The Tribune, Chandigarh, India

Inflation eases to 3-yr low, hopes of RBI rate cut rise

New Delhi/Mumbai, Jan 14
The country’s headline inflation slowed to its lowest level in three years, hardening expectations for an interest rate cut by the RBI later this month to boost an economy that is set to post its slowest growth in a decade.

The wholesale price index (WPI), India's main inflation indicator, rose an annual 7.18 percent in December, the slowest since December 2009 and below analysts' forecast of 7.4 percent rise in a Reuters poll. Wholesale prices rose 7.24 percent in November.

The better-than-expected inflation data left most analysts debating not whether the Reserve Bank of India would cut interest rates at its policy review on January 29, but by how much.

"The probability of a rate cut in January-end has increased," Abheek Barua, chief economist at HDFC Bank in New Delhi, said. "But the next question is whether it will be 25 basis points or higher."

Following the inflation data, financial markets rallied in anticipation of an early rate cut. India's 10-year bond yield fell to its lowest in 29 months. The rupee strengthened against the dollar, while swap rates fell.

The slowdown in the headline inflation was led by a moderation in the prices of fuel and manufactured goods. The annual reading for October was revised down to 7.32% from 7.45%, the government said Monday. And a drop in nonmanufacturing inflation, used by the RBI to gauge demand-driven price pressures, to 4.2% in December from 4.5% a month ago further bolstered hopes for the long-awaited cut.

Last month, amid mounting calls from politicians and industry for a lower borrowing rates, the RBI signalled a possible reduction in the January-March quarter.

The policy repo rate has remained unchanged at 8.0 percent since April 2011, putting India's interest rates among the highest of the major economies.

While a slowdown in the global economy has prompted many other central banks to support growth through monetary stimulus, the RBI has hitherto rebuffed calls for lower lending rates citing high inflation and the size of the fiscal deficit.

India’s economic growth that once looked poised to hit double-digits has been stuck below 6 percent for the past three quarters, hurt by a combination of weak investment and consumer demand. — Reuters

Stocks soar to 2-year high on GAAR, inflation

Mumbai, January 14
The BSE Sensex and Nifty rose more than 1 percent on Monday to two-year highs after a slower-than-expected rise in inflation cemented hopes the RBI will cut interest rates later this month, boosting banks and property shares such as DLF.

Sentiment was also supported after India delayed the implementation of controversial rules on tax avoidance to 2016, helping remove uncertainty about whether foreign investors would continue their strong buying of domestic equities.

Infosys rallied for a second session to a nine-month high after some brokerages including Barclays upgraded their ratings on the stock following its better-than-expected earnings and revenue guidance.

"The enthusiasm with regards to reforms continuing, lower inflation and tepid industrial growth are making way for rate cut, which have led to a rally in the market," said Kaushik Dani, fund manager at Peerless Mutual Fund.

The BSE Sensex rose 1.23%, or 242.77 points, to end at 19,906.41, its highest close since January 6, 2011, and its biggest single-day percentage gain since November 29, 2012.

The broader Nifty rose 1.22%, or 72.75 points, to end at 6,024.05, closing above the psychologically important 6,000 level and matching the same milestones as those for the Sensex.

Gains on Monday were sparked by data showing the headline inflation slowed to its lowest level in three years. Analysts now expect at least a 25 basis point rate cut by the Reserve Bank of India at its policy review on January 29.

Rate-sensitive stocks led gainers, with real estate developer DLF jumping 7.3%, marking its biggest single-day percentage gain since October 28, 2011, helped as well by J.P.Morgan's upgrade to "overweight" from "neutral".

Among banks, ICICI Bank gained 1.9%, while SBI rose 0.4%. Infosys rose 3.5%, after already gaining nearly 17% on Friday. — Reuters

India reaps reward of bumper wheat crops as world exports shrink

New Delhi/Singapore, Jan 14
India is poised to triple wheat exports this year to a higher-than-expected, record 6 million tonnes, helping plug a shortfall in lower-quality grain supplies and keep a lid on global prices. Five years of bumper harvests have created unruly, large stockpiles of wheat in India at a time when Australia and Russia, the world's second and third largest exporters, face shrinking production due to adverse weather.

The amount India is set to export is paltry in a global trade of nearly 140 million tonnes, but it will fulfil the needs of the biggest buyers of lower-quality wheat in the Middle East and Africa as global supplies ease.

"The magnitude of Indian exports is not going to be enough to change the global trade balance but certainly what it means is that it frees up availability of lower quality wheat," said Sudakshina Unnikrishnan, commodities analyst at Barclays Capital in London.

"We don't have those massive amounts of lower quality wheat that we had last year," she told Reuters. In 2012, Indian wheat exports stood at 2 million tonnes.

Larger exports from India will help cap a rally in the benchmark Chicago wheat market which jumped 1.4 percent on Friday after the US Department of Agriculture pegged US inventories at a four-year low of 716 million bushels at the end of the crop marketing year. The United States is the world's biggest wheat exporter.

Global wheat supplies are likely to tighten further with the United States declaring much of the central and southern wheat belt a disaster area last week due to persistent drought. Farmers face dismal prospects for the spring and summer due to the drought and lower-than-expected plantings, analysts say.

Wheat ended 2012 as the best performing commodity, gaining 19.2% among the 19 commodities in the Thomson Reuters-Jefferies CRB index as the market was buoyed by lower production in Australia and the Black Sea region.

India's record crop coincides with a decline in shipments from its main rivals for lower-quality wheat. Prices are also at least $20 cheaper per tonne than similar Australian grain.

Australia produced a record crop at the end of 2011 but untimely rains reduced the quality. A year later, wheat production fell by more than a quarter due to dry weather and drought is also expected to halve Russia's wheat exports this year to 10.5 million tonnes.

BURDENSOME STOCKS: India, the world's second-biggest wheat producer, usually consumes most of its crop, but a government intervention scheme and favourable weather have boosted production, and surpluses. — Reuters

TCS net spurts 23%, beats Q3 estimate

Bangalore, January 14
Tata Consultancy Services Ltd (TCS), India's No.1 software services exporter, posted a 23% rise in quarterly profit, joining rival Infosys Ltd in topping market forecasts and adding to expectations for a revival in corporate technology spending.

Net profit rose to Rs 35.52 billion for the quarter ended December from Rs 28.87 billion a year earlier, TCS said on Monday. That compares with an average estimate of Rs 32.43 billion in a poll of 19 analysts, according to Thomson Reuters.

India's US $100 billion IT services sector has been under pressure to sustain growth as clients in key markets including the United States and Europe maintain a cautious stance on tech spending due to an uncertain global economy.

Fuelling expectations the sector may be turning a corner, second-ranked Infosys Ltd on Friday raised its full-year revenue forecast after new clients and an acceleration in IT spending by existing customers helped the firm post a stronger-than-expected quarterly profit.

TCS has said it expects to beat the industry's export revenue growth forecast set by Nasscom. — Reuters

SC allows more time for revoked telecom licences
Legal Correspondent

New Delhi, January 14
The Supreme Court on Monday allowed the telecom operators that had been asked to stop their services by January 18 following cancellation of their 2G cellular licenses, to continue their operations till February 4.

A bench comprising justices G.S. Singhvi and K.S. Radhakrishnan passed the order on the government’s plea that the telecom companies should be allowed to continue on the condition that they would be liable to pay for the spectrum as per the price realized in the upcoming auction on March 11.

On February 2, 2012, the SC had cancelled the 122 licenses issued in January 2008 by then telecom minister A. Raja and ordered their auction.

Prashant Bhushan, appearing for the NGO Centre for PIL, which was one of the petitioners on whose plea the 2G licenses had been cancelled, opposed granting extension to the companies as the consumers had the option to opt for other service providers.

Posting the next hearing for February 4, the Supreme Court bench asked the government about the amount due from these companies since the 2012 verdict.

Rupee rallies on GAAR deferral, hits over 1-week high of 54.49/$

Mumbai, January 14
The Indian rupee strengthened on Monday for its fourth session in the past five as lower-than-expected inflation numbers further raised expectations the central bank will cut interest rates later this month to boost economic growth.

The rupee also rose after India delayed the implementation of controversial rules on tax avoidance to 2016, a decision expected to support capital inflows from foreign investors.

The potential for rate cuts is expected to support the rupee, although investors are worried about the impact of twin deficits, the current account and fiscal deficit, and are looking for signs that economic growth is bottoming out.

The partially convertible rupee closed at 54.4950/5050 per dollar versus its previous close of 54.7550/7650 on Friday. The unit moved in a wide range of 54.42 to 54.82 during the day. — Reuters