Friday 20th November, 2009 Ending a two-day losing streak, the Indian markets recouped most of the losses today and the BSE Sensex closed 1% higher for the week. In fact, India ended as the best performer in Asia today. On the BSE Sensex, five stocks closed in the positive for every stock that ended in the red. The BSE-Sensex and the NSE-Nifty closed with gains of around 236 points (1.4%) and 63 points (1.3%) respectively. Stocks from the mid and small cap spaces also followed suit, as the BSE-Midcap and BSE-Smallcap indices closed higher by around 1.1% and 0.4% respectively. The rupee was trading at 46.62 to the US dollar at the time of writing. In an important announcement, the deputy chief of India’s Planning commission, Mr. Montek Singh Ahluwalia has indicated that the government has no plans of imposing a tax to curb the inflow of foreign funds. While most economists have been of the opinion that the government needs to impose restrictions on capital flows to ward off volatility in the stock and commodity markets, the government seems to be undaunted. Foreign investors have so far bought more than US$ 15 bn of Indian equities in 2009, after selling US$ 13 bn worth of the same in 2008. This has helped Indian stocks move up about 75% and lifted the rupee to its highest levels in more than a year. Brazil and Taiwan have already taken steps to curb hot money inflows, and other governments are keeping a watchful eye on inflows, wary that they could fuel asset price bubbles. However, the Indian government seems to be of the belief that it can make productive use of the foreign funds by investing US$ 500 bn in the country’s infrastructure development. It remains to be seen how far the plans fructify. Meanwhile, the Asian Development Bank (ADB) has agreed to provide US$ 2.9 bn in assistance for six power projects in India. This includes US$ 1 bn in assistance to Power Grid Corporation. The Power Minister had recently indicated that he is expecting to deliver only 65,000 MW capacity addition by the end of the 11th plan period (instead of 78,750 MW), as the sector is facing a funding shortage of well over Rs 4,000 bn to meet capacity addition. Further some of the Ultra Mega Power Projects (UMPPs) floated this year have already run into difficulties. We believe that despite the additional funding being sourced, the sector will continue to face execution risks in the medium term. Stocks from the sector including NTPC and Tata Power are trading higher. Bharti Airtel, India’s top mobile operator, seems to be determined to stay ahead of competition despite the intense pricing pressure. The company has launched a new bill plan that would reduce mobile roaming rates by nearly 60%. It may be noted that Bharti Airtel accounts for more than 23% of mobile users in the world’s fastest-growing market. The company has, however, in recent months lagged smaller rivals in monthly subscriber additions due to a price war in the industry. However, we believe that as the sector consolidates it will only be possible for well established players such as Bharti to stronger from this. Source: Market Closing: Indian markets lead Asian pullback

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