Rain Worries in India; Tata Steel Raises $500 M

Mayank Mehta
21 Jul, 2009
New York City

Investors in India worried weak rain in the first 45 days of monsoon season may increase government deficit and lower rural spending. Tata Steel raised $500 million in an offering in Europe. Average sales have increased 11% and earnings 19% at the 230 companies releasing earnings so far.

[R]6:00 PM Mumbai, 8:30 AM New York – Indian investors worried that weak rains in the first 45 days of monsoon season may affect the government deficit and lower rural spending. Tata Steel raised $500 million in an offering in Europe.[/R]

Investors are finally waking up to the importance of monsoon rains to the Indian economy. The rains between June and July 15, this season are running 27% below normal according to Agriculture Minister Sharad Pawar.

Though agriculture accounts only 20% on India’s economy it affects nearly 55% of its population who are dependent on the farming income. The lack of rains will force government to offer higher subsidies to farmers which will add to the nation’s government deficit.

Separately, the government may have to raise its borrowing limit from international investors. Currently only $5 billion of the government debt can be sold on foreign investors and $15 billion of the corporate bonds.

The government has tripled its borrowing to $94 billion in the current fiscal year to fund its 6.8% budget deficit.

The Sensex index in India decreased 128.52 or 0.85% to 15,062.49 and of the stocks listed in the index, 21 decreased and 9 increased.

On BSE trading turnover decreased to 6,190 crore rupees from 6,193 crore rupees.

However on the earnings front, of the 230 companies releasing earnings so far in the first fiscal quarter, sales have increased 11% to 91,037 crore rupees and earnings have jumped 45.8% 12,313 crore rupees. The data was reported by Capitalmarket.com.

Gainers & Losers

Tata Steel surged 5.3% to 411.75 rupees after it completed $500 million of GDR offering that priced shares at $7.64 a share. Each GDR represents one share of Tata Steel. The offering will dilute the current shareholders by 9%.

Petron Engineering Construction surged 4.9% to 115.90 rupees after the company said it received order of 48.1 crore rupees from Jaiprakash Associates.

State Bank of India decreased 0.7% to 1,708.40 rupees, ICICI Bank declined 1.9% to 772 rupees and HDFC Bank fell 0.6% to 1,462.05 rupees.

Maruti Suzuki increased 2.6% to 1,239.90 rupees on the expectations that the company will report better than expected earnings on Thursday.

Zuari Industries increased 2% to 289.15 rupees after it reported net income in the fiscal first quarter surged 70% to 46.43 crore rupees.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 256.70 or 2.73% to 9,652.02, Hang Seng index in Hong Kong decreased 0.64 or 0.00% to 19,501.73 and CSI 300 index in China lower 51.29 or 1.43% to 3,539.83. ASX 200 index in Australia increased 0.40 or 0.01% to 4,050.70. The FTSE Bursa KL Composite index in Malaysia closed lower 4.55 or 0.40% to 1,134.70.

The Kospi Index in South Korea increased 10.48 or 0.71% to close at 1,488.99. SET index in Thailand closed lower 3.84 or 0.63% to 609.83 and JSE Index in Indonesia increased 40.20 or 1.91% to 2,146.55. The Sensex index in India decreased 128.52 or 0.85% to 15,062.49.