Talks of Higher Rates in India; Rupee Rises

Mayank Mehta
06 Oct, 2009
New York City

Recent stock advance in Mumbai may not survive if Reserve Bank of India acts to increase interest rate as inflation runs high. The RBI Governor Rao sounded hawkish as consumer and wholesale prices continue to rise. Weak monsoon is likely to add more inflationary pressure.

[R]6:00 PM Mumbai, 8:30 AM New York – Recent stock advance in Mumbai may not survive if Reserve Bank of India acts to increase interest rate as inflation runs high. The RBI Governor Rao sounded hawkish as consumer and wholesale prices continue to rise. Weak monsoon is likely to add more inflationary pressure.[/R]

Stocks in Mumbai closed higher on the back of a rise in Europe and U.S. Rupee gained to one-year high after Reserve Bank of India Governor Duvvuri Subbaro indicated interest rate tightening.

Rupee increased 1.3% to 46.888 to a dollar, the highest since October 1, 2008. The rupee is expected to increase to 43 against a dollar by the end of first quarter according to Ticker.com research.

Governor Rao in Istanbul, Turkey at a gathering of central bankers said we need to exit from the current excessive economic stimulus but it is “how and when we should exit is still not clear.

Inflation in India is still high when compared to other nations in Asia and consumer prices are increasing at near double digit level. The government 10-year bond fell after the comments with yields rising to 7.21%.

The Sensex index in India increased 92.13 or 0.5% to 16,958.54 and CNX Nifty index rose 24.20 or 0.4% to 5,027.40. Among the Sensex 30 stocks, there were as many gainers as losers.

On BSE trading, 1,057 stocks advanced, 1,710 declined and 85 were unchanged.

Suashish Diamonds closed up 20% its daily intra-day trading limit for the second consecutive day on the company’s plan to de-list the stock.

Gainers & Losers

3i Infotech Limited increased 5.1% to Rs 98.00 after the technology company said Reliance Mutual Fund has hiked its stake in the company.

Container Corporation of India Limited slipped 0.6% to Rs 1,200.00 after the container logistics company said a block deal of 50,000 shares was executed on BSE at Rs 1,180 per share.

Dishman Pharmaceuticals and Chemicals Limited fell 0.1% to Rs 237.70 after one of the promoters revoked a portion of shares pledged earlier.

Four Soft Limited closed unchanged at Rs 23.00 and separately the freight forwarding company signed a contract with Smart Logistics BV of the Netherlands to automate its operations.

Hindalco Industries Limited advanced 3.8% to Rs 122.70 after the aluminum, copper and other metal processor was sought after by bargain hunter as the stock fell 8.3% in last two sessions.

Hindustan Unilever rose 4.3% to Rs 266.00 on a trading volume of 579,540 shares compared to 2-week average of 296,091 shares.

Hindustan Dorr-Oliver Limited climbed 5.0% to Rs 137.60 after the engineering and turnkey solutions provider said on Tuesday that it secured an order of Rs 130 crore from Vedanta group firm BALCO for construction of a fume treatment plant in Chhattisgarh.

IRB Infrastructure Developers Ltd rose 2.1% to Rs 218.20 said it has qualified to bid for projects worth Rs 22,000 crore from National Highway Authority of India and Gujarat State Road Development Corp and others.

Lupin Limited rose 3.5% to Rs 1,210.80 after the pharmaceutical company said Salix Pharmaceuticals Inc Monday said it is licensing drug delivery technology from Lupin Ltd. of India.

Larsen & Toubro Limited fell 0.7% to Rs 1,642.10 after the construction operator confirmed Rs 1,513 crore contracts in the second quarter of the current financial year.

Madras Cements Ltd declined 3.4% to Rs 118.45.

Madhucon Projects Limited added 2.0% to Rs 256.50 after the engaged in execution of expressways and national highways said that government of Nepal has awarded the work of upgrading of Sanfebager Martadi road, a project funded by Exim Bank of India, Mumbai.

Numeric Power Systems Limited added 4.9% to Rs 549.95 after the manufacture of uninterrupted power supply systems and accessories granted 1:1 bonus to shareholders as of October 15.

Pyramid Saimira Theatre Limited advanced 4.9% to Rs 26.50 and the company entered into a strategic partnership with RDB Group for the movie production.

Prism Cement Limited decreased 6.5% to Rs 51.05 after the cement maker said second quarter sales rose 40% to Rs 228.40 crore from Rs 163.17 crore a year ago. Net profit for the quarter rose 133% to Rs 35 crore compared to net profit of Rs 15 crore a year ago.

Reliance Infrastructure Limited rose 5.1% to Rs 1,283.95 said on reports the firm may sell shares in its power distribution and metro project units to the public.

Sesa Goa gained 2.8% or to Rs 274 said on plans to raise funds for expansion purposes.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 17.31 or 0.18% to 9,691.80, Hang Seng index in Hong Kong increased 382.46 or 1.87% to 20,811.53, ASX 200 index in Australia increased 18.30 or 0.40% to 4,591.60. The FTSE Bursa KL Composite index in Malaysia was lower 3.72 or 0.31% to 1,212.73. CSI 300 index in China were closed today.

The Kospi Index in South Korea decreased 8.46 or 0.56% to close at 1,598.44 SET index in Thailand closed higher 12.92 or 1.80% to 731.39. JSE Index in Indonesia increased 47.73 or 1.92% to 2,528.15. The Sensex index in India increased 92.13 or 0.55% to 16,958.54.