Indian Refiner Shares Gain on Plan for Oil Levy on Income Tax

Indian Oil Corp., the nation’s biggest refiner, and its state-run counterparts rose in Mumbai trading after the government said it may consider charging a levy on income tax to partly recover losses from selling fuels below cost.

India will take a decision on fuel prices soon, S. Sundareshan, additional secretary in the Oil Ministry, said today. Officials of the oil and finance ministries discussed increasing prices, rationalizing duties and oil bonds.

Indian Oil gained 10.3 rupees, or 2.5 percent, to 424.35 rupees at 11:07 a.m. local time in Mumbai. Bharat Petroleum Corp. rose 8 rupees, or 2.3 percent, to 355.75 rupees and Hindustan Petroleum Corp. gained 6.5 rupees, or 2.7 percent, to 247 rupees.

India, Asia’s third-biggest economy, imports 70 percent of its oil requirement and is trying to soften the impact of surging crude oil prices. Retail fuel prices are capped in India to help curb inflation, which is running at a 3 1/2 year high.

New York oil futures have increased 24 percent in the past two months and reached a record $135.09 on May 22.

India shares up in cautious trade; Rel Comm rises

Indian shares rose on Tuesday, led by Reliance Industries and bolstered by strong regional markets, but traders were uncertain about the sustainability of the gains amid rising inflation and high oil prices.

Reliance Communications added 1.4 percent to 550.75 rupees, rebounding from a 5.1 percent fall on Monday triggered by news that it and South Africa’s MTN Group had started talks that could create a $66 billion telecoms group.

Traders said the gains reflected hopes that Reliance Communications could engineer a deal that did not excessively stretch its balance sheet.Shares in Reliance Industries, India’s top listed firm, rose 0.6 percent to 2,539.70 rupees as traders saw a buying opportunity after the stock had fallen more than 5 percent in the past three days.

At 11:27 a.m. (0557 GMT), the 30-share BSE index was up 0.33 percent, or 54.15 points, at 16,402.65, with 20 components gaining, having risen nearly 1 percent earlier.

The index is down more than 19 percent in 2008.

"There is a lack of conviction in the market," said D.D. Sharma, vice president at Anand Rathi Securities in Mumbai. "It is still not clear how the authorities will manage inflation and high crude prices."Annual inflation topped 8 percent in March for the first time in 3-½ years, revised data showed on Friday, and analysts said a possible rise in government-set retail fuel prices could push it closer to double digits.

The Indian government will soon take a decision on an oil ministry proposal to raise petrol and fuel prices, a senior official said on Tuesday without elaborating.JM Financial Services said in a technical research report that a pullback of 200 to 500 points was likely in the main index over the next few days after the recent market sell-off.

Tata Consultancy Services Ltd rose 0.4 percent to 963 rupees after India’s top software services exporter said it had signed a five-year deal worth $100 million with privately held European firm NXP Semiconductors. Larsen & Toubro was up 0.9 percent at 2,775 rupees on bargain hunting after the stock fell 8.2 percent in the last three days. India’s top engineering and construction firm is due to report results on Thursday.

In the broader market, 1,470 gainers defeated 802 losers on volume of more than 90 million shares.

The broader 50-share NSE index was up 0.69 percent at 4,908.80.

Elsewhere in the region, Karachi’s 100-share index declined 1.71 percent to 12,369.70, while Colombo’s All-share index was down 0.18 percent at 2,567.42 points.

STOCKS ON THE MOVE

* Omaxe was up 2.7 percent at 216.30 rupees after the real estate firm said it was talking to merchant bankers in India and abroad to raise at least $500 million through an equity placement.

* Sita Shree Food Products Ltd rose 4.9 percent to 44.35 rupees on news the company had won orders from Reliance Fresh for 400 metric tonnes of wheat flour and pulses, higher than a previous order for 160 metric tonnes.

MAIN TOP 3 BY VOLUME

* Ispat Industries Ltd on 5 million shares

* Reliance Natural Resources Ltd on 4 million shares

* IFCI Ltd on 3 million shares

Bush hits '08 trail; do Republicans want his help?

President George W. Bush has made it clear he is excited to get out on the campaign trail this election year to help Republicans keep the White House and retake Congress -- but do they want his help?

Republican presidential hopeful John McCain has said he wants help from Bush, who can haul in enormous campaign cash. But McCain has walked a fine line with the unpopular Bush, backing the president on the Iraq war while bucking him on how to address climate change.Bush will kick off raising money for McCain on Tuesday and Wednesday at three events in Arizona and Utah, but they will only be together at one and it will be out of the public eye. That has raised questions about whether Bush helps or hurts the Arizona senator.

"On the one hand (Republicans) want to keep their distance from the president in order to avoid being cast as a third Bush term, yet at the same time they need to tap into the fund-raising capacity of the president," said Anthony Corrado, a professor of government at Colby College in Maine.

The Reuters/Zogby poll last week found Bush’s approval rating had fallen 4 percentage points to 23 percent, a record low for pollster John Zogby. Congress fared even worse, however, falling 5 points to 11 percent.In a time-honored practice by presidents on the trail, Bush has scheduled non-campaign events on his three-day, five-state trip, which helps defray the enormous costs of hosting the presidential entourage for which candidates must pay.

Despite wrapping up the Republican nomination, McCain has lagged his Democratic rivals in raising money even though they have not finished their contest. McCain raised $18.5 million in April while New York Sen. Hillary Clinton pulled in $21 million and Illinois Sen. Barack Obama attracted $30.7 million."They probably want to do a lot of this now while there’s attention still on the Democratic race," Corrado said, saying Bush will be best used in western and southern states.

PROBLEMS MORE EXTENSIVE FOR REPUBLICANS

While the White House said there may be a Bush-McCain photo opportunity on Tuesday, Corrado said "every shot that comes out through election day where McCain is sharing a podium with the president is going to be a day when more ammunition is provided for the Democrats for the fall campaign."

In addition, Republicans are talking openly about the difficulties they face holding on to the White House and retaking control of Congress in November, noting the unpopular war in Iraq that has lasted years longer than expected.They also point to the teetering economy as well soaring gasoline and food prices. Plus, Republicans in recent months have lost three special elections for vacant seats in the House of Representatives in districts they have traditionally held.

In a sign Bush’s problems likely extend beyond the top of the ticket, the other two fund-raisers the president will attend this week for Republicans seeking seats in the House are also closed to the media."The political atmosphere facing House Republicans this November is the worst since Watergate and is far more toxic than the fall of 2006 when we lost 30 seats," Rep. Tom Davis, a Virginia Republican, said in a memo to fellow Republicans.

Democrats now hold a 236-199 advantage in the House. Republicans have seen some 28 members decide to retire or seek another office, versus seven Democrats. Senate Democrats only have to defend 12 seats versus 23 Republicans must guard.

Bush will help raise money in two key swing congressional districts on the trip: New Mexico’s open first congressional district and Kansas’ third district, where Republicans are trying again to knock out Democratic Rep. Dennis Moore."He is poisoning the well for Republican congressional candidates and for John McCain," said Larry Sabato, director of the Center for Politics at the University of Virginia. "I think McCain’s chances depend in part on whether Bush and his White House team can manage to get Bush up around 40 (percent) again," referring to the president’s approval rating.

Gold pulled higher by oil after pipeline blow-up

Gold opened higher on Tuesday as further supply disruptions in Nigeria, the world’s eighth-largest oil producer, and a weaker dollar, made the precious metal increasingly attractive.

Spot gold stood at $927.00/927.90 an ounce by 0329 GMT, having earlier risen above $930, and up from $925.20/926.60 in New York late last week.

Both Britain and the United States were closed for public holidays on Monday.

A rise in oil prices above $133 on production problems in the North Sea over the weekend and in Nigeria on Monday when rebels blew up a pipeline, drove gold higher on Tuesday.

"I am tracking oil prices for direction. And the dollar is still weakening," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"If gold holds above $910, it could go up to $950. If it falls below $910, it could go back to the $800s," he added.

Oil bellwether NYMEX crude oil was up 97 cents at $133.16 by 0333 GMT, having climbed earlier as high as $133.46 after rebels from Nigeria’s southern Niger Delta blew up a Royal Dutch Shell oil pipeline on Monday, forcing the firm to cut production.

Spot gold rose as high as $935.30 last Thursday, its highest level in a month, on the day that oil prices rose above $135.00.

Non-commercial investors in U.S. gold futures turned bullish last week, hiking their long positions by around 20 percent in the week to May 20, data from the U.S. Commodity Futures Trading Commission showed on Friday.

Non-commercial investors, often referred to as speculators, were net long on 182,119 lots of gold on the New York Mercantile Exchange’s COMEX metals division, up from 152,938 lots a week earlier.

Further adding to bullion’s attractiveness as an alternate currency, the U.S. dollar remained close to one-month lows against a basket of currencies on Tuesday as investors expect economic data and speeches by Federal Reserve officials to provide a clearer picture of the deteriorating economy.

Gold is often seen as an alternative currency when the dollar weakens.

The dollar index was within sight of one-month lows of 71.823 struck last week, as it stood at 71.930 on Tuesday morning.

Gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $2.00 to $927.80 an ounce.

Benchmark April gold on the Tokyo Commodity Exchange was up 2 yen at $3,107 yen per gram by the end of the morning session, having settled unchanged on Monday.

Spot platinum rose to $2,176.00/2,196.00 an ounce from $2,156.50/2,176.50 late in New York on Friday.

The most active Tokyo platinum futures contract for April was up another 12 yen per gram at 7,055 yen by the end of the TOCOM morning session, having settled 40 yen higher on Monday.

Silver was largely steady from last week at $18.23/18.29 an ounce, against last Friday’s $18.26 high, which was its highest level since April 18.

Spot palladium was largely steady at $449/$457 an ounce.

Monsoon to arrive in 3-4 days - officials

India’s June-September monsoon rains, vital for the farm economy and overall growth, are expected to reach Kerala in the next 3-4 days, weather officials said in a statement on Monday.

With the strengthening of westerly winds, the southwest monsoon has advanced into more southern and central parts of the Bay of Bengal, the statement said."Thus conditions are becoming favourable for onset of monsoon over Kerala during the next 3-4 days," the statement said.

The Indian Meteorological Department this month said the annual monsoon rains were forecast to reach southern India slightly earlier than normal on May 29.

Officials have forecast rains in 2008 at 99 percent of the long-term average.

Analysts say an early monsoon would help crops like rice, soybean and groundnut, which are sown in June and July, and could help India improve its food security amid global shortages.Fast rising food prices have been a major driver of inflation in recent weeks, pushing the wholesale price rate to its highest in 3-1/2 years above 8 percent, and causing a major headache for the Congress Party-led government facing a string of elections.

Ambani may transfer Rel Comm stake to MTN - paper

A proposed deal between South Africa’s MTN Group and Reliance Communications may result in a transfer of Chairman Anil Ambani’s two-thirds stake in the Indian firm to MTN, the Economic Times said on Tuesday, citing sources.

That would trigger an open offer from MTN for another 20 percent of Reliance Communications, as Indian law mandates such an offer to shareholders after an acquisition of more than 15 percent of a company.

MTN would become a holding company of India’s No. 2 mobile operator, and Ambani would in return get around a third in the South African firm, and keep an indirect holding of nearly 20 percent in Reliance Communications, the paper said, citing sources.

The transaction would be a share-swap deal, the paper said, with the offer to minority shareholders in cash.

"In effect, the Anil Dhirubhai Ambani Group will become the largest shareholder of the combined entity, likely to be christened MTN Reliance," the paper said, citing unidentified sources.

A spokesman for Reliance Communications declined comment.

MTN and Reliance Communications on Monday said they were in exclusive talks aimed at a potential combination of their businesses, that could create a $66 billion telecoms giant.

S.Africa's MTN now talks to Reliance

South Africa’s MTN Group has started talks with Indian mobile operator Reliance Communications that could create a $66 billion emerging markets telecoms group.Indian number two Reliance quickly stepped into the void after bigger rival Bharti Airtel pulled out of talks with MTN at the weekend aimed at taking control of sub-Saharan Africa’s biggest mobile operator.

A combination of MTN, valued at $38 billion at Friday’s close, and Reliance, valued at $28 billion, would create a top ten global industry player to rival Japan’s NTT DoCoMo Inc in market value. In terms of subscribers, a merged group would slot in just below Deutsche Telekom -- as the seventh biggest in the world..

A source with knowledge of the negotiations said Reliance would not be looking for the same structure as Bharti in the deal. Media and analysts had speculated that Bharti was eyeing a 51 percent stake in MTN and Bharti said it had pulled out of talks after the South African firm suggested it become an MTN subsidiary.

Shares in Reliance fell as investors worried about the costs of a deal while MTN stock fell as much as 7.6 percent. Investors were expecting a healthy premium from a Bharti buyout.MTN is seeking new markets outside Africa and the Middle East and will likely push to retain its brand and culture.

"Whatever the shape of the company moving forward, there is little doubt that the retention of the MTN brand and culture would be two of the most important aspects executive management and shareholders should ensure," Frost & Sullivan analyst Lindsey Mc Donald said.

Reliance Communications and MTN said earlier that the two groups had entered into exclusive talks about potentially combining their businesses. A 45-day exclusivity period will be in force, during which neither can talk to any other entity.

Reliance Communications Chairman Anil Ambani, one of India’s richest men, said a deal with MTN could "provide investors, customers and the people of both companies a global platform for exponential growth".

LACKS FINANCIAL MUSCLE

MTN had 68.2 million subscribers as of March, compared with Reliance Communications’ 48 million.

"Reliance Communications is smaller than MTN, and lacks the financial muscle for a takeover, but it is not going to want to be a subsidiary, either," said Ravi Dodhia, a telecoms analyst at KR Choksey Securities.He said the two firms were instead likely to create a new company, with MTN taking a 51 percent stake.

But Rajay Ambekar, a telecoms analyst and fund manager at Cadiz African Harvest in Cape Town said MTN Chief Executive Phuthuma Nhleko and his executives were aggressively looking for growth and sector consolidation opportunities."If MTN is looking to remain listed on the Johannesburg Stock Exchange and remain a South African company and be the aggressor in this deals, having this sort of exclusivity says to everyone else: ’You guys don’t approach us, don’t bother, we are not looking to be acquired’," Ambekar said.

Harit Shah at India’s Angel Broking, said Reliance and MTN might swap shares, as the foreign holding in Reliance Communications was considerably lower than in Bharti Airtel, a factor that was seen as a possible roadblock for Bharti’s attempted deal.

Foreign ownership of Indian telecom firms is capped at 74 percent, and Bharti is 30.5 percent owned by Singapore Telecommunications.

Shares in Reliance Communications, fell as much as 5.7 percent to their lowest since May 12 while in Johannesburg, shares in MTN fell as much as 7.6 percent to 145.11 rand, their lowest since April 30.

"The market is disappointed that MTN has called off its talks with Bharti Airtel," said Garth Mackenzie, a trader at BOE Stockbrokers in Johannesburg.

"The market was anticipating a buyout from Bharti of MTN of a controlling stake. Naturally, Bharti would have to pay a premium to the share price, if shareholders were going to give up their shares," he said.

Analysts had speculated that Bharti Airtel was engineering a merger that would value MTN at up to $50 billion.

Shares in Bharti rose as much as 4.2 percent to 872 rupees, their highest since May 6, when they slumped more than 5 percent on news that Bharti was in talks with MTN.

Reliance Communications bought Ugandan Anupam Global Soft Ltd in February, saying it would launch mobile services in Uganda by the end of 2008 and spend up to $500 million over five years to build a telecom network there.

Last year, it lost the $11 billion race for majority control of India’s third-largest mobile provider to Vodafone Plc, but has made several smaller overseas acquisitions, including a UK-based WiMax operator of 4G services.

India’s wireless market grew 25-fold between 2002-07, ringing up record profits for telecom firms, but that growth is expected to slow as the percentage of the population with a mobile phone tops 40 percent by 2010 from 22 percent now.

In contrast, MTN is present in some of the world’s most lucrative markets, such as Nigeria, Cameroon, Ghana, Zambia and Uganda, and has said it is keen to pursue more expansion opportunities in emerging markets.

Reliance is being advised by Lazard while MTN is advised by Merrill Lynch.