India Insight

By Aditya Kalra and Ankush Arora

Indian shares ended the June quarter on a positive note as the Sensex and Nifty registered gains of around 3 percent during the period, data showed.

The markets managed to post gains in the quarter despite falling around 2 percent in June after the U.S. Fed said it plans to begin winding down its stimulus later this year if economic conditions are favourable.

In positive developments, monsoon rains arrived on time and covered the whole country two weeks ahead of schedule while inflation slipped below 5 percent. Sentiment was also boosted when rating agency Fitch revised its outlook on India back to “stable” from “negative”.

However, current account deficit concerns were exacerbated as rupee remained weak and fell below 60/dollar mark for the first time ever. Here are the top five gainers and losers of the June quarter:

GAINERS

Hindustan Unilever (HUL): India’s largest consumer goods maker emerged the best Sensex performer in the June quarter with gains of over 25.5 percent. Unilever, the parent company, said in April it will raise its stake in HUL to as much as 75 percent.

Nestled in the Himalayas, Uttarakhand attracts increasing numbers of visitors every year. Between 2001 and 2010, the number of visitors to the state rose nearly 200 percent to 30.3 million. With major Hindu shrines located in the state, about 70 percent of the tourists who visit the state visit religious sites. That is a worrying sign for ecologically fragile areas such as Kedarnath – a small temple town located 3,583 metres (11,755 feet) above sea level and almost entirely washed out in recent flash floods.

The rush to the Himalayas has been accompanied by a haphazard pattern of growth that might not be sustainable. A study by infrastructure group IL&FS IDC Ltd showed that the carrying capacities – maximum number of persons an environment can support — of various tourist centres in Uttarakhand reached saturation levels in 2010.

It is in this context that some environmentalists have been calling the devastating floods a man-made catastrophe. “Ecological fragility sets limits. Today these limits are being violated … and the pilgrimage to the Char Dhams is being turned into crass consumerist mass tourism,” said activist Vandana Shiva in an email conversation with me.

Google Trends shows that the term “current account deficit” is among top searches from India in 2013. Add “gold” as a comparative keyword and the searches for the commodity Indians love are far higher.

Indians buy gold for everything – investment, gifts, wedding ceremonies and auspicious days. But of late, this has become a pain for policymakers.

As the Indian economy struggles, policymakers say that high gold imports and the rising current account deficit are big concerns. India’s number one import, crude oil, and gold, it’s number two, hurt the current account deficit. While crude oil is necessary, gold is not, especially if we believe our finance minister.

Shares of Indian metal companies are going through a rough patch in 2013 as a slowing economy at home coupled with rising input costs and weakness in Europe hurts demand.

Indian shares have had a mixed year so far, but the BSE metals index, which is a barometer of metal companies’ performance in India, has been the worst performer among sectors, data shows.

The 13-share metals index is down more than 33 percent this year, widely underperforming the benchmark BSE Sensex that has lost nearly 3 percent.

Indian shares ended in the green in three of five trading sessions but jittery market reaction to the U.S. Federal Reserve’s announcement of a gradual end to its $85 billion bond-buying stimulus took the BSE Sensex down 2.1 percent for the week. The broader 50-share Nifty lost 2.4 percent.

The U.S. central bank’s monetary programme has been a source of easy money for emerging markets such as India that used FII inflows to finance its current account deficit. The possibility of a liquidity drought and a consequent selloff by foreign investors spooked the markets with the rupee plummeting to a record low of 59.98 against the dollar on Thursday.

China factory activity, which shrunk to a nine-month low, also alarmed Asian markets this week.

(Any opinions expressed here are those of the author and not of Thomson Reuters)

The Aam Aadmi Party (common man’s party), led by bureaucrat-turned-activist Arvind Kejriwal, is gearing up for state-level polls in Delhi this year with an array of candidates chosen for their honesty.

Kejriwal’s election plank is to cleanse India of corrupt politicians and bring more transparency to government. With graft scandals embarrassing the ruling Congress and the main opposition Bharatiya Janata Party (BJP), the Aam Aadmi Party is taking a more grassroots approach to the problem: weed out the bad ones before they become candidates.

Anyone can hope to be a election candidate for the party if they are endorsed by 100 potential voters from the constituency they hope to represent. Political analysts say that’s not too difficult but makes the process more transparent.

Thousands stranded in parts of northern India awaited rescuers on Wednesday as floods caused by heavier-than-usual monsoon rains killed at least 150 people in worst-hit Uttarakhand.

Prime Minister Manmohan Singh announced a 10-billion-rupee aid package for the state after he and Congress president Sonia Gandhi did an aerial survey of the flood-hit region.

“The government will not spare any effort in rescue and relief operations,” Singh said on his official Twitter account, adding the large-scale devastation they witnessed was “most distressing”.

By Ankush Arora and Aditya Kalra

Gains of 1.9 percent on Friday helped the Sensex recover some of its losses but the benchmark still ended down 1.3 percent for the week. The index ended in the red for three of five trading sessions this week.

Indian markets largely ignored Fitch’s rating outlook upgrade and Finance Minister P. Chidambaram’s pledge to do more for the economy. Ahead of Monday’s Reserve Bank of India policy review, data showed May inflation stood at 4.7 percent. However, recent weakness in the rupee and a high current account deficit are some of the factors that dampen hopes of a rate cut.

Here are the top five Sensex losers of the week:

JINDAL STEEL AND POWER (JSPL): Shares in JSPL, which ended with losses of 13.21 percent this week, were battered after the Central Bureau of Investigation registered a case against the company over coal mining rights. Shares of the company, controlled by Congress MP Naveen Jindal, have had a rough year so far, losing more than 45 percent.

Indian markets struggled in trade on Thursday with the Sensex falling more than 200 points while the Nifty sank over 50 points. Weak Asian markets also weighed as the Nikkei slumped more than 800 points on worries the U.S. Fed would trim its stimulus programme in the coming months.

The rupee also remained weak, trading below 58 versus the dollar, as Finance Minister P. Chidambaram did not announce any concrete steps to arrest its fall.

At least 100 stocks had touched their 52-week low on the National Stock Exchange (NSE) during trade, data showed. Here’s a look at some stocks that hit a one-year low during Thursday’s trade:

Fitch Ratings revised India’s sovereign rating outlook to “stable” from “negative” on the back of measures taken by the government to contain the budget deficit, it said in a statement on Wednesday. The rating agency had cut India’s outlook to negative in June 2012 and currently has a ‘BBB-‘ rating for the country.

“Fitch expects the government to broadly meet its FY14 budget deficit target of 4.8 percent of GDP (including privatisation receipts) and to gradually reduce the high level of public debt over the medium-term,” the rating agency said.

An acceleration in economic reforms that leads to a material improvement in potential growth rate consistent with stable consumer price inflation and external balance could be one of the factors that could trigger a positive rating action, it added.