Food inflation eases, but fuel prices keep up pressure

The easing in food prices has been marred by rising fuel inflation, giving no respite to the overall inflation level that has been consistently rising since it came out of sub-zero levels in September last year

Food inflation fell to 16.3% for the week ended 6th March on easing prices of pulses and vegetables, but fuel inflation shot up to 12.68%, reports PTI.

For the previous week, food inflation was at 17.8% and fuel inflation at 11.4%.

Vegetable prices showed a marked decline of more than 10% over the week, followed by about 4% fall in prices of pulses. Urad and arhar prices were down 6% each during the week.

However, the easing in food prices has been marred by rising fuel inflation, giving no respite to the overall inflation level that has been consistently rising since it came out of sub-zero levels in September last year.

The fuel index comprising fuel, power, light and lubricants saw an inflation of 12.68% over the week led by 16.8% inflation in petrol prices and 14.99% in diesel prices.

The rise in fuel prices is a result of the budgetary announcement of a hike in excise and customs duty on petrol and diesel.

Overall inflation has risen to 9.89% for February from a low of 1.34% in October last year, primarily led by high food prices.

Inflation has already breached the RBI's projection of 8.5% for the fiscal-end in January when it touched 8.56%.
 

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UBI in talks with ARCs to sell Rs 100 crore of bad loans

The Bank plans to sell off Rs100 crore of its bad loans by end-March and has already sold Rs200 crore worth of bad assets so far in this fiscal

United Bank of India (UBI) is negotiating with a clutch of asset reconstruction companies (ARCs) to sell bad loans worth Rs100 crore for cleaning up its loan book, a senior bank official said on Thursday, reports PTI.

The Bank plans to sell off Rs100 crore of its bad loans by end-March and has already sold Rs200 crore worth of bad assets so far in this fiscal, UBI's executive director TM Bhasin told reporters at the bank's listing ceremony in Mumbai.

"We have received bids from ARCs to sell our bad assets. We are currently evaluating bids and expect to sell Rs100 crore worth of bad loans by the end of this month," he said.

The decision to sell off bad loans is part of the restructuring of the bank's advance portfolio and will also reduce the non-performing assets (NPAs) burden, Mr Bhasin said, without outlining the segments which have incurred most of the losses.

Kolkata-based UBI has a gross NPA level of 2.4%, while its net NPAs stand at 1.21%. This is slightly higher than its peers.

UBI currently has a loan book of Rs43,000 crore, while its total deposit base stands at around Rs67,000 crore. UBI today got listed on the Bombay Stock Exchange with a 17% premium at Rs77 against an issue price of Rs66 per share. On the NSE, the shares were listed at Rs74.9, a premium of 13.48%.

With UBI going public, Punjab & Sindh Bank is the only unlisted public sector lender now. Central Bank of India was the last state-run bank to get listed.

To purge their balance sheets by this fiscal-end, many banks either opted for one-time settlement of their defaulted advances or sold them off to ARCs.

NPA levels started rising in the system, particularly in the last one year, post the financial crisis that hit many businesses and resulted in job losses.

Top bankers, including State Bank of India chairman, OP Bhatt, had recently indicated that the slippages are likely to rise in the coming months and a substantial economic recovery is yet to take place.

However, rating agency CRISIL had recently said that the pace of rise of NPAs is likely to slow down in the approaching months as companies are now in a better position to repay their loans.

The agency, which projected that gross NPAs in the system would grow to 5% of the total assets by end-FY11, now expects the ratio to be around 4.5%.
 

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A short dip is around the corner

The market still looks overbought; expect a dip in a day or two

The breakout we mentioned yesterday has taken the market higher. The Nifty was up 0.85% at 5,231 points from yesterday’s close of 5,198.10, while the BSE's 30-share index rose by 1% or 106.90 points at 17,490.08. Of course, selling took over after 1.30pm in the afternoon and the market came down in the end to the same level as the opening.

Despite the fact that the market looks overbought, the short-term trend is still up. Every single market in the Asia Pacific region was in the green except the NZX50.
 
Jakarta was the highest gainer (up 3.25%) followed by KOSPI (up 2.11%) and the Hang Seng was up by 1.72%. Shanghai’s index jumped 1.93% after a continuous slump from 11 March 2010. All this bullishness was followed by an overnight strength in US markets where the Dow was up 44 points, and the Nasdaq was up 16 points.

American markets closed in the green yesterday as the Federal Reserve announced that it was not tweaking interest rates as of now, a move which augurs well for risky assets such as emerging market equities. Until there is a sharp sign of reversal by the Fed and other central banks, the Indian market is going to push ahead, subject to short-term dips. All European markets were up at the time of writing.

Among the Nifty movers, Cipla Ltd was up 5.10% at Rs334, Idea Cellular Ltd was up 3.29% at Rs64.40, Hindalco Industries Ltd was up 2.42% at Rs173.65, and Larsen & Toubro was up 1.84% at Rs1,628.60 after the company announced that it had won an order worth over Rs1,000 crore from ONGC.

Among the major losers in the Nifty, Unitech Ltd shed 2% at Rs73.50, Maruti Suzuki was down 1.63% at Rs1,435, Tata Power was down 1.48% at Rs1,364.15, BPCL was down 1.27% at Rs538.35, and Hindustan Unilever was down 1.24% at Rs223.90. We expect the market to dip in a day or two. Whether that will signal the end of the rally since the Budget, only time will tell. Stocks remain highly overbought.

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