The Tribune, Chandigarh, India

	RBI may cut rates in Jan after food inflation dips to 6-yr low Tribune News Service New Delhi, December 29 Food inflation fell sharply to a six-year low of 0.42 per cent for the week ended December 17 but there are no celebrations yet as it is being attributed to seasonal factors and a high base effect. However, with food inflation plunging for several weeks in a row, industry is expecting the Reserve Bank of India to cut interest rates next month. Apex industry body Assocham said the fall in food inflation had been due to a good kharif (autumn) harvest and this should prompt the RBI to cut interest rates in the monetary policy review next month. The chamber said there have been 13-14 rate hikes and industry wants interest rates to come down so that fresh investments can take place. The main reason for the drop was a fall in prices of essential items like vegetables, onion, potato and wheat declined. Food inflation, as measured by the wholesale price index, stood at 1.81% in the previous week as against 15.48% in the same week in 2010. Reacting to the inflation numbers, Finance Minister Pranab Mukherjee said the overall inflation would be 6% by March-end, a stand the government has been maintaining. According to official data released today, onions grew cheaper by 59.04% year-on-year during the week under review, while potato prices were down by 33.76%. Prices of wheat also fell by 3.30%. Overall, vegetables became 36.02% cheaper during the week ended December 17. Siddharth Shankar, director at the Kassa group, said: “The inflation numbers released today represent a mixed picture and also reflect that inflation will remain subdued for the next 2-3 months. If we look at the numbers in detail it represents that inflation is still very much inherent in the system and once we are done away with the high base effect we will see a sharp rebound in inflation numbers.” Crisil in its report on the monetary policy had said that a reversal in monetary policy stance is now expected due to moderating growth momentum and higher downside risks to growth. The sharp fall in food inflation numbers, which was in double digits till the first week of November, though owing to seasonal factors will come as a relief to both the government and the RBI battling stubbornly high prices for over two years. With food inflation down and demand side pressures declining, observers are waiting to see if the RBI which had indicated in its last policy review that rates had peaked, goes ahead and cuts rates.
	Ambani brothers’ reunion raises hope of deals Mumbai/New Delhi, December 29 The spectacle of the long-feuding billionaire Ambani brothers dancing at a celebration of the 80th anniversary of the birth of their late father this week sent Indian media into a frenzy and reignited speculation the two might again do business together. The show of unity by India's richest family came more than a year after Mukesh and Anil Ambani buried the hatchet in a five-year battle that split the business empire inherited from their father, but family watchers were sceptical that the reunion would result in renewed business ties. "Any deal reached between the two groups will be a hard and ruthless business decision. There is no sentiment involved," said SP Tulsian, an independent market analyst. When they ended their feud last year, the brothers also dropped an agreement not to compete on each others' turf. Soon after, Mukesh's Reliance Industries made a dramatic return to telecoms by taking control of the only firm that won wireless broadband licences across India. That deal makes him a potential rival or partner to Anil's Reliance Communications, which has a $925 million convertible bond due in March and has seen its share price tumble 52% this year in a ferocious cellular market. Reliance Communications, with about $6 billion in debt, has failed in efforts to sell off its tower business but sources have said that U.S. private equity giants Carlyle Group and Blackstone Group are in talks about a possible $3.5 billion deal for the 95%-owned tower arm. Market watchers have said Mukesh's nascent broadband business makes a natural tenant for Anil's towers business. "The only deal on the horizon could be one for Reliance Comm's towers. That is important for RIL's telecom rollout, and it could mean Reliance either becoming a long-term customer for leasing the infrastructure, or picking up a direct stake," said P Phani Sekhar, a fund manager at Angel Broking. Mukesh's Reliance Infotel is said to be in talks with firms including Reliance Comm for leasing telecoms towers as it prepares to launch services, but sources have said Mukesh is not looking to buy a stake in his younger brother's tower firm. While both brothers have had a tough year, the 52-year-old Anil is widely seen to need his brother more than Mukesh, 54, needs Anil, at least as far as business is concerned. — Reuters
	Eurozone faces tough debt hurdles early next year Frankfurt/Main, December 29 After a hugely turbulent 2011, the 17 countries that use the euro will be quickly confronted in the new year with major hurdles to solving their government debt crisis, just as the eurozone economy is expected to sink back into recession. With government finances under pressure as growth wanes, the eurozone will find it even more difficult to shore up its shaky banks and keep a lid on the high borrowing costs that threaten Italy and Spain with financial ruin. As early as the second full week of January, bond auctions in which Italy and Spain need to borrow big chunks of cash will start showing whether the eurozone is finally getting a grip on the two-year-old crisis that has seen three countries bailed out. If the auctions go well and borrowing costs ease, then hopes may rise that the strategy of getting governments to embark on often-savage austerity measures to reduce deficits, along with massive support for the banking system from the European Central Bank, may be working. If rates are still high and show that investors remain nervous about lending to governments, then fears will rise of a government debt default that could cripple banks, sink the economy and, in the extreme case, destroy the 17-member currency union. Italy and Spain will seek to borrow heavily in the first quarter at affordable interest costs, starting the second week in January. The slowing eurozone economy may slip into or already be in recession, lowering tax revenue and increasing government budget deficits. Bailed-out Greece must agree with creditors on a debt writedown that will cut the value of their holdings by 50 percent in an effort to start putting the bankrupt country back on its feet. The major players — eurozone governments, the European Union's executive Commission and the European Central Bank — must work together to convince financial markets that troubled governments can pay their heavy debts and therefore deserve to borrow at affordable interest costs. Default fears have driven up bond market interest rates and made it more and more expensive for indebted governments to borrow to pay off maturing bonds. That vicious cycle forced Greece, Ireland and Portugal to seek bailout loans from the other eurozone governments and the IMF. — AP
	Sensex falls 3rd day; Reliance, banks drop Mumbai, December 29 The BSE Sensex fell for a third consecutive session on Thursday to their lowest close in more than a week as a weakening rupee added to the worries about fading outlook for corporate earnings. Subdued global markets and Europe's economic woes also pushed investors to cut their exposure on concern the global risk aversion sentiment could trigger more foreign fund withdrawals from emerging markets, traders said. The main 30-share BSE index shed 1.17%, or 183.92 points, to 15,543.93, its lowest close since Dec 20. 24 of its components declined. It has lost 2.7% over the past three sessions and is on track to post its biggest annual fall in three years, having dropped 24% since the start of January. Energy majorReliance Industries led the losses. The stock dropped 3.7% to Rs 711.90, its lowest close in more than two years. The rupee fell as much as 0.8% on concerns worsening European economy could accelerate foreign fund withdrawals from India. — Reuters
	FDI flows soar but policy inertia spoils party in 2011 New Delhi, December 29 India received increased foreign direct investment in 2011 than the previous year, but lack of big ticket policy announcements belied high expecations leading to gloomy mood among investors. It is said that figures speak for themselves. Not in the case of the data relating to the foreign direct investment. On the face of it, the country attracted FDI worth US $22.52 billion between January and September, 2011 against $15.97 billion in the same period last year. The rise in the inflows should have cheered the investment climate. Instead, the mood is gloomy, especially after the government was forced to put on hold the big bang policy of opening multibrand retail to foreign investment. "...Going ahead, it may face a slowdwon mainly because of global economic uncertainties. The government needs to work more on improving investment climate of the country," CRISIL principal economist DK Joshi said. Industry and policy planners expected the window of FDI to get widened at a time when the global financial markets went into a tailspin following the European debt crisis and the flows from the foreign institutional investors not only dried but took a reverse turn. The Bombay Stock Exchange Sensex reflecting the sagging confidence of the FIIs, has declined from 20,561.05 on January 3, 2011 to 15,175.08 on December 19, 2011. The FIIs have withdrawn Rs 2,497.50 crore between January and December 20, exerting pressure on the rupee which has seen a drop in value against the US dollar by 16 per cent since July. It was exactly in this backdrop that the policy makers and the industry looked towards the political leadership to take some big steps and liberalise the country's FDI regime, so that overall overseas resources are robust. But then, the "political compulsions", as Prime Minister Manmohan Singh said, led to halt in the reforms process. Reforms in pensions and insurance by liberalising FDI in these areas, could also go a long way in encouraging global investors. However, the opposition parties are not on the same page with the government. — PTI
	Tough IPO mkt drives deals between PE funds Mumbai, December 29 When Ind-Barath Power Infra Ltd dropped plans for a Rs 1,056 crore (US $200 million) initial public offer (IPO) earlier this year, it not only thwarted the fundraising plans of its controlling shareholder, but blocked an exit route for a clutch of private equity investors. Those funds, including Sequoia Capital, Citigroup's venture capital arm and 3i, invested a combined Rs 1,177 crore ($223 million) in Ind-Barath and may get a breather as the firm is in talks to sell a big chunk to buyout giants such as TPG Capital and Apollo Global Management. So-called secondary deals, when a private equity investor sells its holding to another such investor, have traditionally been less favoured by buyout firms than an exit through an IPO or the sale of a company to an industry rival. But with weak capital markets shutting off the IPO option for now and mergers between domestic corporate rivals still rare, owners of Indian companies and their private equity investors eyeing the exits will be forced to look at alternatives, including secondary market deals. KPMG figures roughly Rs 501,600 crore ($95 billion) in maturing Indian private equity investments made during the bull market years of 2006-2008 will come up for sale over the next three years. "Logic suggests that a good time for exits is not a good time for investing and vice versa. But the current environment appears to be challenging on both fronts," said Raja Parthasarathy, managing director at IDFC Private Equity, one of India's largest private equity funds. — PTI
	NRIs can hedge rupee overseas borrowing: RBI New Delhi, December 29 The Reserve Bank on Thursday allowed non- residents to hedge currency risk for external commercial borrowings denominated in rupees with Indian banks. The new guideline aims at mitigating currency risk attached with the rupee borrowings. RBI had allowed overseas borrowings in the local currency in September. The RBI said micro finance NGOs have been permitted to avail of ECBs designated in rupee, under the automatic route, from overseas organisations and individuals as per the guidelines. It has been decided to allow nonresidents to hedge their currency risk in respect of ECBs denominated in rupees with banks in India, RBI said. It added the amount and tenure of the hedge should not exceed that of the underlying transaction. — Reuters
	Intel’s latest mobile platform now available Bangalore, December 29 Intel Corp on Thursday announced the availability of the latest mobile Intel Atom processor-based platform, formerly codenamed "Cedar Trail." Designed to provide small, compact, on-the-go computing with great battery life at an affordable price, the latest platform adds several new features to netbook computers made popular by students, families, and those looking for light productivity and Internet browsing, the company said in a statement. These devices would be available in early 2012 from major OEMs including Acer, Asus, Hewlett-Packard, Lenovo, Samsung, and Toshiba. The company’s new design's dedicated media engine enables full 1080p high-definition playback of videos and Blu-Ray content. — PTI
	NHAI retail bond sale oversubscribed New Delhi, December 29 The National Highways Authority of India's (NHAI) first sale of retail bonds has received bids for nearly five times the base amount so far, capitalising on investors' appetite for safe havens as the global debt crisis keeps domestic equity markets lacklustre. NHAI, which launched its issue on Wednesday, has received bids for about Rs 250 billion ($4.68 billion), a person involved with the issue said. The issue is set to close on Jan 11, but bankers have the option of early closure. The issue has rougly received three times subscription for its qualified institutional investor category and about twice the size for the high net worth individual category, bankers said. The issue, which has a core size of Rs 50 bn, has an option to retain an equivalent amount as greenshoe. — Reuters