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The Week That Was

India Infoline News Service | Mumbai |

Benchmark indices may turn volatile in the coming week amid various economic data points to be announced.

Top Stories


RBI raises repo rate by 25bps to 8%

The RBI governor sprang a rabbit out of his hat with a rate hike when the consensus was of a status quo. The repo and MSF rates were raised by 25bps to 8% and 9% respectively while the CRR was left unchanged at 4%. Stating that the RBI is neither hawk, nor dove, Raghuram Rajan said, "We are owls. The owl is traditionally a symbol of wisdom. We are vigilant when others are resting," add that that the RBI is doing what is necessary for the economy.

The RBI governor made it clear that the primary focus is not the investors, not the markets; it is the consumer and how to bring inflation down for the Indian consumer. In its recent policies, RBI has been laying more emphasis on CPI as an inflation benchmark and therefore making it the key determinant of its inflation-curbing actions. A rate hike of 25bps at this juncture, the RBI says, was required to stem upside risks to the central bank’s CPI forecast of 8% for the next 12 months

On the basis of an assessment of the current and evolving macroeconomic situation, RBI has decided to:

  • Increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75% to 8.0%; and
  • Keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0% of net demand and time liability (NDTL).
  • Consequently, the reverse repo rate under the LAF stands adjusted at 7.0%, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0%.

Assessment

Since the Mid-Quarter Review of December 2013, the global recovery is gaining traction, led by the strengthening of the US economy, but it is still uneven and subdued in the Euro area and Japan, and a slowdown in China seems to be underway. Notwithstanding the boost from stronger external demand, uncertainty continues to surround the prospects for some emerging economies, with domestic fragilities getting accentuated. Financial market contagion is a clear potential risk. Domestically, some loss of momentum of growth is likely in Q3 of 2013-14, despite a strong pick-up in rabi sowing. Industrial activity remains in contractionary mode, mainly on account of manufacturing, which declined for the second month in succession during Q3. Consumption demand continues to weaken and lacklustre capital goods production points to stalled investment demand. Fiscal tightening through Q3 and Q4 is likely to exacerbate the weakness in aggregate demand. Lead indicators of services suggest a subdued outlook, barring some pick-up in transport and communication activity...Read More

Reactions on RBI's announcement:

Dun & Bradstreet India comments on RBI policy

Hike in repo rate may support INR: ICRA

RBI rate hike disappointing: Parsvnath Developers

Elevated interest rates remain a challenge for banking sector: Federal Bank

Hike in repo rate comes as surprise: CBRE Asia

RBI move is likely to make matters difficult for realty sector

Rates appear to have peaked for short term: ING Vysya Bank

RBI again adopted a hawkish stance: Sanjay Dutt

Further tightening won't be required in near term: ICICI Bank

RBI is expected to actively manage liquidity in near term

CARE expects status quo in repo rate in next policy review

Repo rate hike is in line with the gradual shift in focus towards CPI inflation: Chanda Kochhar

Tight monetary policy to hit growth recovery process: PHD Chamber

RBI has taken disinflationary process: Knight Frank India

RBI has adopted a balanced approach: LVB

High interest rates lead to subdued demand: CII

RBI chose to act this time: FundsIndia.com

RBI found it acceptable to target WPI inflation: Axis MF

RBI sticks with its forward guidance, hikes by 25bp: HSBC

Firing on all cylinders: subsidised LPG hiked to 12 cylinders

This was to happen sooner than later especially after Rahul Gandhi meeting the PM on the issue and various ministers lobbying for an increase in the number of subsidised cylinders. At the AICC session, Rahul Gandhi had said that nine cylinders aren’t sufficient. The Congress needs 12 cylinders. The women of India need 12 cylinders. The Cabinet today cleared raising the quota of subsidised LPG to 12 cylinders per year from nine earlier.  The Aadhaar platform will no longer be linked to the subsidy scheme.Oil minister M Veerappa Moily said raising the LPG quota will cost Rs. 5,000 crore in additional subsidy annually. Over a week ago, the government had indicated that the limit would be raised...Read More

Apr-Dec fiscal deficit crosses 95% of target

Fiscal deficit in the first three quarters of the current fiscal year ending March touched 95.2% of the budgeted target for the whole year, says report. The fiscal deficit touched Rs 5.16 trn during April-December as against 78.8% a year ago, government data showed on Friday. Net tax receipts were at Rs 5.18 trn in the first nine months of the current fiscal year to March 2014. 

Govt revises FY13 GDP growth forecast to 4.5%

Gross Domestic Product (GDP) at factor cost at constant (2004-05) prices in 2012-13 is estimated at Rs. 54.8 lakh crore as against Rs52.5 lakh crore in 2011-12 registering a growth of 4.5 per cent during the year as against a growth of 6.7 per cent in the year 2011-12. At current prices, GDP in 2012-13 is estimated at Rs93.9 lakh crore as against Rs83.9 lakh crore in 2011-12, showing an increase of 11.9 per cent during the year, as against an increase of 15.8 per cent in the previous year.

At constant (2004-05) prices, the Gross National Income at factor cost in 2012-13 is estimated at Rs54.2 lakh crore as against Rs. 52 lakh crore in 2011-12 showing a rise of 4.1 per cent during the year, as against an increase of 6.9 per cent in the previous year. At current prices, the Gross National Income in 2012-13 is estimated at Rs. 92.7 lakh crore as compared to Rs. 83.1 lakh crore in 2011-12, showing a rise of 11.5 per cent during the year, as against an increase of 16.0 per cent in the previous year...Read More


April-Dec 8 core industries growth at 2.1%

The Eight Core Industries have a combined weight of 37.90 % in the Index of Industrial Production (IIP). The combined Index of Eight Core Industries stands at 165.6 in December, 2013, which was 2.1 % higher compared to the index of December, 2012.

Coal

Coal production (weight: 4.38 %) declined by 0.6 % in December, 2013 over December, 2012. Its cumulative index during April to December, 2013-14 increased by 1.2 % over corresponding period of previous year...Read More

Rate hike will set economy on disinflationary path: Rajan

Today, on the basis of an assessment of the current and evolving macroeconomic situation, we have decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 8.0%.  Let me first address the balance of risks that confronts us in the evolving macroeconomic outlook. The slowdown in the economy is getting increasingly worrisome. Our current assessment is that growth is likely to lose momentum in Q3 of 2013-14, with industrial activity in contractionary mode, mainly on account of manufacturing. Lead indicators of services also suggest a subdued outlook, barring some pick-up in transport and communication activity. On the other hand, agricultural performance has so far been robust, and the strong pick-up in rabi sowing indicates that this should be sustained. Another silver lining is the significant narrowing of the trade deficit on the back of resilient export growth...Read More

Withdrawal of pre-2005 notes is to prevent counterfeiting: Rajan

Foreign direct investment: Benefits, developments & major changes

Foreign investments provide enormous growth for growth to Indian economy. Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country. FDI in India is subject to certain Rules and is subject to predefined limits in various sectors which range from 20% to 100%. A foreign company planning to set up business operations in India may incorporate a company under the Companies Act, 1956, as a joint venture or a wholly-owned subsidiary. Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh. India imposes cap on equity holding by foreign investors in various sectors. For instance: current FDI limit in aviation sector is maximum 49%. The FDI limits are reviewed by the Government from time to time and as and when the need is felt and FDI is allowed in new sectors where the limits of investment in the existing sectors are modified accordingly...Read More

Getting comfortable with volatility: Mark Mobius

Over the past few weeks, we’ve seen significant volatility in the markets, which has spooked some investors, but is also something we have become accustomed to. Markets generally (not only emerging markets) have become much more volatile during the last 20 years as a result of massive flows of money from not only institutional investors and long-only mutual funds but also hedge funds and high-frequency trading. We see such selloffs as potential opportunities to pick up bargains in select stocks if, in fact, the prices move low enough to draw our interest. We have found, however, that these kinds of fluctuations have, in the past, been generally short lived. For short-term investors, the type of selloff like the one we have seen in the markets recently can be very worrying. That’s why, to some degree, we will see money quickly jumping out of what are deemed to be "risk assets," which include emerging market equities. But I think most long-term investors realize that they need to think before they leap, since recoveries can come very fast and it can be difficult to get back in when the recovery comes...Read More

News In Focus

Banks need to employ more people to prepare for tougher regulatory stress tests

A new report from PwC has revealed that banks do not have enough employees dedicated to preparing for tougher regulatory stress tests. The report, Passing the stress test, based on a global survey of 24 mainly non-US banks, found that, overall, participating banks are confident that they meet current regulatory requirements but that they underestimate the amount of resource needed to meet the demands of a tougher regulatory stress testing regime. 90% of respondents have fewer than 20 people dedicated to stress tests. This is less than half of that typically seen in comparable US banks (some US banks have significantly more), which have increased staff levels in response to demands imposed by the Federal Reserve. None of the respondents to the survey planned to recruit more than 20 people to work on stress testing in the next three years...Read More

Young farmers key to innovating agriculture sector

The second-annual European Congress of Young Farmers honoured top innovators in agriculture, hosted by EPP Group MEPs. It wrapped up a two-day conference aimed at encouraging more young Europeans to turn to farming as a source of employment, with the help of the new budget from the Common Agricultural Policy. Currently for every nine European farmers over the age of 55, there's only one under 35. The farming work force has aged more than in any other sector. Since 2000, the number of farmers fell 9% overall, and 45% among young farmers. Thus the urgency to attract youth...Read More

Stop Tobacco, Live More

Students Working Against Tobacco (SWAT) is a CSR initiative undertaken by the students of EMDI Institute of Media and Communication, located in Lower Parel. This year, SWAT marks its 11th year in running and the students have been inspired to spread awareness about the cause by trying to nip it in the bud. Keeping this in mind, the SWAT team went to various schools across Mumbai to educate the children through interactive activities such as debate competitions, panel discussions and a performance put up by the SWAT team. Taking the cause forward, the team also visited Masina Hospital Rehabilitation Center, Byculla for a recreational evening with the patients. SWAT, this year, also includes a treasure hunt on 15th of February that will take teams across the city of Mumbai. Registrations for the treasure hunt will soon open on the Facebook page – ‘S.W.A.T. Official’. An anti-tobacco awareness rock concert, Rockatronica, the only smoke free concert in Mumbai will be held on the 16th of February at Bandra Fort’s Amphitheatre.

Government schools fall short of WHO norms for tobacco control: Survey

Asthma risk to premature babies higher than previously thought

Babies born early are more likely to develop childhood asthma than those born at full term, new research shows. A worldwide study of more than 1.5 million children found that the risk of developing asthma, or asthma-like symptoms, after a preterm birth is higher than previously thought. In addition, the risks of developing asthmatic symptoms are the same for preschool and school-age children, indicating that children born prematurely do not outgrow the risk. With asthma the most common chronic disease in childhood, and an increasing number of babies now surviving premature birth, this is likely to become a significant health problem. Asthma affects some 8%t of children born at full term, while this rises to 14%t in babies born prematurely – defined as at least three weeks early – the study shows...Read More

Property Prices maintaining downward slide: Makaan.com Property Index

It has been almost six months now that Makaan.com Property Index has been confirming that the property prices have started stabilizing or are on a downward trend in major key property markets of India. So, what does the index bring this time for the readers? Are the property prices moving in favour of home buyers? Yes! Should the readers give up the wait and watch policy and start looking for options to build a dream home out of a property? Definitely Yes! But what is the insight coming with the Makaan.com Property Index for the last quarter of 2013? This time it is a race - a race between the cities depicting which city is still showing appreciation in property prices in MPI and which ones have ceased (showing depreciation or stabilisation) and are becoming favourable for the home buyers...Read More

Smartphone users in urban India will cross 104 mn in 2014: Deloitte

The number of smartphone users in urban India will cross 104 million in 2014 compared with 51 million users in 2013, according to the 4th edition of Deloitte’s predictions for the technology, media and telecommunications (TMT) in India in 2014.

Further, smartphone users are expected to drive the highest video consumption on mobile. The report adds that consumers are increasingly becoming screen agnostic, and are viewing video content on their smartphones both inside and outside the home...Read More

Trust in business remains highest in India; media slips

The 2014 Edelman Trust Barometer indicates that people in India generally look at business to lead in the debate for change, as the most trusted institution in India. The survey has also found that NGOs have emerged as a close second in the four sectors ranked in the barometer. Trust in media and government slipped in 2014, according to the study. The 2014 India findings of the Edelman Trust Barometer demonstrate that trust in India is fragile. Trust in business is high, but this implies higher expectations from business. Increasing trust in NGOs means they are being looked at as an alternative for the lack of governance and oversight in India. Trust in media and the low trust levels in Government, over time, is a call for these institutions to pay closer attention to the public’s expectations. Transparent and proactive engagement is critical to building and retaining trust in India...Read More

Only 67million mobiles linked to bank accounts in India

Mumbai played host to the second FIPS conference, hosted by Prof. Rajanish Dass of Catallyst Constellations and Santanu Sengupta Convenor FIPS Forum. Earlier in Oct 2013, the first global conference on Financial Inclusion & Payment Systems (FIPS) had been inaugurated by Dr C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, Government of India, in Delhi. Eminent speakers at the second conference included G. Padmanabhan, Executive Director, Reserve Bank of India, R Chandrasekhar, President, NASSCOM, AP Hota, CEO, NPCI, Suresh Sethi, CEO mPesa, Vodafone and Shailesh Baidwan, CEO, Amex. Dr. Partho Sarathi Shome, Adviser to the Finance Minister addressed the dignitaries via a video feed. He indicated that financial inclusion needs to be extended to all geographical extents in the country and must include people from all sections of the society...Read More

Earnings Corner

IIFL consolidated 9MFY14; Net Profit at Rs. 197 cr, up 3% YoY

IIFL announced that for April - Dec 2013 (9MFY14), income stood at Rs. 2,050 Cr up 6% yoy.

The Earnings before Interest, Depreciation and Tax was at Rs. 1,196 Cr, up 24% yoy while Profit after Tax was at Rs. 197 Cr, up 3% yoy. 

Income for the quarter stood at Rs. 690 Cr marginally up qoq, marginally down yoy. Earnings before Interest, Depreciation and Tax was at Rs. 418 Cr, up 4% qoq and up 17% yoy.

Profit after Tax at Rs. 67 Cr, marginally up qoq and down 8% yoy

Interim dividend declared

The Board of Directors of India Infoline Ltd have declared dividend of Rs. 3 per share. i.e. 150% of par value

Nirmal Jain, Chairman, IIFL, commented on the financial results of Q3FY14 "The NBFC operations have reported positive growth despite falling share of gold loans and higher short term interest cost at the end of September. Our capital market operations now have sharpened focus on advisory business and we expect them to see traction soon. RBI’s relaxation of LTV norms for gold loans and easing of liquidity and short term interest rates should also help in margin expansion."...Read More

Gateway Distriparks Q3 Consolidated Net Profit up 14%

Firstsource Solutions Q3 PAT up 8%

Motherson Sumi Systems Q3 net profit up 143%

Marico Q3 net profit at Rs1353.673 mn

IRB Infrastructure Q3 net profit at Rs1085.218 mn

Google Q4 cons revenue at $16.86 bn

Blue Star Infotech Q3 total operating income at Rs6,833 Lakh

EID Parry Q3 net profit at Rs515.8mn

Arvind Q3 net profit up 36%

TTML Q3 revenue up 6%

Colgate-Palmolive Q4 net sales at $4,361 mn

Hero MotoCorp Q3 net profit at Rs5.25bn

EIH net profit up 145%

Greenply Industries Q3 net sales up 3%

Shriram City Union Finance Q3 Net Profit up 15%

Hero MotoCorp Q3 net profit at Rs5.24bn

Piramal Enterprises Q3 net profit at Rs111.40mn

Shoppers Stop Q3 EBITDA up 16%

JSW Energy Q3 net profit at Rs2032.70 mn

Siemens Q1 net profit at Rs651.331 mn

TVS Motor Company Q3 revenue up 13%

Qualcomm Q1 revenue up 10%

Indiabulls Real Estate Q3 net profit at Rs 283.638 mn

Bank of India Q3 net profit at Rs5858.20 mn

Symantec Corp Q3 operating margin up 24%

Zee Learn Q3 net loss at Rs338 lacs

Facebook Q4 revenue at $2.59bn

Crompton Greaves Q3 net profit at Rs620.20 mn

Tata Global Beverages Q3 net profit at Rs1195.50 mn

Mahindra Holidays Q3 net profit at Rs200mn

Titan Q3 net profit at Rs1655.70 mn

Indoco Remedies Q3 net revenue up 25%

Century Textiles Q3 net profit at Rs15.80 mn

ICICI Bank Q3 PAT at Rs25.32bn

Godrej Properties Q3 PAT at Rs373mn, up 5% YoY

OnMobile Global Q3 revenue up 28%

Bharti Airtel Q3 PAT at Rs. 6.10bn

NTPC Q3 net profit at Rs28612.80mn

Sutlej Textiles net profit up 82%

Jyothy Laboratories Q3 net profit up 63%

Jindal Steel & Power Q3 net profit at Rs5615.10mn

JSW Steel Q3 net profit at Rs4664.90 mn

Maruti Suzuki Q3 net profit at Rs6811.50 mn

IPCA Labs Q3 PAT at Rs1.39bn

Apple Q1 net profit at $13.1 bn

Just Dial Q3 net profit up 86%

Welspun India Q3 revenue up 24% 

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