New Delhi, June 22
The rupee breached the 57 mark to the US dollar today as the weak global economic climate led to a flight of capital to the dollar while domestic issues like the capital outflows, weak macro economic situation and widening current account deficit also contributed to the Indian currency plunging new lows.

The negative news on the rupee front dampened the euphoria for the economy in the form of fall in crude oil prices which fell $90 to a barrel. The fall in crude prices will boost the economy as they bring down the import cost and ease inflation.

With the rupee weakening further and hitting the levels of 57.32 against the dollar, finance secretary R.S. Gujral said with the exchange rate being market determined, the rupee would move in tandem with the international situation. He added the aspect of direct supply for the oil marketing companies is also a step in the direction to control volatility in the forex market.

Gujral further said the rupee’s depreciation might neutralize the benefit India could have gained from fall in crude oil prices over the fiscal deficit.

With the rupee’s depreciation hopes of a cut in petrol prices have also come down as it is countering the benefit of a fall in crude oil prices.

The RBI has asked the state-owned oil firms to buy half of their dollar requirement for oil imports from a single public sector banks. This step is intended to help check volatility and arrest the free-fall of the rupee.

Sandeep Sabharwal, CEO, PMS, Prabhudas Lilladher said with the drastic fall in commodity prices like crude the downside risks for the Indian economy have reduced substantially. He said with crude having fallen 30% over the last 3 months it has a direct and immediate impact on India’s growth prospects.

Last year higher crude prices sucked out $40 billion from the Indian economy but now the fall will reduce domestic inflation, government deficit as well as impact the rupee positively over a period of time, he said. The rupee slide will lead to a rise in exports.

Anindya Banerjee, senior manager, currency derivatives research desk, Kotak Securities, said the rupee touched a record low of 57.32 against the dollar, a fall of more than a rupee since yesterday. Lack of monetary easing from the US Federal Reserve has triggered a run for the dollar and selling in equities and commodities globally.

New Delhi, June 22
Cement stocks slumped on Friday after the Competition Commission of India (CCI) in an unprecedented move cited price cartel formation as reason for clamping down with a whopping penalty of Rs 6,307 crore on 11 companies while analysts expressed concern that this would take away the pricing power of the cement companies. Shares of cement firms like ACC, Ambuja, Ultratech, Jaiprakash and JK fell up to 6% during trade.

A labourer takes a nap on the stacked ACC cement sacks on the outskirts of Allahabad. Shares in Indian cement manufacturers tumbled in early trade on Friday after they were fined a combined US $1.1 billion for price fixing, even as many of them vowed to appeal the ruling by the nation's increasingly assertive anti-trust regulator. — Reuters

According to a report by ICICI Direct, CCI has levied a penalty on 11 cement companies for artificially increasing cement prices by keeping lower supply in the markets through cutting down their production. The penalty amounts to 43-47 per cent of the sum of total reported profit in FY2010 and FY 2011.

The companies affected are ACC, Ambuja Cement, UltraTech Cement, India Cement, JK Cement, Madras Cement, Jaypee Cement, Century Textiles, Grasim, Binani Cement and Lafarge India.

The report said the firms can appeal against the penalty to the Competition Appellate Tribunal (CAT) as the companies always deny an artificial increase in cement prices.

According to analysts at Kotak Equities, while cement manufacturers prepare for tedious litigation to defend their action there is concern about the ramifications of the ruling on the pricing power so far enjoyed by the sector and its corresponding ability to sustain profitability in the face of rising cost pressure. The impact is higher for ACC and Jaiprakash, followed by Ambuja and Ultratech.

According to BNP Paribas, CCI has found Indian cement producers in violation of the Competition Act, 2002, for making anticompetitive agreements and cartels. As well as a penalty, it has issued a cease and desist order and disallowed the collection and distribution of production, dispatch and price data by the Cement Manufacturers’ Association (CMA) to members. It said if the Competition Appellate Tribunal and the Supreme Court agree with CCI’s conclusions, it is likely to negatively impact the pricing power of the industry.

The move is likely to have a longer-term impact on the profitability of the cement sector and result in derating of sector valuation multiples.

Mumbai, June 22
Indian gold recovered from its lowest level in over a week after the rupee touched a new low on Friday, d riving away physical traders on a day the government retained its normal monsoon forecast, vital to rural demand.

At 0850 GMT, the most-traded gold contract was trading at Rs 29,965 per 10 grams, up from the previous session's low of Rs 29,815.

"Activity is still dull despite yesterday's fall because of the constant fall in the rupee," said a dealer with a private bank in Mumbai.

The Indian currency weakened beyond the psychologically important 57-per-dollar mark on Friday, hitting a record low for a second consecutive session.

The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal.

India's monsoon is still expected to be average in 2012, allaying concerns over agricultural output triggered by sparse rainfall in the last few weeks.

Rural areas, which contribute to over 60 per cent of gold demand, are dependent on monsoon rain to spur agricultural production and disposable incomes.

The onset of the monsoon rain curtails festive and wedding activity. — Reuters

Salo, Finland, June 22
Nokia workers in Salo thought chief executive Stephen Elop signalled that their plant, Europe's last major mobile phone factory, would survive when he visited in February, but last week he announced its closure anyway.

This final chapter in Nokia's long goodbye to manufacturing in Finland will claim about 850 jobs, on top of 1,000 announced earlier in the year, and rob the town of 90% of its tax revenue. Once the world's dominant mobile phone provider, Nokia has been bested in a smartphone war by Apple and Samsung and other phones running Google software. It is also losing share in the market for more basic phones.

Its strategy to reverse its fortunes, abandoning its own Symbian smartphone software in favour of a largely untested alternative from Microsoft, Elop's former employer, has limped from setback to setback. Sales of Nokia's new Windows Phone models, the Lumia series, have been slow to pick up, while the bottom has fallen out of the market for old phones running deadend Symbian.

As recently as this week, Microsoft revealed that a new version of its software won't run on the existing Lumia range, and a Wall Street analyst said the software giant was looking at making its own phones in direct competition with its new partner. Over two years, workers at Nokia have become familiar with bad news, but are still not inured to it. Rivals have long been focused in Asia, and analysts had said Nokia should do the same. — Reuters

New Delhi, June 22
In one of the biggest investments in the single brand retail sector, Swedish-based IKEA, the world’s largest furniture maker, will invest 1.5 billion euros (approximately Rs 10,500 crore) in the Indian market.

This was conveyed by IKEA CEO Mikael Ohlsson in a meeting with India’s Commerce & Industry Minister Anand Sharma in St Petersburg, Russia on Friday.

IKEA has confirmed it would be investing in India to the tune of 600 million euros (approximately Rs 4,200 crore) in the first stage and additional estimated foreign direct investment of up to 900 million euros (approximately Rs 6,300 crore), totalling an estimated 1.5 billion euros (approximately Rs 10, 500 crore) for initial establishment of 25 retail stores in a wholly-owned subsidiary.

Ohlsson also communicated their decision to raise existing sourcing for their global operation from India significantly. After meeting the global CEOs, Sharma said that despite the problems in global economy and recent lowering of the rating outlook, investors’ confidence in India remains robust.

Sharma added IKEA had certain reservations about sourcing norms which were discussed with the Industry Ministry officials after which the decision to invest was taken.

Sharma who is in St. Petersburg for International Economic Forum (SPIEF) also met Olaf Koch, CEO and chairman of the management board of Metro AG, on Thursday, who expressed happiness over the performance of the company’s investments in India and apprised the minister about its expansion plans here. Koch said Metro would soon increase the number of its stores in India from ten to 16.

India currently allows 100 percent foreign direct investments in single-brand retail. FDI in multibrand retail for supermarkets in still on hold.

New Delhi, June 22
Auto component manufacturers have been forced to scale down their output as the automobile manufacturers are cutting down production in the wake of the slowdown in the automobile industry reeling under high interest rates and high fuel costs. The manufacturers have been cutting down production as the inventory has been piling up.

Auto Component Manufacturers Association (ACMA) president Arvind Kapur said “auto parts makers are directly linked to the automobile manufacturers. If they’re cutting down production, we also adjust our production according to requirements and regulate our output”.

He said the main reason for adjustment of production was to ensure that there was no pileup of inventory.

While he did not quantify the production cut in the components sector, Kapur said: "Thankfully for the sector, exports have been growing which has partially enabled the companies to offset decline in domestic demand."

ACM said the components industry had a turnover of around $40 billion in 2010-11, which is estimated to touch $ 66.3 billion in FY16.

Hit by high interest rates and petrol prices many automobile manufacturers in India have also planned to shut down their plants temporarily to reduce inventories as vehicle sales are going down.

India’s largest carmaker, Maruti Suzuki India, will have its week-long annual maintenance shut down from next week. Toyota Kirloskar Motor has rationalized output of its petrol cars due to low demand. Similarly, Fiat India is considering shutting down its plant for a few days next month and Tata Motors has stopped production of commercial vehicles in Pune from today for three days.