Elevated Inflation in India; Stocks Fall

Chandrasekhar Atreya
07 Oct, 2010
New York City

Indian stocks fell sharply after the latest stubborn inflation data. The rupee edged higher the dollar declined all major currencies. IMF raises the GDP forecast for India to 9.7%. Cairn Energy seeks shareholder approval for Vedanta offer. Tea output drops in August due to pest attacks.

[R]5:00 PM Mumbai – Indian stocks fell sharply after the latest stubborn inflation data. The rupee edged higher the dollar declined all major currencies. IMF raises the GDP forecast for India to 9.7%. Cairn Energy seeks shareholder approval for Vedanta offer. Tea output drops in August due to pest attacks.[/R]

Indian stocks fell pushing down the benchmark index the most in six weeks after strong rallies in the last few days saw the index zoom to trading highs on copious foreign fund inflows.

The BSE Sensex Index fell 1.1% or 227.76 to close at 20,315.32. The CNX Nifty on the National Stock Exchange dropped 66.15 points to close at 6,120.30.

Rupee lost 16 paisa to close at Rs 44.34 against the U.S. dollar.

The wholesale price index in India increased 0.1% to 181.0 from 180.9 for the previous week. For the year to the week calculated on point to point basis inflation surged to 18.53% compared to 18.31% for the previous week.

The International Monetary Fund raised its India growth forecast for 2010, citing robust industrial output and strong macro-economic indicators, but also warned that global economic recovery remained fragile.

India’s economy will expand 9.7% this year, up from the July forecast of 9.4%, IMF said Wednesday in its World Economic Outlook Report. Asia’s third-largest economy is expected to slow down to 8.4% in 2011.

U.K.-based Cairn Energy will seek shareholder’s nod on Thursday for sale of majority stake in its Indian arm to London-listed Vedanta Resources for up to $8.48 billion, a development that would close all options for state-owned ONGC to make a counter offer.

Once the shareholders approve the deal, ONGC will run out of its last opportunity to make a counter offer or exercise its pre-emption right.

Power equipment maker Bharat Heavy Electricals said Thursday it won an order worth Rs 3,700 crore ($835 million) to build a 700 megawatt thermal power plant in Bellary in Karnataka.

Promoters of Binani Cement decided to delist the shares of the company by purchasing the entire 30.1% public holding in the firm. The board of Binani Industries on Wednesday approved the plan to purchase the entire public equity shareholding of its subsidiary Binani Cement, the promoters said in a regulatory filing.

The rupee appreciated 16 paisa to Rs 44.33 against the U.S. dollar at the Interbank Foreign Exchange market in the morning trade Thursday on sustained FII inflows into equity markets.

Besides, the dollar’s weakness against other major currencies, such as the euro and the yen, also supported the rupee.

Tea output in India, the world’s second-largest grower, dropped 9% in August after a pest attack damaged crop in the growing regions of the country.

Production was 122.7 million kilograms, compared with 134.4 million kilograms a year earlier, according to details posted on the Web site of state-run Tea Board of India. Output in the year till August fell 1.7% to 584.9 million kilograms it said.

India plans to sign an accord with the United States on shale gas technology when President Obama visits in November as the south Asian nation prepares to offer exploration areas in the coming year.

“We are hopeful that we will get into collaboration. The policy framework for shale gas is being formulated and the first round of auction will be before the end of 2011,” S. Sundareshan, India’s Oil Secretary, said in an interview in New York on Wednesday.

India’s largest gas producer Reliance Industries maybe sitting on additional significant oil reserves in its block D4 in the KG Basin. RIL’s partner, Canada-based Niko Resources, which owns 15% in this block located on the east coast of India, raised initial estimates of gas reserves in D4.

Niko’s Chairman and CEO Edward S. Sampson told investors in a conference recently,” we fell it’s twice the size of D6 and has prospectivity of up to and exceeding potential for 100 Tcf gas. It would change India and with 15% it would change Niko.”

Indian Railways earned nearly 7.83% more revenue in the period April to September this year as compared to earnings in the same period last year.

The total earnings of Indian Railways during this period were Rs 44,323.7 crore compared to Rs 41,104.78 last year. Earnings from goods traffic were 6.57% higher while passenger revenues were 9.64% higher.

Gainers & Losers

Aurobindo Pharma Limited fell 0.1% to Rs 1,100.00 after the pharmaceutical ingredient maker received final approval from the US Food & Drug Administration to market a generic version of Merck''s Cozaar.

Bharti Airtel Limited rose 0.6% to Rs 354.00 after the telecomm service provider in partnership with telecom gear makers Ericsson and Huawei to build and manage its mobile network in Bangladesh.

Bharat Heavy Electricals Limited declined 2.1% to Rs 2,608.00 after the energy related infrastructure sector received order of Rs 3,700 crore to build a 700 megawatts thermal power plant at Bellary in South India.

Binani Industries Limited spurted 15.4% to Rs 140.25 after the conglomerate agreed to buy the entire public shareholding in its subsidiary Binani Cement and delist the share.

Cadila Healthcare Limited decreased 1.3% to Rs 684.00 after the company received nod from the US drug regulator to market Losartan Potassium tablets and Losartan Potassium Hydrochlorothiazide tablets.

Ennore Coke plunged 3.2% to Rs 140.00 after the stock surged 38% in the preceding four trading sessions.

Elecon Engineering Company Limited increased 1.6% to Rs 93.15 after the equipment maker secured order of Rs 56.26 crore from Tecpro Systems for supply of equipments.

Hindalco Industries Limited rose 0.6% to Rs 211.70 after the aluminum and copper company''s US unit -- Novelis Inc is in talks to buy BP Plc''s 60% stake in its US joint venture, Logan Aluminium, for $600 million in an all-cash deal.

Indsil Hydro Power and Manganese Limited surged 8.4% to Rs 102.50 after the steel ingots and power generator fixed October 18 as the record date for issue of bonus shares in the ratio of 2:3.

Kalpataru Power Transmission Limited gained 0.7% to Rs 191.25 after the towers construction firm invests Rs 90.04 crore in its unit JMC Projects by subscribing to a preferential issue of 43.5 lakh shares at Rs 207 per share.

Kingfisher Airlines Limited soared 5.4% to Rs 80.05 after the billionaire investor Wilbur Ross is likely to invest up to 150 million in the company.

Reliance Industries Limited fell 0.5% to Rs 1,038.50 after the petrochemical company''s partner Niko Resources raised initial estimates of gas reserves in the D4 block located on the east coast of India.

Shreyas Shipping & Logistics Limited increased 3.3% to Rs 52.25 after the logistic plans to invest around Rs 100 crore to expand its shipping, warehousing and inland transportation capacities.

State Bank of Travancore slipped 3.4% to Rs 915.75 after the creditor turned ex-dividend October 7 for an interim dividend of Rs 8 per share for the year.

Srei Infrastructure Finance Limited slumped 4% to Rs 101.95 after the non-banking firm raised its benchmark lending rate by 100 basis points to 16% per annum, effective immediately.

Spicejet Limited rose 0.7% to Rs 77.80 after the Sun TV promoter Kalanithi Maran and his unlisted aviation firm Kal Airways acquired 1.93 crore shares, or 5.03% equity in the firm as part of the deal to acquire 37.7% stake in the firm.

Western India Shipyard Limited plunged 2.9% to Rs 14.40 after the ship and rig repairer on profit booking after the stock jumped 16% in the preceding two trading sessions.