Rainfall Worries in India

Mayank Mehta
25 Jun, 2009
New York City

Investors in India turned cautious on the worries of adequate monsoon rainfall and growing fiscal deficit. Makers of motorcycles, automobiles and consumer products fell. Tata Motors and Tata Steel fell ahead of earnings.

[R]5:00 PM Mumbai, 7:30 AM New York – Investors in India turned cautious on the worries of adequate monsoon rainfall and growing fiscal deficit. Makers of motorcycles, automobiles and consumer products fell. Tata Motors and Tata Steel fell ahead of earnings.[/R]

The stocks in Mumbai trading faced headwind for the second day after the government lowered its forecast for rainfall this monsoon season but stopped short of sounding drought alert and foreign investors sold stocks.

The wholesale inflation for a year ending on June 13 declined 1.14%, lower than 1.61% fall at the end of previous week.

The Sensex index in India decreased 77.11 or 0.53 % to 14,345.62 and CNX Nifty index lost 28.15 or 0.7% to 4,264.80. Of the stocks in Sensex 30 index, 18 decreased and 12 increased.

Trading on the NSE declined to 17,946.49 crore rupees from yesterday’s 18,823 crore rupees.

Rupee weakened to 48.65 against a dollar. The government is expected to borrow as much as 380,000 crore rupees ($76 billion).

The government tax receipts for the year ended March 2009 increased 2% to 440,000 crore rupees and tax receipts in April 2009 declined 10.9% to 11,846 crore rupees ($2.2 billion).

Prithviraj Chavan, Minister of Science and Technology said that rainfall this monsoon season is expected to be 93% of long term average, lower than previous estimate of 96% of long term average. The rainfall is the main source of irrigation for 235 million farmers in rural India and nearly 70% of the population live on the farm income.

Gainers & Losers

Jaiprakash Associates increased 2.7% to 219.25 rupees after the company planned to merge its subsidiary Jaiprakash Power Ventures in which it holds 84.3% with Jaiprakash Hydro Power. The listed parent company controls 63.4% in the hydro power company.

Tata Motors decreased 5.9% to 336 crore rupees ahead of its earnings tomorrow on the speculation that the company may report a loss of 285 crore rupees on weak sales at its UK subsidiary that sells luxury brands Land Rover and Jaguar. Tata Steel also dropped 2.4%.

Weak monsoon estimate also dragged other domestic auto makers. Maruti Suzuki declined 2.8% and Mahindra & Mahindra fell 2.5%.

The government may be forced to increase retail petrol prices by 2 rupees a liter and diesel price by 1 rupee. The international prices of crude oil have strengthened in the last six months and state controlled oil marketing companies are losing 6 rupees a liter of petrol and 3 rupees a liter of diesel.

ACC increased 2.2% after the company agreed to form a coal mining joint venture in Madhya Pradesh State.

Reliance Industries fell 1.5% to 1,971 rupees and ONGC dropped 1.1% to 1,040 rupees after it reported 16% decline in net profit after the market close yesterday.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 205.76 or 2.15% to 9,796.08, Hang Seng index in Hong Kong increased 382.88 or 2.14% to 18,275.03, CSI 300 index in China lower 2.81 or 0.09% to 3,117.92. ASX 200 index in Australia increased 49.00 or 1.29% to 3,856.00. The KL Composite index in Malaysia closed higher 16.26 or 1.54% to 1,074.11.

The Kospi Index in South Korea increased 28.94 or 2.12% to close at 1,392.73.SET index in Thailand closed higher 9.17 or 1.58% to 590.60 and JSE Index in Indonesia increased 48.50 or 2.43% to 2,044.17. The Sensex index in India decreased 77.11 or 0.53 % to 14,345.62.