Sameer

SEBI IS doing a good job at looking into the BSE as well lookie here.

How did you manipulate share prices?
ASHWIN J PUNNEN

TIMES NEWS NETWORK[ TUESDAY, OCTOBER 04, 2005 01:51:34 AM]
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MUMBAI: The modus operandi adopted by promoters to manipulate the prices of penny stocks is similar. The Securities and Exchange Board of India (Sebi), which recently strengthened its surveillance department and cracked down on price manipulation, has unearthed a common tactic used by promoters to ramp up shares and sell them to public or institutional players.

In the first stage, the promoters demat their holding as they hold a large chunk of the company’s equity. And then they transfer a part of these holding to individuals and entities close to them through off-market deals. A case in point is Mumbai-based IFSL where promoters transferred about 12% to a set of individuals linked to them.

These individuals then trade heavily and create liquidity in the counter and attract retail investors.

During this period, the company makes a flurry of announcements about new plans. In some cases, a stock split is also announced to increase volume and also to make it appear that shares are still ruling lower. The companies, which were making losses, suddenly show a huge jump in sales and profits.

For instance, Mumbai-based Prime Properties whose promoters were banned from trading in the company’s stocks by Sebi on Friday, showed a 1888% jump in profits from Rs 10.12 lakh in the quarter ended June ‘04 to Rs 2.01 crore during June ‘05.


Some times handsome dividends are also announced after many years to dupe the investors. “These events are of great importance, not to be dismissed as fortuitous, signifying careful planning and execution, with a view to encouraging and inveigling investors to trade in these shares,” says Sebi in its order promoters of one such company.

Konkan Tyres, another firm where Sebi has taken action, was in dire straits for many years. After eight years, unaudited results for the quarter ended June 30, ‘05 showed a sudden turnaround in performance.

The company which was loss making till the financial year ended March ‘05, showed a net profit of Rs 64 lakh during the quarter ended June 30, ‘05, as compared to a net loss of Rs 25 lakh in June 30, ‘04 quarter. In fact, the operation of the company was suspended during the second half of the year ended March 31, ‘04 and the bank had taken possession of all the moveable and immovable properties of the company.

The company also announced a set of future expansion plans and bagging some foreign orders. Following the news, the stock of the company surged by over 200% in two months.

In the final stage, these individuals offload stocks into the open market or to foreign funds through block deals. ET had reported that leading foreign funds such as Goldman Sachs, Citigroup, Merrill Lynch and ABN Amro had done block deals in IFSL. Most of these stocks were sold by the entities in whose favour promoters had transferred the shares.

http://economictimes.indiatimes.com/...02,curpg-2.cms


With a P/E ratio of 16.246 the BSE remains more competitive than most markets, one should also not forget that.

Sameer

http://economictimes.indiatimes.com/...ow/1234866.cms

Will the Sensex touch Mt 10K?

INDIATIMES NEWS NETWORK[ MONDAY, SEPTEMBER 19, 2005 01:27:26 AM]
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If you look at the way the Indian stock market is behaving for past couple of months, it seems the bull is in no mood to take a break. Recently, when it crossed 8,000 mark, everyone started asking: what's next?

Within a week it soared another 300 points and there is no immediate sign of a slide. Most interestingly nothing seems to bother the bull. Whether it's Mumbai flood or Katrina hurricane in the US, the Sensex simply zoomed ahead.

But, how long will it last? Sebi member Madhukar even went on record saying that he won't be surprised if the Sensex touches 16,000 mark. Though 16,000 seems to be a distant dream as of now, the Sensex may very well reach 10,000 in near future.

So, the question is: will it reach 10,000 or not? Let's examine both sides of the coin.

Sensex @ 10K! Sounds alarming? Not, if the current momentum on the bourses continues and there are more than enough catalysts to propel the markets further, at least at the current growth rate.

The Indian stock market has never seen so much interest in the recent past. The bulls are charged up and the market scaling new peaks is almost a daily routine now.

The bulls had roared loud last time with such intensity when Harshad Mehta was around. The BSE Sensitive Index (Sensex) had surged from the 2,000 level to the 4,000-point milestone in less than three months. However, that boom proved to be a damp squib once the deeds of Mehta were out in open. Thereafter, the benchmark index, which tracks 30 large-cap stocks, had taken more than seven years to cross the 5,000-point level. The obvious reason, the past rallies were driven by more of speculations rather than fundamental strength.

Here are some reasons why the bull run on the bourses will not stop.
The current bull run can be considered to be continuing for about past three years now, except for a few hiccups. A major distraction has been Black Monday, May 17, 2005. The Sensex had dropped nearly 900 points in two trading sessions following the loss of BJP-led National Democratic Alliance (NDA) in the general elections. However, the index pared its loss by nearly 600 points in just eight days with the appointment of Manmohan Singh as the country's prime minister.

The markets have developed a habit of overcoming a number of bearish trends, including terror attacks, natural calamities, anti-reform policies or even oil price hike.

Consider some of the major dates in the recent past that could have been some major roadblocks to the rally. Sensex gained more than 150 points in the week following December 26, 2004, the day when the tsunami hit south India. Then in July-end this year when heavy rains and floods stopped normal life in the country's financial capital Mumbai, Sensex was up by a whopping 120 points. Also in July 2005, when the government announced its decision to abandon any strategic stake sale in 13 PSUs, the index gained nearly 800 points.

Then, there is soaring global crude oil price, which has jumped more than 70 per cent to a new record high above the $70 per barrel mark. The rise in crude prices has been a major irritant for most of the global markets, but the current rally on Indian bourses is hardly paying heed to this roadblock either.
good factor prevails

According to an analysis by ET Online, the maximum time the Sensex can take to reach the 10,000-point mark is one year, if the P/E ratios of 30 Sensex companies remain at current levels and the companies at least maintain their profit growth at the same rate in June 2005 quarter.

Moreover, the dream run to the 10K mark can get only better, as the corporate earnings results for the current September 2005 quarter is expected to get better than the previous quarter. The analysts and the companies are all optimistic about improving earnings performances. The underlying strength in macroeconomic scenario is further boosting the growth story.

Go through the comments of various industry bigwigs on the day Sensex hit the 8,000 level and you will find that everybody was gung-ho about the ensuing rally. Ranbaxy Labs chief Malvinder Singh was bang on point when he said that Sensex was on way to 10,000 points and this was a start of a bullish India phase. HCL Technologies head Shiv Nadar said the rally was based on clearly established fundamentals of Indian economy and solidity of Indian companies. Dabur India chairman Vivek Burman said the current run was sustainable and Sensex could reach new heights.
There are many sceptics who drone about the risks associated with the Sensex scaling new heights. While, earlier a host of market analysts were advising the investors to keep away from the "overvalued" market, now mostly they are asking the investors to keep away from "overvalued" stocks. To a large extend, this change in market outlook has been driven by the current optimism in the markets.

The greatest example of a reversal in stance comes from none other than the union finance minister, P Chidambaram. In July this year, the month when Sensex was traversing beyond the 7,000 level after shrugging off London bomb blasts and rains and flood in Mumbai, the minister said that he would be concerned if the Sensex crossed the 8,000 level. Come September 8, 2005, the Sensex crossed the mark and the finance minister also joined the party. The minister said there was no reason to worry as the stock market rally seems to have a stronger fundamental basis.

The proclamation cannot be considered as coming from an ordinary politician, but a respected pro-reform economist. The views of the minister were also reiterated by M Damodaran, the chairman of the market watchdog authority Sebi, who said that the Sebi was not worried by Sensex reaching the 8K level.
Valuations still in comfort zone

While, reiterating his no-worry views, P Chidambaram added on September 15, 2005 that there are no signs of a speculative bubble in the market, as the P/E ratios remain at comfortable levels. The finance minister said that the P/E ratios are holding at comfortable levels between 16.0 and 16.5 currently, as compared to earlier peaks when the ratio had gone above 25.

The Sensex P/E ratio has come down substantially in the recent past, after peaking as much as 60 in early 1990s. While defying the prevailing misconception that the markets are overvalued, the fall in the P/E ratio also proves that investors have gone conservative and are not willing to pay higher price for stocks.

A study of P/E ratios of 30 Sensex scrips gives another reason working in favour of Sensex continuing its northward momentum. With exception of a few companies, P/Es are in sync with the average industry P/Es well within the comfortable levels.

Economic growth and corporate profits: a winning combo

Buoyant corporate earnings results have been one of major drivers of the current rally in stock markets. While, steel and refinery companies saw decline in growth rates in the June 2005 quarter, overall the companies reported their quarterly results in-line with or above expectations.
P Chidambaram reiterated the view recently that the September 2005 quarter results from business houses and banks were expected to be as good as the June quarter. The minister added that the market is being driven by high business confidence, foreign money, copious domestic liquidity, return of small investors and optimistic earnings forecasts for the current quarter.

On another positive note, India has emerged as one of the fastest growing economies in the world with a sustainable growth rate. The government's projections for 7 per cent economic growth has been ratified by a number of global entities including the Asian Development Bank (ADB) and the credit rating agency Standard and Poor's (S&P).

Willing all-round participation

Unlike the previous rallies in the past when foreign investors played a key role, the current rally is broader across the sectors and is being participated by all market sections, including foreign institutional investors (FIIs), domestic mutual funds and retail investors as well.

The global liquidity, calculated as sum of the US monetary base and foreign exchange reserves held by central banks world over, have surged by nearly 20 per cent since 2003, which represents its fastest growth in nearly 30 years. The surging global liquidity is finding way to emerging markets due to low interest rates in the US and other developed markets. India has emerged as one of the favourite destinations due to its sustainable economic growth and robust corporate profit growth performance.

The increased focus on improving corporate governance by Indian companies and limited impact of external factors on the Indian economy is adding considerably to the growing global confidence in the country. India has been the second-biggest recipient of offshore fund money in Asia so far this year, with Taiwan leading the pack.
The growing overseas confidence in Indian equities can be gauged from the fact that number of FIIs registered to do business in India increased to 764 by the end of August this fiscal, from 685 in 2004-2005 and 540 in 2003-2004. The FII inflows in Indian equities have already crossed the $8 bn mark so far this calendar year, as compared to a total of $8.5 bn in 2004.

The foreign money is finding its way into the country in form of growing FDI inflows as well. The FDI inflows are likely to exceed $5 bn this fiscal year, from $3.73 bn in 2004-2005. During the April-July 2005 period, total FDI inflows jumped 40 per cent yoy to $1.6 bn, with the month of July alone seeing 84 per cent yoy growth. A number of sectors, including auto, refineries, power and engineering sectors, are witnessing significant upsurge in FDI inflows. The surge in foreign money inflow is boosting further the confidence in the Indian growth story, from both within and outside the country.

The FIIs are finding good company in domestic mutual funds (MFs) in terms of inflows into the Indian equity market. The MFs have even outperformed the FIIs to some extend during the latest rally. In August 2005, FIIs were net buyers of Rs 5,051 crore, down from Rs 7.934 crore in July 2005. However, domestic MFs remained active buyers in August with inflow of Rs 2,293 crore, up from Rs 505 crore in the previous month. The increased MF inflows in the recent past have been supported by lot of money raised through IPOs finding its way to the market.
There are a number of large-cap players with strong fundamentals who have remained away or have played only a small role in the current rally. A number of these stocks are trading at P/E ratios of below 15 times their FY05 earnings and there is still room for growth in these stocks. During the time Sensex travelled from 6,000 points to the 8,000-point level, 12 out of 30 index stocks underperformed the overall rally.

However, recent market figures show an uptrend in most of these stocks and they are poised to contribute significantly to the overall market growth going forward.

FIIs which till now mostly focused on mid-cap growth stories so far, have started showing their interest in large-cap stocks as well. Then, a number of IT majors have not contributed any major part in the current rally, as compared to the previous rallies. An improving outlook for the sector is likely to considerably boost the performance of IT majors going forward.

The persisting warnings from regulatory authorities and market analysts alike regarding the above-average upsurge in mid-cap, small-cap and even penny stocks are likely to drive the retail investors as well towards the large-cap stocks. During the period when Sensex surged 1,000 points to cross the 8,000-point mark, the BSE Midcap index moved up 26 percent and the BSE Small-cap Index jumped nearly 40 per cent.
The growing spending appetite of consumers is one of the major catalysts behind most of the factors working in favour of the current bull run. The rise in consumer spending is directly affecting the sales and profit performances of the business houses, while contributing positively to the overall macroeconomic scenario. These factors in turn add to the positive business sentiments while attracting funds into the markets. The rising purchasing power, higher disposable incomes and improving consumer sentiments are leading the consumers to eyeing high-end products like plasma TV, luxury cars and foreign holidays among others.

The picture is set to get even rosier going forward. A number of sectors, including auto, bank, cement, construction, FMCG and technology, are poised for a robust uptrend in the near future.

Another major factor working in favour of the current bull run, which is likely to add further to the current rally, is growing interest in equities as a major investment destination. The low interest rates are resulting in lower rate of return on investments in various traditional instruments, including post-office small savings schemes and term deposits in banks or mutual funds. Consequently, the investors are moving towards perking up their funds in equity as an alternative.

All these support the fact that the 10K destination cannot be far away for the Sensex.




India is a tiger on the rise, make no mistake, it limps sometimes because of its Babus but 7% average is nothing, India can acheave 10%+ easily with the most moderate of reforms.

Sameer

A few dangers do lie ahead, money is comming into the BSE from FIIs because of low US interest rates and of course the boom in the US housing market which has created many a bloated mutual fund that is pumping money in higher yielding foreign markets. In my opinion the BSE belongs at the 8350 range and it belongs there for another six months in order to await the feelgood news we are all expecting.

Sameer

The Japanese too have been investing heavily in their Indian portfolios because of a cheaper P/E ratio than China, they have inf act sold off some in China and bought more in India BUT there is always a danger of excessive cash flooding the Indian economy across sectors. The BSE has seen such a rise than some are expecting a 10-15% correction beyound the 9000 mark back down towhere the BSE probably belongs in the low 8s.

Its about the economy stupid.

Let us wait for second quarter results and WATCH CONSUMER SPENDING ESPECIALLY DURING DIWALI TIME THIS WILL DICTATE THE BSE'S FUTURE FOR THE YEAR.

Sameer

Remember the saying when the bull is running, hide away in the hills.

Patience will be a virtue in the short run, in the long run the BSE is poised for more.

Karthik

The FII inflows need to be streamlined further.

The capital markets stand at a point where everything's been very quick and sharp. A correction is due.

The argument that the markets are reflecting the robust economy is not very assuring. This kind of heavy FII-driven bull runs are unsustainable.

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indianguy4u

20% correction is long over due. There is some sinister story behind this unrelenting bull run.

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Hala Madrid!!

Monk

I disagree with most of the things being said about the Sensex here,
The Sensex has been prone to market manipulations but things have gotten a lot better in terms of regulations. You guys should read the Securities Contracts regulations Act and the SEBI guidelines on investor protection. The legislation is tough enough and the punitive action prescribed is very severe.

Secondly, The BSE Sensex has always been an excellent economic indicator of both the boom up ahead and the bust. the reason for this is the excellent representation of companies in the BSE.

yes, i do agree that the BSE has gone up too fast and needs to cool off urgently, but thats because of the large amount of liquidity flows into the Indian Economy. Global media has done an excellent job of promoting the Indian Economy, so everyone with cash for Investment wants a share of the Indian apple pie or perhaps the Indian Rasgolla.
Secondly, India still doesnt have FDI norms as friendly as China whereas the Indian stock markets have depth and the capacity to absorb liquidity . So a lot of FDI funds are coming through the FII route. They say that in other Emerging markets like China, Vietnam, Thailand and korea , its easy to get in but almost impossible to sellout when you want to leave because of lack of market depth and liquidity. India is the exact opposite. Indian stock markets can absorb shocks, May.17,2004 showed us that.

Remember, all the FII flows you are seeing are nothing but what would otherwise come in as FDI. If the government made the FDI more attractive we would see a better balance. That would be a lot better than regulating the FIIs.

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indianguy4u

Stock exchanges cannot be a indicator of health of any economy. SE is the place of gamblers & punters who speculate on the stocks which they think would give them more returns from other stocks & other investment instruments.

Sameer

Indiaforu that is not true at all.

On the contrary there is a proven statistical relationship between a stock market and the economy wherein the stock market in the LR follows the economy. There is no debate about that, the stock market is beyound speculation, much has changed since the 80s. At least thats what I learnt in Forecasting Financial markts in masters.

Sameer

And it continues but keep an eye on the gainers today, these companies have reported surges i profit or future expansion plans and their prices reflect that, these are not your speculative one off companies.

The markets will probably correct eventually, noone doubts that but the BSE belongs in the low 8Ks or high 7Ks for another 6 months, then we will have to reevaluate.


http://economictimes.indiatimes.com/...ow/1252029.cms

Sensex zooms 102 points, touches new high

INDIATIMES NEWS NETWORK[ TUESDAY, OCTOBER 04, 2005 04:53:35 PM]
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Bulls continued to hold reign of market sentiments for yet another day with both Sensex and Nifty scaling new peaks on the back of broad-based buying support.

The Sensex jumped more than 100 points to reach a new all-time closing high of 8,799.96, after surging to a new all-time intraday high of 8,808.83.

Nifty closed with a gain of 33.30 points at a new closing high at 2,663.35, after scaling a new intraday peak of 2,667.05.

Sensex breached yet another milestone on Tuesday after surging past the 8,800-point mark for the first time in history. A number of index heavyweights and pivotal stocks extended their gains in afternoon trade.

Wipro, HDFC Bank, Dr Reddy’s Labs, Infosys and Tata Motors were among the major gainers on Sensex, while Cipla, Gujarat Ambuja Cements, Hindalco, HLL, ICICI Bank, TCS and Reliance Energy were the only Sensex scrips to close in the red. There were 22 stocks on the Sensex that moved higher, while one stock, tobacco major ITC, closed flat on Tuesday.

Markets opened on a firm note on Tuesday, with robust gains in a number of auto, bank, pharma, metal and energy stocks. While auto and technology stocks extended their gains in morning trade after moving higher sharply on Monday, banking scrips also bounced back after trading on a relatively subdued note in the previous trading session.

Sensex moved higher after opening 9.05 points up at 8,706.70. Nifty also advanced ahead after opening 0.05 points down at 2,630.00.

A number of small-cap and mid-cap indices also extended their gains on Tuesday, continuing with the uptrend Monday after trading on a subdued note over the past few days. The BSE Midcap Index advanced 1.07 per cent, or 45.72 points, to 4,302.99, the BSE Small-cap Index surged 1.50 per cent, or 87.61 points, to 5,912.20 and the CNX Midcap Index jumped 1.34 per cent, or 51.80 points, to 3,912.90.

Market sentiments continued to gain support from robust economic growth projections and expectations for strong 2Q corporate earnings results. However, some market observers have warned of selective profit booking at higher levels in the near term.

After closing with modest loss on Friday last week, markets bounced back on Monday and the benchmark indices jumped to new all-time highs driven by all-round buying support. Auto scrips surged ahead on the back of robust vehicle sales figures for the month of September, while IT scrips also registered smart gains driven by expectations for robust 2Q results. IT major Infosys kicks off the second-quarter earnings season on October 11, 2005.

The US markets closed on a mixed note on Monday, with blue chips closing with modest losses and the tech-heavy Nasdaq composite index moving higher. The global crude oil prices declined on Monday.

Among the Indian ADRs, Dr Reddy's Labs, Ranbaxy, HDFC Bank, Satyam Computer and Tata Motors moved higher, while ICICI Bank, Infosys, and Wipro closed in negative territory on Monday.

Banking majors began trading on a firm note on Tuesday, after trading on a relatively subdued note on Monday. However, select banking scrips lost ground as the trading session progressed on profit booking at higher levels.

Private sector banking major HDFC Bank jumped 4.67 per cent to Rs 709.95 and was among the largest gainers on the Sensex. HDFC Bank ADR had jumped 5.5 per cent on Monday.

A number of auto scrips extended their gains on Tuesday, after surging ahead sharply on Monday on the back of impressive vehicle sales figures for the month of September. Bajaj Auto jumped 2.37 per cent to Rs 1,810.05, Hero Honda advanced 2.58 per cent to Rs 768, Maruti rose 1.92 per cent to Rs 589.45 and Tata Motors surged 2.88 per cent to Rs 569.20.

Tata Motors announced on Monday that its vehicle sales jumped 13 per cent yoy to 40,095 units in September 2005. The company has reported 11 per cent yoy growth in its commercial vehicle sales and 1 per cent yoy growth for car and utility vehicle sales for the month. Other auto majors Bajaj Auto, Maruti and Hero Honda have already announced robust sales growth figures for the last month.

Maruti surged higher for the second consecutive day on the back of impressive vehicle sales figures for the month of September and the price hikes announced by the company. The car major plans to again hike its car prices before end of this year.

Two-wheeler maker TVS Motor surged for the second consecutive day on the back of robust sales figures announced by the company for the month of September 2005.

The company announced that its two-wheeler sales increased by 16 per cent yoy to a record of 121,108 units last month. The stock closed 2.69 per cent higher at Rs 103, after hitting a 52-week high at Rs 105.70.

Tractor and utility vehicles maker Mahindra & Mahindra (M&M) surged 1.13 per cent to Rs 393.20 after the company announced 13 per cent yoy growth in its vehicle sales for the month of September.

Eicher Motors jumped 2.16 per cent to Rs 286.30 after the company announced its Q2 results.

The company announced on Tuesday that its net profit in the quarter ended September 30, 2005 totalled Rs 13.81 mn on net sales of Rs 38.37 mn.

IT scrips gained support from firmness in the US dollar versus Indian rupee. Infosys, Satyam Computer and Wipro were trading with firm gains. IT stocks have registered smart gains over the past couple of trading sessions on expectations for robust 2Q earnings results.

Infosys jumped 2.96 per cent to Rs 2,629.40, Satyam Computer advanced 2.51 per cent to Rs 589.30 and Wipro surged 5.16 per cent to Rs 400.35. However, TCS slipped 0.52 per cent to Rs 1,489.20 on profit booking at higher levels.
GAIL India announced on Tuesday that it was keen on investing in exploration and production ventures and LNG liquefaction ventures in Australia. The gas major added that to meet the requirement of LNG for its projects, including Dabhol, the company is holding talks with Australian companies for sourcing the gas.

The stock closed 0.48 per cent higher at Rs 282.30 after hitting a 52-week high at Rs 287.50 earlier in trading session.

Earlier in morning trade, GAIL India surged ahead on the back of a historic pact signed by the company for equity participation in an offshore project in Myanmar.

The company announced that it has signed an agreement with Daewoo Corp and Kogas of Korea for equity participation in the A-3 block in offshore Myanmar. The A-3 block is situated adjacent to A-1 block, in which GAIL is a consortium partner and a preferred buyer for the gas produced from this block.

GAIL added that it has been also considered as the preferred buyer to buy Daewoo's share of natural gas from the A-3 block.

IFSL Ltd continued to lose ground on the back of recent regulatory actions against the company. The stock plunged 9.85 per cent to Rs 17.85.

The company informed the BSE on Tuesday that its board of directors held a meeting on October 3, 2005 to take note of recent developments. IFSL added that the board decided to cooperate with the ongoing Sebi investigations and reaffirmed its faith in the business and ongoing projects of the company.

Geometric Software Solutions plunged 8.14 per cent to Rs 99.85 after the company said that its revenue growth has remained disappointing this quarter.

The company informed the BSE on Tuesday that it expects sequential revenue growth in this quarter to remain in mid-single digits, as the ramp up of various projects has been below its expectations. Geometric Software Solutions added that it had expanded its manpower base and facilities as per expectations for double-digit revenue growth and consequently utilisation levels have been affected adversely.

Orchid Chemicals & Pharmaceuticals Ltd moved up 0.96 per cent to Rs 272.15 on the back of an exclusive marketing alliance with Mayne Pharma.

The company announced on Tuesday that it has reached an exclusive distribution alliance with Mayne Pharma, the injectable speciality pharmaceuticals division of Mayne Group, for marketing Orchid Chemicals’ select life-saving injectable antibiotic formulations in the US, Canada, European and Australian markets.

Wimco surged 2.09 per cent to Rs 53.65 on the back of acquisition of a 16.76 per cent stake in the company by Swedish Match.

Patel Engineering firmed up 3.88 per cent to Rs 239.90 driven by new contracts worth Rs 374 crore bagged by the company.

The company announced on Tuesday that it has secured two projects, the Nettampadu Lift state II irrigation project worth Rs 315 crore and a railway tunnel project worth Rs 59 crore.

Havells India firmed up 2.52 per cent to Rs 368.35 on the back of reports that the company was likely to announce an overseas acquisition this week.




Companies are doing well and expanding mainly because of consumer spending which is on a roll, one should watch for second wuarter and third quarter data on consumer spending in order to have a better picture on the BSE position

Sameer

India eco to match Chinese might soon
SHIVOM CHAKRAVARTI

TIMES NEWS NETWORK[ TUESDAY, OCTOBER 04, 2005 12:15:26 AM]
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The Indian economy has just inched closer to the Chinese economy. The Indian industrial sector has recorded a double-digit GDP growth of 10.3per cent, which, most importantly, is less than a per cent of the Chinese industrial sector’s GDP growth.

China has always been considered the dominant manufacturing sector and the industrial hub of the world, but the Indian manufacturing GDP sector has recently recorded a 11.4per cent growth. The manufacturing sector has been instrumental in increasing India’s industrial GDP, as well as closing the gap between GDP growth rates of India and China.

Higher global demand for Indian manufacturing goods, higher purchasing power within the country, and increasing internal demand for manufactured goods are some key reasons for the improved performance of the manufacturing sector. Of course, the Chinese manufacturing sector remains much larger in absolute terms.

Good performance by the manufacturing sector in the index of industrial production, is a clear reflection of the increase in production in the manufacturing sector. During April, May and June the Indian index of industrial production has recorded year-on-year double-digit increases. Of which the manufacturing sector has recorded year-on-year increases of 9.8per cent, 11.5per cent, and 12.6per cent respectively.

As a matter of fact the manufacturing sector has been one of the key driving forces of the index of industrial production, and the overall production levels in the country. The index of industrial production is a measure of the overall levels of production taking place in the country, and the sector wise production as well.

The key drivers of the manufacturing sector were the increase in global and internal demand for Indian manufactured goods.

Engineering goods have been the best performing manufactured export item. Engineering goods exports have recorded increases in excess of 30per cent over the last three years. It currently stands at 30per cent for the year so far.

Other manufacturing sector exports that shone during the period are, leather products, chemicals & related products, gems & jewellery, plastic & linoleum products, and computer softwares. The abolition of the WTO quotas for textile products, has also greatly appreciated India’s manufacturing exports bill.

Greater internal demand for manufactured products has also led to the strong performance of the manufacturing sector. Higher purchasing power in both rural and urban India has lead to an increase in demand for household manufactured items. As higher purchasing power shifts individual demand from basic or necessary goods to more expensive manufactured luxury goods. Goods like expensive clothing, cars, jewellery, all of which are manufactured products.

http://economictimes.indiatimes.com/...ow/1251139.cms

Monk

Sameer,
For which month, quarter or year is this 10.3% growth. Is it IIP or just manufacturing. Economic Times hasn't given enough details of this. Any other source?

Sameer

Its this past quarter's growth, it must be and its IIP.

For the manufacturing sector

here is the quote
"Good performance by the manufacturing sector in the index of industrial production, is a clear reflection of the increase in production in the manufacturing sector. During April, May and June the Indian index of industrial production has recorded year-on-year double-digit increases. Of which the manufacturing sector has recorded year-on-year increases of 9.8per cent, 11.5per cent, and 12.6per cent respectively. "

This is due to higher consumer spending which is also fueling the BSE at the moment as corporations etc are reporting higher earnings based on consumption spending increases for the most part.

Sameer

I said that consumers are driving the Indian economy, here you go.

http://economictimes.indiatimes.com/...ow/1255345.cms

It's official: India’s global market leader
VINOD MAHANTA AND BHANU PANDE

TIMES NEWS NETWORK[ FRIDAY, OCTOBER 07, 2005 01:21:42 AM]
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NEW DELHI: A promising market’ for years, India has now transcended that status. Shedding that tag, the country is being rechristened as the world’s fastest-growing market across categories and sectors. What was a promise has now turned into reality.

Look around you: India is the fastest-growing market in cell phones, automobiles, travel and tourism, DVDs, digicams and laptops, among other things. In cell phones, India is growing at a whopping 60%. It has been ranked the second-fastest growing travel and tourism economy in the world ahead of China, and right behind Montenegro, as per the latest ’04 forecasts released by WTTC.

In automobiles, India logged the fastest growth among the top 15 passenger car-producing countries last year. As per latest rankings by the International Organisation of motor vehicle manufacturers, OICA, India’s car production grew 30% in ’04 followed by Brazil at 17%.

That’s not all. Indians are spending more on luxury items than ever before and the growth in high-end consumer durables can vouch for that. AC Neilsen figures for January-August ’05 tell a fantastic story. Home theatres grew 386.8%, frost-free refrigerators 42.4%, ACs 116%, flat TVs 64% and fully automatic washing machines surged 35.2%.

While certain consumer durables categories have grown by over 50%, some like laptops have defied all rules of gravity with a whopping 123% y-o-y growth in the April to June quarter. According to a Morgan Stanley report, in June ’05, the growth rate of the consumer goods sector was at a 10-year high.

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But what has changed in the market? No doubt, the penetration levels of most of the products are pathetic.

But one of the reasons for the good growth rates has been the low base of these products. Also, the market is taking off due to fundamental changes in the economy. Analysts believe that the strong growth can even be attributed to increased borrowing.

According to Chetan Ahya, economist, Morgan Stanley, leveraging has gone up by 32% points of the GDP over the past six years — something which was last seen only in the late ’80s. “Leveraging has gone up because worldwide, there has been a dip in the cost of capital, and that has pushed consumption in the system,” Mr Ahya adds.

The borrowing has been driven by both the government and households, which have been the two major constituencies that have pushed consumption. Morgan Stanley’s estimates for aggregate borrowings, including government debt plus banks’ loan advances to corporates and households, indicate a huge spike in the past six years.

The total of these two has shot up to 119% of the GDP as of March ’05 (estimated to rise to 124% by March ’06) from 87% of the GDP in March 1999
Another major driver, according to Rajesh Chadha, chief economist, NCAER, is growth in per capita income during the 1980s and more particularly, in the 1990s. Between 1951 and 1980, average GDP grew by 3.5% per annum on a population growth of 2.2% per annum. Per capita GDP grew merely by 1.3% per annum. So India’s huge population base held a simple ‘promise’. “On the contrary, the 1980s and 1990s witnessed a GDP growth rate of 6% plus, with population rising at less than 2% per annum. This resulted in a 4% plus growth per annum in per capita GDP,” Mr Chadha adds.

Changing demographics have also played a role in growth of the Indian market. A recent McKinsey quarterly report says India’s consumer demand — increasing three to five times faster than the economy — reveals the outlines of an aspiring middle class that is vibrant, growing and young. Indeed, 70% of India’s citizens are less than 36 years old, and the country is home to 20% of the world’s population under the age of 24.

“There has been a subtle shift in the culture as well; it’s no longer taboo to be in debt. In addition to this support from borrowing, the acceleration in per capita income has also supported rise in consumption,” says Mr Ahya