Budget Deficit in India Surges, Stocks Rise

123jump.com Staff
10 Feb, 2009
New York City

The budget deficit in India forecasted to widen 6% in fiscal 2009 according to investment banker Kotak Mahindra Bank. India Tea Production Rises 4% to 981 million kilos in 2008. DLF jumped 8.4% to 151.60 rupees on news the company has secured long-term loans of about 2,000 crore rupees.

[R]10:00AM New York, 7:30 PM Mumbai – The budget deficit in India forecasted to widen 6% in fiscal 2009, Kotak. India’s Tea Production Rises 4% to 981 million kilos in 2008.[/R]

The benchmark stock index in India rose 0.8% on heightened expectations government will unveil additional measures to stimulate the economy in the interim budget.

Investor sentiment was also boosted by heightened buying by foreign institutional investors.

Preliminary figures showed foreign funds bought shares worth 368.96 crore rupees today compared with 289.10 crore rupees yesterday.

In Mumbai, the BSE 30-share Sensex rose 0.8% or 63.58 to 9,647.47, and the CNX Nifty gained 0.5% or 14.60 to 2934.50.

Of the stocks traded on the BSE, 1376 rose, 1101 declined, and 109 remained unchanged.

Trading Statistics

Daily turnover on the BSE rose to 3,716 crore rupees from 2,836.19 crore rupees yesterday.

India’s Deficit to Widen to 6%

Economic Times of India reported that Kotak Mahindra Bank said today the country’s fiscal deficit may widen to 6% of the gross domestic product, substantially more than the government’s estimate of 2.5%.

The deficit is forecasted to widen in the wake of “duty cuts, pay commission awards, farm debt waiver, expenses on account of National Rural Employment Guarantee Act, fiscal stimulus and cyclical slippages in tax collection”.

According to the report, government needs to issue a higher amount of treasury bill issuances in order to cover for a shortfall of 640 billion rupees needed in the market.

Government today announced an additional 460 billion rupees of borrowing.

Tax collections are forecasted to fall in January-March 2009 as corporate profits drop on worsening economic conditions.

“Adding repayments of 360.90 billion rupees for fiscal 2010, we expect the total gross borrowing to be around 2.07 trillion rupees, lower than fiscal 2009 borrowing of 2.6 trillion rupees,” Kotak Mahindra Bank said.

India’s Tea Production Rises 4%

India’s Tea Board reported today that the country’s tea production rose 4% to 981 million kilos from 944.64 million kilos a year ago and exports edged up 10% to 196.03 million kg as output from Kenya slipped.

Output in December increased to 58.61 million kilos from 50.16 million kilos a year earlier, while shipments in the month rose to 20.51 million kilos compared with 18.38 million kilos a year earlier.

The report notes that tea exports fell on high prices in the global market and resumption of trade with Iraq.

Prices of Indian tea rose to 146.99 rupees per kilos in December 2008 from 97.75 rupees a year ago, while the average prices between January and December last year rose to 116.39 rupees per unit.

Gainers & Losers

Reliance Infrastructure fell 2.8%, ITC declined 1.9%, and NTPC slipped 1.6%.

DLF jumped 8.4% to 151.60 rupees on news the company has secured long-term loans of about 2,000 crore rupees. Indiabulls Real Estate rose 5.5%, Unitech increased 9.5%, and HDIL soared 4.1%.

Reliance Industries advanced 0.8% to 1,400.30 rupees. ONGC shed 1.8% to 708.95 rupees on profit taking.

Bharat Heavy Electricals rose 4.1% to 1,450 rupees after winning four major contracts worth 7,000 crore rupees from various customers for the supply and installation of main plant equipment for thermal power projects.

Larsen & Toubro gained 3.1% to 695.10 rupees on bargain hunting.

Praj Industries climbed 8.9% to 61 rupees after the company it has developed an innovative technology to manufacture ethanol.

Mahindra and Mahindra increased 4% to 285.15 rupees on news its auto components and design engineering arm Mahindra Systech is in advanced talks with two Australian aerospace companies to acquire an aircraft components maker and to forge a joint venture for building eight and 14 seat planes.

Financial stocks increased. State Bank of India advanced 1.5% to 1,165 rupees and HDFC Bank climbed 2.8% to 945 rupees, and ICICI Bank gained 0.2% to 428.65 rupees.