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PM To Meet Industry Leaders Over Slow Recovery

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With economic growth remaining sluggish and rupee depreciating, Prime Minister Manmohan Singh will have an interaction with the captains of industry later this month to discuss ways to boost industrial output and contain current account deficit (CAD), a PMO statement said on Monday, 8 July.

The rupee fell to an all-time low of 61.21 on Monday, 8 July as an emerging markets sell-off on worries of an early end to US stimulus laid bare the vulnerability of a country dependant on capital inflows to fund its record current account deficit.

The BSE benchmark Sensex fell over 171 points dragged by oil and gas and banking stocks, including ONGC, ICICI Bank and HDFC Bank, the rupee hitting a new low against the dollar spurring concerns that RBI might delay a rate cut and FIIs would pull out funds.

The prime minister will meet the leaders of the industry on July 29 to review the state of economy and work out steps to push growth. The discussions will cover measures to correct CAD and revive industrial growth.

The issue of depreciation of the rupee and its impact on trade and industry will also be discussed.The meeting assumes significance as the government has been concerned over the sluggish growth, high CAD and depreciating rupee. CAD last fiscal was 4.8 per cent and government intends to bring it down to 4.2 per cent this financial year.

Read Also: Markets Hammered In FII Sell-off; Re Hits 61/$

The slide in the value of rupee is another concern in the government. The rupee today fell to an
all-time low of 61.19 against dollar. Singh will also discuss with the captains of the industry ways to accelerate skill development, besides development of Delhi-Mumbai Industrial Corridor (DMIC), Chennai-Bangalore Industrial  Corridor (CBIC) and Amritsar-Delhi-Kolkata Industrial Corridor (ADKIC).

Singh will meet the leaders of the industry a month after setting an investment target of Rs 1.15
lakh crore in PPP (public private partnership) projects across infrastructure sectors in rail,
port and power in the next six months to pep up the investor.

Plunging Rupee, Stuttering Sensex
The 30-share sensex started the day on a sluggish note at 19,233.21 as rupee tanked to all-time low of 61.21 against the dollar in morning trade. It later recovered a bit during the day on suspected RBI intervention to arrest rupee's slide and closed the day lower by 171.05 points, or 0.88 per cent, at 19,324.77. Similarly, the wide-based National Stock Exchange index Nifty lost 56.35 points, or 0.96 per cent, to close at 5,811.55. Also, SX40 index, the flagship index of MCX-SX, closed 90.44 points, or 0.78 per cent lower at 11,535.44.

Deutsche Bank cut the BSE Sensex's target to 21,000 from 22,500, citing aster-than-anticipated tapering down of US monetary stimulus, India's high short-term external financing needs and fears over a China slowdown.

The rupee will be a key determinant for stock markets, Deutsche added. The local currency hit a record low at 61.21 on 8 July. "Currency stability has emerged as the overriding catalyst for the Indian equity market and until the currency stabilises, we expect the Indian equity market to stay highly volatile," Deutsche added in its report. Deutsche shifted its bias towards exporters and defensives in its model portfolio, raising healthcare to "neutral" from "underweight" and consumer discretionary to "overweight" from "neutral", mainly due to a higher weighting in Maruti Suzuki India Ltd and Bajaj Auto Ltd.

The brokerage also cut industrial and metal shares to "underweight" from "overweight", while reiterating Maruti, ITC, Reliance Industries Ltd, HDFC Bank Ltd, Tata Consultancy Services Ltd as its top picks.

Investors are now gearing up for a new earnings season that begins next week when Infosys Ltd unveils its June-quarter results on July 12, while also hoping for more government or central bank measures to boost foreign flows.

Earnings for the first quarter of the new fiscal year, which started in April, would help determine the outlook for shares and may help create a strong foundation for FY14 estimates, thereby supporting shares that have been hit hard by rupee volatility.

"While it seemed till the end of the previous week that market would gain some ground, the sharp rise in USD/INR has put brakes to bullish expectations," said Milan Bavish, head of research at Inventure Growth and Securities.

Fears Of Widening Fiscal Deficit
Brokers said a steep fall in rupee against the dollar raised fears of widening fiscal deficit and left little room for the Reserve Bank to cut interest rate in its policy review later this month.

The rupee fell to a record low of 61.21 on capital outflows and demand from oil importers after crude oil in overseas markets climbed to nine-month high.

They said a weakening Asian trend amid concerns that a credit squeeze in China will curb growth, further fuelled the selling pressure in domestic markets.

Out of the 30 BSE index components, 21 stocks closed with losses led by ONGC falling 3.49 per cent to Rs 304.45.

The two heavyweights -- Reliance Industries and ICICI Bank -- with 16 per cent weightage on the benchmark dropped by 1.35 per cent to Rs 868.30 and 2.21 per cent to Rs 1,027.95.


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