By Santanu Chakraborty - Jun 21, 2011
India’s stock-index futures gained, signaling an advance in benchmark indexes, after Greek Prime Minister George Papandreou won a parliamentary confidence vote, moving the nation closer to avoiding a default on its debt.
SGX S&P CNX Nifty Index futures for June delivery climbed 40.5 points, or 0.8 percent, to 5,316 at 9:43 a.m. in Singapore. The futures are derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India, which rose 0.3 percent to 5,275.85 yesterday. The benchmark Bombay Stock Exchange Sensitive Index rose 0.3 percent to 17,560.30.
A total of 155 lawmakers supported the motion in the 300- seat parliament in Athens, bolstering Papandreou’s chances of pushing through austerity measures to secure international financial aid for Greece. The International Monetary Fund, contributor of a third of the bailout money for the nation, has warned EU leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.”
“The Greek prime minister winning his confidence vote has removed an uncertainty for markets, including India,” said Gavin Parry, managing director of Parry International Trading Ltd. in Hong Kong.
India’s benchmark stock index rebounded yesterday from the lowest close in four months amid speculation the recent decline was excessive and as investor concern over a possible Greek debt default eased. The MSCI Asia Pacific Index advanced for a second day today, rallying from the longest series of weekly losses in seven years.
‘Dead-Cat Bounce’
“Markets will see a dead-cat bounce on good news from Greece but it will not sustain in the long term,” Gaurang Shah, assistant vice president at Geojit BNP Paribas Financial Services Ltd. (GBNP), said yesterday.
The Sensex has lost 14 percent this year, the most among Asian benchmark indexes tracked by Bloomberg, on concern rising borrowing costs will hurt corporate profits. Sensex stocks are valued at 14.2 times estimated earnings, compared with 10.9 for the MSCI Emerging Markets Index.
Monsoon rain in India will be below normal for the second time in three years, the weather office said yesterday, potentially lowering farm output and accelerating inflation that is the fastest among Asia’s major economies, prompting the Reserve Bank of India to raise rates 10 times since March 2010.
“A weak monsoon will lead to a further spike in inflation, which is being driven by rising commodity and crude oil prices,” Shah said yesterday. “Policy reforms are not coming through, inflation refuses to come down.”
Rural Incomes
Prime Minister Manmohan Singh is relying on adequate rainfall to harvest record quantities of food grains and oilseeds for a second year and cool inflation. Agriculture makes up almost 14 percent of the economy and reduced farm production can also lower rural incomes, hurting sales of tractors and cars.
The government ruled out scrapping curbs on exports of wheat and rice as the world’s second-biggest producer preserves grains to supply food to consumers at below market prices and combat rising prices. A government report on June 14 showed that the wholesale-price index rose 9.06 percent in May from a year earlier, after an 8.66 percent jump in April. Food inflation data for the week ended June 11 is released tomorrow.
“We have seen food inflation cooling down all the way from 20 percent to 8 percent year-on-year and if rains disappoint then obviously that trend can reverse very quickly,” Anubhuti Sahay, a Mumbai-based economist at Standard Chartered Plc., said yesterday. Inadequate rainfall “is likely to damp rural demand, which in our view was extremely important in the overall economic activity” in the last fiscal year, she said.
Indian Oil Corp., the nation’s biggest refiner, may be active after Finance Director P.K. Goyal said the company plans to raise $500 million by selling dollar bonds next month.
The government plans to allow state-run refiners like Indian Oil to increase diesel tariffs. A panel of ministers will meet “shortly” to consider raising fuel costs, Oil Minister S. Jaipal Reddy said June 13. The refiners had a revenue loss of 450 billion rupees ($10 billion) in the first quarter from selling fuel below cost, Reddy said.
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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