India's Economy Probably Expanded Fastest After China

India's economy probably grew at the second-fastest pace among the world's biggest nations last quarter, adding pressure on the central bank to increase borrowing costs for the fourth time in a year.

Asia's fourth-largest economy grew 8.9 percent in the three months to Sept. 30 from a year earlier, matching the gain of the previous quarter, according to the median forecast of 17 economists in a Bloomberg News survey. The statistics department report is due tomorrow at noon in New Delhi.

Consumers in India are using their rising incomes to buy more cars, clothes, mobile phones and houses. That's stretching the production capacity of companies and fanning inflation, and may prompt the Reserve Bank of India to increase interest rates in its next monetary policy statement on Jan. 30.

``Inflation pressures are serious,'' said Rajat Nag, Managing Director General of the Southeast Asia department at the Asian Development Bank in Manila. ``Production capacities must be increased to prevent prices from rising. Interest rates may rise in the short term.''

India's benchmark wholesale price inflation rate held at 5.29 percent in the second week of November, above the government's ``tolerance'' level of 4 percent. Manufacturing inflation rose to 4.59 percent, the highest in 1 1/2 years, as companies including Hindustan Lever Ltd., India's biggest household products maker, raised prices of soap and toothpaste.

Chasing China

India's $775 billion economy has grown more than 8 percent in five of the past six quarters. China's $2.2 trillion economy, Asia's second largest, expanded 10.4 percent in the quarter ended Sept. 30, the quickest pace among the world's 20 largest economies and almost four times the 2.6 percent gain in the 12 European nations sharing the euro.

Reserve Bank of India Governor Yaga Venugopal Reddy in his last monetary policy statement on Oct. 31 said demand pressures exist in the economy and that production capacity must match economic expansion to prevent inflation flaring up.

Reddy and his fellow policy makers are expected to raise interest rates again at the beginning of 2007 as signs of ``overheating'' in the economy have emerged, the Paris-based Organization for Economic Co-operation and Development said in a report yesterday.

General Motors Corp., Royal Dutch Shell Plc. and other companies have invested in about 3,000 new factories and expansion projects worth about $21 billion in India since May 2004 to cater to growing demand, according to Finance Minister Palaniappan Chidambaram.

`Get Stronger'

``India's high growth trajectory is here to stay,'' said Brijmohan Lall Munjal, chairman of Hero Honda Motors Ltd., India's biggest motorcycle maker, currently building its third factory for $420 million. ``Incomes are rising, the government is spending more money to improve infrastructure. Economic growth will only get stronger from here.''

Per-capita income in India has doubled in the last nine years and the number of households earning an annual income of at least $10,000 is rising more than 20 percent a year, according to McKinsey & Co.

The creation of new jobs in the software industry and at call centers is putting more money in the hands of some 350 million middle-class Indians. For example, Dell Inc., the world's second-largest personal-computer maker, opened its fourth customer-service center in India this month as it seeks to reduce costs to shore up declining profit.

Cars, Mobile Phones

Agriculture production rose at the fastest pace in two years in the year ended March 31, increasing incomes of 650 million people who depend on farming for their livelihood.

That's helped companies such as Maruti Udyog Ltd., which sells half the cars bought in India, post a 40 percent gain in fiscal second-quarter profit as it sold more of its new WagonR and Swift hatchback models.

Bharti Airtel Ltd., India's largest mobile-phone service provider, said second-quarter profit soared 79 percent to a record because of a near-doubling of subscribers. India is the fastest-growing cellphone market in the world and companies added a record 6.71 million users last month compared with 6.07 million new users in September.

Growth in India's economy is also benefiting from Prime Minister Manmohan Singh's decision to increase spending on roads, ports and other infrastructure by a quarter to 992 billion rupees ($22 billion) in the year that started April 1 in a bid to attract overseas manufacturing companies and spur growth to 10 percent over a decade.

Public Works

Infrastructure spending is spurring demand for steel, cement and electricity in India, which spends a seventh of China's $150 billion investment in public works each year according to Morgan Stanley.

Governor Reddy last month left the central bank's reverse repurchase rate, or the overnight borrowing rate, unchanged while increasing the repurchase rate, or the overnight lending rate, by a quarter point to 7.25 percent, to give itself room to take further action to prevent ``overheating''.

The Reserve Bank of India, which for the first time said the economy is at risk of ``overheating,'' is reluctant to raise both the interest rates at its disposal at once to avoid slowing the economy too much.

``India can't afford to slow down its pace of growth,'' said Adi Godrej, chairman and managing director, Godrej Consumer Products Ltd., an Indian maker of personal-care items. ``India needs to grow faster to pull out large part of the population which is still reeling under poverty.''

Table of forecasts

-----------------------------------
                           GDP YoY
Firm                        Jul-Sep
-----------------------------------
Median                         8.9%
Average                        8.8%
High                           9.7%
Low                            7.5%
Number of Forecasts              17
-----------------------------------
Anand Rathi Securities         9.4%
Citigroup                      8.5%
Credit Suisse                  9.7%
Darashaw & Co. Ltd.            9.1%
DBS Group                      8.4%
Deutsche Bank                  8.3%
Forecast Singapore             7.5%
Global Absolute Research       9.1%
HSBC                           9.0%
ICRA Limited                   8.8%
IDBI Capital                   8.5%
Ideaglobal                     9.0%
ING Vysya Bank                 8.9%
JPMorgan Chase                 8.7%
Kotak Mahindra Bank            8.9%
Standard Chartered Bank        8.1%
Thomson IFR                    9.6%
-----------------------------------

source :- bloomberg

Hilton, DLF to Build 75 Hotels in India in 7 Years

Hilton Hotels Corp., the second- largest U.S. provider of rooms, plans to build 75 hotels and serviced apartments in India in a venture with DLF Ltd, a real estate company owned by billionaire Kushal Pal Singh.

Hilton, based in Beverly Hills, California, will invest $143 million building the properties over seven years, the companies said in a statement. DLF will control 74 percent of the venture.

Hilton and Accor SA, Europe's largest hotel company, are building rooms in India as Deccan Aviation Ltd. adds flights to new airports and tourism grows at the world's third-fastest pace after Montenegro and China.

Hilton Chief Executive Officer Stephen Bollenbach said in October the group is also looking for a partner in China, where it plans to open 100 hotels in the next three to five years.

Hilton today said it will build its Hilton Hotels and Hilton Garden Inn brand in India, a move made possible by its $5.7 billion purchase of U.K.-based Hilton Group. The venture will initially build 20 hotels in cities including Chandigarh, Chennai, and Kolkata to cater to business travelers, it said.

Paris-based Accor yesterday said it formed a venture with the Indian unit of Emaar Properties PJSC to set up 100 budget hotels in India. John Keells Holdings Ltd., Sri Lanka's biggest hotel operator, plans to invest $100 million building its first resorts in India, Deputy Chairman Ajit Gunewardene said in an interview in Singapore.
SOURCE:- Bloomberg

NIFTY INTRADAY

Indian mkt most volatile; but investors happy

It pays to take risk -- even in stock markets. Indian stocks might be the most volatile in the world, but returns for investors are also best among all the leading markets globally, including the US, UK and a number of Asian and European countries.

According to an analysis of the daily return and volatility in benchmark indices of major global markets over the past one year, investors on the Dalal street have reaped highest returns as compared to their global peers.
The Indian market has given a higher return than most of its counterparts despite an equally high level of fear factor -- as measured by volatility in daily market movements.

The Bombay Stock Exchange's 30-share benchmark index Sensex has given an average daily return of around 0.2 per cent over the past one year, which is twice the return given by its closest rival, the South African index.

All other major world stock indices including the US, UK, France, Hong Kong, Singapore, Australia, Malaysia, Mexico and Japan have given a daily average return of below 0.1 per cent.

Notwithstanding the high level of gains from the market, Indian investors are still the most worried lot as the volatility ratio of key stock index is the highest here.

The good news is daily average volatility has been on a gradual decline over the past few months after surging to as high as 3.25 per cent in June this year. It has been hovering around one per cent level over the past couple of months, except for a few days when it went up to nearly two per cent.

The volatility ratio had surged to an all-time high of 12.55 per cent on May 22 -- the day when Sensex recorded the highest intra-day fall of 1,111 points.

However, the current level of volatility in the Indian market is still higher than all the other major markets. Other than India, only Mexico, Brazil, Japan and South Africa have recorded an average daily volatility of more than one per cent over the past one year.

The volatility gauge has been below one per cent in relatively mature markets like the US, UK, France, Hong Kong, Singapore, Australia and Malaysia.

An analysis of the volatility index of BSE Sensex during the April-September period in 2006, shows it had peaked in the May-June period with values as high as 2.55 and 3.25. It then declined gradually on the back of strong FII inflows and improving investor sentiments.

Volatility dropped to 1.97 per cent in July and then to 0.67 in August. Since September onwards, it has hovered between 1-1.6 per cent.

"There was a general decline in volatility of major indices in September 2006 over the previous month. However, the Indian indices were comparatively more volatile over the previous month," market regulator SEBI said in its latest monthly report.

But a high level of volatility has not prevented BSE Sensex from outperforming the frontline indices of other major markets such as the USA, UK and Japan. The returns from Indian markets have outperformed other emerging markets of Brazil, Mexico and South Africa.