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Jun 16, 2012, 11.23 AM IST
Intense political intriguing dominated the whole week among the UPA allies for the selection of the Presidental nominee.The Sensex rose 1.63% on Friday to 16,949, posting its highest close since May 3. The Nifty advanced 1.67% to 5,139. For June, Indian equities rallied over 4.5%, outperforming Asian peers.
Rising on the hopes of a rate-cut, Indian equity benchmarks climbed 1.7% to the highest close in six weeks.
With India having posted its weakest growth in nine years for the January-March quarter, expectations are high that the RBI will switch focus on growth. According to a CNBC-TV18 poll, the consensus on the street is that the central bank will deliver a 25-basis point cut on Monday.
Intense political intriguing dominated the whole week among the UPA allies for the selection of the Presidental nominee. In a sudden statement on Friday evening, Congress president announced finance minister Pranab Mukherjee as the UPA's Presidential nominee, silencing detractors Mamta Bannerjee and Mulayam Singh Yadav.
The week started off with ratings agency Standard & Poor's announcing that India stands the risk of losing its investment-grade rating due to slowing GDP growth and political roadblocks to economic policymaking. In a report titled 'Will India Be The First BRIC Fallen Angel' , S&P pointed out factors that could force the ratings agency to downgrade India, making it the first BRIC nation to lose its investment-grade rating.
Suzlon also opened the week with a sigh of relief as the world’s fifth largest wind turbine-maker announced that the holders of its June series of FCCBs, approved the company’s proposal for an extension of maturity date of the FCCBs until July 27, 2012.
Industrial output for April - as measured by the index of industrial production (IIP) - was almost flat at 0.1% year-on-year, way below the CNBC-TV18 poll estimate of 1.08%. The only consolation was that industrial output was much better than the (revised) 3.2%-decline in March. The output in April would have been worse but for a 5% growth in consumer durables and 5.4% growth in consumer non-durables. Capital goods continued to be the biggest laggard, declining 16.3%, underscoring the slowdown in the investment cycle.
The week also saw the Reserve Bank of India boosting telecom lending . The Reserve Bank of India (RBI) has stated that the telecom spectrum will be treated as a tangible security so that it can be mortgaged and borrowed against.
To ease pressure on the agriculture sector, the government deferred the fertiliser ministry's proposal to hike retail prices of urea by 10% to Rs 5,841 per tonne for the 2012-13. "It (the proposal on urea price increase) has gone back to the ministry. They have to take a second look at it," home minister P Chidambaram said after the Cabinet Committee of Economic Affairs (CCEA) meeting.
A recent report observed by Macquarie Research said that HDFC inflated earnings and ROE over the past two years. "We believe FY11 and FY12 earnings are overstated by 38% and 24% respectively and reported ROE would have been 600 and 400 bps lower at 16% and 18% respectively if the adjustments had been made through the P&L. In other words, earnings growth has been managed."
Vice-chairman and CEO of HDFC Keki Mistry explained that the earnings were based on accounting adjustments and systems that are widely used and accepted. Mistry added that the share of profits of Rs 1,400 crore in the subsidiaries is not reflected in the P&L account and will reflect when HDFC adopts the IFRS system of accounting.
State Bank of India's cut in lending rates across various categories by 50-350 basis points was the highlight of the week. However, the bank's base rate remains unchanged at 10%.
The revision in rates will primarily bring down cost of money in the small and medium enterprise (SME) sector. But it is not applicable to personal loan segements (home, auto and others) as well as some select export credit segments.
Adding to the woes of a sluggish economy, India's exports declined by 4.16% to USD 25.68 billion in May due to unabated slump in global demand and slowdown in domestic industrial growth. Imports dropped by a sharper pace of 7.36% to USD 41.9 billion, signaling weakening of the economy especially with regard to fresh investments as inward shipments of plant and machinery fell by 8%.
In a sudden development that brought the week to a close, a federal court jury in Manhattan found former Goldman Sachs board member Rajat Gupta guilty of three counts of securities fraud and one count of conspiracy, ending the four-week-long trial. He was found not guilty on two other securities fraud charges.
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