Accelerating economic reforms only answer to fight slowdown: Govt
New Delhi, Dec 23: Projecting a lower economic growth of 7 per cent amid the global slowdown, the government today said that accelerating pending economic reforms was the only way to push economy toward high growth and hinted at aggressive monetary policy leading to lower interest regime.
“In the face of a global slowdown and a moderation in domestic investment demand, accelerating the pending policy reforms is, perhaps, the answer to flagging business sentiment and bringing the economy back to the 8.5-9 per cent growth path,” the government said in its Mid-Year Review of the economy presented in Parliament. The effort to step up growth by pumping in more investment and economic stimulus package would lead to doubling of fiscal deficit to five per cent of GDP in the current fiscal, but the government does not appear to be unduly worried about it. The commitment to economic reforms is demonstrated with the government introducing two controversial bills relating to insurance sector in Parliament in an election year, despite stiff resistance from the Left parties.
With focus on growth, the government has opted to set aside the fiscal deficit target for the current year. “The additional fiscal stimulus for 2008-09 may be of the order of 2 per cent of the GDP,” which according to Chief Economic Adviser Arvind Virmani may push the fiscal deficit to five per cent of the GDP from the budget estimate of 2.5 per cent.
Besides fast-tracking of the economic reforms, the government has also indicated “aggressive”easing of interest rates to offset the impact of global turmoil.
The Review of the economy said, “There is a considerable scope for monetary policy easing over the next six to 12 months to offset the global increase in demand for money that is being transmitted to India.”
Following cuts in the policy rates by RBI, several banks have already reduced their lending rates giving relief to the hard-pressed borrowers especially in the sectors including housing, exports, small and medium enterprises. Through a slew of measures, the central bank has injected about Rs 3 lakh crore into the cash-strapped system. (PTI)

Business Clips
‘India’s Sapat eyes Britain’s troubled Whittard’
London: Sapat, an Indian tea company, is eyeing Whittard of Chelsea, an upmarket British tea and coffee retailer that is reported to be on the brink of entering administration, a newspaper reported on Tuesday. Sapat owner Nikhil Joshi told the Times newspaper Tuesday that he was following the situation at Whittard closely. “We’re waiting for some clarity to assess our next move. We are in a position to make an acquisition. We have looked at this brand in the past. For us, an entry into the UK would make sense,” he added. Rumours about Whittard swelled Tuesday amid unconfirmed reports that the company, backed by failed Icelandic bank Landsbanki, had called in Ernst & Young as standby administrator. “It is thought that Sapat, which is expected to make a turnover of more than 100 million pounds this year, has at least 20 million pounds in cash on its books to spend on acquisitions,” the Times said. Founded 110 years ago, Sapat, one of India's largest growers and blenders of tea, made an unsuccessful bid to buy Clipper, a British organic tea company, for 24 million pounds. Joshi told the paper that Whittard had been neglected for decades. “The company has been plagued with problems. The core problem: it’s a place you might go to buy your mum a present, but don’t want to visit for yourself.” “Our business is not in a downturn. We’re very much in a position to make acquisitions,” he told the Times. (IANS)

Legal action to be taken against defaulting airlines: Patel
New Delhi: The government on Tuesday said it would take “all possible steps, including legal action” against airlines if they continue to default on airport service charge dues. According to the government, the airlines owe around Rs.11.01 billion (Rs 1,101 crore) to the Airports Authority of India (AAI) in the airport service charge. “The government has given instructions to the AAI to take all possible steps, including legal action, against the defaulting airlines,” Civil Aviation Minister Praful Patel told Parliament on Tuesday. Interestingly, the state-run Air India owes the maximum in dues to the AAI. The flagship carrier has to clear arrears to the tune of Rs 7.39 billion. Leading private airline Jet Airways owes Rs.320.78 million to the airports operators, while Kingfisher Airlines owes Rs.2.86 billion. Low-cost carriers SpiceJet, IndiGo Airlines and GoAir have to pay Rs.150.76 million, Rs.60 million and Rs.80.81 million respectively. Paramount Airways owes Rs.120.5 million to the authority. “Due to reduction in flights and passenger flow, there is a reduction in the revenue of the AAI and other private airport developers,” Patel said. The AAI reported a fall in revenue to the tune of Rs.2.28 billion in the April-September period this year, compared to the last corresponding period.
The airlines also owe Rs.487.5 million to Hyderebad International Airport Ltd (HIAL) and Rs.410 million to Bangalore International Airport Ltd (BIAL). The Indian carriers also owe nearly Rs.28 billion to oil companies. They were Oct 22 given a breather until March 2009 to clear their dues to the oil companies. Besides, the airlines have been given an extended credit period on jet fuel purchase to 90 days from 60 days and would be applicable till March 2009. (IANS)

Textiles exports may fall short of target
New Delhi: Textiles exports may fall short of the target and even witness negative growth, the government said here on Tuesday. “Recession in the US and European markets has slackened demand and exports, which grow at 11.5 percent in the first four months, may go negative,” Textiles Minister Shankar Sinh Vaghela told reporters. “However, this is something that we cannot control, and like other sectors the slowdown will have negative impact on the textile sector also,” he added. “On the positive side, our cotton production has increased considerably and it is estimated that it will reach a record level of 32.20 million bales this fiscal.” Vaghela said the finance department has been approached for a stimulus package for the textiles industry. “This includes loan waiver of Rs.26 billion for handloom cooperatives and concessional interest at the rate of 7 per cent.” Additionally, the minimum support price of cotton has been increased by record 39 percent to 45 per cent during the cotton season of 2008-09, the minister added. (IANS)

Further rate cuts possible, says PM’s economic adviser
Mumbai: A senior member of the Prime Minister’s Economic Advisory Council Tuesday said there was more room for rate cuts by the end of this financial year. Maintaining that the central Reserve Bank of India (RBI) still had room to cut short-term lending rates, council chairman Suresh Tendulkar said: “A one percentage point cut in both repo and reverse repo rates is desirable.”
He added that inflation is expected to decline to around 4-5 per cent by the end of this fiscal. RBI had cut repo and reverse repo rates early this month by a percentage point each to ease the liquidity crunch.
Inflation has dipped to the lowest in nine months at 6.84 per cent. Referring to continued resistance by some private banks to slash lending rates even after state-owned banks had done so, Tendulkar said: “Private sector banks will (now) have to reduce their rates.” He said banks were unwilling to lend despite being well capitalized. (IANS)

STOCK COMMENTS
Pyramid Saimira can test Rs 140-150: Baliga
Ambareesh Baliga of Karvy Stock Broking is of the view that Pyramid Saimira Theatre can test Rs 140-150.
Baliga told CNBC-TV18, “In Pyramid Saimira the promoter has to make the open offer and not the company because in interview promoter’s were talking of the company making the open offer which I do not think is possible and normally whenever there is news of open offer whenever SEBI asks the promoter or the company to make an open offer normally the prices move up and they shoot up very sharply. But here the market has taken it otherwise which is very clear that there is a big question mark whether this open offer will happen at all or not.”
He further added, “As the stock is come down Rs 20 one wants to invest and I suppose that’s one of the reasons why most of the people in the market, I would say 95% of the people in the market just look at the price movements and want to invest. They do not look at the fundamentals, they don’t look at the news and that’s one of the reasons why we see so much of volatility in the markets.”
“If open offer does not happen then you will see levels of around Rs 40 where it was quoting sometime back. I think the valuations for Pyramid given the market scenario, given the way they have been shutting down screens and the cost of that, I think the fair valuations for Pyramid would be anywhere in the region of around Rs 40-50, maximum Rs 60; I do not think it will be beyond that and looking at the way people had bought this stock sometime back expecting this open offer because of which it had moved up to the levels of Rs 80. I think all that selling will also come in.”
“Unless the open offer is very clear and that’s happening and that the promoter has put the money on the table until that happens, I do not see any upside in the stock and in case this open offer goes through then I suppose the upside for this stock is around Rs 140-150 because I suppose 50% of the stock will be accepted under open offer and post that again the prices slide to Rs 40. So taking an average the upside is around Rs 140-150 in case it happens but in case if it doesn’t happen you will see the price tightening around Rs 40. So in case it goes through you have an upside but if it does not go through then you have an Rs 20-25 downside from here.”

JP Associates can touch Rs 105-110: Baliga
Ambareesh Baliga of Karvy Stock Broking is of the view that Jaiprakash Associates can touch Rs 105-110.
Baliga told CNBC-TV18, “I have not looked at Jaiprakash Associates deal very closely but from whatever I can understand, there is a question on corporate governance, which is coming up which is clearly reflected in the market mood. From these levels we don’t expect too much of an upside. The upside which we look at for this stock is possibly around Rs 105-110 levels not beyond that.”

Petronet LNG can test Rs 50-55: Baliga
Ambareesh Baliga of Karvy Stock Broking is of the view that Petronet LNG can test Rs 50-55 over the next one year.
Baliga told CNBC-TV18, “Petronet LNG is not really a value buy as such but one could get levels of around Rs 50-55 for this over the next one year. Looking at the expansion plans which are there, I think it is on-stream as such and also the margins have been under pressure that is one concern for this stock. But going ahead for FY09 and FY10 we don’t see too much of a growth happening. So from that point of view, the price could be capped at around Rs 51-55 levels.”

Limited upside in ONGC, Cairn: Subramanian
R Venkat Subramanian of Kotak Securities is of the view that there is very limited upside in ONGC and Cairn.
Subramanian told CNBC-TV18, “With the oil prices being what they are, there is very limited upside in ONGC and Cairn, the only thing you can say is that its down so much possibility of some up tick in oil prices because even if the global economies are slowing and I don’t know whether there is any case to be made for such a steep demand destruction that will justify the current oil prices. So I think there is perhaps room for oil prices to move up a little bit and hence some upside to these stocks but Cairn for instance trades even to justify its valuations per barrel to the oil, so while there maybe a trading upside but there isn’t much to be made for the oil companies right now.”

Stay away from JP Associates: Subramanian
R Venkat Subramanian of Kotak Securities is of the view that one should stay away from JP Associates.
Subramanian told CNBC-TV18, “I think JP Associates is not infrastructure but it’s a lot about real estate. So that extent the up tick you have seen may also have something to do with the factored of all the real estate companies have had a run but given the huge dependence on the capex going forward for them to deliver earnings, I would stay away from companies like JP Associates.”

Balrampur Chini can test Rs 55: Mohindar
Rahul Mohindar of Viratechindia is of the view that Balrampur Chini Mills can test Rs 55 in the short term.
Mohindar told CNBC-TV18, “In Balrampur Chini from a medium-term perspective there is a visible 20% upside. If I just look at it short-term per se which means from a current level of Rs 47-48, we would expect it to move towards Rs 55 odd levels. If we look at this stock from a slightly medium-term perspective, should we clear this Rs 56 levels which is considered to be the key resistance for the stock, we would probably move all the way upto Rs 70-72. So I am looking at this with a stoploss of approximately Rs 43 and it makes an interesting trading call because we have seen a very good buildup in volumes.”

Ambuja Cements an investment opportunity: Sukhani
Technical Analyst, Sudarshan Sukhani is of the view that Ambuja Cements is a much better investment opportunity after a small correction. Sukhani told CNBC-TV18, “Every time we see Suzlon making a 5% or 10% up move or down move we have to remember from where it fell. So it needs to develop a long base for investors to get into it, in trading there are momentum opportunities but this is not one. Suzlon has not even come close to the November highs; it is much lower than that. So I would say Suzlon at this point needs to correct before even momentum buyers can enter it.” He further added, “Gujarat Ambuja is a much better investment opportunity after a small correction; I think all cement stocks should become a momentum trading ideas again.”