New Delhi, January 10
Stating that India's gross domestic product growth and risk appetite may lag expectations, Citigroup Global on Thursday cut India's rating from “neutral” to “underweight”.

Citigroup downgraded India as part of its emerging markets review, saying a rebound in economic growth, corporate risk appetite and the investment cycle may not be as strong as current expectations.

Citigroup added the "ongoing political battles and the upcoming 2014 elections may make this year noisy." However, more government reform action, along with easing inflation and falling interest rates should support equities, added the bank.

Citigroup sees the Bombay Stock Exchange benchmark Sensex rising by 7% more from current levels in 2013, with a target of 20,800. "Indian market will be led by earnings per share (EPS) growth in 2013, not PE expansion," the bank said. More government reform action, along with easing inflation and falling interest rates should support equities, added the bank.

The group favours cyclical stocks to defensives in the Indian market.

Earlier this week, global ratings agency Fitch had also said that India may face a credit ratings downgrade in the next 12-24 months. The recent macroeconomic trends have been disappointing, a Fitch analyst had said.

Last month, global rating agency Fitch had warned that policy slippage, fiscal loosening in the run-up to 2014 general elections and weak growth could force a downgrade of India's credit rating. It had pegged India's growth for the current financial year at 6%.

"Our affirmation of the 'BBB-' rating in June reflected India's diversified economy and high domestic savings... Policy slippage and/or mounting evidence of a structural decline in the trend growth rate, such as protracted relatively weak economic data, could cause the ratings to be downgraded," Fitch had said.

Standard & Poor's had also warned that India still faced one-in-three chance of downgrade in its sovereign rating to junk grade over the next 24 months citing high fiscal deficit and debt burden, but rival Moody's said the country's growth prospects for 2013 have improved.

"A downgrade is likely if India's economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow," the S&P had said in a statement. "High fiscal deficits and a heavy debt burden remain the most significant rating constraints" it said.

The ratings agency had in April cut the outlook on India's BBB- rating — the lowest investment grade — to negative from stable, assigning one in three chance of a downgrade to below investment grade over the next two years. — Agencies

New Delhi, January 10
The cabinet approved a plan on thursday to recapitalize state-owned banks by infusing Rs 12,517 crore in them to meet their capital adequacy norms and expand lending operations.

Finance Minister P. Chidambaram said about nine to ten state-owned banks will benefit from the capital infusion programme. The amount of capital infusion and the terms and conditions would be decided after consultation with each bank, he said, adding the exercise was aimed at helping them meet stricter Basel-III norms on capital adequacy which every bank is required to meet.

On the need for funds infusion, he said: "If banks have to expand business, capital has to be infused from time to time. In fact, I envisage, with the kind of growth of the banking business, capital has to be infused virtually every year for the next few years. Capital can only be provided by shareholders, he said, adding the government is the majority shareholder in state-owned banks.

The funds will be disbursed before March to state-owned banks. The government had already earmarked the amount in the budget for the current fiscal.

The recapitalization will ensure compliance to the regulatory norms on capital adequacy and will cater to the credit needs of productive sectors of the economy as well as to withstand the impact of stress in the economy. This will also support national and international operations of the state-owned banks and will also boost the confidence of investors and market sentiments.

The fresh infusion in the equity capital of state-owned banks will enable them to expand their credit growth.

This additional availability of credit will cater to the credit needs of the economy and will also benefit employment oriented sectors, especially agriculture, micro & small enterprises, export, entrepreneurs in promotion of their economic activities which would, in turn, contribute substantially to the growth of the economy.

The government has been infusing funds in state-owned banks during the last couple of years to strengthen their finances. It has injected about Rs 32,000 crore in the banks during the previous two financial years. In FY2011-12 state-owned banks got Rs 12,000 crore for improving their capital adequacy ratio.

New Delhi, January 10
With Kingfisher Airlines employees threatening to move court on the company’s closure, Vijay Mallya, promoter of the beleaguered carrier, broke his silence on Thursday by outlining plans for a revival to be funded with Rs 6.5 billion from his UB Group.

In a letter to his staff he said the airline had submitted a detailed plan to the industry regulator to restart operations using seven planes by the start of the 2013 summer schedule, increasing to 21 planes in four months. The second phase of the plan would see it expand to 57 planes within 12 months of a recapitalization, Mallya stated.

However, even though Mallya is trying hard to persuade his employees, the big question is whether the DGCA is convinced of the viability of his plans. Kingfisher, whose flying license expired on Dec 31, 2012, had earlier submitted a revival plan to the DGCA, which did not accept it and asked the company to furnish additional details.

Kingfisher has tried unsuccessfully to raise cash for over a year, but there has been no breakthrough yet.

Mallya’s letter did not mention anything about the payment schedule of employees’ dues, only said that “both plans contain detailed information on key assumptions and funding requirements, including payment of outstanding salaries to employees.” The airline has not paid its employees since May, 2012.

On Wednesday airline employees had threatened to file a winding up petition in the courts under the Companies Act if the management did not share its revival plan with them. Though latter had promised the workers their dues till June would be paid by Dec 2012 it failed to meet the deadline. The commitment to the employees had come following a two-month strike by its engineers and pilots over nonpayment of dues.

Shares in grounded carrier Kingfisher Airlines jumped as much as 9.7% on Thursday after Mallya sent the letter to the staff.

Kingfisher, which lost its operating licence at end-2012 and has not flown since the start of October, filed its plan, which included the same funding amount from UB, to regulators in late December.

Mumbai, January 10
Tata Motors’ market capitalization crossed the Rs one trillion (US $18.23 billion) mark, joining what is now a 14-member club that also includes Reliance Industries, Oil & Natural Gas Corp (ONGC) and Tata Consultancy Services (TCS).

Tata Motors shares have hit a record high this year after surging 4.7 per cent as of Wednesday's close, adding to its 75 per cent gain in 2012.

Signs of improving sales at its unlisted unit Jaguar Land Rover and better economic outlook in its key China market have bolstered the auto maker's shares, analysts said.

The Rs 1 trillion market cap includes differential voting rights and common shares.

Tata Motors was the best performing stock in the year 2012 among the 30-Sensex stocks. The stock gained over 75 per cent in the previous year as compared to the BSE Sensex which gained 26 per cent in the same period.

Earlier this week, CLSA upgraded Tata Motors from 'outperform' rating to 'buy' supported by multiple product launches by Jaguar.

The brokerage upped price target from Rs 300 earlier to Rs 385 and expects JLR to deliver strong performance over fiscal 2014-15 driven by new product launches.

CLSA believes the company's India business remains under pressure but expects the commercial vehicle (CV) sales to improve by FY15. The brokerage also upgraded FY14-15 EPS (earnings per share) by 5-8 per cent.

The company recently launched a new version of the Safari Storme SUV in a bid to increase its market share.

In the last fiscal the company had sold about 16,000 Safaris and said that the SUV market is at present 570,000 units and growing at an astounding rate of 50%.

At 2:56 pm on Thursday, Tata Motors shares surged by 2.02 per cent at Rs 333.25 on the Bombay Stock Exchange. — Agencies