Sensex up by 516 pts on Dip in Inflation,Inline GDP numbers

Closing Bell: Lower inflation, in-line GDP boosts market sentiment

Sensex surges 516 points as inflation eases

Bulls get their act together, lift Sensex up by 516 pts

After lying low for the entire week, Indian stock market benchmarks surged on Friday to close over 3 per cent higher backed by host of positive cues from domestic and global markets. Market opened with a gap-up reacting to drop in inflation to 12.40 per cent against expectation of 12.83 per cent, on moderation in prices of vegetables, meat, cement and a few non-administered petroleum products.

Directionless till Thursday, investors took this opportunity to build positions in recently beaten down banking and realty stocks as fears of Reserve Bank of India raising interest rates eased. Market also got a lift from a rally in Asia and the US earlier on the back of a surprise 3.3 per cent first quarter GDP growth in US. Retreating oil prices as traders discounted threat of hurricane Gustav to US installations boosted sentiments further. However, oil climbed back up to $117 in Friday’s trade as threat from Gustav continued to loom.

Back home, data showed the Indian economy grew at 7.9 per cent in the April-June quarter against previous quarter's 8.8 per cent. The numbers were also disappointing compared with previous year’s 9.2 per cent growth. This is the first time in last thirteen quarters that GDP growth has fallen below 8 per cent, but India is still expected to clock an annual growth of 8 per cent. “Moderation will continue for at least for two more quarters (factoring the further tightening by RBI).

However, we do not expect GDP to fall below 8 per cent in 2008-09. The consumption demand (both from consumer and government) is still strong which should support the manufacturing sector. Investment and savings are also satisfactory and is reflected in growth of construction sector in this quarter (11.4% against 7.7% a year ago),” said Krupresh Thakkar, research analyst, India Capital Markets. “Growth in agriculture holds the key, as a good season would increase demand for other products from industrial and service sectors boosting the economy. The slight slowdown in service sector is an area of concern but we would like to watch the figures for one more quarter,” he added.

Bombay’s Stock Exchange’s Sensex closed at 14,564.53, up 516.19 points or 3.67 per cent. The 30-share index touched a high of 14,586.16 and low of 14,279.02. National Stock Exchange’s Nifty ended at 4,360, up 3.46 per cent or 146 points. It touched a high of 4,368.80 and low of 4,230.60.

Hitendra Nayee, institutional-head, dealing, India Capital Markets, said, “domestic funds and foreign institutions both turned buyers. After months, we saw inflation climbing down and GDP numbers were also in line with expectations. The good thing is volumes were high, that shows interest returning back into the market. Now, the NSG meet will be keenly watched. We are expecting short-term uptrend in the market.” However, second rung stocks were behind in the race as compared with heavyweights.

BSE Midcap Index closed 2.38 per cent higher at 5,742.29 and BSE Smallcap Index gained 1.61 per cent to close at 6,891.64. State Bank of India (7.19%), Reliance Infrastructure (5.97%), ICICI Bank (5.93%) Tata Motors (5.44%) and DLF (5.35%) were the major Sensex gainers. There were no losers in the index. Shares of Tata Steel surged nearly 5 per cent after the company posted 60.5 per cent rise in April-June consolidated net profit late on Thursday. The company's shares ended up 4.99 per cent at Rs 600.35 with volume traded at 22,11,323 against two-week average of 14,78,472 shares.

The steel maker is in talks to raise at least $1 billion from a stake sale to private equity firms or a private placement of shares, according to media reports. Gammon Infrastructure Projects ended up 1.17 per cent at Rs 94.95 on BSE after it got an order for a bridge project worth Rs 8 billion. Jai Corp ended up 5 per cent at Rs 324.30 on market talk that Mukesh Ambani's Reliance Industries may grant it a gas distribution contract. On BSE , advances were 1,851 and declines 790. According to NSE website, total turnover was Rs 10,626.94 crore (provisional), up from Rs 8,769 crore Wednesday—a prior to settlement day.

Source:ET,BL,Sify

India economy growth slows to 7.9 percent in Q1

India's economy grows at 7.9% in Q1

Indian economic growth moderated to 7.9 per cent in the first quarter of current fiscal, against 9.2 per a year ago as rising borrowing costs impacted manufacturing and some other sectors.However, moderation in the GDP growth was expected as RBI hardened interest rates to control double-digit inflation.

If the first quarter GDP growth continues in the remaining months of this fiscal, the economy would expand at the rate more or less projected by Finance Minister P Chidambaram.
He projected the economy to grow by close to 8 per cent, compared to 9 per cent in the previous fiscal.

Manufacturing growth almost halved to 5.6 per cent, against 10.9 per cent as rising interest rates impacted their expansion. Even though agriculture grew by lower rate of three per cent, it is quite considerable on the high base of 4.4 per cent.

The other sectors which witnessed considerable decline in growth rate are electricity, gas and water supply, which expanded at the rate of 2.6 per cent against 7.9 per cent.In the services sector, trade, hotels, transport and communication grew by 11.2 per cent, against 13.1 per cent.
Finance, insurance, real estate and business services expanded by 9.3 per cent, against 12.6 per cent.

However, community, social and personal services grew by higher rate of 8.4 per cent, against 5.2 per cent.Construction activities also expanded at higher rate of 11.4 per cent, as compared to 7.7 per cent, while mining and quaring grew by 4.8 per cent, against 1.7 per cent.
In absolute terms, India's GDP stood at Rs 7,82,357 crore (Rs 7,823.57 billion) in the first quarter of this fiscal, against 7,24,949 crore (Rs 7249.49 billion) in the corresponding period of 2007-08.

In services, trade, hotels, transport and communication grew by 11.2 per cent against 13.1 per cent, while financing, insurance, real estate and business services rose at the rate of 9.3 per cent against 12.6 per cent.However, community, social and personal services grew at higher rate of 8.4 per cent against 5.2 per cent.

Commenting on the growth figures, PM's EAC member Saumitra Chaudhuri said, "It is on expected lines. When EAC came out with the GDP projection, monsoon conditions were not clear. If monsoon turns out to be good, which seems to be the case, there could be some upside."
What is heartening is that investment in the economy continues to be buoyant.
"The investment-GDP ratio has risen to 37.9 per cent, which means GDP growth is likely to be maintained," a finance ministry official said.

However, some analysts believe that economy is likely to expand at lower growth rate in the next quarter. "I expect that the figures would be flat below 7.9 per cent in the next quarter," CRISIL principal economist D K Joshi said.

Moderation in economic growth, particularly in manufacturing, was expected as RBI had tightened monetary policy to curb double digit inflation.For the first quarter, wholesale prices-based inflation stood at 9.4 per cent. Mineral inflation was at a huge 46 per cent, while food articles inflation stood at 5.8 per cent, fish at 1.5 per cent, manufactured products at nine per cent and electricity at 1.4 per cent.

The consumer price index for industrial workers, which is a better indicator of the impact of price rise on the common man, rose by 7.7 per cent in the first quarter.
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India's economy grows at 7.9% in Q1
Growth at 3 year low but rates to stay tight
Economic growth slows to 7.9%
GDP moderates to 7.9% in Q1



Source: ET,Rediff,BS, BL

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Source:ET, BS, BL etc