The Tribune, Chandigarh, India

Infosys, not RIL, now rules stock market

Mumbai, December 13
Billionaire Mukesh Ambani-led Reliance Industries Ltd has lost its position as the Indian stock market’s most influential individual company to IT major Infosys, following a recent plunge in its share price.

Measured in terms of its weightage on the key barometer index of Indian stock market, the Sensex, RIL had been enjoying its position as the most influential stock for many years and the movement in its share price has been crucial for any major fall or rise in this index.

However, RIL has now slipped to second position after Infosys in terms of its Sensex weightage, which is measured by the market value of a company’s free-float or non-promoter shares that can be freely traded in the market.

At the end of yesterday’s trade, Infosys was the top- weight Sensex stock with a weightage of 10.25 per cent, pushing RIL to second slot with a weightage of 10.08 per cent. Similarly, at the NSE’s Nifty index, another barometer of the stock market, Infosys was the top-ranked stock with a weightage of 9.13 per cent, followed by RIL’s 8.48 per cent.

The weightage of a stock on these two indices changes daily as per the change in the market value of their shares.

According to market analysts, Reliance's replacement has not come as a surprise, as its stock has been under-performing at the Sensex for quite sometime. On a group-basis, RIL had slipped to third slot in June this year, in terms of a corporate group's influence in moving the stock market benchmark Sensex, after HDFC and Tata groups.

HDFC Ltd and HDFC Bank together carry a weightage of over 13 per cent in the Sensex, while four Tata group firms on the index (TCS, Tata Steel, Tata Motors and Tata Power) command a weightage of close to 11 per cent.

RIL stock has crashed by 31 per cent so far this year, while Infosys' loss has been smaller at 21 per cent in this period. Also, the decline in Infosys has been slightly lower than that of 23 per cent drop in the Sensex so far this year.

As a result, RIL’s free-float market value, or the value of RIL shares held by public shareholders, stood at Rs 131,091 crore, which was lower than that of Infosys at Rs 133,305 crore as on yesterday. However, RIL remains bigger than Infosys in terms of the overall market value, including the promoter shares. — PTI

Infy’s super feat

RIL had been enjoying its position as the most influential stock for many years.

RIL has now slipped to second position behind Infosys in terms of its Sensex weightage, which is measured by the market value of a company's free-float or non-promoter shares that can be freely traded in the market.

At the end of Monday’s trade, Infosys was the top- weight Sensex stock with a weightage of 10.25 per cent.

Limited policy options could prolong economic slowdown

New Delhi, December 13
If Indian policymakers are hoping the country's slowing economy can rebound largely the same way it did from the 2008 global financial crisis, they are dreaming. The reason is the government cannot wield some of the tools it could the last time the world picture was gloomy.

This time, India's strained government finances and high inflation leave little room for the strong doses of fiscal and monetary stimulus that supported consumer demand and shielded the economy three years ago.

"India doesn’t have any fiscal headroom to provide any stimulus," said Andrew Kenningham, an economist with Capital Economics in London. "It will have to brace itself for an economic slowdown longer than the one after the 2008 financial crisis."

Economic woes are mounting. On Tuesday the rupee hit a new all-time low after the government reported on Monday that industrial output in October fell a stunning 5.1% from a year earlier — the first decline in more than two years.

India still has a growth rate many countries envy, but the pace is dropping quite sharply and — unlike during the 2008 global crisis — it is hard to see how government fiscal policies can jack it up.

Before the global financial crisis, India was close to achieving 10% annual economic growth. When the financial tsunami hit, growth slumped to 6.8% and then rebounded to 8% and 8.5% as the world emerged from the crisis.

Once again, growth is under pressure. Last Friday, the government slashed its forecast for the current year to around 7.5% from a previous forecast of 9%.

Growth slipped below 7% in the July-September quarter and, with increasing headwinds, a sub-7 per cent clip is now widely expected in the near- to medium-term.

India's economy was cushioned from the 2008 global crisis by $36 billion in fiscal stimulus made up by new spending and tax cuts.

The stimulus pushed out the 2008/09 fiscal deficit by 3.5 per centage points to 6% of GDP, a hit New Delhi was able to absorb thanks to years of solid economic growth that shored up tax revenue and helped reduce debt.

Today, the numbers do not look so good. The federal government's tax-to-GDP ratio is now less than 10%, down from a peak of 11.9% in 2007/08. Public debt is 70% of GDP, up from 68.7% in 2007-08.

"Even without any fiscal stimulus, this time we are staring at a big fiscal slippage on account of higher subsidies and revenue losses. Any stimulus would put too much strain on fiscal health," Anubhuti Sahay, economist at Standard Chartered Bank in Mumbai.

This year's fiscal deficit target of 4.6% is expected to end up around 5.5%.

In the first seven months of the fiscal year, net tax revenue grew just 7.3% from a year earlier against a budgeted rise of about 18% for the full year. Expenditure during the seven months rose about 10%, way above the 3.4% rise pencilled in. — Reuters

Rupee’s freefall continues, crosses 53-mark against $

Mumbai, December 13
The Indian rupee touched a record low for the second day in a row on Tuesday as both foreign and domestic investors snapped up dollars to reduce exposure to India's cooling economy. A firmer stock market provided a bit of comfort, but traders said the rupee looks to be headed lower still as worries about the euro crisis add to anxiety about slowing foreign capital inflows into emerging market economies such as India.

A growing trade deficit and the low probability of strong intervention from the RBI, given the limited firepower in its currency reserves, is likely to keep the rupee under pressure, traders said.

The rupee ended at 53.22/23 to the dollar, down 0.7% from Monday's close of 52.84/85, after touching a record low of 53.52 during the day. The currency has lost 4.8% of its value against the dollar in the last four weeks and 16% so far this year.

Some traders believe the currency soon could weaken to 55 to the dollar within days. "Any intervention from the RBI is likely to be token," said a foreign exchange dealer with a private sector bank. — Reuters

Fitch pegs down FY12 growth outlook to 7%

New Delhi, December 13
Ratings agency Fitch on Tuesday revised its growth projection for the Indian economy in 2011-12 downward to 7% from the earlier estimate of 7.5% on account of sustained inflation, the global slowdown and high domestic interest rates. In its report, Global Economic Outlook: December 2011, it said the economy is likely to regain the 8% economic growth trajectory only in 2013-14.

"India's economic outlook remains challenging as growth is likely to slow against a backdrop of elevated inflation. The economy is likely to remain weighed down by a combination of the weaker global economy and higher domestic interest rates. This has prompted Fitch to lower its real GDP growth forecast to 7% in FY12 from 8% earlier," it added. It has also revised its growth forecast for FY13 downward to 7.5% from 8% earlier. — PTI

RBI expected to keep rates on hold

Mumbai, December 13
The Reserve Bank of India is widely expected to keep rates on hold at its review on Friday, but economists in a poll expect it to accelerate monetary easing in 2012 as economic conditions worsen in Asia's third-largest economy.

All but one of the 20 economists surveyed expect the central bank to keep rates on hold at its midquarter review.

The Reserve Bank has raised interest rates 13 times since early 2010, lifting its key lending rate, the repo rate, to 8.50 per cent.

The central bank signalled in October an inclination to leave rates on hold in coming months on expectations that persistently high inflation will begin to ease.

While most economists did not forecast an interest rate cut until the second calendar quarter of 2012 — retaining the view held in a poll conducted in mid-October — they now expect the central bank to begin trimming the cash reserve ratio earlier than they did previously.

All but one of 15 respondents expect the RBI to keep the CRR (cash reserve ratio), the percentage of deposits banks must maintain with the Resrve Bank, firm at 6 per cent on Friday, with one expecting a cut, despite market chatter that the central bank might trim the requirement in order to ease tight market liquidity.

However, five of eleven respondents expect a cash reserve ratio cut by the end of the first quarter of fiscal 2012, and a majority among the same group expect a cut by June.

In an October poll, the median view held that cash reserve ratio would stay at its current 6 per cent through September.

Industrial output fell in October for the first time in over two years as capital goods investment slumped. The plunge of 5.1 per cent from a year earlier was far worse than the 0.5 per cent drop economists had forecast in a Reuters poll.

"The authorities should be comforted by signs of moderation in the headline inflation (if the outcome does not deviate much from consensus), though still-elevated levels will deter any possible shift towards an easing bias at least until the end of fiscal 2011-12," said Radhika Rao, economist with Forecast Pte in Singapore.

Headline inflation for November, due to be announced on Wednesday, is expected to ease to 9.04 per cent from 9.73 per cent the month before, according to a Reuters poll. — Reuters

Fed likely to stay on sidelines at policy meeting

Washington, DC, Dec 13
The Federal Reserve is likely to hold off offering the US economy fresh stimulus at a meeting of its policy-setting Federal Open Market Committee on Tuesday as it weighs encouraging signs on the recovery against risks coming from Europe.

Fed officials are expected to continue discussions on how they might sharpen their communications to get more traction out of the monetary easing they have already put in place, but observers rate chances of an announcement as low. — Reuters

IIP contraction: Economists caution against policy easing

Mumbai, December 13
Even as the 5.1 percentage points contraction in the factory output data came as a rude shock, leading economists and analysts have advised the Reserve Bank of India against any knee-jerk reaction on the monetary front as inflation still remains highly elevated.

On Monday the government released the factory output number for October that showed manufacturing contracted by a whopping 5.1% in the month against 11.3% a year ago, hitting a 34-month low.

The RBI has increased its key lending rate by a total of 375 basis points since March 2010 to batten down inflation that has stayed above 9% for nearly a year. However, its rate hikes have done more to dampen growth than tame inflation. The September quarter GDP rose only 6.9%, the slowest in over two years.

Manufacturing output, which contributes about 76 percent to industrial production, fell an annual 6 percent in October, reflecting weak consumer demand at home and overseas.

HDFC Bank chief economist Abheek Barua said, "even though price pressure is likely to ease going ahead with the first sign of moderation coming as early as this week, inflation still remains high and there is still some uncertainty over how it can pan out going ahead.

"We therefore expect the RBI to maintain key policy rates on Dec 16, and abstain from a CRR (cash reserve ratio) cut. The central bank could, however, build in a dovish forward guidance throwing the door open for a CRR cut when it meets in January, timing it with a possible expansion in government borrowings at the time," Barua said.

HSBC Asia chief economist Lief Eskeseen too opined that "though the massive contraction in the IIP numbers was partly coloured by the volatility of the capital goods segment and the timing of Diwali, it goes well beyond this and reflects a broadbased slowdown.

"However, this doesn’t mean that rate cuts are just around the corner. Inflation remains too high for comfort and downward pressures on the exchange also act as a constraint. Despite the slowdown in growth, there are still significant upside risks to inflation from tight capacity, pent up commodity prices pressures, and the depreciated exchange rate. ," he said. — PTI

Growth setbacks drag India funds down in Nov

London, December 13
Worries that India's evolution into an economic superpower may be overhyped and signs the government may lack the will to further dismantle a protectionist legacy drove India-themed funds to the bottom of performance league tables in November.

According to data from Lipper ranking the performance of all 3,400 equity funds available for sale in Britain, India-themed vehicles were well represented at the bottom to reflect heavy falls in local stocks.

"The market is having to digest a whole different growth outlook," said Maarten-Jan Bakkum, emerging market equity strategist at ING Investment Management. India's reputation with investors has suffered setbacks from a succession of gloomy economic indicators. — Reuters

Job market set to bloom in new year

New Delhi, December 13
In stark contrast to the fears of economic slowdown hurting the country's labour market, two separate job market surveys on Tuesday suggested an improving employment scenario and predicted robust hiring activities for the new year — which could be the best in the world.

Painting an optimistic picture, global HR firm Manpower said in its quarterly job market report that Indian employers are the most bullish globally when it comes to hiring, with robust recruitment plans for the next three months – the first quarter of 2012.

Against the backdrop of contraction in industrial output and gloomy economic growth prospects, concerns are rising that such situation could seriously hurt employment in the country. — Agencies

Trident to ramp up paper capacity, exports
Ruchika M Khanna/TNS

Chandigarh, December 13
Abhishek Industries Ltd, the flagship company of the Trident group, plans a major expansion in its paper business. Set up three years ago, the firm is not just looking at expanding its export market, but is also eyeing a bigger share in the domestic market.

Talking to The Tribune, Trident group MD Rajinder Gupta said the company was now looking at adding different kinds of paper in its product basket so as to increase its market share.

“We’ve just introduced two premium range of ecofriendly papers — Trident Eco Green and Trident Digiprint, which will help us improve our share in the domestic market as well as in exports. Presently, 30% of the paper we manufacture is exported, mainly to the United States and Canada. We hope to raise the share of exports to 40% by the end of this fiscal,” he said.

Trident Paper so far has a nine per cent market share in the domestic paper business, which the company proposes to increase to 30% by March 2012. For this, the company will be strengthening its retailer and distributor model, specifically across North India so as to get a 40 per cent market share here.

The company commissioned its Rs 825 crore integrated pulp and paper project in Barnala in 2008. The unit has a current capacity of 167,000 tonnes per annum.

Gupta said the company has set up a 90,000 tpa wheat straw based fibre line at its integrated paper plant to produce bleached pulp with environment friendly pulping process.

PSU banks’ loan to Kingfisher not overvalued: Govt

New Delhi, December 13
The government on Tuesday defended state-run lenders' exposure to debt-ridden Kingfisher Airlines and said that loans worth Rs 6,419 crore to the debt-ridden air carrier were not over-valued.

To a query in Rajya Sabha on whether banks had bought the airlines' shares for 260 per cent more than the market prices, minister of state for finance Namo Narain Meena said, "There was no overvaluation to accommodate the airline."

He said public sector banks have an exposure of Rs 5,792.66 crore to the airline by way of fund-based limits and non-fund based limits and Rs 1,109.20 crore through investment in cumulative redeemable preference shares and nonconvertible cumulative redeemable preference shares. — PTI