Economy Watch

Economy News

Indian Economy Watch as on 27-Oct-2010

Inflation

The Planning Commission today exuded confidence that inflation would moderate to 6% by December end from over 8% currently, mainly on account of good farm output. The agriculture sector growth output during 2010-11, according to Planning Commission member (agriculture) Abhijit Sen, is expected to be about 7%, the highest in the Eleventh Plan. ``The Wholesale Price Inflation would come down to 6% by December. Food inflation would also come down to 6% level by December,`` Sen said when asked about the impact of good Kharif this year on WPI and food inflation. Food inflation has declined by 0.84% point to 15.53% for the week ended October 9 due softening of vegetable prices.

Rs v/s US $

On Oct. 18, 2010 (Monday),

On Oct. 19, 2010 (Tuesday),

On Oct. 20, 2010 (Wednesday),

On Oct. 21, 2010 (Thursday),

On Oct. 22, 2010 (Friday),

Inflation likely to fall to 6.5% by Dec: PMEAC

Prime Minister`s economic panel has said inflation is likely to decline to 6.5% by December from `uncomfortably high` 8.6% due to RBI`s steps and the expected fall in food prices on the back of good monsoons. ``Our own expectation is (that) by December the inflation rate would come to 6.5%,`` Prime Minister``s Economic Advisory Council (PMEAC) Chairman C Rangarajan said. He further said that the Reserve Bank may need to raise policy rates yet again in its quarterly policy on 2<sup>nd</sup> November to tame high inflation of 8.6%. The RBI has raised key policy rates five times so far this year, but there has been no sign of inflation`s cooling off. The rate of price rise in September was 8.62% in September, up from 8.51% in August. ``The inflation is at uncomfortably high level. So continued actions on the part of RBI may be needed,`` he added. Rangarajan said prices of vegetables and fruits, which are contributing substantially to food inflation, are likely to fall in November and December as there is usually a seasonal decline in the prices of these commodities

TRAI norms on linking 2G spectrum prices with 3G in Oct

Telecom regulator TRAI on Tuesday said it would come out with guidelines on linking 2G spectrum prices with that of 3G airwaves by this month. In May 2010, the Telecom Regulatory Authority of India (TRAI) had come up with recommendations that includes linking 2G spectrum prices with 3G rates.

After the recommendations faced severe opposition from the incumbent GSM players, TRAI had said it would study the issue (linking 2G 3G prices) and submit fresh proposals. ``We told government, that we will be apprising of our study in the next few days,`` TRAI Chairman J S Sarma said when asked if the regulatory body will come out with the 2G pricing norms by end of October. TRAI``s earlier recommendations included levying a one- time charge on operators holding excess 2G spectrum beyond 6.2 MHz. The regulator came up with this proposal after the auction for the third generation airwaves earlier this year fetched the government a whopping Rs 540 billion. Besides the proposal on 2G pricing, TRAI is also planning to come up with a set of regulations by this month to curb the menace of unsolicited commercial communications.

Free online trademark search from next month

An entrepreneur wanting a trademark now will be able to search the registry online without any cost whether a particular symbol or design is available and not booked already. The facility, to be extended by the Controller General of Patents, Designs and Trademarks, is likely to be available in the next few weeks, a top official said at a CII meet here today. As of now, a person has to pay Rs 500 to search whether the trademark of his choice is available. He also has to physically go the Trademark Registry Office. The move will also save entrepreneurs from touts who promise trademarks, which are already booked, Controller General of Patents, Designs and Trademarks P H Kurian said.About 85,000 applications for registration of trademarks have already been filed in the first six months of the current fiscal.

TRAI to bring regulation to curb unsolicited

Concerned over growing menace of unsolicited commercial calls and messages, telecom regulator TRAI today said it will bring a set of regulations by this month. ``That job (framing regulations on unsolicited calls) is almost complete. We are planning to come up with the regulations before the end of this month,`` TRAI Chairman J S Sarma told reporters. The Telecom Regulatory Authority of India (TRAI) had released a consultation paper on `Review of Telecom Unsolicited Commercial Communications Regulations` in May this year. Unsolicited commercial communications is one of the growing concern for telecom consumers. However, Sarma, who was attending an open house discussion on National Broadband Plan, declined to comment whether, TRAI will set regulations for putting up a `Do Call Registry.`

FinMin maintains Rs 40k bn disinvestment target

The Finance Ministry today exuded confidence of meeting target of raising Rs 400 billion through disinvestment this fiscal, but did not raise the projected numbers despite buoyed response to Coal India`s initial public offering, the country`s biggest issue so far. ``We are working towards the Rs 400 billion disinvestment target and we are confident of achieving it,`` Disinvestment Secretary Sumit Bose told PTI when asked if the Finance Ministry is revising its target upwards for the current financial year on account of huge response to Coal India IPO. Speculations are rife that the ministry has raised the target of fund raising through disinvestment for this fiscal. The government has proposed to mop up Rs 400 billion by offloading stakes partly in PSUs in 2010-11. Bose further said he is `very happy` with the Coal India IPO response, particularly great enthusiasm shown by retail investors.

Forex reserves kitty up by USD 1,634 mn

India`s forex reserves increased by USD 1,634 million to stand at USD 295,792 million as on Oct. 8, 2010 mainly on account of rise in foreign currency assets. As er the weekly statistical supplement of the Reserve Bank of India (RBI) released on Oct. 15, 2010, foreign currency assets rose by USD 1,593 million to stand at USD 268,100 million. Meanwhile, reserve position in the International Monetary Fund (IMF) increased by USD 12 million at USD 2,008 million. Special Drawing Rights (SDRs) increased by USD 29 million at USD 5,168 million. Gold reserves remained flat at USD 20,516 million.Foreign currency assets expressed in USD include the effect of appreciation or depreciation on non-US currencies (such as Euro, Sterling and Yen) held in reserves.

Stock Markets

Sensex ends choppy week with mild gains

Indian equities witnessed a choppy trend for the second consecutive week. Both the benchmark indexes -Nifty and the Sensex were extremely volatile as quarterly earnings and fund flows to India`s biggest IPO kept investors on their toes. Finally, the markets ended with marginal gains. While among the major results, TCS thump market expectations, while Wipro was not in line with expectations. Cement majors ACC and Ambuja Cement also reported lower earnings for the September quarter. Meanwhile, India`s larget IPO - Coal India - received an awesome response with over 15 times total subscriptions. FIIs alone had put in subscription of over Rs 1 lakh crore to the mega issue. Metal stocks were seen under pressure on reports of China economy cooling off. Foreign institutional investors bought scrips worth USD 220.12 million Friday. For the month, FII fund inflows have touched almost USD 5.8 billion and the yearly inflows have touched approximately USD 24 billion, as per data available with the Securities and Exchange Board of India (SEBI). The 30 share index, Sensex gained 40.81 points, or 0.20%, to 20,165.86 in the week ended Oct. 22, 2010. On the other hand, the broad based NSE Nifty rose 3.40 points, or 0.06%, to 6,066.05 in the same period. Mid-cap stocks gained 114.14 points, or 1.37%, to 8,425.80 in the week. While small-cap shares rose 94.05 points, or 0.88%, to 10,723.70 during the week. Major gainers over the week in the sectoral indices were HC gained 2.85%, Oil & Gas 2.69%, Capital Goods rose 1.09%, PSU climbed 1.01%, and IT went up 0.95%. Metal dropped 2.69%, Realty fell 2.18%, BSE Conusmer Durables lost 0.87%, Auto declined 0.23%, and Power went down 0.02% among major losers in the sectoral indices over the week. Major gainers in 30-share index were Tata Consultancy Services (9.37%), Reliance Industries (3.90%), Cipla (3.86%), Hero Honda Motors (2.92%), and Reliance Communications (1.88%) over the week.

On the other hand Sterlite Industries (India) (5.80%), Wipro (5.30%), Housing Development Finance Corporation(4.66%), Jaiprakash Associates (3.79%), and Tata Steel (2.93%) were the biggest losers in the Sensex over the week.

Economy news

Food inflation declined to 15.53% for the week ended 9th October, on improved supplies and declining prices of certain vegetables, especially, potato. Food inflation fell by 0.84% points to 15.53% during the week, from 16.37% in the previous week, government data showed. Diesel prices should be deregulated as early as possible. If approval is accepted by government will lead a pricehike of Rs 2.87 per liter.The government today announced a marginal hike of Rs 20 a quintal in the support price of wheat to Rs 1,120,

but the prices of masoor and gram dals have been raised sharply by up to Rs 380 a quintal to encourage farmers to

grow more.

Cement Companies may hike the prices by Rs 10 per bag in Delhi.

International news

China`s annual gross domestic product growth slowed to 9.6% in the third quarter from 10.3% in the second

quarter. Consumer prices rose 3.6 percent last month, as pre Government Data. The Industrial output rose 13.3 % in

September from a year earlier and against 13.9% in the month of August.

The Manufacturing PMI for EU has come positive for the month of September at 54.10 v/s 53.70 in August