Inflation Worries in India; Robust 3G Auction

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
20 May, 2010
New York City

Stocks in Mumbai closed higher after 3G license auction drew nearly twice the revenue that estimated. ONGC and Oil India surged after the government increased the natural gas price terms. Inflation surged in the latest read.

[R]6:00 PM Mumbai, 8:30 AM New York – Stocks in Mumbai closed higher after 3G license auction drew nearly twice the revenue that estimated. ONGC and Oil India surged after the government increased the natural gas price terms. Inflation surged in the latest read.[/R]

The Sensex index pared some recent losses on the hopes that more than double proceeds from the 3G spectrum auction will help the government boost spending. Inflation surged at the end of last week.

The e-auction for 3G spectrum license ended on Wednesday after 34 days, that may provide the government as much as Rs 67,710 crore revenue. RCom, Bharti, Aircell each won 13 circles. No single operator managed to get the pan-India license for 22 circles on offer which touched Rs 16,750.58 crore.

The auction for the Wireless Broadband Access is scheduled to begin on this Saturday.

The wholesale price index in India decreased 0.1% to 299.2 from 299.5 for the previous week. For the year ending in the week, average inflation surged to 16.19% compared to 6.67% in the same period a year ago, according to the latest data from the statistics bureau.

The Union Cabinet on Wednesday gave its approval for a hike in the price of natural gas supplied under the Administered Pricing Mechanism by Oil and Natural Gas Commission and Oil India Ltd, doubling it to $4.20 per mBtu from the present $1.79 mBtu bringing it on par at which Reliance Industries sells its gas.

The government controls the price of gas, produced by ONGC and OIL from the fields allocated by the government. ONGC gained the most.

Jindal Steel & Power Ltd, the nation’s second largest steel producer by market value has arranged $400 million of bank loans to fund the acquisition of Oman’s Shadeed Iron & Steel Co for $464 million including debt of $79 million.

Deputy Managing Director Sushil Maroo confirmed this in an interview. This will be the first overseas acquisition since 2007.

HSBC InvestDirect (India) Ltd, the retail broking unit of HSBC Holdings Plc, plans to surrender its merchant banking license to the SEBI in order to focus on securities services for retail and corporate clients, according to a statement on the Bombay Stock Exchange today.

The Sensex index in India increased 111.19 or 0.68% to 16,519.68 and CNX Nifty index rose 37.05 or 0.75% to 4,956.70. Among the Sensex 30 stocks, 19 rose and 11 fell.

On BSE trading, 1,335 stocks advanced, 1,391 declined and 113 were unchanged. Banking, Capital Goods and metal stocks rose.

The food price index rose 16.49% in the year to May 8, a tad higher than the prior week''s annual reading of 16.44% as fruit and vegetables prices climbed on the back of a heat wave.

Hydro power generation firm SJVN was trading at Rs 25 a 3.8% discount to the initial public offer price of Rs 26.

Rupee edged lower 77 paisa to 46.37 against one dollar.

Gainers & Losers

Amara Raja Batteries Limited dropped 4.1% to Rs 157.60 after the company reported fourth quarter net profit rose 30.8% to Rs 36.70 crore.

Grasim Industries Limited fell 2.7% to Rs 2,504.95 after the company reported fourth quarter net profit rose 15% to Rs 654.48 crore.

Hindusthan National Glass & Industries Limited added 1.1% to Rs 204.00 after the company reported fourth quarter net profit fell 9.5% to Rs 24.38 crore.

Indraprastha Gas Limited fell 5.7% to Rs 227.70 on concern an upward revision in regulated gas price will impact the company''s earnings.

Oil India Limited added 8.2% to Rs 1,249.70 after the crude oil prices continued to fall on Wednesday, May 19 falling below $70 a barrel level for successive sessions on concerns of slowing gasoline demand in the US, and very high inventories.

Jet Airways (India) Limited fell 2.4% to Rs 498.00 after the company reported full-year net loss of Rs 467.64 crore compared to net loss of Rs 402.34 crore a year ago.

Marsons Limited added 2.5% to Rs 18.45 after the company won a Rs 60 crore order from Rajasthan Rajya Vidyut Prasaran Nigam for supply of power transformers.

Mahanagar Telephone Nigam Limited rose 1.6% to Rs 57.10 after the 3G mobile service operator and leading GSM Mobile service operator today announced that it has crossed the 1,00,000 3G subscribers in Mumbai telecom circle.

Poddar Pigments Ltd increased 3.9% to Rs 44.95 after the company reported fourth quarter net profit spurted 555.4% to Rs 7.93 crore.

Rainbow Papers Limited rose 2.2% to Rs 218.65 after the company said its board will meet on May 28 to consider a 10-for-1 stock split.

Shree Cement Limited gained 6.2% to Rs 2,170.00. The company reported fourth quarter net loss of Rs 71.37 crore compared to net profit of Rs 235.64 a year ago.