RBI cracks whip on loan recast

Steep increase in provisioning proposed banks, companies set to face the heat

The Reserve Bank of India has proposed a steep rise in the provisioning requirement for loan restructuring — to five per cent from April 1, against 2.75 per cent at present.

The new norms would be applicable on fresh cases. For existing ones, the raise has been proposed in a phased manner.

In the draft guidelines on restructuring of advances by banks, the banking regulator has proposed to end the leeway given to banks on debt restructuring from April 1, 2015, as recommended by the B Mahapatra panel. At present, banks can maintain the same asset classification status even after debt recast, though they have to make higher provisioning, of 2.75 per cent, compared to 15-20 per cent provisioning required for sub-standard assets. According to RBI’s communication, from April 1, 2015, all loans that are restructured will be classified as NPAs.

However, for loans to infra projects, the asset classification benefit would continue beyond April 1, 2015, RBI said.

While the provisioning for fresh loan recast has been increased to five per cent, for existing restructured loans, banks have to increase provisioning to 3.75 per cent over the four quarters of 2013-14, and to five per cent over the four quarters of 2014-15.

For banks, already burdened with higher restructuring of advances, the proposals would put further pressure on their bottom lines. They had requested the regulator not to implement the Mahapatra panel recommendations in a hurry, but it seems the regulator is not in a conciliatory mood.

The restructured portfolio of banks grew at a whopping 58.48 per cent in 2011-12, while the compound average growth rate of such assets over 2009-2012 stood at 42.54 per cent. Some of banks’ large exposures restructured in the past wereKingfisher Airlines, Air India, Bhusan Steel, Bharati Shipyard and Hotel Leelaventure, among others.

The Mahapatra committee expects about 30 per cent of the restructured standard advances to slip into the NPA category in the worst-case scenario.

Regarding the time period for attaining viability, RBI has decided to qualify for special asset classification benefits, banks should ensure the unit taken up for recast achieves viability in eight years if engaged in infra activities and five years in other cases.

Why Cut Rates if Current A/c Deficit is a Worry,Ask Experts

RBI says deficit key for policy,but other policy action also needed to tame it 

Economists are finding it tough to square the Reserve Banks decision to cut key policy rates while expressing serious concern over the implications of the high current account deficit (CAD) for the conduct of monetary policy. 

Most of us were trying to know the central banks framework.If the CAD mattered so much,then why did it cut rates wondered A Prasanna, chief economist with ICICI Securities Primary Dealership. Rajeev Malik of CLSA and Tushar Poddar of Goldman Sachs also posed similar queries to RBI governor D Subbarao at the post-policy analysts teleconference. Subbarao explained that the CAD was an important factor in framing policy even as the central bank did not have any particular level in mind.

We are not targeting a CAD rate by way of monetary policy.But we have to take into account implications of CAD for monetary policy.We take into account the size and composition of the CAD, he told the economists.Correcting the CAD would require other policy actions,he said.

The latest RBI report flagged CAD in addition to inflation and fiscal deficit as a serious concern.The governor explained that the central bank had to manage multiple objectives,including inflation,and encourage savings,besides providing adequate funds for businesses.

Subbarao told the analysts that the RBI had factored in the impact of a release of suppressed inflation in the near future.Prices of several items in the fuel group,which are currently subsidised,are likely to go up once they are deregulated.He also said the RBI was not drawing too much comfort from the decline in inflation as per the wholesale price index.

Realty Stocks Back on Investor Radar

Stocks rally 30-50 % as buyers are quick to pick up projects nearing completion 

Investors have started putting money again into real estate stocks,encouraged,in part,by the speed at which flats are being sold off in a few luxury projects,mostly those nearing completion.Stocks of real estate companies have rallied 30-50 % over the past three months,on hopes that a highly anticipated interest rate cut which came ultimately on Tuesday would help revive buying,thereby helping companies pare their inventories. Luxury housing projects launched in the last quarter were snapped up within days of their launch,data shows,prompting analysts to say that investors have started taking fresh position in the countrys real estate sector.

The recent sales and registrations data suggests recovery in the housing sector, Goldman Sachs analyst Puneet Jain said in a research note recently.Mumbai has seen pickup in residential project launches due to clarity on regulations. According to data provided by Mumbai-based Lodha Group,the developer received 1,300 applications worth.5,400 crore for pre-launch bookings of a luxury residential project in Worli. Similarly,the L&T-Omkar joint venture redevelopment in Parel,Mumbai,got 400 confirmed bookings within five days of the launch.We saw a number of new launches during the quarter. In certain projects the demand was great as pricing was done very competitively, said Ashutosh Limaye,head of research at property consultant Jones Lang La-Salle. Buyers are not willing to take risk in under-construction projects,thus most of the demand is coming from projects that are near completion. 

Market sentiment turned further bullish after RBI and Goldman Sachs data showed that housing loan growth for fiscal year 2013 has been 13% so far,exceeding the overall credit growth of 7%,for the first time in six years. DLFs senior vice-president Sanjey Roy backed the trend of better bookings.We had launched Sky Court project in Gurgaon in the December quarter and it saw huge response.We sold 674 apartments with average ticket size of.1.3 core within a day of the launch. 

Analysts say the real estate sector may witness a re-rating,as a reversal in the interest rate cycle and easier project financing from banks will help companies post higher margins.In the past few quarters,we have seen decent growth across the country.Bangalore,Chennai,Pune and Kolkata have shown good growth while Mumbai has shown improvement.Tier II and III cities like Indore,Lucknow and Vizag have displayed strong user demand, said VK Sharma,finance director and chief executive of LIC Housing Finance.According to the Goldman Sachs report,Bangalore has witnessed the largest up-tick in rentals,which have risen 18% in the past one year. Gurgaon,too,is seeing increase in demand for luxury homes from FMCG,telecom and financial companies,besides IT firms.

The demand-supply mismatch in the housing sector will keep the demand strong for many years to come, said Rajat Rajgarhia,head of research at Motilal Oswal.The affordability ratio is also working out well for most buyers.Only a prolonged slowdown in the economy can affect demand in the real estate sector. However,according to Liases Foras Real Estate Rating & Research,there is an inventory overhang in the National Capital Region and Mumbai Metropolitan Region.

Who Gains from Fall in Interest Rates

RBI slashes repo rate, CRR by 25 bps each

The central bank cuts inflation target to 6.8% for March 2013 vs 7.5% earlier

The Reserve Bank of India ( RBI) has slashed the repo rate by 25 bps to 7.75%. The reverse repo rate will also be adjusted to 6.75% from 7%. It has also announced a cut in CRR by 25 bps to 4%, effective February 9, 2013.

The rate cut, first in nine months, is likely to encourage banks to reduce their lending rates.

The CRR cut is expected to infuse Rs 18,000 crore of liquidity into the banking system.

The central bank has revised the inflation target for March 2013 to 6.8% versus 7.5% earlier.

As per expectations of analysts, a moderation in inflation has provided the RBI with an opportunity to ease the rates. It now hopes to act in conjunction with the govt to support growth. "Even though inflation has peaked, further inflation going into the next fiscal is likely to be muted," said Governor, Dr D Subbarao, while annoucing the measures. It could remain rangebound around the current levels.

Investment outlook is still lacklustre. Liquidity conditions are still tight, although CRR was cut in September and October, and carried out Open Market Operations, the average borrowing has been above RBI's comfort. This could affect credit outflow to productive sectors, Dr Subbarao said.

"With headline inflation likely to have peaked and non-food manufactured products inflation declining steadily over the last few months, there is an increasing likelihood of inflation remaining range-bound around current levels going into 2013-14," RBI said in its third quarter review of monetary policy for FY13.

"This provides space, albeit limited, for monetary policy to give greater emphasis to growth risks. The above policy guidance will, however, be conditioned by the evolving growth-inflation dynamic and the management of risks from twin deficits," it added.

The banking regulator said its monetary policy actions are likely to support growth, anchor medium-term inflation expectations and improve liquidity conditions.

Global risks may spillover into the Indian economy via trade. Large fiscal deficit to stunt growth impulses and crowd out private investment, which is a concern, said the governor of RBI.

Soon, get interest on your savings deposit every month

Also on the cards could be the first interest rate reduction in nine months

The interest earned on your savings bank deposits is likely to be credited to your account every month, against the current practice of quarterly transfers. The Reserve Bank of India (RBI) is likely to ask banks, as early as Tuesday, the day of the third-quarter review of its monetary policy, to increase the frequency of interest payment on savings account deposits.

According to bankers, the regulator feels banks now have a robust technology platform that can enable an increase in frequency of interest credit. Bankers confirm they have the required technology for this.

Following the deregulation of interest rates on savings bank deposits in October 2011, banks have been free to decide their respective interest rates. In April 2010, RBI had also mandated them to compute savings deposit interest rates on a daily basis. They could now be asked to credit interest regularly, irrespective of whether or not an account is active.

On the policy stance, RBI is expected to cut its prime lending rate for the first time in nine months, by at least 25 bps, bankers say. The central bank had last reduced the policy rate, or the repo rate, in April 2012, by 50 bps, after a gap of three years. It maintained a status quo in the five policy reviews that followed, as the inflation rate stayed above its comfort zone of 4.5-5 per cent.

The rate of inflation in December stood at its lowest in three years, down to 7.18 per cent from 7.24 per cent the previous month. The concerns around economic growth could prompt the central bank to stimulate demand by cutting rates, analysts say.

RBI could also draw comfort from the government’s recent initiatives to address the twin deficits — fiscal and current account. Besides reforms like allowing foreign direct investment in multi-brand retail and aviation, the government has also increased import duty on gold by two percentage points to six per cent, to address high current account deficit.

STRATEGIC MOVES RBI’s likely steps in Tuesday’s monetary policy review

Interest credit

Apr 2010: RBI mandates banks to compute interest rateson savings bank deposits on a daily basis Oct 2011: Interest rates deregulated, banks allowed to decide their respective rates on savings bank deposits Jan 2013: RBI likely to ask banks to credit interest on savings bank deposits every month, irrespective of whether or not an account is active Rationale: RBI feels banks now have a robust technology platform to enable a more frequent interest credit

Rate cut

Apr 2012: Repo rate reduced by 50 basis points Apr-Dec 2012: Rates kept unchanged in the 5 policy reviews during the period Jan 2013: RBI expected to cut policy rate by at least 25 bps Rationale: Though above the 4.5-5% comfort range, Decinflation rate was down to 7.18%. RBI may try to boost demand by cutting rates

L&T Profit Rises 13%,Reaffirms Order Flow

Engineering and construction company Larsen & Toubro is confident of meeting its target of new orders worth.80,000-85,000 crore in the current fiscal year,its CFO R Shankar Raman has said.Notwithstanding the skepticism on our guidance that has existed through the quarters,we have achieved 75% of our order inflow target, Raman told reporters while announcing the companys Q3 results on Thursday.We believe that we will stay within the guidance range. 

Investors cheered the companys reiteration of order inflow guidance,pushing its shares up over 1.5% to.1,585.5 on the BSE.Analysts,however,said that concerns over slow-moving orders and potential cancellations,which had led several brokerages to downgrade the stock,still persist.L&T reported a 13% rise in year-on-year net profit for the October-December quarter to.1,122 crore.

Sales rose 10.2% to.15,581 crore.L&T has won new orders worth.60,100 crore in the nine month ended December,which means it would have to book orders worth.20,000-25,000 crore in the last quarter ending March.

Its order backlog was worth.1,62,334 crore as on December.Infrastructure,energy and industrial sectors are witnessing a prolonged trough in the investment cycle and there is intense competition for select opportunities, Raman said.

FM eyes 20% rise in revenue with stable tax regime

Says ministry and RBI are working closely

In an indication of what the Budget could entail, Finance Minister P Chidambaram on Wednesday said he would stick to a five-year road map for fiscal consolidation by looking for a 20 per cent increase in revenues a year without raising taxes but relying mostly on expenditure cuts.

In his second leg of the two-nation roadshow to sell Brand India, Chidambaram told investors in Singapore he was confident of reining in the fiscal deficit at 5.3 per cent of GDP for 2012-13 and then reducing it by 0.6 percentage points every year to three per cent by 2016-17. This, he said, would be achieved by a stable tax regime, non-adversarial tax compliance and a fair dispute mechanism. These tools, Chidambaram said, would swell the kitty by 20 per cent, according to a note by Bank of America-Merrill Lynch.

The bank hosted a meeting between the finance minister and foreign institutional investors, debt investors and representatives of companies in Singapore. After Mauritius, Singapore is the biggest source of FDI inflows into India.

The government was also counting on savings under the Direct Benefits Transfer scheme, Chidambaram said. Pilot projects indicate a saving of 20-60 per cent by reducing leakages.

For fiscal consolidation in the current financial year, the minister said he was relying mostly on reducing expenditure and bringing in austerity steps. He exuded confidence that the disinvestment target of Rs 30,000 crore would be met, and NTPC will be divested next to bring around Rs 11,000 crore. Public sector companies that don’t meet investment targets by March will be asked to return the surplus money as special dividend to the government, the minister said.

However, the Bank of America-Merrill Lynch note said the target of controlling fiscal deficit at 5.3 per cent of GDP was below consensus, and the bank’s estimate was 5.9 per cent of GDP.

Chidambaram told investors that while the cap for debt investments had been raised to $75 billion, the government was considering making the sub-caps fungible to accelerate investments.

Ahead of the monetary policy review on January 29, he said the finance ministry and the Reserve Bank of India (RBI) worked closely, contrary to perception. Earlier, he had said if necessary, the finance ministry would “walk alone to face the challenge of growth”, after RBI kept the key policy repo rate unchanged in October.

RBI Governor D Subbarao is expected to meet Chidambaram tomorrow to discuss the macroeconomic situation.

Chidambaram expressed hope the insurance and pension Bills would be passed in the Budget session of Parliament. The finance minister said, “Behind the noise, there were quiet negotiations with the opposition parties (to seek) support from them.”

Chidambaram said the possibility of an unstable government after the 2014 Lok Sabha polls would be the biggest threat to reforms.

Yesterday, Chidambaram met investors in Hong Kong.

FM’s PITCH

Oil and coal exploration on Cabinet Committee on Investments’ agenda Growth to revert to 8% by 2014-15 Raise savings rate to 36% from projected 31.7% for FY13 Up investment rate to 38% from projected 35.3% for FY 13 GST unlikely by April 2013, but hopes to get Bill passed in winter session Current account deficit tricky, but would be financed with capital inflows Most GAAR issues sorted out  Land Acquisition Bill to add a little to project cost but make the environment peaceful for companies  RBI and insurance regulator (Irda) more consultative with each other SAT has only 40 cases, which will be cleared in two months

Investors Flock to Private Fin Cos,Give Govt Lenders a Miss

Private banks draw big investment due to better asset quality thanks to their retail focus 

In February,Axis Bank is poised to raise.6,000 crore by selling shares.The amount is double of what the government will invest in 10 lenders it owns,reflecting the competitive superiority private banks are acquiring. 

The untapped potential in a country with more than half the population without access to formal finance is drawing investors from Fidelity to JPMorgan to private companies even as investors shun bad loans-laden government banks. Existing banks are seeking more capital to face competition from new entrants as the opening up of the banking sector is now imminent,while non-banking financing companies are rushing for capital to fulfil their aspiration of becoming fullfledged banks.The only risk faced by a bank is the asset quality risk,which is in the control of the bank management.In case of public sector banks,their investment decisions could be driven by government policies, said Ashvin Parekh,partner,E&Y.Private sector banks have the choice to take decisions. Investors are making a distinction between private and public sector finance companies as they are headed in different direction with the slump in economic growth splitting their performances.While private lenders are lean with greater focus on fast-growing retail lending,state-run lenders are saddled with record high bad loans,and counting.This has led to valuations differential with some private lenders such as Axis at 2.6 times and HDFC Bank trading at 4.4 times the book value,while Bank of India and Bank of Baroda trade at 1.3 times.

The government banks capital need is about $29 billion,equal to 35%- 125% of their current market capitalisation.Given the governments weak fiscal situation,the banks may need equity infusions on a continuous basis,hurting their return on equity,says Bank of America Merrill Lyn-ch.Our overall preference is still strongly hinged in favour of private banks, says Rajeev Varma of Bank of America Merrill Lynch in a note.We see them structurally outperforming government banks given the capital challenges arising from Basel III and wage negotiation issues that the latter may face from FY14. 

The government this month agreed to invest.12,517 crore in 10 banks controlled by it.But this may be a just a drop in the ocean.The government may have to invest.90,000 crore to meet the banks capital requirements,which may be tough.The governments failure to meet the banks capital needs may leave them less competitive.

On the contrary,private companies are receiving strong response to their share sales. Mahindra Financial Services and IndusInd bank together raised close to.2,900 crore through a share sale last quarter. Ratnakar Bank raised funds and Repco Home Finance,and Cholamandalm Finance will soon tap investors for funds. But the public sector banks may get some attention from the government,say experts.I would expect the next budget will have measures to recapitalise public sector banks to the tune of.10,000-12,000 crore, says Vishwavir Ahuja,chief executive at Ratnakar Bank.This will lead to high investor appetite for public sector banks. But non-banking finance companies are eager to raise capital to become eligible for new banking licences.

In fact,the RBI,through a panel headed by its former deputy governor Usha Thorat,has suggested that these companies,which perform a key financial intermediation,raise their capital.Once investors got a fairly good understanding of the Thorat panels draft recommendations,they realised the fact that enhancement of capital will be the best way to strengthen NBFcs, said V Ravi,CFO,Mahindra Financial Services.Once the new banking licences are in place,as much as $5 billion could get invested in NBFCs

RIL Up 10% in Six Sessions,Brokers Raise Price Target

Analysts expect things to get better as RIL is expected to negotiate hard for an increase in gas prices after March 2014 

Reliance Industries,Indias largest company by market capitalisation,has surged nearly 10% in the past six trading sessions,capping a gain of 2.35%.21.10 on Monday to close at. 920.05 after hitting an intraday high of.954.50.Leading brokerages have upgraded the stock ever since the company reported better-than-expected results on Friday,with a 24% jump in third quarter net profit,the first after four quarters of declining returns, aided by good earnings from oil refining business. Indeed,the stock was up even before the results were out and rallied over 7% between January 14 and 18,as investors were taking bets on higher earnings. 

Companies like Reliance have entered into long-term contracts for buying low-grade crude oil with high sulphur content.Refineries are processing low-grade crude oil into high-margin products like petrol,diesel and aviation turbine fuel.The integration of refinery with petrochemical operations is also adding to their margins, said Deven Choksey,managing director at KR Choksey.Leading foreign brokerages like Macquarie has revised its 12-month price target for Reliance to.1,100,while Goldman has put a price target of.1,050 and Credit Suisse.1,006.However,select brokerages have also raised questions over falling gas production in the Krishna-Godavari basin.At present,Reliance has two refineries at Jamnagar with a combined output of 1.24 million barrels of crude per day.

The complex refineries have turned more profitable compared with the bottom-of-the barrel refineries as these refiners can process low-grade crude oil into high value-added fuels.The benchmark Brent crude oil prices is trading above $111 per barrel.

Companies like RIL are getting a discount of nearly $10 per barrel on low-grade crude oil from international market and thats how it is able to post higher refining margins, said AK Prabhakar,senior vicepresident at Anand Rathi Financial Services.Analysts expect things to get better for Reliance going forward as the company is expected to negotiate hard for an increase in gas prices after March 2014.Besides,the launch of 4G telecom services from the middle of this year could be another big-bang trigger for the stock.

SpiceJets Growing Mkt Share to Help Draw Foreign Partner

Focus on regional connectivity aids airline to grow market share 20% in Nov 

In an environment bereft of Kingfisher Airlines,Spice Jet,one of the champions of the low-cost carrier model,has recorded its highest-ever net profit in a quarter, after three-and-a-half years.The company registered a net profit of.102 crore against a loss of.39 crore in the same quarter last fiscal. One of the chief reasons for this stupendous turnaround in its operational performance can be attributed to its well-calibrated steps during the year.

The airline has been consistent in its focus on enhancing its regional connectivity,especially with tier-II and tier-III cities. Down South,with Hyderabad as its base,the airline has already connected twelve cities. Such a strong focus on regional connectivity has helped the company gain substantial market share.In the past one year,according to the website of DGCA,the companys market share has increased to 20% in November this fiscal from 16.4% in January last year.According to data by AAI, the growth in passenger traffic at regional airports (tier-II and tier-III cities) has been higher than at metros. Passenger traffic at 18 domestic airports in the past five years,on an average,has grown at a compounded annual rate of 25% in comparison with 9.7% at airports in metros.

The reason being airports in metros are running at full capacity with a heavy load on the Mumbai-Delhi route,which handled close to 40% traffic in 2010.Hence,this growth in non-metro airports due to the emergence of tier-II and tier-III cities has enhanced the market share of SpiceJet and IndiGo,which have astrong focus on regional connectivity.Besides,the company has been very cautious in expanding its capacity.In the past one-and-a-half years,the company has increased its capacity to 50 aircraft from 20-30.It is estimated that over 25% of this expansion would come from Bombardier Q-400,which has a seating capacity of less than 100.This is a very lucrative and sensible strategy,given the fact that close to 56% its market is targeted at low-cost travellers. Having a load factor of 75-80 %,this preference for regional short-haul connectivity has worked well in Spice Jets favour. 

At present,SpiceJet flies to 42 cities and seven international destinations.Also,its prompt strategies to infuse funds (preferential allotment to promoters ) and various ticket schemes to attract passengers have worked favourably. 

The recent 2013 scheme,which presented travellers an opportunity to book a one way ticket to any destination was a very smart strategy to tide over the unsold capacity in a lean season.With the scheme,it focused on volume growth,which helped it secure a substantial booking for its 30% capacity for February and March.In the December 2012 quarter,the passenger growth for its domestic and international operations has been over 80%.This growth has enhanced the companys overall yield,which grew by 29% against last years December quarter.Consequently,its net sales from operations grew 37% to.1,603 crore on a YoY basis.Altering its flights to profitable routes,especially internationally,has also benefited.It has kept its fuel expenses in check.Its fuel expenses as a part of its net sales fell to 45% in the December 2012 quarter from 50% in the year-ago period.

Going ahead,close to 60% of the incremental revenues generated through its 2013 scheme would come in the March quarter of 2013 and the remaining in the June quarter of 2013.Having gained market share consistently with a calculated expansion also provides the company a strong edge in terms of securing an equity stake by a foreign airlines company.Investors should hold onto the companys stock till the end of the first half of the next fiscal due to the strong likelihood of a stake sale in the company to a foreign player.For the industry,this sharp improvement in the financial performance of SpiceJet also alludes to a strong financial performance by Jet Airways,which has a 25.2% market share and derives close to 45% of its revenues from domestic markets.

On track with reforms, but political uncertainty a worry: Kenneth Andrade, IDFC MF

IDFC Mutual Fund expects Indian companies to show a lot more financial discipline during the fourth quarter of the current fiscal year. Banks have already written off some of their bad loans and local companies will sell non-core assets to cut debt, Kenneth Andrade, chief investment officer, IDFC Mutual Fund, tells ET's Apurv Gupta. However, the CIO, who manages Rs25,000 crore of investor funds and is known for his acumen in stock-picking, raises concerns on political uncertainty ahead of '14 elections as a fractured majority could adversely deteriorate economic environment for a while. Edited excerpts: 

How do you see the year panning out against the backdrop of 2012, which was a turbulent year? 

There has been a large economic expansion in the country in the past seven years. The first leg was led by the expansion from corporate and the second leg in the last three years was led by the growth in a consumer-led economy. We have been maintaining that Corporate India will see its last leg of balance-sheet growth or the increase in balance sheet into 2013 March end. Post this, you will see companies having a lot more financial discipline. Banks have already taken write-offs and corporates will deleverage and sell non-core assets. This is similar to 2000. We have come a full circle and are seeing a rewind. This could be the beginning of a new cycle. 

Do you think that there is lot of nervousness on the political climate and policy deadlock which is scaring away investors? 

Ahead of the elections in 2014 it is not surprising that the environment is uncertain. There is no political consensus and a fractured majority could adversely deteriorate the current environment for some time. But the latest round of events on FDI and attempts to lower subsidy are all in the right direction. As long as the longer term direction is to move to a market-driven economy with some level of subsidization, as a country we should pull it through as the economy tiers upwards in growth. Earnings growth, which is a rarity across the world, is something of a given in the Indian economy which has gotten investors' attention worldwide. 

How are you positioning your portfolio in that case? 

We are expecting this year to be a reasonably stable. There does not seem to be any one large macro event outside or internally which will disrupt the entire environment. So, the focus will be back on to earnings growth and the deleveraging of corporate and the economy. We will expand this part of our holding given the fact that cash flows will materialise on the system, balance sheets will stop growing and you would have some part of a capacity actually getting utilised. 

So do you think that a large number of infrastructure projects stuck for want of funds and approvals taking-off this year? 

We feel that infrastructure will be a stable sector from here onwards. There are several reasons for this. First, there was this execution issue. Many people said that Indian companies will not be able to execute large projects. However, that was resolved as many companies showed their competence on that front. The second issue is fuel supply. The supply is available but the issue is to negotiate and resolve. The third factor is that the price cannot be passed on to the end consumer. However, that, too, will see a resolution in the next two-three years. While this was not the case so far, states have now started passing on the cost to the consumer. So, most of the projects that were unviable as the cost could not be passed on to the consumer will become feasible. 

What segment or space are you particularly bullish on? 

We are positive on public sector companies, especially, from bank and power sectors. Most of our funds are drawing down their exposure to FMCG and pharma space due to stretched valuations. Most of these PSUs have survived many cycles and proved that they are as efficient as any other private sector company. They have several natural advantages in terms of their reach and distribution. Most of the PSUs have huge cash reserves and are not leveraged. Most of them are available at attractive valuations. For instance, companies in the utility sector like power and gas have been expanding their capacities in the past few years. The balance sheets are strong. All this while the stock is trading at historical low valuations despite many of these companies enjoying a sort of monopoly status in their segments. We believe it's a compelling place to be in. In case of PSU banks, the most talked about issues like NPAs, will be resolved in the next 2-3 years. 

Apart from political uncertainty, there are macro-economic concerns like ballooning fiscal deficit. Do you think that will keep the investors on the edge? 

The key risk continues to be the uncontrolled fiscal deficit to which there is still no answer. The recent events have changed that sentiment quite significantly. It is left to be seen if the same can be implemented in the spirit in which it was announced. A lot of this pessimissim is captured in the valuations of the market. Valuations are comfortable, corporates look like they will recalibrate their balance sheets towards a low debt: equity structure and this will make investing in corporate equity more attractive. So while at a macro level there are significant unanswered questions, at the micro level corporate business models are beginning to look attractive. 

How do you see the interest rates scenario in the first half of this year? Do you think RBI will opt for growth vis-a-vis inflation? 

We expect RBI to cut rates by 50 basis points by March this year. However, the overall cycle will be quite shallow given the current balance of macro risk. If the government policy continues in the current direction, then there may be meaningful room later in the cycle for rate cuts. 

RIL to Bring All Retail Cos Under Reliance Fresh

Reliance Industries plans to consolidate all its retail units under a single entity,signalling that it is not looking for a foreign partner in any of its businesses,a person with the direct knowledge of the development said.

The company has initiated a process to club all its eight independent retailing companies such as apparel chain Reliance Trends and consumer electronics chain Reliance Digital under grocery chain Reliance Fresh,in a bid to remove administrative glitches and increase synergies and efficiencies among various businesses,the person said.

This will make Reliance Fresh a single retail entity under Reliance Retail,the groups holding company for retail business.Reliance last Monday had filed a petition in the Bombay High Court,seeking permission for a scheme of arrangement of several of its entities including Reliance Retail,Reliance Fresh,Reliance Autozone,Reliance Trends,footwear chain Reliance Footprint,Reliance Digital Media,Reliance Leisure,Reliance Gems and Jewels,and Reliance Replay Gaming.In India,companies need high court approval for mergers and demergers to take effect. An email sent to Reliance Retail did not elicit a response till late on Sunday. Sandeep Junnarkar,partner of Junnarkar & Associates,the law firm that has petitioned the court on Reliances behalf,declined to comment.The consolidation will all but end the possibility of Reliance roping in foreign partners to grow separate businesses in the wake of the country easing norms for foreign investment in retail.

This is third major restructuring of the retail business that the countrys largest company by value has initiated since it forayed into the industry in 2006,and with this it comes full circle.It started as a large single entity.Then in 2007,when retail was touted as the next sunrise sector,Reliance decided to spin off the retail venture into dozens of smaller entities focusing on different businesses such as consumer electronics,apparels,food business and supply chain.In September 2011,Reliance sought high courts nod to merge some entities such as Reliance Hypermart,Reliance Wellness,Reliance Home Store,Reliance Lifestyle and Reliance Supply Chain with Reliance Fresh.

Reliance Retail became the holding company of the new entity.Now,Reliance Fresh will be even bigger with the latest proposed additions of seven more entities into it.In 2011,at the time of the first round of mergers,Reliance official then said it was done to increase synergy and optimise efficiency.

The logic remains the same now.While the move would not help the group save costs as such,it will help increase efficiency in inventory management and back-end service among others,and reduce administrative glitches.Launched as one of Indias most ambitious retail venture with investment commitment of.25,000 crore,Reliance Retail over the years underwent a roller-coaster ride to find its feet in Indias fledgling yet promising retail market.LIke others,it was hit hard by a wrenching economic slowdown in late 2008,prompting it to close several stores and downsize operations.

The group currently runs more than 1,400 stores in 129 cities across the country.For the nine months ended December 2012,Reliance Retails income jumped 44% year-onyear to.7,749 crore.A company official said Reliance Retail does not have any immediate plan to tap the capital market because at current company size,it cannot raise more than.1,000 crore.We want the company to reach revenues of.40,000-50,000 crore before we tap the market. Last June,Mukesh Ambani,chairman of RIL,had spelled out his bullishness on the retail business when he told shareholders he aims revenues from the retail venture to grow by five to six times to.40,000-50,000 crore in three-four.

Wheat Exports Poised to Top 9.5mt This Financial Year

Government keen to ship out 5 million tonnes from official stocks to make space for the upcoming harvest 

India's wheat exports are poised to rise to a record 9.5 million tonnes in the current fiscal year as the government is keen to ship out 5 million tonne from official stocks to make space for the bumper harvest.Top officials said private firms would also be allowed for the first time to draw from government stocks to speed up exports as official agencies need to quickly make arrangements for the new harvest and official procurement.With adverse weather hitting output in major producing nations,exporters expect a good price in the international market.The proposal may come up in cabinet agenda on Thursday.

We need to make room for fresh harvest.We think we can export another 5 million tonne of wheat from the government stock, Food Minister K V Thomas told ET.Currently,wheat from the stocks of Food Corporation of India can be sold only by state-run firms such as MMTC,STC and PEC.We are working on a mechanism for allowing private players to ship wheat along with PSUs.The process will be transparent so that there is least financial burden on the government, he said.

The country is likely to get yet another bumper crop this year due to favourable weather conditions such as the recent rains in northern India and cold weather since the beginning of this month.The government expects the output to beat last years record.If such weather conditions continue,we expect to surpass last years output of 93 million tonne, said agriculture secretary Ashish Bahuguna.

The demand for Indian wheat has gone up amid a fall in wheat production across Australia and Russia.The government has finalised tender for exporting 2.305 million tonne of wheat as against the target of 4.5 million tonne.Of which,around 1.5 million tonne have already been shipped out.Now with the proposal of government opening up options for private players to sell government stock,wheat trading houses are expecting good export numbers.We are waiting for the government to open the export for private traders.There is a huge stock in the country and we are expecting again a bumper crop of 100 million tonne, said Anil Monga,managing director,Emmsons International Ltd.According to industry sources,contracts for the new crop for April-May shipment were being signed at $300- $330 a tonne.The current demand for Indian wheat was largely coming from Bangladesh,South Korea,the Middle East and African countries.

The government has been able to export the grain at an average price of $300 a tonne.Indian wheat is currently in huge demand globally.We should take full advantage of the situation and export as much as we can, says Pravin Dongre,president,Indian Pulses and Grains Association.According to agency reports,Chicago wheat gained 5% last week,recording the biggest weekly gain since July as the worsening condition of the US winter crop threatened to squeeze global supplies that have been affected by an adverse weather.A series of rain showers helped ease drought conditions in parts of the United States over the last week but the drought expanded in the parts of the US Plains that produce the most US wheat,according to agency reports.Indian wheat is quoted around $340 a tonne,C&F,in Asia compared with $350- $355 being offered for similar quality Australian wheat.Weather has affected supplies from Russia and Australia,which are major exporters.

Reliance Industries net profit rises 23.92% in the December 2012 quarter

Sales rise 10.28% to Rs 93886.00 crore

Net profit of Reliance Industries rose 23.92% to Rs 5502.00 crore in the quarter ended December 2012 as against Rs 4440.00 crore during the previous quarter ended December 2011. Sales rose 10.28% to Rs 93886.00 crore in the quarter ended December 2012 as against Rs 85135.00 crore during the previous quarter ended December 2011.

Particulars	Quarter Ended
	Dec. 2012	Dec. 2011	% Var.
Sales	93886.00	85135.00	10
OPM %	8.92	8.56	4
PBDT	9307.00	8308.00	12
PBT	6850.00	5738.00	19
NP	5502.00	4440.00	24

IT Cos Will Continue to Get Tax Benefits

Onsite work at client locations by software cos eligible for exemptions: CBDT 

The finance ministry has said software development at client locations and deployment of personnel abroad by Indias IT firms such as Infosys, Wipro, and TCS will continue to get tax exemptions,drawing cheer from the $100 billion sector.The Central Board of Direct Taxes on Thursday said onsite work at client locations by software firms would be treated as deemed exports,making them eligible for tax benefits. It also said deployment of manpower abroad and transfer of a software unit from one special economic zone to another would not impact these concessions.We hope that these clarifications will set the disputes to rest, CBDT chairperson Poonam Kishore Saxena told reporters.

The clarifications are based on the recommendations of a panel headed by former CBDT Chairman N Rangachary, set up by Prime Minister Manmohan Singh following representations from industry.The clarifications address key concerns of the software sector over the stability of tax exemptions enjoyed by them under various schemes,after tax authorities started issuing notices and raising tax demands.The industry was quick to cheer the announcement,but said past assessments and denials of benefits should be resolved in line with the latest clarifications.While this is a positive step,it is important that the implementation is carried on efficiently.We urge that benefits denied in the past be reviewed in light of this move,and there be swift closure of cases for the Industry to benefit from this, Nasscom President Som Mittal said in a statement. 

Nasscom represents the $100 billion Indian IT-ITeS industry,which earns almost $79 billion from exports.India accounts for less than 5% of global technology spending.These clarifications largely address most of industrys concerns, said Pranav Satya, partner,Ernst & Young.The clarifications issued by the Central Board of Direct Taxes come days before Finance Minister P Chidambaram embarks on a visit to Hong Kong and Singapore to woo investors.Software companies enjoy tax exemptions under special economic zone scheme and software technology park scheme, but disputes arose between the industry and the tax department after exemptions available on export of software services were denied on various grounds.

Different interpretations of existing laws gave rise to disputes and litigation.It is clarified that the software developed abroad at a clients place would be eligible for benefits under the respective provisions,because these would amount to deemed export and tax benefits would not be denied merely on this ground, the Central Board of Direct Taxes said in a statement.But the CBDT said a direct and intimate connection would be necessary between development of software abroad and the units to be eligible for tax benefit.Also,the development of software would have to follow a contract between clients and the eligible unit.However,it also clarified that the tax benefits would not be denied merely on the grounds that a separate and specific master service agreement,which firms enter into with their clients for specific works,does not exist.

The statement of work would normally prevail over the master service agreement in determining the eligibility for tax benefits, it said.The CBDT said exemptions will not be denied to a unit in case it changes hands from one owner to another.It has also done away with the requirement to maintain separate books of accounts for units enjoying tax exemptions under different schemes.The CBDT said that research and development activities embedded in engineering and design will be covered under computer software and enjoy tax benefits.

Govt Halves CDMA Spectrum Bid Price

Price for 5 units of airwaves in 800 MHz band set at.9,100 cr 

India on Thursday halved the reserve price for CDMA airwaves in the 800 MHz band in a bid to salvage the sale of these airwaves,but the lone mobile phone company that is tipped to participate in the upcoming sale process for this frequency band said it had expected a steeper cut. Sistema Shyam Teleservices (SSTL ) that offers mobile and data services under the MTS brand said that the governments move was in the right direction as it had realised the limited demand for the technology. However,as per ground realities one would have expected much greater reduction, a spokesperson from the telco added.The Cabinet Committee on Economic Affairs,headed by Prime Minister Manmohan Singh, reduced the reserve price of five units of CDMA airwaves (5 MHz) to.9,100 crore from.18,200 crore,telecom minister Kapil Sibal said.

This is about one-fourth of the.36,000 crore base price that had been initially suggested by telecom regulator Trai. Sibal added that auctions for both CDMA and GSM frequencies will be completed by March 31 and added that market forces would decide the revenue that the government generates.The government was forced to half the reserve price since no mobile phone company had opted to bid for CDMA airwaves in the earlier round of auctions held in November,2012 due to the high reserve price.Earlier this month,the Empowered Group of Ministers (EGoM) on spectrum,headed by finance minister P Chidambaram, has asked the Cabinet to take a final call on a 30-50 % reduction in the base price for airwaves in the 800 MHz band.A top executive with a dualtechnology operator had earlier told ET that CDMA was a dying platform and RCOM and Tata Teleservices had lost over 36 million subscribers over the last 18 months as customers switched to the more popular GSM technology. 

CDMA telcos would have to shell out.1,820 per unit of airwaves andsince a company like Sistema can bid for a maximum for a maximum of 3.75 MHz,this translates to.6,825 crore for the local arm of the Russian company.But the company will be required to pay only a fourth of this upfront and the rest can be paid in ten equal installments after a two-year moratorium.If Sistema wins pan-I ndia airwaves,it will have to pay.1,706 crore upfront,but the actual outgo may be around.200 crore as it is slated to get a refund around.1,500 crore,the entry fee it had paid in 2008. 

CDMA spectrum is crucial for Sistema Shyam that must shut down its networks by February 4 if it does not bid.But an executive with the company told ET that the company will look into the business case once again before deciding to bid. A Do To fficial told ET that if the 3.75 MHz available for sale is bought the government could rake in around.6,500 crore.But this may not be possible as no CDMA companies may bid in the auction.An executive from Auspi,the industry body representing CDMA telcos told ET that despite the price cut,telcos were unlikely to bid for spectrum in the 800 MHz band. Hemant Joshi,Partner,Deloitte Haskins & Sells said that there was still uncertainty on whether there will be a business case even after the 50% reduction in spectrum price.He added however that data play on CDMA technology could result in active bidding participation.

Govt approves 50% cut in reserve price of CDMA spectrum

The Cabinet today approved a 50% cut in the auction reserve price for CDMA spectrum, a move which may encourage Russia's Sistema to participate in the auction process.

The auction which was held in November last year, after Supreme Court direction of cancelling all licenses and conducting auction to give spectrum to all the firms, saw no bidder for CDMA segment. Sistema had said the reserve was too high to bid.

"The Cabinet has approved 50% reduction in CDMA spectrum (reserve) price which was fixed earlier at Rs 18,200 crore (pan India 5MHz)," Telecom Minister Kapil Sibal said. After 50% reduction, pan India 5MHz of 800 MHz CDMA spectrum will be priced at Rs 9,100 crore.

The spectrum auction, both GSM and CDMA, will be completed by March 31 and markets will decide how much revenue the government will get, he added. 

The Cabinet, headed by Prime Minister Manmohan Singh, considered the recommendation of the Empowered Group of Ministers (EGoM) which suggested a 50% cut in the reserve price of 800 MHz band. 

The Cabinet has already approved a 30% cut in the reserve price of 1,800 MHz band spectrum used for offering GSM services. SC has recently allowed the companies, whose licences were cancelled, to continue operations till February 4.

Govt imposes 2.5% import duty on crude edible oil

The government today imposed 2.5% import duty on crude edible oil to protect domestic farmers, but kept duties unchanged on refined cooking oil fearing a hike in retail prices.

The decision was taken at the meeting of Cabinet Committee on Economic Affairs (CCEA) held here, a source said.

At present, crude edible oil attracts no import duty but there is 7.5% duty on refined edible oil.

India imports about half of total domestic requirement of cooking oil. In 2011-12 oil year (November-October), the total import of vegetables oils (edible and non-edible oil) was an all-time high of 10.19 million tonne. In the first two months of the current oil year, imports are up by 5%.

The Agriculture Ministry had proposed an increase in the duty on crude edible oil to protect the interest of palm growers, particularly from Andhra Pradesh.

Earlier this week, Agriculture Minister Sharad Pawar, Finance Minister Pranab Mukherjee and Food Minister K V Thomas reviewed the edible oil imports and discussed the issue of raising the duty on edible oil.

Agriculture Ministry wanted to an import duty crude edible oil to be 7.5%, 15% on refined oil. But during the inter-ministerial meeting, the finance ministry felt such a sharp rise would lead to rise in inflation.

Govt increases LPG cap to nine

Government today decided to increase the cap on LPG cylinders to 9. This will be effective from April onwards, Veerappa Moily, petroleum and natural gas minister said today.

In September 2012, the government had increased the cap to 6 cylinders. Oil companies have also been allowed to revise diesel prices periodically. 

The decision in in line with the Kelkar Committee which had recommended phased decontrol of diesel prices and LPG. 

The government was considering diesel and LPG price hike as the marketing companies were facing a revenue loss of more than Rs 1,60,000 crore.

The government was actively considering a hike in price of diesel prices which was being sold at a revenue loss of Rs 9.60 a litre. 

On Tuesday, Delhi saw a 32 paise hike in petrol prices, the increase in rates was due to withdrawal of VAT exemption in June last year, the first hike since November 2012.

More Funds Expect India to Turn a Tiger

Macquarie,the latest to join the list,raises Sensex target for 2013 to 22200 

Foreign fund managers seem more optimistic about Indian equities in 2013 than in the previous year.Macquarie on Wednesday raised its Sensex target to 22200 from 21600 and said it expected the Indian elephant to turn into a tiger in 2013,joining a long list of brokerages,including Morgan Stanley,Goldman Sachs,JP Morgan and Nomura,who expect that the fresh wave of economic reforms set off by Prime Minister Manmohan Singh in September last year will revive investment and boost economic growth.The Australia-based investment bank also increased the Nifty target to 6900 from 6600,15% higher than Wednesdays 6001.85.It expects that the burst of reforms would lift economic growth back to 8% per annum which prevailed between 2004 and 2008 over the next three years,improving to 6.7% in FY14 from the projected 5.6% in FY13. Corporate earnings growth may surprise on the upside around 16-17 % as (the) market (is) not factoring in improvement in EBITDA margins,with neither falling core inflation nor reduction in interest costs getting built in, the report said. 

Cyclical sectors are even cheaper and are at 10-year lows as compared to defensives. Macquarie added Axis Bank,State Bank of India and DLF to its top 10 ideas by replacing ICICI Bank,Dr Reddy's and HDFC Bank.Last week US-based brokerage house Goldman Sachs said Nifty will scale a new peak of 7000 by the year end,making it Asias second-best performer after South Korea.Several factors,such as inexpensive valuations and corporate and economic growth would be behind this performance,said Goldman Sachs.Indias 17% return,if eventually achieved,will be second only to Koreas 18%.China and Singapore are estimated to return 15% and 12%,respectively,it added.All of these are projections for the year ending 31 December 2013.Another US brokerage,Morgan Staley,set a record target of 23069 for Sensex,while CLSAs Sensex target stood at 21250 for December 2013.Indian markets have been able to ignore negatives last year due to cheap money flowing in from overseas. 

FIIs bought equities worth $24.4 billion last year,the second highest since overseas portfolio investors were allowed to invest in Indian equity in 1992.The highest inflow was $29 billion in 2010.These are net inflows after deducting sales. Sensex managed a return of 26% in 2012,while Nifty managed 27%.While market experts are hopeful about the prospects of FII fund flows to emerging markets in 2013,they feel there could be some changes in portfolios.A Bank of America - Merrill Lynch Fund Manager Survey released on 15 January said emerging market investor increased allocation to India to the highest since July 2010,though Russia,China,and Turkey are the most popular market for them at the start of 2013.The Indian benchmark index gained 2% so far this year and foreign institutional investors invested nearly.10,600 crore in Indian equities. 

FII investment during the first 15 days of last year was.2,836 crore.Global growth optimism has surged to a 33-month high,according to the BofA-ML survey.The number of investors taking larger-than-normal risk hit the highest level since 2004 while the number taking out market protection fell to the lowest since the first quarter of 2008,the survey said.Nearly half of the 254 survey participants said they now expect to sell government bonds to buy equities.Investors appetite for risk in their portfolios is now at its highest in nine years,while an increasing number judge equities as undervalued,particularly in Europe.Moreover,investors have reduced cash holdings to 3.8% from 4.2% in December.This marks the most positive reading of willingness to hold riskier assets since April 2011,though it has not reached levels that would represent a contrarian sell signal,the survey said.Asia Pacific investors once again raised their allocations to cyclicals and reduced exposure to defensives. Retail,energy and technology are tied for the most-favoured sector at a net 33% overweight.The allocation to media was also raised notably this month.The survey,which was conducted by BofA-Merrill Lynch Research with the help of market research company TNS,covered 254 panelists with $754 billion of assets under management.

Bank Chiefs Want RBI to Reduce Repo Rate,CRR

Bankers sang from the same song sheet that they have been for a year,seeking a cut in interest rate and cash reserve requirement if industry and borrowers have to benefit from lower lending rates.Lenders said that a reduction in the repo rate the rate at which Reserve Bank of India lends to banks alone will not lead to a lower interest rate across the system.It should be accompanied by lower CRR, which releases cash to banks who are borrowing from the RBI to meet liquidity tightness.We have requested for rate cuts across the board, said Pramit Jhaveri,India chief executive at Citigroup,after a meeting with central bankers in their customary meeting before monetary policy review.

The RBI will announce its quarterly policy on January 29.The expectation of a rate cut is rising with inflation easing to a three-year low,especially the socalled core inflation of manufactured products.But the 10% retail price acceleration in November and the record high current account deficit,the excess of spending overseas than earning,are tempering hopes. Policy transmission will happen only if RBI cuts rates meaningfully, said K Ramakrishnan ,CEO at Indian Banks Association. Bankers are demanding a 50 basis point cut in repo rate and a 25 basis point cut in cash reserve ratio the slice of deposits that banks have to keep with the RBI.

A basis point is 0.01 percentage point. Repo rate is at 8% and CRR is at 4.25%. Banks are demanding a cut in rate in the backdrop of tight liquidity conditions.Bankers are borrowing in the range of.80,000-. 1 lakh crore from RBI on a daily basis.Although the RBI has been easing monetary conditions through lower CRR over the years despite noises on controlling inflation,the pass through has been meagre. 

After RBI lowered CRR in October 2012,no large bank lowered its base rate,the minimum at which funds could be lent.HDFC Bank realigned its rates to 9.70% at par with State bank of India and ICICI Bank that had lowered their rates to 9.75% early last year.RBI data shows a slowdown with deposits rising 11% by December end 2012,down from 17% a year ago.Similarly,advances rose 15% against a 16% a year ago.

Quick Action 

EXPECTATION OF A RATE cut is rising with inflation easing to a three-year low,especially the so-called core inflation of manufactured products BUT THE 10% RETAIL PRICE acceleration in Nov and the record high current account deficit are tempering hopes BANKS ARE DEMANDING A cut in rate in the backdrop of tight liquidity conditions;RBI will announce its quarterly policy on January 29

Street Relies on RIL Again,Cites 4G,KG Price Revision

Broking houses upbeat on stock,which has been languishing for more than 18 months now 

Reliance Industries (RIL),Indias largest company by market value,has caught the fancy of brokerages and investors as it expects to roll out its fourth generation (4G) data-driven network by June this year as well as enjoy higher prices for natural gas from its Krishna Godavari fields after March 2014.The RIL scrip,which accounts for 9% of the 30-share Sensex,has been languishing for more than 18 months as brokers failed to see earnings growth after the company cut down its gas production by two-thirds.

The trading pattern of the Reliance stock is (that) it moves up very sharply after it had frustrated most of the investors.This is what I have seen in the last 25 years, said Upendra Kulkarni,executive director at Fortress Financial Services.The stock is expected to give returns between 25% and 60% over the next two years on the back of expected positive news flow in oil & gas and telecom sectors. 

The company will announce its third quarter results on Friday..In 2012,RIL underperformed Sensex,giving a return of 18% against 26% by the index.Most of the returns accrued in the last four months of the calendar year 2012,between September and December.Some investors have sold their shares back to the company in a buyback offer which ends on January 19.The company has spent.3,900 crore,or 38.5% of its total.10,440 crore corpus meant for the share purchase,for the buy back. Many brokerage houses,which had been downgrading the stock for a year,between November 2011 and September 2012,have now put a buy call on the scrip. Leading foreign brokerages,including CLSA,Goldman Sachs,Deutsche Bank and Sanford C Bernstein have come up with buys with aggressive price targets for the next one year.Goldman Sachs and Deutsche Bank have set the price target at.1,010,while CLSA has put it at.930 and Sanford C Bernstein at.895.Local broker Edelweiss has put its price target at.906.On Monday,the stock closed at.847,up.7.65,or 0.9%,on BSE.The valuation of RIL stock has dipped to very attractive levels,thus we are seen a buying frenzy in recent months by big institutions, said Suraj Saraogi, Managing Director at Keynote Capital,a broker.

In the futures and options market its a great trading idea,we have been advising the covered call strategy (buy shares at spot market and sell call options of higher strike price) to our clients, he added.C Rangarajan,economic advisor to the Prime Minister,has recommended a hike in KG basin gas prices to $8/mmbtu from $4.2/mmbtu in a report submitted to the government on January 3,2013.The company,owned by billionaire Mukesh Ambani,will soon file an integrated development plan for the KG-D 6 field,which should pave the way for an upgrade in reserves and an increase in gas production from the fiscal year 2016.Reliance enjoyed the maximum number of buy ratings during July to October 2011.From a universe of 50 analysts,over 80% had buy recommendations for the stock then,while about 12% had hold and only 5% had sell ratings.But fortunes changed for Reliance Industries from November 2011 as a slew of analysts downgraded the stock.By the end of September 2012 analysts with buy recommendations had dropped to nearly 30% from a high of over 80% in October 2011.During the period,sell recommendations on the stock also increased to nearly 25% from 5% and hold recommendations to 45% from 12%.After September,however,things have started looking up.

Inflation declines to 7.18 per cent in December

Mumbai: India's headline inflation rose to 7.18 percent in December 2012, less than the Reserve Bank of India's projection of 8 per cent, and should reinforce hopes for a cut in interest rates 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 gauge, was slower than the 7.24 per cent seen in November.

The RBI had projected December inflation of around 8 percent in its October policy review, when it had also raised its March-end inflation projection by 50 basis points to 7.5 per cent.

While food prices are keeping the headline inflation figure high, non-food manufacturing, or core inflation, has been falling and dropped to 4.5 percent in November.

India's consumer price inflation rose to 10.56 per cent in December from 9.9 per cent in November mostly on account of higher food prices. India's retail inflation is the highest among the BRICS group of emerging economies - Brazil, Russia, China, and South Africa - and is above what the RBI calls its comfort level.

CPI rose to 10.74 percent in December compared to 9.97 percent in November in rural areas while in urban India it rose to 10.42 percent versus 9.69 percent in November.

The RBI's next policy review is on January 29, and analysts expect a cut of at least 25 basis points in the policy repo rate, which has been held at 8.0 percent for past the nine months despite a sharp slowdown in the economy.

Upward revisions in earlier provisional numbers could limit the extent of rate cuts by the RBI. The September WPI figure was adjusted up by 26 basis points to 8.07 percent and economists expect a similar revision in the October number as well.

"If magnitude of revisions are high, that definitely reflects hidden demand which was not accounted for earlier and that could decelerate the pace of rate cuts," said Saugata Bhattacharya, chief economist at Axis Bank.

The RBI said last month that it expects the inflation numbers to edge up in December and January before moderating.

However, the WPI numbers may not cool as much as expected after January if the government implements a proposal to raise diesel prices every month by one rupee per litre.

"If diesel prices are raised every month, that will push up inflation expectation as the second round impact of such continuous price increase will also be high," said A. Prasanna, chief economist at ICICI Securities Primary Dealership.

New Delhi is trying to mend its finances as the end of the fiscal year in March nears, by raising railway passenger fares and subsidised fuel prices to reach its fiscal deficit target of 5.3 percent of GDP.

Asia's third-largest economy is likely to post its slowest growth in a decade this fiscal year after investment sentiment was hit by sluggish policymaking, a swelling fiscal deficit, high inflation and elevated interest rates. India is likely to post a growth of 5.5-5.6 percent in 2012/13.

Industrial output contracted 0.1 percent in November on weak capital goods production and muted consumer demand.

The RBI, in recent years one of the most hawkish central banks globally, was unable to shift its policy stance towards growth until December due to stubborn inflation, even as its peers in China, Brazil and South Korea became more aggressive on policy easing to support growth.

RIL & TCS Nos,Inflation Data will Set the Tone for Markets

The week ahead will keep Dalal Street on its toes,as bellwethers Reliance Industries, TCS and ITC declare their quarterly results and set the tone for the markets. Investors and analysts will watch the management commentary around the results and look for any revisions in earnings forecasts for this fiscal and the year ahead. TCS will announce its Q3 results on Monday.Analysts expect a 21% rise in net profit and 20% jump in sales.

The busiest day of the week will be Friday, January 18, when RIL, ITC, HDFC Bank and Wipro declare their third-quarter earnings. Analysts expect Reliance Industries to report a 17% growth in profit and 6% rise in sales. Profit booking in markets will continue this week. Nifty is likely to trade in a range between 5850 and 5050, AK Prabhakar, senior VP - equity research,at Anand Rathi Financial Services,said.Technology stocks are likely to outperform the markets on the back of Infosys results.The further direction for technology stocks will be determined by TCS numbers. The other results this week are of Axis Bank (January 15),Bajaj Auto (January 16),Hero MotoCorp and HCL Technologies (January 17).Another key event for the markets will be the wholesale inflation numbers to be released on Monday. 

Markets have factored in an interest rate cut by RBI at its policy meeting on January 29,especially after factory output fell by 0.1% in November from a year ago.Inflation has shown signs of moderation,raising hopes of a rate cut.An economists poll by Reuters shows the WPI inflation rose an annual 7.4% in December,after rising 7.24% the previous month.Analysts say technology will be the theme of the week after Infosys surged 17% on Friday as the company raised its revenue forecast and posted stronger-than-expected results.  

Traders are building high hopes on the technology counters,as TCS, Wipro and HCL Tech release their results during the week.No big negative surprises are expected from the earnings of blue-chip companies and the markets are unlikely to see any significant correction, said Pankaj Pandey,head of research at ICICI Securities. There might be a reshuffle of funds from FMCG and pharma stocks to technology counters. Traders are also looking for announcement on a hike in diesel and LPG prices after the oil ministry sent a proposal for an increase to the cabinet last week. Sebi is due to hold its board meeting on January 18,amid expectations it may tighten norms for offer-for-sale transactions.On the global front,China will release its GDP numbers,and Goldman,Citi,and Intel will report their earnings during the week.

Weekly Stocks Outlook

Bank Stocks Outlook:

Seen dn on profit-booking; Oct-Dec results eyed Bank stocks are seen under pressure as profit-booking is likely to continue in the coming week, analysts said. 

Capital Goods Stocks Outlook:

To trade in narrow range next week Shares of capital goods and engineering companies are seen trading in a thin band next week as weak industrial production figure for November is likely to keep sentiment subdued for the sector, analyst said. 

Steel Stocks Outlook: 

Dn on weak fundamentals next wk; earnings eyed Shares of major steel companies are seen slightly down over the next few sessions as fundamentals continue to remain weak, analysts said. 

Cement Stocks Outlook: 

Rangebound next wk; Oct-Dec earnings eyed Shares of cement manufacturers are seen trading in a range next week, as investors await Oct-Dec earnings of these companies to take fresh views on the sector, analysts said. 

Pharma Stocks Outlook:

In range next week ahead of Oct-Dec results Shares of major pharmaceutical companies are seen in a range next week ahead of Oct-Dec earnings, analysts from domestic brokerages said. An analyst said "slight" consolidation is likely in some pharmaceutical stocks, which

recently saw rallies. 
Telecom Stocks Outlook:

Seen down next week on profit sales Telecom stocks are expected to see profit sales next week and trade with a weak bias after having traded at higher levels for several sessions, a technical analyst said. 

IT Stocks Outlook:

Seen up next week; TCS, Wipro results eyed Shares of major information technology companies are seen up next week, buoyed by the positive momentum set by Infosys, which saw a better-than-expected performance in Oct-Dec. 

Oil Stocks Outlook:

PSU cos up next wk as fuel price hike seen soon Shares of state-owned oil-marketing companies are likely to trade in the positive territory next week, as fuel price hike is imminent, as stated by Minister of Petroleum and Natural Gas Veerappa Moily today.