Did the stock markets smell it ahead of others? The Indian economy is close to bottoming out, says leading research outfit Nomura.

After four quarters of consecutive declines, the index which measures real M2 money supply, non-oil imports, equity returns, repo rate, real bank credit, industrial output and tourists rose in first quarter (Q1) of fiscal 2009-10 suggesting pick-up in economic activity.

Nomura uses a composite leading index (CLI) to identify turning points in the growth rate cycle. The index which had fallen from near 102 levels in September 2007 to 99, shows a breakout from current levels and seems to be rising upwards.

Since the CLI has a lead of two quarters over non-agricultural GDP growth rate-the pick up in Q1 suggests some pick-up in economic activity from the third quarter, feels Nomura economist Sonal Varma.

“Export and production data in several Asian countries (including India) have continued the improvement seen in previous months,” chief analyst Allan Von Mehren of Dankse Bank, Denmark’s largest bank.

Purchasing managers’ index for new orders show that after falling in mid-2008, the index for India has recovered significantly.

However, the recovery for the economy may not be very quick. Nomura says the decline in real GDP growth (the latest data available are Q4 of fiscal 2008-2009 ) will continue in first six months of 2009.

“We forecast real GDP growth to trough in the second quarter of FY09 at 4.5% year-on-year, led by inventory de-stocking and a further weakening of output in the services sector.”

But it maintains that overall, the turnaround in the leading index is positive . “We interpret it as a sign that the Indian economy is now close to bottoming out,” the Japanese outfit said.

Meanwhile, Citigroup economists feel that consumer price index could fall from 9.6% levels in Feb 09 to 5-6 % range soon as good monsoons could see new crop coming in. While latest inflation data pegs the WPI at 0.3% for the week ended 14 Mar, however the consumer price index (CPI) – released on a monthly basis – remained at neardouble-digit levels, up 9.6% in Februray 09.

“Given the base effect and new crop coming in, it is now consensus that normal monsoons will result in the CPI moderating to 5-6 % levels. Importantly , food articles comprise 14% of the wholesale price index but 57% of the CPI,” Citigroup economists Rohini Malkani and Anushka Shah said. – ET

India is projected to witness a growth between 7-7.5% during the current financial year, after remaining in high growth path constantly for the last four years, said Ashok Chawla, secretary, department of economic affairs.

Whereas, the pace of growth next year is dependent upon how long the global recession lasts and how quickly capital flows return to normal, he added. With the presence of strong domestic demand stimulus, he added further that the India expected to maintain a strong pace of economic growth despite continuation of global recession.

India has taken a number of steps to inject liquidity into the financial systems, recapitalized banks and other systemically important institutions to tide over the crisis, he said.

Chawla identified banking sectors and capital markets as areas where the expert teams of India and China to jointly work and evolve a time-bound strategy for closer engagement.

Financial sector reform process would play as a key to improve productivity, efficiency, profitability and coverage of the system, he emphasized. – MyIRIS.

Indian GDP stands at 7.6% v/s 7.9% in last quater.

India’s economy grew at the slowest pace since 2004 last quarter, increasing pressure on the central bank to cut interest rates.

Asia’s third-largest economy expanded 7.6 percent in the three months to Sept. 30 from a year earlier, after a 7.9 percent gain in the previous quarter, the statistics office said in a statement in New Delhi today. The median forecast of 16 economists in a Bloomberg News survey was for 7.2 percent growth.

Governor Duvvuri Subbarao may have to deepen the rate cuts he started last month to support growth in India’s $1.2 trillion economy as the world sinks into recession. Reducing borrowing costs would also shore up investor confidence after terrorist attacks since Nov. 26 killed at least 121 people in Mumbai, the nation’s financial hub.-Blomberg

 The annual Wholesale Price Index-based inflation rose 8.84 per cent for the week ended November 15, marginally down from the previous week’s yearly rise of 8.90 per cent. The latest WPI inflation rate was the lowest reading since May 17 and well below early August’s peak of 12.91 per cent.

The official WPI for ‘All Commodities’ for the latest reported week rose by 0.04 per cent to 235.1 points, up from 235 points for the previous week. The annual rate of inflation, calculated on point-to-point basis, stood at 3.35 per cent during the corresponding week of the previous year.

Fish-Marine cheaper

The Primary Articles Group rose 0.1 per cent as the index for ‘Food Articles’ group rose by 0.1 per cent due to higher prices of moong, rice and bajra (3 per cent each), ragi (2 per cent) and masur, maize and fruits and vegetables (1 per cent each). However, the prices of fish-marine (12 per cent) and gram and tea (2 per cent each) declined.

Soyabean dearer

The index for ‘Non-Food Articles’ group rose marginally due to higher prices of soyabean (11 per cent), gingelly seed and castor seed (2 per cent each) and linseed (1 per cent). However, the prices of raw rubber (4 per cent), cotton seed groundnut seed and raw cotton (2 per cent each) and raw silk (1 per cent) declined.

The fuel, power, light and lubricants group index remained unchanged at its previous week’s level of 353.3 points. The Manufactured Products group rose by 0.05 per cent as the index for the ‘Food Products’ group declined by 0.1 per cent due to lower prices of cotton seed oil (5 per cent), imported edible oil (4 per cent), rice bran oil (3 per cent) and gur (2 per cent).

However, the prices of bran (all kinds) (5 per cent), gingelly oil (4 per cent), sooji (rawa) (2 per cent) and salt and atta (1 per cent each) moved up. The index for the ‘Textiles’ group rose by 1.0 per cent due to higher prices of cotton yarn-cones and hessian and sacking bags (4 per cent each), texturised yarn (2 per cent) and hessian cloth and cotton yarn-hanks (1 per cent each). However, the prices of synthetic yarn (2 per cent) declined.

The index for ‘Rubber and Plastic Products’ group declined by 0.2 per cent due to lower prices of PVC fitting and accessories (12 per cent). The index for ‘Chemicals and Chemical Products’ group rose by 0.3 per cent due to higher prices of acetylene (70 per cent) and oxygen (8 per cent). However, the prices of vitamin liquids (4 per cent) declined.

The index for the ‘Base Metals Alloys and Metal Products’ group declined by 0.6 per cent due to lower prices of ferro silicon (24 per cent), steel ingots (plain carbon) (16 per cent), basic pig iron and foundry pig iron (7 per cent each), zinc (3 per cent), steel sheets, plates and strips (2 per cent) and ms bars and rounds (1 per cent). However, the prices of joist and rolls and other iron steel (3 per cent each) moved up. – TheHinduBusinessLine

Wednesday’s terrorist attack that rocked the financial capital of the country could further dampen investor sentiment already shattered by the credit crisis, say analysts and marketmen.

However, most of them do not expect a sharp fall in key indices.

“There might be a knee-jerk reaction in the market when it opens”, said Mr Manish Sonthalia, Vice-President, Equity Strategy, Motilal Oswal Financial Services Ltd.

Both Bombay Stock Exchange and National Stock Exchange were officially closed on Thursday following the terror attack.

“I don’t see a great impact tomorrow on markets,” said Mr U. K. Sinha, Chairman & Managing Director of UTI AMC. In the past also such developments had only a temporary impact on trading, he said.

Both BSE and NSE said that the expiry in futures and options, and settlement due on Thursday, were postponed to Friday.

The Singapore Nifty Index Futures opened a little lower than the previous close and ended lower by 64 points.

The terror attack as such is not going to impact the market but will have sentimental impact and foreigners may defer their investment plans, said Mr Dinesh Thakkar, CMD of Angel Broking Ltd.

Some analsyts feel that in the event of a market crash, domestic institutions such as LIC might come to the rescue, said the head of research at a broking firm.

On Tuesday, Sensex ended higher by 331.19 points at 9026.72.

Downgrade seen

As foreign tourists were held captive in top hotels, there might be a downgrade on the big and reputed names in the hotel industry, said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets Ltd.

The terror attack is bound to create a panic amongst the foreign investors which in turn could impact foreign direct and institutional investments.

The US traded shares of Indian companies were up on Wednesday. ICICI bank was up by 1.8 per cent, Infosys by 6 per cent, MTNL by 3.1 per cent and Wipro by 3.8 per cent.

Meanwhile, the SEBI board, scheduled to meet tomorrow, is expected to consider, among others, the exit route for regional stock exchanges and guidelines for separate exchanges for small and medium enterprises.

The equity, currency, bonds and money markets were officially closed on Thursday.

Source – TheHinduBusinessLine.

Global credit rating agency Standard and Poor’s has maintained a credit watch with negative implications on troubled financial giant Citigroup INC , after it received a multi-billion dollar rescue package from the US government. 

“We expect the support to reduce impact of deteriorating asset quality on the ratings and help to restore confidence in the company. As a result, we no longer believe that ratings would fall more than one notch by year-end,” Standard and Poor’s credit analyst Tanya Azarchs said. 

“However, we would provide our stand-alone assessment of creditworthiness, which excludes government support. This assessment could be lower than the issuer credit rating, to reflect the potential for substantial asset-quality deterioration,” Azarchs added. 

S&P maintained credit watch with negative implications on the counterparty credit rating of ‘AA-’ on Citigroup Inc. ‘AA-’ refers to an investment grade rating but involving a higher degree of long-term risk. 

“The guarantee package on 306 billion dollar of assets provided by the US government as well the equity investment, are, in our view, a clear message of support for this and other systematically important banks, the agency said. 

“In our view, the immediate package is sufficient to limit the downside risk represented by the troubled assets. It should also remove the causes of a crisis of confidence that could have overtaken the organisation,” it said. 

The US government is investing in $20 billion of preferred stock that is redeemable at Citigroup’s option for common stock or cash.

US markets had rallied.