[T.S.R:14498] India Infoline Weekly Newsletter - June 11, 2010

The two main indices recovered from early week's hiccups on the back of encouraging economic data from across Asia. Next week could turn out to be rather subdued and sideways as economic reports are fewer.

World markets survive another scare There is no escaping volatility for the global stock markets as sovereign debt concerns continued to haunt investors around the world. Global markets had another topsy-turvy week, though they did manage to rebound by the end of the week. Remarks by an official in Hungary that the country might default on its debt unnerved investors before the government swung into action to limit the damage. The Hungarian prime minister announced an economic plan that included cuts in public-sector wages. Greece's main share index hit its lowest level since March 1998 and the euro sank to a four-year low against the dollar. In addition, credit rating agency Fitch warned the UK that its fiscal challenge was formidable, and called for much deeper reductions in public spending. The recently elected British premier David Cameron said that the proposed emergency budget, to be unveiled on June 22 would change the nation's whole way of life. However, the panic proved to be short-lived as investors heaved a sigh of relief following the release of a spate of encouraging economic numbers, particularly from the Asia Pacific region. Economic reports from Japan to Australia reassured investors that the global recovery is in tact, notwithstanding the European debt crisis. Beijing announced a sharp jump in May exports, boosting investors' confidence about its economy's strength. Also, the US Federal Reserve said that it would act as needed to support the economic recovery. Government reports showed that Chinese industrial output, retail sales and fixed-asset investment climbed, while inflation accelerated to the quickest pace in 19 months. The euro rebounded and was on track to post its biggest weekly gain this year. Copper also rose for the fourth day in a row, though crude slipped to trade below US$75 per a barrel. Belgium, Portugal and Spain found good demand for their bonds this week. Italy too carried out a successful sale on Friday, easing immediate concerns about funding problems on the euro-zone periphery and boosting appetite for the euro, banking shares and battered Spanish stocks. World stocks measured by the MSCI All-Country World Index advanced 1.6% this week. The Stoxx Europe 600 Index was heading for a 2.1% gain this week. UK deficit at US$226bn...Worse than we thought: David Cameron Euro stabilization package a lot of money: Bernanke Broadband auction ends...Govt to pocket Rs385bn Auction for India's wireless broadband spectrum ended on Friday after 16 days of aggressive bidding. Infotel Broadband Services, run by Anant Nahata, bagged spectrum in all 22 circles of the country and will pay Rs128.48bn. Infotel is owned by the son of Mahendra Nahata, managing director of Himachal Futuristic Communications Ltd. (HFCL). Qualcomm bagged the lucrative circles of Delhi and Mumbai. A slot of 20 MHz unpaired broadband spectrum went for Rs128.90bn, fetching the Government Rs385bn. Broadband spectrum in Mumbai emerged the most expensive, beating Delhi's highest bid of Rs22.41bn at Rs22.93bn. Reliance Communications, Idea Cellular and Vodafone-Essar failed to win broadband spectrum in any circle. Bharti Airtel won broadband spectrum in four circles of Maharashtra, Karnataka, Kolkata and Punjab. Bharti said that scarcity of slots and the auction format resulted in extremely high price levels. The company said that it had secured spectrum in select circles to experiment with new technologies. Bharti will pay a total of Rs33.14bn for the BWA spectrum. Combined revenue from the two auctions will touch Rs1.06 trillion (US$22.7bn), about three times the Government's initial estimates. To fund its fiscal deficit, projected at 5.5% of FY11 GDP, the Government is due to borrow a record Rs4.57 trillion (US$97bn) in the year. But it had assumed revenue of Rs350bn from the spectrum auctions while preparing estimates and some analysts have said that the windfall from the 3G-BWA auctions could cut the deficit to 4.5%, reducing market borrowings. Qualcomm wins BWA spectrum in 2.3 GHz Band BWA auction prices significantly exceeded its business case estimates: RCOM TRAI issues consultation paper on 'National Broadband Plan' ...RIL buys Infotel Broadband Reliance Industries Ltd. (RIL) announced that it has entered into an agreement to acquire a substantial stake in Infotel Broadband Services Pvt. Ltd., which has emerged as a successful bidder in all the 22 circles of the auction for Broadband Wireless Access (BWA) Spectrum conducted by the DoT. RIL will invest about Rs48bn by way of subscription to fresh equity capital at par to be issued by Infotel Broadband. Post this investment, RIL will own 95% of the equity and Infotel Broadband will be a subsidiary of RIL. The Mukesh Ambani owned company sees the broadband opportunity as a new frontier of knowledge economy in which it can take a leadership position and provide India with an opportunity to be in the forefront among the countries providing world-class 4G network and services. A single 20 MHz TDD spectrum when used with LTE (Long Term Evolution) has the potential of providing greater capacity when compared to existing communication infrastructure in the country, RIL said in a statement.