Business this week - Coal India disinvestmentAfter a stellar performance towards the start and middle of the week, the equity markets in India came under immense selling pressure on Friday. The 30-share S & P BSE Sensex ended the week 498.82 points down (-1.68 per cent) while the 50-share CNX Nifty closed 143.45 points in the red (-1.6 per cent). On Friday, the Sensex opened 29,801.60 points and went up to a lifetime high of 29,844.16 before going into the red. BPCL, HCL Technologies, DLF, Lupin, ITC, and BHEL were among the top Nifty gainers. The Q3 results of ACC, Aurobindo Pharma, Bharti Airtel, Hero MotoCorp, Jindal Steel, Jindal Power, Lupin, NMDC, NHPC, Punjab National Bank, Tata Power Company, Tata Motors and Tata Steel are due this week.

Gold closed the week at INR 27,895 (up 1.71 per cent) while silver also gained 2.15 per cent in the last trading session of the week to close at INR 38,105. The Indian Rupee closed at 61.86 to the dollar this week.

Economic growth higher than estimated

According to the revised statistics computing systems, the growth of the Indian economy may now be estimated quite higher than previously believed, said the Government on Friday. The economic growth rate of India for the FY 2013-14 had previously been pegged at 4.7 per cent but TCA Anant, Chief Statistician of India, said that this has been retrospectively revised to 6.9 per cent. The revision only goes to show that economic statistics are still unreliable in a country like India making administration and decision-making very difficult.

The World Bank had declared a few weeks ago that India’s economy is likely to overtake China’s economy by the year 2016-17. With the revision of growth figures, however, that India may be a lot closer to overtaking its neighbour than earlier assumed. The growth of the Indian economy in FY 2012-13 was also revised from 4.7 percent to 5.1 percent.

RBI may slash interest rates further

Speculation is rife that India’s Central bank, the Reserve Bank of India, may, in the course of its forthcoming bi-monthly monetary policy review (the sixth such review for the current fiscal year), slash its policy rate by 0.25 per cent. The last rate cut of about 25 basis points came last month after about 20 months of having taken a hawkish stance. In January, following reports of the Wholesale Price Index (WPI) inflation estimates for December touching almost zero levels, the RBI cut its policy repo rate from 8 per cent to 7.75 per cent. Market watchers estimate that the announcement may come in as early as Tuesday, February 3. A slash in the RBI’s credit rates is likely to further boost growth and bring cheer to the corporate sector.

FII inflow at a high

Easing inflation levels, an investor-friendly outlook and RBI’s willingness to initiate a rate cut has brought overseas investors scrambling to get their investments into the Indian markets. According to news reports about INR 33,688 crore was invested by foreign investors into Indian capital markets in January 2015 – the highest figure in the past six months. In July last year, foreign investors had pumped in INR 36,046 crore into Indian markets. In January, the Foreign Institutional Investors (FIIs) are reported to have invested INR 12,919 crore into the equity markets of India and INR 20,769 crore into the debt market. In 2014, the net investment coming in from FIIs into the Indian debt markets was about INR 1.16 lakh crore, and into the equity market was about INR 98,150 crore.

Coal India disinvestment mops up 22,400 crore

In the past week, the Government of India managed to raise about INR 22,400 crore by sale of a 10 per cent stake in Coal India Ltd. The fund raising drive by the Government is being deemed the largest equity offering in domestic markets. Coal India’s offer for sale (OFS) attracted about 675 million bids and was oversubscribed on Friday suggesting an immense appetite among retail investors in equity markets. The Government sold a 10 percent of its stake or about 631.6 million shares. About 20 per cent of the issue had been reserved exclusively for retail investors who were offered a 5 per cent discount on the offer price that would be reached following the close of the OFS. The floor price for the offer was set at INR 358.

The overwhelming response to the OFS is now a feather in the cap of the Government that has ambitious disinvestment plans for this financial year. The institutional investors that put in bids, such as banks, mutual funds and insurance companies exuded a significant demand for Coal India shares. Coming after the disinvestment exercise of SAIL, this is also a very positive step towards achievement of the disinvestment target for this year.