Mumbai, January 23
The Reserve Bank of India is likely to keep policy rates unchanged in the third quarterly review of monetary policy tomorrow, even as inflation and economic growth rate have eased, say bankers.

"I don't see moderation in the interest rate (in the upcoming policy review). CRR (cash reserve ratio) cut I’m not hopeful," SBI chairman Pratip Chaudhuri said.

"I think there would be strong measures to indicate the RBI wants inflation to be stamped out totally," he said.

Headline inflation fell to a two-year low of 7.47 per cent in December, 2011. Food inflation stood at (-)0.42 per cent as of January 7. On the other hand, in the July-September the economy grew by 6.9 per cent — the lowest level in over two years.

Indian Overseas Bank chairman & managing director M. Narendra also said the central bank is likely to keep policy rates unchanged for a while. There is a little possibility of changing the CRR in the coming policy review, he added. At present, CRR, the portion of deposits which commercial banks keep with the central bank, stands at 6%.

Canara Bank chairman & MD S. Raman said there was some possibility of the RBI slashing CRR by 25 basis points to infuse liquidity in the light of moderation in industrial activity.

Kotak Mahindra Bank MD Uday Kotak said: "Domestic liquidity is tight as you can see at numbers...at the most the market can hope something on CRR to correct the domestic liquidity situation".

Banks are drawing over Rs 100,000 crore from the repo window everyday, even though the RBI is carrying on open market operation on weekly basis to ease liquidity pressure.

It is to be noted that, in its last review in December, the RBI pressed the pause button on its monetary tightening measures and said it might go for rate cuts in the future depending on moderation in inflation.

"From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth," RBI governor Subbarao had said in the last policy review. — PTI

Mumbai, January 23
The rupee rose on Monday to hit its highest level in ten weeks aided by dollar flows, which helped the currency navigate the impact of choppy local shares and demand from oil refiners. It ended 50.09/10 to the dollar, 0.5% stronger than Friday's close of 50.32/33. It touched a high of 50.05 earlier, a level last seen Nov 14.

Many traders believe the rupee may gain more ground in the coming days and rise to around 49.20 as fears of a meltdown in the eurozone ease and policymakers in Asia's third-largest economy look to boost faltering growth.

After market hours, the RBI said in a report exchange rate pressures have reduced somewhat following the revival of equity flows in January.

"We’ll have to see if the rupee breaks the resistance of 50.00-50.05. If that breaks, then we could see a rise of another rupee," said Hari Chandramgathan, a forex dealer with Federal Bank.

Meanwhile, gold hit a six-week high on Monday as the euro recovered against the dollar and other commodities climbed, with confidence in the precious metal rising after it recorded three straight weeks of gains for the first time since November. — Reuters

New Delhi, January 23
The crippling strikes at the Manesar plants of the country’s largest car maker, Maruti Suzuki India Ltd, coupled with high interest and soaring fuel prices dragged down the the company’s profits in the third quarter ending December 2011 by 63.6 per cent to Rs 205.6 crore..

The bigger than expected fall in Q3 profit was also a reflection on the yearly results of the company as it posted a 38.9% fall in net profit for the nine month period between April to December 2011.

The company had posted a net profit of Rs 565.17 crore for the corresponding period last financial year, Maruti Suzuki said in a statement.

The company's net sales declined by 17.4 per cent to Rs 7,663.6 crore during the quarter under review from Rs 9,276.73 crore in the year-ago period, it added.

"Sales in the quarter were impacted by sluggish market conditions caused by higher fuel prices and interest rates," the company said on Monday.

The strikes, which shut down its factories in Manesar for weeks at a cost of over $500 million, resulted in a production loss of 40,000 vehicles during the quarter, Maruti said.

The carmaker, which produced every other car sold in India this time last year, may struggle to post a rise in sales volume in the fiscal year that ends in March, its chairman has said. A weakened rupee, which fell by around a fifth from its high in July, also hurt Maruti's profits by increasing the cost of imports.

London, January 23
Takeover talk swirled around Research In Motion on Monday as investors and analysts pondered whether new chief executive Thorsten Heins had been appointed to lead a turnaround of the struggling phonemaker or prepare it for sale.Heins, who joined the Canadian company in 2007, took over the top job on Saturday when co-CEOs Mike Lazaridis and Jim Balsillie finally bowed to investor pressure and resigned.

They hand over a firm that has lost market share and market value after being comprehensively outplayed by the likes of Apple and Google. The group looks badly in need of a leader that can rejuvenate both the design and operational sides of the business.

"If there are no meaningful signs of an imminent turnaround then I think the spotlight will turn back on to the assets that RIM holds and who they might be attractive to," CCS Insight analyst Ben Wood told Reuters. "The annual analyst event in May will now become the focal point to the unveiling of Thorsten's vision. We know the speed with which you make strategic changes and implement them is absolutely critical because the cellphone business won’t stand still."

On the surface, the former Siemens AG executive appeared to suggest he would stick to the current strategy, but analysts expect that to change in the coming months.

RIM's existing product lineup has struggled to compete with Apple's iPhone and iPad and the slew of large-screen and powerful devices from Samsung and other manufacturers using Google's Android operating system.

First on the agenda will be a need to improve execution, with a particular focus in North America where RIM has haemorrhaged market share after a year marked by product delays and a botched launch of its PlayBook tablet.

Analysts have said logical buyers for RIM also include fellow-struggler Nokia, perhaps with support from Microsoft, and Facebook which is increasingly pushing its content to users via their mobile phones. If there is no obvious buyer, Heins does have more immediate options to add value to the business. — Reuters

New Delhi, January 23
Industry chamber Ficci today said the Indian economy could grow at a slower pace of 6.9% in the current fiscal, as against 8.5% in the previous year.

"The fiscal 2011-12 has the possibility of posting a GDP growth rate of 6.9% based in weighted average," the Ficci Economic Outlook Survey said. The remaining 67% feel that the growth rate will touch 7%, the survey said.

The government expects the economy to grow at around 7% in the current fiscal. The pace of growth is slower than the 9% rate projected at the time of the Budget on account of the slowdown in the global economy.

The survey further said the inflation rate would be 7% by March-end, based on the weighted average. More than 50% of the respondents feel that the inflation rate would be around 7-7.5% in March-end, 2012. Only 24% of the respondents fell that inflation would still stick around 7.5% in the next fiscal," the survey said.

Overall inflation has remained near double digits since December 2010. It eased to 7.5% in December 2011, driven mainly by the drop in prices of food items. The finance ministry expects inflation to come down to 6-7% by March-end.

The Reserve Bank of India has hiked interest rates 13 times since March, 2010, to control inflation. Industry is of the view that repeated rate hikes have made borrowings costlier and has impacted investments. Although the RBI took a pause on its rate hike strategy at its policy review last month, there is wide anticipation it will keep policy rates unchanged on Tuesday. — PTI

Mumbai, January 23
Local-sourcing requirements could deter foreign retailers from taking advantage of new rules allowing them to take full ownership of their operations in India, and many potential investors are seeking more clarity from the government.

India formally eliminated restrictions on foreign investment in its single-brand retail sector earlier this month, but made it mandatory for foreign firms to source 30 percent of their requirements from small and medium enterprises.

The caveat defines small industries as those with a total investment in plant and machinery of up to Rs 50 million (about $1 million).

Representatives from the US-India Business Council, which works towards strengthening trade ties, will visit India on January 31 to discuss the finer details of the sourcing clause with government officials in New Delhi, council president Ron Somers, who is based in Washington DC, told Reuters.

Many retailers are keen to invest in India but are concerned about the local-sourcing clause, he said.

"We need more clarity on the fine print. We need to understand what this local-sourcing requirement means for our companies, as single-brand retail comprises of many different kinds of businesses," he said. "We understand the intention and the background for the clause... But this will be a difficult policy to make work if it is followed right to the letter. It may not create the rush or flood of investment initially because of these different fine-print provisions”, he added.

The council has estimated that the Indian single-brand retail market will grow threefold to $20-$25 billion in five years.

Single-brand retail comprises a wide range of speciality formats, including electronics, apparel, cosmetics, footwear and fast-food.

"The level of technology, quality and scale which is required by global brands is not going to be present with the these very small businesses," said Debashish Mukherjee, a partner and VP at consultancy firm AT Kearney. "With the same revenue, the company has to go to more suppliers so that they are less than $1 million (maximum investment). It’ll create huge supply chain problems." — Reuters

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