Costlier pulses, milk drive up food inflation to 10.86%

Food inflation, based on the annual Wholesale Price Index, increased 10.86 per cent during the week ended August 21, up from the previous week's rise of 10.05 per cent. Pulses and milk were among the items responsible for the surge.

Primary articles

Fuel inflation too climbed 12.71 per cent on a year-on-year basis during the latest reported week, higher than the 12.57 per cent recorded in the previous week, government data released on Friday showed.

The annual rate of inflation for Primary Articles, calculated on point-to-point basis, stood at 15.19 per cent for the latest week compared with 14.75 per cent points the previous week.

Fish dearer

On a sequential basis, the Primary Articles' group index increased 1.4 per cent as the index for Food Articles' group gained 1.8 per cent due to higher prices of fish-inland (22 per cent), fruits and vegetables (4 per cent) and gram (1 per cent). However, the prices of moong and eggs (2 per cent each) and masur (1 per cent) declined.

The index for 'Non-Food Articles' group was up 0.4 per cent due to costlier raw silk (2 per cent) and groundnut seed, raw cotton, copra and rape and mustard seed (1 per cent each).

However, the prices of castorseed (3 per cent), raw rubber (2 per cent) and gingelly seed (1 per cent) slipped. The index for 'Minerals' group increased 1.4 per cent due to higher prices of fluorite (3 per cent) and barytes and iron ore (2 per cent each). However, the prices of steatite (26 per cent), asbestos (21 per cent) and feldspar (4 per cent) dropped.

The Fuels group, on a sequential basis, gained 0.2 per cent due to costlier light diesel oil, furnace oil and aviation turbine fuel (2 per cent each) and naphtha (1 per cent). However, the prices of bitumen (1 per cent) declined.

Bull of the week: Stock that rallied 62% in 5 days

EIH Associated Hotels gained 9.98% or Rs 20.95 to close at Rs 230.85. It touched a 52-week high of Rs 230.85. There were pending buy orders of 43,187 shares, with no sellers available.

Why the run up?

On August 30, 2010, Energy major Reliance Industries controlled by billionaire Mukesh Ambani, announced its foray into the hospitality sector by acquiring a 14.12% in EIH for a total cost of Rs 1021 crore. The stake buy worked out to Rs 184 per share. The acquisition at Rs 184 per share represented almost a 20% premium to its price of Rs 151 on the day. EIH holds 75% controlling stake in EIH Associated Hotels.

On September 01, 2010 , Reliance, bought an additional 0.68% in EIH Ltd, raising its holding to 14.8% in the hotel chain.

Reliance's 14.8% stake in EIH, just shy of the 15% level that triggers a mandatory open offer to buy an additional 20%, could mean the company is not keen to take management control of the hotel chain.

ITC, which holds 14.98% stake in EIH, reiterated that it would not make a hostile bid for EIH.

Analajit Singh, Chairman of Max India, who also holds under 5% stake in EIH, was also interested in hiking his stake in the company. However, talks failed over differences in valuations.

US payrolls fall less than expected in August

US employment fell for a third straight month in August, but the decline was far less than expected and private payrolls growth surprised on the upside, easing pressure on the Federal Reserve to prop up growth.

Nonfarm payrolls fell 54,000, the Labor Department said on Friday as temporary jobs to conduct the decennial dropped by 114,000.

US payrolls fall less than expected in August

Private employment, considered a better gauge of labor market health, increased 67,000 after a revised 107,000 gain in July. In addition, the government revised payrolls for June and July to show 123,000 fewer jobs lost than previously reported.

The decline in payrolls was about half as large as expected. Analysts polled by Reuters had forecast overall employment falling 100,000 and private-sector hiring increasing 41,000.

The unemployment rate edged up to 9.6% last month, in line with market expectations. The rise in the jobless rate reflected an increase in the labor force as some discouraged workers resumed the hunt for jobs.

"We really need private businesses to step up and begin to hire more aggressively for this recovery to really gain momentum," said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania.

The smaller-than-expected job losses last month could assuage fears the economy is sliding back into recession and ease pressure on the Fed -- the U.S. central bank -- to launch a fresh round of bond buying to keep borrowing costs low.

Concerns of a double-dip recession have diminished somewhat this week as data showed strength in manufacturing and gains in consumer spending but the sluggish pace of growth has kept investors on edge.

While the unwinding of temporary census jobs has been a major drag on payrolls, an uncertain economic outlook has also caused businesses to pare hiring.

Consumer spending hurt

Jobs scarcity is hurting consumer spending, which normally accounts for about two-thirds of US economic activity, leaving the recovery from the worst recession in 70 years sputtering.

Growth slowed markedly in the second quarter and Fed Chairman Ben Bernanke has said the central bank stands ready to take fresh measures to support the economy if needed.

Minutes of the Fed's last policy meeting released this week showed several policymakers felt the outlook would have to deteriorate "appreciably" to spur fresh monetary support.

"The economy is in a bit of a lull and gauging how long we are stuck in this rut will determine if the Federal Reserve needs to step in," said Sweet.

The economy's poor health has weakened President Barack Obama's popularity and could see Republicans wrestle control of Congress away from the Democratic Party.

Typically in midterm elections when there is no presidential race the party in power in the White House suffers losses, but analysts say the drubbing Democrats could face may be unusually severe.

Last month, the dominant service sector added 67,000 jobs after July's 70,000 rise. Temporary help services, which is seen as a harbinger of future permanent hiring, rebounded 16,800 after falling in July for the first time since September.

There were more job losses at cash-strapped state governments, pulling down government payrolls down by 121,000 compared to a 161,000 fall in July.

Employment in the goods-producing sector was unchanged last month as a drop in manufacturing offset an increase in construction payrolls, which were boosted by the return of 10,000 striking workers. Manufacturing jobs fell 27,000 after gaining 34,000 in July.

The average workweek was unchanged at 34.2 hours the previous month.

FDI dips 18% during Jan-June 2010

New Delhi: Foreign direct investment in India declined by 18.3 percent to USD 10.77 billion during the first half of 2010.

During January-June 2009, the country received USD 13.19 billion foreign direct investment (FDI), according to the data of the Industry Ministry.

"The main reason for the decline in FDI is slump in the major western economies like the US and Europe..., international trade expert with India's prestigious Indian Institute of Foreign Trade (IIFT) Rakesh Mohan Joshi said.

Joshi said that the flow of foreign investments depends particularly on the on the revival of the western countries.

The sectors which attracted maximum overseas investments include services, telecommunication, construction activities, housing and real estate, power and automobile.

The country received maximum investments from countries like Mauritius, the US, UK, Singapore, the Netherlands and Japan.

The government is making sustained efforts to make the FDI policy regime more attractive and investor friendly, with a view to attract investments from all major investing countries.

The government had floated discussion papers for public comments to liberalise FDI in multi-brand retail and defence sector.

FDI for 2009-10 at USD 25.88 billion was lower by five percent from USD 27.33 billion in the previous fiscal.

Auto sales beat monsoon blues; Maruti posts record numbers

New Delhi: Increasing spending power and excitement created by model launches helped major automakers report robust growth in August sales Wednesday with market leader Maruti Suzuki witnessing best ever monthly dispatches.

Automobile sales, which are usually down in the rainy season, continued to cruise with major firms, including Hyundai, Tata Motors and Hero Honda posting healthy sales in August, due to increased consumer confidence on the booming economy.

During the month, Maruti Suzuki posted its highest ever monthly sales at 1,04,791 units, a 23.56 percent increase from 84,808 units in August 2009.

The company also posted its best figure so far for the domestic market at 92,674 units, a 32.47 percent increase from 69,961 units in August 2009.

"With economic activities going strong, consumers' spending powers have increased. It has helped boosting auto sales," IDFC securities director (research) Ramnath S said.

New models by the companies have also created excitement in the market and many of these have witnessed long-waiting periods for delivery, he added.

The country's second largest carmaker Hyundai Motor India also reported 17.21 percent jump in its domestic sales at 28,601 units as against 24,401 units in August 2009.

Commenting on the sales, Hyundai Motor India director
(marketing and sales) Arvind Saxena said the market continues to be positive and the company expects the trend to continue with the onset of the festive season.

Homegrown auto major Tata Motors reported a 45.10 percent increase in its domestic passenger vehicle sales at 25,196 units compared to 17,364 units in the year-ago month.

Another manufacturer Mahindra & Mahindra's sales in domestic market jumped by 27.39 percent last month at 27,275 units as against 21,410 units in the same month last year.

Carmaker General Motors India saw its sales climbing 33.71 percent to 7,941 units in August compared to 5,939 units in the same month last year. Honda Siel Cars' sales stood at 5,532 units, registering 38.75 percent jump over 3,987 units in the corresponding month last year.

Another auto maker Toyota Kirloskar Motor reported 26.09 percent jump in its sales at 6,361 units compared to 5,045 units in the corresponding month last year.

Ramnath said the growth momentum is expected to continue in future up to the festive season.

"There is a spill-over of demand... The festive season will be very good this time," he added.

On the two-wheelers front, market leader Hero Honda reported a jump of 2.28 percent in its sales at 4,24,617 units in August 2010 against 4,15,137 units in the same month last year. It was the 4th consecutive time, the company posted over four lakh dispatch sales in a single month.

Chennai-based TVS Motor Company's two-wheeler sales in last month grew 31.75 percent to 1,67,109 units from 1,26,842 units in August 2009.

Another two-wheeler maker India Yamaha Motor reported 29.76 percent increase in its total sales at 30,450 units. It had sold 23,466 units in the same month last year. Suzuki Motorcycle India's sales jumped 50.78 per cent to 19,314 units from 12,809 units in August last year.

Reliance Broadcast okays raising over Rs 400cr

Reliance Broadcast Network said on Wednesday its board has approved raising over Rs 400 crore through an issue of equity shares to its founder and other investors.

The infused capital would enhance its net worth and augment its borrowing capabilities, the company said in a statement.

Govt to restate part of Q1 GDP, may revise it at mkt prices

After questions were raised on the GDP numbers announced yesterday, the government is in damage control mode. It is likely to revise the GDP at market prices. Finance Minister Pranab Mukherjee says this revised figure will be made public soon.

“What the central statistics office (CSO) gives as a figure, gets corrected sometimes. There's no doubt in it because these are on the basis of random surveys. Therefore there are some errors here and there. The revised figure will be given. Some criticism has been made about the fact that the projection from the demand side is not matching and the growth from that has been projected and that will have to be addressed.”

Former Chief Statistician of India, Pronab Sen said, "The estimates that we make from the production side are in fact very accurate so there is no issue with the 8.8% growth. The difference has actually arisen out of a statistical issue, which is that two different prices are used to get the constant figure. In the case of the production side number we use the WPI, in the case of the expenditure side we use the consumer price index. Now normally the difference between the two indices is about 2% points or so but in this particular quarter as well all know the difference was nearly 8% to 9% and that what’s causing the problem."

Good US macro data crucial for markets this week: David Bowers

The sell-off across globe weighed on the markets; European markets like France's CAC, Germany's DAX and Britain's FTSE went down around 1% each. Even US index futures were down 0.5%.

The benchmark Nifty closed with modest losses, after showing smart recovery in the last half an hour of trade, led by FMCG, auto, select telecom, healthcare and technology companies' shares. The Sensex recouped more than 150 points despite weak global cues and a 3% fall in RIL.

The Sensex closed at 17,971.12, down 60.99 points or 0.34% and the Nifty fell 13.05 points or 0.24% to settle at 5,402.40, after seeing a recovery of 151.13 points and 53.5 points from their day's respective lows.

Kingfisher board okays raising up to Rs 5000cr

The board of private carrier Kingfisher Airlines met on Tuesday and approved a resolution to raise up to Rs 5,000 crore in order to retire massive debt, which currently stands at Rs 6,000 crore. The company now seeks shareholders’ nod for fund raising and also to hike authorised share capital, which after the board’s approval has gone up to 4,250 crore from Rs 1,000 crore.

The company says that fund raising will be done via various instruments which could include preferential shares, GDRs, rights and even equity shares. It also says that it will immediately be raising up to USD 250 million by way of GDR and about Rs 500 crore will come in via domestic offering.

The process, company says will get completed within the next three to four months.

The aviation major will also convert Rs 650 crore of UB loans into preferential shares. It will also seek shareholders’ approval to increase the authorized share capital from the Rs 1,000 crore that they have to Rs 4,250 crore. This translates into hiking authorized equity capital from Rs 900 crore to Rs 1,650 crore and Rs 100 crore share authorized preferential share capital to Rs 2,600 crore

Liberty Shoes keen on breaking into telecom equipment space

CEO of Liberty Shoes, Adesh Gupta said, they hope to foray into the telecom space soon. However, he declined to confirm whether they have bid for ITI Limited, which manufactures and supplies telephone and communications equipment and parts. "It is a sensitive issue. We would prefer not to add any comments at this point in time. At an appropriate time we will come back to you," he said.

He however mentioned that any such bid would most likely be through the promoter entity and not the listed Liberty Shoes.

DTC introduced in LS; tax relief lower than original proposal

New Delhi: The government Monday introduced Direct Taxes Code (DTC), offering much lower benefits than in the original proposal that seeks to increase tax exemption on income from Rs 1.6 lakh to Rs 2 lakh and fix the corporate tax at a flat 30 percent.

As per the Bill, income from Rs 2-5 lakh will be taxed at 10 percent; Rs 5-10 lakh at 20 percent and 30 percent thereafter.

The changes, when they take effect, will help save up to Rs 41,040 for people earning more than Rs 10 lakh a year.

The exemption on savings and as also payment of interest up to Rs 1.5 lakh on housing loan has been retained in the proposed DTC Bill.

While senior citizens will continue to enjoy greater tax exemption, women tax payers will lose their special status under the proposed Direct Taxes Code.

The Bill proposes to raise the tax exemption limit for senior citizens above 65 years to Rs 2.5 lakh per annum from Rs 2.4 lakh at present.

Finance Minister Pranab Mukherjee tabled the Bill in the Lok Sabha and it has been referred to select committee of Parliament for scrutiny.

Similarly, the exemption limit for senior citizens, is sought to be raised marginally to Rs 2.5 lakh from Rs 2.40 lakh now.

Currently, income from Rs 1.6-5 lakh attracts 10 percent tax; from Rs 5-8 lakh, 20 percent and beyond Rs 8 lakh, 30 percent.

The proposed tax slabs are much lower than originally suggested in the draft DTC bill -- 10 percent for Rs 1.6 lakh to Rs 10 lakh, 20 per cent from Rs 10-25 lakh and 30 per cent for income above Rs 30 lakh.

According to estimates, an individual tax payer earning more than Rs 10 lakh would save up to Rs 41,040 annually.

The legislation also proposes to increase MAT from 18 percent to 20 percent of book profit of a company. It seeks to levy dividend distribution tax at 15 percent.

RIL acquires 14.12% in EIH for Rs 1021 crore

Reliance Industries has forayed into hospitality sector today. Through its wholly owned subsidiary Reliance Industries Investment and Holding Private Limited, it has acquired 14.12% in EIH for a total cost of Rs 1021 crore, reports CNBC-TV18.

“RIL’s subsidiary bought shares from Oberoi Hotels Private Limited and certain other promoters of EIH Limited,” says an official statement. It further says, "RIL has full faith in and would support the management of EIH and there is no change of management, operation or control of EIH.”

However, post-stake sale, there will be no change of management, operation or control of EIH Limited as per the RIL statement.

The stake buy works out to Rs 184 per share while the stock ended today at Rs 150 per share on the BSE.

Earlier, Analajit Singh of Max India, who also holds under 5% stake in EIH, was interested in hiking stake his share. However, talks failed over differences in valuations.

When contacted, ITC, which holds 14.98% stake in EIH, declined to comment on the deal. However, it reiterated that it will not make a hostile bid for EIH.

See Sensex at 22000 by year end: Deutsche Bank

Today, the Sensex closed at 18038.25 up 39.84 points or 0.22% and the Nifty ended up 6.75 points or 0.12% at 5415.45.

Ashwani Gujral, Technical Analyst says, 5,470 was a key level while the markets were coming down. “Today, we have kind of tested that level again and confirmed that this market now has downside momentum. So, in case 5,400 gets taken out, which is about the 50-day moving average, then the next level here should be 5,250 to 5,270. Clearly, we are in a correction and it’s likely that we underperform global markets in this period.”

However, Ajay Bagga, Head of Private Wealth Management (PWM) India, Deutsche Bank doesn’t expect a major correction. He sees Sensex at 22,000 by the end of the year. “We remain bullish on the Indian markets.”