with the 7 percent estimated on Jan. 25, he said.

“In the absence of a strong supply response, increasing demand will inevitably lead to higher prices,” Reserve Bank Deputy Governor Subir Gokarn said April 5. He said a “monetary response is warranted” should demand exceed supply and stoke inflation.

India’s $1.3 trillion economy may expand as much as 9.25 percent in the year ending March 31, 2012, the finance ministry said in February.

Capacity, Loans

Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker, plans to boost capacity by 21 percent in the current financial year as part of investment plans totaling as much as 40 billion rupees ($908 million), Chief Financial Officer Ajay Seth said in an interview on April 6. The company’s sales climbed to a record in March.

Recent data on bank loans show lenders are giving loans at a faster pace than the central bank’s target. Commercial loans rose 23 percent from the previous year as of March 11, more than the 20 percent rate prescribed by the Reserve Bank of India.

Manufacturing grew for a 24th straight month, with the purchasing managers’ index holding unchanged at 57.9 in March from February, when it accelerated at the fastest pace in three months, HSBC Holdings Plc and Markit Economics said April 1.

“Strong consumption and supply constraints are together responsible for the high inflation,” saidRamya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore. The central bank needs to extend rate increases to restrain prices, she said.

Budget Boost

Salaries in India this year may rise the most in the Asia- Pacific region, fueling consumer demand, a survey by Aon Hewitt LLC showed March 8. Spending under the government’sNational Rural Employment Guarantee Act of 2005 has surged almost fourfold to 399 billion rupees.

Demand may find more support from Finance Minister Pranab Mukherjee’s budget for the fiscal year ending March 31, 2012, that plans to spur spending and exempt incomes below 180,000 rupees from tax, higher than the previous threshold of 160,000 rupees.

Prime Minister Manmohan Singh’s coalition aims to put more money in the hands of voters to help them cope with rising prices and shore up support for five state elections in 2011.

Rising oil and commodity costs and sustained economic growth are escalating pressure on Asian central banks to boost borrowing costs. China on April 5 raised rates for the fourth time since October. Vietnam, Taiwan, South Korea and Thailand increased borrowing costs in March or April to curb inflation.

India relies on imports to meet three-quarters of its annual energy needs.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

India-Pakistan Match - double victory for India

Talks between the two Prime ministers to continue

The most expected World cup semi-final match between India and Pakistan got over yesterday 30 March 2011, with India ending on the winning side. Cricket has never been just a sport for everyone. That too, whenever there is a match between India and Pakistan, it has created more enthusiasm and speculations. This time, the India-Pakistan semi-final match created more expectations not only on the cricket side but also on the political side. The initiative of Manmohan Singh to invite Gilani to watch the match was complimented by various political personalities including the Opposition leader LK Advani. The talks between the two Prime ministers on the eve of the match are expected to continue and make a progress in maintaining smooth bilateral relations between the two countries. The Mohali match, even though Pakistan lost it, is considered important for both India and Pakistan, as it has helped to create better relationship between the two countries. Manmohan Singh's government, which has been facing a tough time due to the various scams accusations, the visit of Pakistan Prime minister has given the party a new turn. www.indiainfoline.com

India Stocks Rise; Bharat Heavy, Larsen & Toubro Advance

July 4 (Bloomberg) -- Indian stocks rose after a regional political party said Prime Minister Manmohan Singh's nuclear agreement with the U.S. is ``satisfactory,'' signaling they may support the deal and prevent the government from collapsing.

Bharat Heavy Electricals Ltd., the country's largest power equipment maker, had the biggest gain on the Sensitive Index this week. Jaiprakash Associates Ltd., India's biggest builder of dams, climbed the most in more than three months.

``Early elections look unlikely now,'' said R.K. Gupta, who manages the equivalent of about $100 million of stocks at Taurus Asset Management Co. in New Delhi. ``Chances of the nuclear deal going through seem bright, that's giving some relief to the markets.''

The Bombay Stock Exchange's Sensitive Index, or Sensex, rose 359.89, or 2.8 percent, to 13,454. The index posted its seventh weekly decline, its longest losing run since the week ended April 13. The S&P CNX Nifty Index on the National Stock Exchange added 90.25, or 2.3 percent, to 4,016.

India's Samajwadi Party, a regional group based in the country's most populous state, will decide later today after meeting smaller parties whether to back the deal, Mulayam Singh Yadav, chief of the Samajwadi Party, told reporters in New Delhi after meeting Singh.

The ruling coalition is making a final attempt to shore up support for a nuclear energy accord before Singh and President George W. Bush meet in Japan next week. The Congress party, which leads the alliance, has sought backing from other parties to save the accord after its communist allies threatened to withdraw support.

Bharat Heavy
Bharat Heavy rose 7 percent to 1,500.20 rupees, the most since June 11. Jaiprakash added 11 percent to 153.50 rupees, its biggest advance since March 25. Larsen & Toubro Ltd., India's largest engineering company, gained 6.7 percent to 2,381.45 rupees. Siemens India Ltd., the local unit of Europe's biggest engineering company, jumped 11 percent to 428.40 rupees, its most since Oct. 29.

Stocks also rose after the weather office said India's monsoon, which accounts for four-fifths of the nation's annual rainfall, has been 21 percent above average so far this season.

ITC, the country's largest cigarette maker, rose 1.1 percent to 171.20 rupees. Hindustan Unilever Ltd., India's biggest maker of household goods, added 2.6 percent to 201.50 rupees.

Overseas funds sold a net 3.5 billion rupees ($87 million) of Indian stocks on July 2, increasing their net outflow this year from equities to $6.41 billion, according to the nation's stock market regulator.

Jain Irrigation Systems Ltd. (JI IN) rose 28.25 rupees, or 6.5 percent, to 461, its biggest gain since March 24. India's biggest agriculture-related company by value rebounded from a 14-month low after 3.1 percent of its shares traded in a single transaction. As many as 2.23 million shares traded at 442 rupees apiece at 10:06 a.m. local time on the Bombay Stock Exchange, data available on the Bloomberg showed. The buyers and sellers weren't immediately known.

Punj Lloyd Ltd. (PUNJ IN) added 28.2 rupees, or 14 percent, to 227.85, the most since May 23, 2006. The engineering and construction company got a 10.1 billion rupees contract from GVK Power (Govindwal Sahib) Ltd. to build a coal-fired thermal power project. Work on the project is expected to be completed by 2011, the company said.

Ranbaxy Laboratories Ltd. (RBXY IN) rose 24.45 rupees, or 4.8 percent, to 538.40, the most since June 10. Pfizer Inc., the world's biggest drugmaker, may offer 20 percent more than Daiichi Sankyo Co.'s $4.6 billon bid to obtain a majority stake in Ranbaxy, the Financial Chronicle reported, without citing anyone.

Reliance Communications Ltd. (RCOM IN) climbed 47.05 rupees, or 12 percent, to 436.75, the biggest advance since Feb. 4. India's second-largest mobile phone service operator plans to raise as much as $6 billion from banks to help fund its proposed acquisition of Africa's MTN Group Ltd., the Economic Times newspaper reported, citing unidentified people familiar with the matter.

SpiceJet Ltd. (SJET IN) rose 1.8 rupees, or 7.8 percent, to 25, the most since June 6. Kingfisher Airlines Ltd. is close to finalizing a share-swap deal with low-cost carrier SpiceJet, the Business Standard newspaper said, without saying where it got the information. SpiceJet's stockholders are expected to get one share of the merged entity for every three shares owned, the newspaper said.

Shrenuj & Co. (SJC IN) climbed 4.5 rupees, or 18 percent, to 30.10. The Indian diamond retailer rose the most since April 13, 1998, after 3.5 percent of its equity changed hands in a single trade.

To contact the reporters on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net