India Lifts Rates; High Inflation Worries

Chandrasekhar Atreya
16 Sep, 2010
New York City

Reserve Bank lifted rates as expected but showed its inability control rising inflation in the near future. The statement noted that inflation is likely to remain high for an extended period and recent volatile industrial production is also not desirable. Seven day rally in Sensex halted.

[R]5:00 PM Mumbai – Reserve Bank lifted rates as expected but showed its inability control rising inflation in the near future. The statement noted that inflation is likely to remain high for an extended period and recent volatile industrial production is also not desirable. Seven day rally in Sensex halted with a decline of 0.7%.[/R]

Stocks in India continued their rally into its eighth day in early trade but dropped after the RBI increased both the repurchase and reverse repurchase rates to contain inflation.

The Sensex Index lost 0.43% or 84.62 points to close at 19,417.49.

Reserve Bank raised interest rates for the fifth time this year in a bid to contain fast rising consumer prices and sustained inflation.

The Reserve Bank of India said Thursday that it was raising its repo rate by 25 basis points to 6% and the reverse repo rate by 50 basis points to 5%. The accompanying statement noted that “uncomfortably high inflation is likely to sustain for some months” and industrial production has been volatile.

Inflation has been hovering at a significant high rate between 13% and 15%, significantly above the Reserve Bank target of 5% to 6%.

Corporate India paid 15% higher advance tax in the quarter to September, from a year ago, buoyed by earnings growth in banks, financial services and manufacturing firms.

Of the large companies, Reliance Industries Ltd, Life Insurance Corp of India, ICICI Bank, HDFC Bank, Tata Steel, TCS, HUL, SBI and Siemens India paid higher taxes.

India added 13.5 million new GSM mobile subscribers in August, with Bharti Airtel adding over two million users to achieve close to 30% market share. The total GSM subscriber base stood at over 481 million in August this year, a growth of 2.89% over July, according to data from Cellular Operators Association of India.

Bharti Airtel added a little over two million subscribers to take its total user base to 141.25 million and a market share of 29.33%. Bharti is followed by Vodafone with a share of 23.62%.

ZTE, a leading Chinese telecom equipment maker, received two contracts worth nearly Rs 1,220 crore from domestic mobile operators, seven months after a change in government regulation barred import of China-made equipment.

The Chinese vendor clinched a Rs 920 crore contract from Reliance Communications to supply a mix of 3G and 2G network systems in eight circles, apart from the order for a Rs 300 crore WiMax deal from BSNL.

Mumbai monorail project is on schedule, a top official said in Mumbai Wednesday that six trains will operate in the first phase later this month.

Six trains, each with four air-conditioned cars, will be deployed on the nine kilometer long Chembur Wadala sector in eastern Mumbai, which is around 60% complete, said Mumbai Metropolitan Region Development Authority Joint Commissioner Ashwini Bhide.

IVRCL Assets and Holdings Ltd, a unit of IVRCL Infrastructure & Projects, said Thursday it won an order worth Rs 1,500 crore for extension of the Pune-Mumbai expressway.

The project, which is on build-operate-transfer basis, has a concession period of 17 years and 5 months and is slated to be completed in the next 36 months, the company said in a statement to the BSE.

Gainers & Losers

Atlanta Limited rose 1% to Rs 427 after the infrastructure consortium received a Rs 163.11 crore order from the state government of Mizoram for the construction of a new 2-lane 33-kilometre highway in the state.

ARSS Infrastructure Projects Limited gained 0.4% to Rs 1,267.55 after the construction activities secured an order worth Rs 163.11 crore from the Chief Engineer, PWD, Highway, Mizoram.

ABG Shipyard Limited plunged 2.7% to Rs 236.60 after the shipbuilding company turned ex-dividend of Rs 4 per share for the year ended March.

Bharti Airtel Limited slipped 2.3% to Rs 347.70 after the telecom added 2.03 million mobile subscribers in August, its slowest pace of additions since October 2007 and compared with 2.6 million users added in July.

BGR Energy Systems Limited declined 2.3% to Rs 806.05 after the manufacture of industrial machinery and equipments turned ex-dividend to Rs 7 per share for the year ended March.

Bank of Baroda surged 2% to Rs 886.05 after the Reserve Bank of India raised its repo rate or benchmark lending rate by a 25 basis points to 6% in line with market expectations.

Bang Overseas Ltd. spurted 19.9% to Rs 55.90 after the textile products maker was locked at the upper circuit limit of 20%. The company said it decided to sell its entire stake in an equal joint venture with a foreign firm to the foreign joint venture partner.

Electrotherm (India) Ltd fell 1.5% to Rs 316.00 after the manufacturer of induction furnaces, steel items and battery-operated vehicles turned ex-dividend of Rs 2.50 per share for the year ended March.

IndusInd Bank Limited rose 2.7% to Rs 247.75 after the private sector bank raised $250 million from a share sale to institutional investors priced at Rs 234.55 per share.

IVR Prime Urban Developers Limited fell 1% to Rs 124.95 after the urban infrastructure development won an order worth Rs 1,500 crore for extension of the Pune-Mumbai expressway by 25 km.

IFGL Refractories Limited decreased 4.9% to Rs 59.10 after the refractory for the steel industry company on profit booking after the stock gained 11.18% in the preceding trading session.

JK Paper Limited increased 3.5% to Rs 67.95 after the paper and boards maker plans to rise about Rs 450 crore through a share sale to institutions or a rights issue to fund expansion in Orissa.

Jet Airways (India) Limited declined 2.6% to Rs 754.95 after the state-run oil marketing companies hiked jet fuel prices by 1.61%.

Jupiter Bioscience Limited fell 0.1% to Rs 103.65 after the specialty chemicals maker stock tumbled 16.42% in the preceding two trading sessions to settle at Rs 103.80 on September 15 from recent high of Rs 124.20 on September 13.

Mudra Lifestyle Limited fell 0.8% to Rs 45.50 after the integrated textile negotiated to sell a majority stake to South Korea''s E-Land Group.

Oil India Limited declined 2.7% to Rs 1,578.75 after the oil distributor turned ex-dividend of Rs 16 per share for the year ended March.

Punj Lloyd Ltd. rose 0.6% to Rs 116.35 after the construction and project management joint venture of the company -- Dayim Punj Lloyd secured a contract from Saudi Aramco, Saudi Arabia''s state oil company for construction of offsite pipelines.

State Bank of India increased 1.2% to Rs 3,100.05 after the bank is in talks with Reserve Bank of India to form a holding company that will control the equity of the bank, its associates and also subsidiaries.

Suzlon Energy Limited gained 3% to Rs 53.20 after the wind power company controlled Germany based REpower Systems signed an agreement with Klagerup Kraft AB for supply of three wind turbines in Sweden.

The Shipping Corporation of India Limited fell 0.3% to Rs 167.25 after the Baltic Dry Index which tracks rates to ship dry commodities slumped 3.40% in London on September 15.

Tata Motors Limited dropped 2.4% to Rs 1,028.80 after the auto maker said global vehicles sales rose 29% to 85,411 units in August from year ago.

Vijay Shanthi Builders Limited rose 0.4% to Rs 36.00 after the construction and mineral water conglomerate entered into a memorandum of understanding for Rs 70 crore project in Chennai, Tamil Nadu.