Mumbai, May 25
Foreign direct investment, the sort of sticky long-term money India craves to fund its current account deficit and build up its infrastructure, may not be so stable after all.

According to a Nomura report, multinational companies have been pulling money out of India at an accelerating rate, moving $10.7 billion out of the country in 2011, up from $7.2 billion in 2010 and just $3.1 billion in 2009.

Outward flows are bad news for a country that this week saw its rupee currency hit a new record low as investors worry about its hefty fiscal and current account shortfalls, slowing economic growth and policy gridlock. Still, corporate funds continue to enter India even as existing investors exit. Inbound foreign direct investment surged 88% to a record $36.5 billion in the fiscal year that ended in March, according to official data.

"Global deleveraging may have forced companies to sell their Indian assets and repatriate funds to their home country," Nomura analysts wrote in the Friday note.

"At the same time, domestic push factors such as slowing potential growth, the high cost of doing business and regulatory uncertainty have weakened the investment climate, likely causing this erosion. This is not a good sign."

Telecoms firms Etisalat of Abu Dhabi and Bahrain Telecommunications Co are leaving India after their cellular licences were among those ordered cancelled by an Indian court amid a corruption probe.

New York Life recently exited its 26% stake in an Indian insurance venture with Max India for $530 million, while US mutual fund giant Fidelity Worldwide Investment recently struck a deal to unload its India unit to local company L&T Finance Holdings.

Foreign companies have been increasingly frustrated by regulatory uncertainty and a lack of reforms. Rules that would allow foreign companies into the supermarket and airline industries are stalled.

Vodafone, the world's biggest mobile carrier, has repeatedly clashed with authorities in India, which is trying to collect more than $2 billion in taxes from it through a retroactive law change, even after India's highest court ruled in the company's favour.

Vodafone, the biggest overseas corporate investor in India, has said it will not walk away.

The Nomura report said the services, manufacturing and real estate sectors probably saw "the maximum outflow". — Reuters

Mumbai, May 25
The rupee strengthened for a second session on Friday, continuing its recovery from record lows hit this week, after the Reserve Bank of India stepped in to defend the currency and exporters and custodian banks were heavy sellers of dollars. The unit still posted its eighth consecutive weekly fall, having hit seven consecutive record lows since May 16. Its latest was on Thursday when it fell to as much as 56.40.

The intense risk aversion from the eurozone has severely pressured the currency, but falls have been magnified by concerns about India's fiscal and economic outlooks. A slight easing of that risk-off sentiment — with the euro inching up from two-year lows against the dollar on Friday — has also helped the rupee recover over the past two sessions.

"The central bank was heard to have been there to some extent in early trade, but most of the gains today were on the back of heavy selling by exporters," said N.S.S. Mani, chief foreign exchange dealer with State Bank of Travancore.

The rupee closed at 55.37/38 per dollar after ending at 55.65/66 on Thursday.

The RBI is believed to be looking to hold the rupee above the psychologically key level of 56 to the dollar, and has been seen intervening in the rupee forward markets, alongside its defence of the spot rupee.

Some of the dollar selling from exporters during the session was believed to come from companies that had missed the central bank's deadline on Thursday to convert half of their foreign currency holdings into rupees. — Reuters

Mumbai, May 25
ITC Ltd, India's largest cigarette maker, reported a better-than-expected 26 percent rise in quarterly profit as higher prices and strong results at its food and agricultural business protected margins from slipping cigarette volumes.

The conglomerate has been forced to increase cigarette prices by 11% since the budget in March raised taxes on tobacco, triggering some concern among investors as volumes, according to analysts, moderated for the third straight quarter.

ITC's net profit rose to Rs 16.14 billion in the fiscal fourth quarter ended March from Rs 12.8 billion a year earlier.

"Consistently if you take price hikes, volumes are bound to suffer and the slight dip there is dampening sentiment," said Naveen Trivedi, an analyst with Karvy Stock Broking. "But their agri-business and foods has done well and offset some of the impact," he said.

Analysts on average had expected ITC, 25.4% owned by British American Tobacco Plc, to report a net profit of Rs 15.7 billion, according to Thomson Reuters I/B/E/S.

The diversified company also reported other income of Rs 2.07 billion this quarter, compared with Rs 1.13 billion a year ago.

The company, which also makes consumer goods of everyday use such as soaps, shampoos along with processed food items and exports agricultural commodities, said net sales grew 17.5% to Rs 68.6 billion.

Sales at ITC’s agri-business, which gets a fifth of its revenue from exports of items such as basmati rice, processed fruits and soymeal, rose 31% from the same period a year ago as a sliding rupee bolstered earnings. The rupee has lost 12.7% against the dollar from its 2012 peak in February.

ITC's fast moving consumer goods business, excluding cigarettes but including packaged foods and personal care products, has grown 24%.

Brokerage ICICI Direct expects the company, which gets nearly half of its revenue from cigarettes, to hike prices by another 8% this year. — Reuters

Mumbai, May 25
Analysts at Goldman Sachs and Bank of America-Merrill Lynch cut their growth forecasts for India, following up on a Morgan Stanley downgrade earlier this week that had sparked much concern in domestic markets.

The downgrades come in a tough month for Indian markets, after global risk aversion surged, exposing the country's fiscal and economic vulnerabilities.

Goldman Sachs said it was cutting its gross domestic product forecast to 6.6 percent from 7.2 percent for the fiscal year ending in March 2013, citing a weaker investment outlook on the back of domestic policy uncertainties.

The bank also revised higher its wholesale price inflation forecast for the same period to 6.5 percent from 5 percent, citing higher food prices and a potential increase in fuel prices.

As a result, Goldman Sachs said it now expects only 50 basis points in additional cuts of the repo rate for calendar year 2012, from its previous forecast of 75 basis points.

Merrill Lynch also downgraded its views, to 6.5 percent from 6.8 percent previously for fiscal 2012-13, though it cited the fallout from the eurozone crisis as its main rationale.

Still, the bank sounded more optimistic on the domestic economy, saying manufacturing growth appeared to be stronger than indicated by the industrial output data, while noting that several lead indicators had turned "neutral" from "negative."

"We continue to believe that the worst is over, but there is still pain left," Merrill Lynch said.

The bank argued that India could ensure a recovery if the central bank steps up its bond purchases via open market operations, raises fuel prices, and issue an offshore bond targeted at nonresident Indians.

The pair of downgrades were still not as deep as Morgan Stanley's earlier this week, which cut its fiscal 2012-13 growth forecast for India to 6.3 percent, citing as a key reason the Indian government's expansionary policy of supporting consumption while investment slows as a key reason. — Reuters

New Delhi, May 25
Despite all the controversies dogging the telecom sector, there seems to be no slowdown in the number of subscribers being added by the mobile phone operators in the country.

This was evident in the number of new subscribers added by the GSM mobile operators. A total of 6.5 million subscribers were added by the GSM operators in the month of April reflecting a growth of 0.98% over the same month last year. The total GSM mobile subscriber base rose to 670.57 million following the additions in April.

India’s largest mobile operator, Bharti Airtel, led the GSM operators’ pack with the addition of 2.01 million users, taking its total subscriber base to 183.29 million, according to the data released by the Cellular Operators Association of India (COAI).

Bharti had a market share of 27.33% by April-end.

Aditya Birla group firm Idea Cellular followed Airtel by adding 1.48 million subscribers to have a total number of 114.20 million subscribers. Its market share rose to 17.03%.

Despite facing the cancellation of all its 22 licences following the supreme Court verdict in February, Norway’s Telenor majority held Uninor, which has seen significant growth in user base in the previous months, continued its march forward by adding 1.12 million new customers in April. Its user base was at 43.55 million by April-end.

Aircel, which had lost customers last month, too added 1.01 million new users in April to take its base to 63.58 million.

Vodafone, with a market share of 22.56% added 0.81 million customers during the month taking its subscriber base to 151.28 million by the end of April.

State-owned telecom firm BSNL did not see any additions during the month. MTNL also lost 0.10 million customers during the month.

The subscriber base of BSNL and MTNL stood at 94.67 million and 5.48 million respectively by the month-end. Videocon added 0.15 million new customers in the month taking its total base to 6.10 million at the end of April-end.

Others like S Tel and Etisalat DB did not saw any new user addition. These companies have already announced shutting down of services and are now helping their users move to other operators through MNP.