Money Morning….


SUUTI stake sale in blue chip companies like ITC and L&T put on hold; Likely to go ahead with stake sale in Axis Bank – Overhang of stake sale gets removed over ITC and L&T; Positive in short term for ITC and L&T

The finance ministry has put the sale of stakes in blue chips such as Larsen and Toubro and ITC, held by the Specified Undertaking of Unit Trust of India, on the backburner because it’s calculating this won’t be needed to meet the government’s fiscal deficit target thanks to savings in expenditure as global commodity prices have dropped.The ministry is confident of raising the amount budgeted through disinvestment in ONGC, Coal India and a few others. This combined with savings will mean the fiscal deficit target of 4.1% of GDP can be met.
North Block was considering the sale of a part of the holdings through an exchange-traded fund but is now looking to sell only SUUTI’s residual stake in Axis Bank. SUUTI currently holds a 11.28% stake in ITC and 8.19% in L&T. It holds 11.7 per cent in Axis Bank, which is worth more than Rs 130 bn. The holdings in the 3 companies are worth nearly Rs 600 bn at current prices, more than the Rs 580 bn budgeted to be raised from asset sales in FY15. The government is already pushing 10% disinvestment in Coal India and 5% in ONGC, which can fetch nearly Rs 380 bn at current prices.
We believe this development to be positive for ITC and L&T, as the overhang of the stake sale gets removed.

Manufacturing growth may moderate in December quarter: FICCI

Showing signs of recovery, industrial production grew at a three-month high of 2.5 % in September on account of better mining and manufacturing output. The manufacturing output, which constitutes over 75 % of the index, grew by 2.5 % in September, compared to 1.4 % in the same month a year ago. “The outlook on the basis of FICCI Manufacturing Survey for Q3 of 2014-15 is less optimistic than Q2 of 2014-15 for the manufacturing sector as the proportion of respondents expecting higher production vis-a-vis last year has fallen to 52 % in Q3 from 62 %in Q2,” the industry body said in its report.

Rs 700 crore fund to cushion against food inflation:

The government will kick off a Rs 700 crore price stabilization fund soon in a move to shield consumers and farmers from price fluctuation of agricultural and horticultural products such as onion, potato, tomato and milk. The fund would be utilized in the next three years and managed by an inter-ministerial panel headed by the secretary of department of agriculture and cooperation (DAC). Sources said the fund would be utilized in two steps. Faced with a price spike soon after assuming power, the Narendra Modi government had taken several steps to tackle inflation and setting up of the fund is one of the key measures. Both retail and wholesale prices have cooled to record levels but authorities are keeping a close watch.

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