The prophets of doom have been proved wrong temporarily and profits seem to be coming at least on paper to the harried investors. The run up has been fast and furious and a lot of shorts are being forced to run for cover. From the budget low of 6825, Nifty has surged ~10% this week. Strengthening Indian rupee against the US Dollar also added to the positive sentiment on the bourses.
The big event is now behind us and what lies ahead is hope that GST will sooner than later get passed and that the RBI may get into action and lower rates. With none of the feared negatives making it into the Union Budget (no increase in time frame for long term capital gains or super-rich tax or hike in basic excise), it remained more of a neutral event. The silver lining, however, was that the fiscal deficit target of 3.9% was met and target of 3.5% has been maintained for FY17. This raises expectations of a rate cut from the RBI.
But the market has to content with the fact that some selling pressure could be witnessed given the precarious situation. It would be prudent to remain cautious at this juncture and use the gains to reshuffle your portfolio instead of blindly adding positions.
Union Budget 2016-17: Spotlight on fiscal prudence
Sometimes, no bad news can be considered as good news. With none of the feared negatives making it in the Union Budget (no increase in time frame for long term capital gains or super-rich tax or hike in basic excise), it remained more of a neutral event in our view. We term it as neutral because in his second Budget presentation as FM, Jaitley had ample time to deliver a dream Budget – one that would have simplified taxation, guided on GST, reduced corporate tax by 1% as promised and cut on non-Plan expenditure. However, hardly any relief was given on direct tax (in fact there were some roll-backs for corporates), possibly due to only 6.6% revenue growth, which was half of the budgeted growth. Plan expenditure spend rose only 2% whereas non-Plan expenditure grew by 7.8% and the FM proposed doing away with the bifurcation - which is actually a good indicator for the government to evaluate its spending on both fronts - so one sees little gain in doing away with it. Even subsidies, as a percentage of GDP, have risen from 1.7% to 1.9%, due to higher jump in food subsidy. Perhaps, the political need of the hour prompted many socialist measures. On the face of it, there’s nothing fundamentally wrong about the FM’s Budget that rests on not one, not two but nine pillars viz agriculture, rural populace, social welfare including healthcare, education, skill development & employment creation, infrastructure, financial reforms, fiscal prudence, tax reforms and ease of doing business. Several measures, announced in disparate areas, promise positive yield in the medium to long term. Farmers and budding entrepreneurs have handsome takeaways, so does the bottom-end of the salaried class, which are all great news. The rural and farm sector allocations including MGNREGA, irrigation, electrification, crop insurance, interest subvention and cooking gas subsidies are laudable as they would make a difference to countless BPL families across the length and breadth of the country. Commitment to no retrospective taxation and measures pertaining to FDI, voluntary disclosure of black money, national rural digital literacy mission were among the other positives...Read More
Union Budget 2016-17: Impact on What Oil & Gas sector
Union Budget 2016-17: Impact on IT and Education sectors
Union Budget 2016-17: Impact on Pharmaceuticals Sector
Union Budget 2016-17: Impact on FMCG & Consumer Discretionary Sector
Budget impact: Capital goods stocks to benefit with increased spend on roads, railways
Budget impact! What's in it for Utilities Sector?
Budget impact on cement: Increase in housing spend positive; Rise in clean energy cess negative
Union Budget 2016-17: Impact on the Telecom Sector
Union Budget 2016-17: Impact on Metals & Mining
Budget impact: Positive for Banks, NBFCs but unchanged allocation for re-capitalisation to hit PSU banks
Union Budget 2016-2017: The FM Speech
I rise to present the Budget for the year 2016-17.
I am presenting this Budget when the global economy is in serious crisis. Global growth has slowed down from 3.4% in 2014 to 3.1% in 2015. Financial markets have been battered and global trade has contracted. Amidst all these global headwinds, the Indian economy has held its ground firmly. Thanks to our inherent strengths and the policies of this Government, a lot of confidence and hope continues to be built around India.
The International Monetary Fund has hailed India as a ‘bright spot’ amidst a slowing global economy. The World Economic Forum has said that India’s growth is ‘extraordinarily high’. We accomplished this despite very unfavourable conditions and despite the fact that we inherited an economy of low growth, high inflation and zero investor confidence in Government’s capability to govern. We converted these difficulties and challenges into opportunities.
Let us look at our achievements compared to the last three years of the previous Government when growth had decelerated to 6.3%. The growth of GDP has now accelerated to 7.6%. This was possible notwithstanding the contraction of global exports by 4.4% compared to 7.7% growth in world exports during the last three years of the previous Government. CPI inflation was at 9.4% during the last three years of the previous Government. Under our Government, CPI inflation has come down to 5.4%, providing big relief to the public. This was accomplished despite two consecutive years of monsoon shortfall of 13%, compared to normal rainfall in the last three years of the previous Government.
Our external situation is robust. The Current Account deficit has declined from 18.4 billion US dollars in the first half of last year to 14.4 billion this year. It is projected to be 1.4% of GDP at the end of this year. Our foreign exchange reserves are at the highest ever level of about 350 billion US dollars.
Click here to read entire Speech
Infographics: The Key Features of Union Budget 2016-2017
Union Budget 2016: 15 Key Reform Measures announced in the budget
Budget 2016-17 built on agenda to Transform India, says Finance Minister Arun Jaitley
Union Budget 2016: A look at the Tax Proposals are aimed at Boosting Economic Growth
Less tension for pension! Measures for moving towards a pensioned society in Union Budget
Abrupt rise in prices of pulses! Corpus of Rs. 900 crore for Price Stabilisation Fund
Union Budget 2016: Export duty on iron ore cut to nil; Vedanta, NMDC gain
Rising expenses! Increase of 15.3% in Plan Expenditure over current fiscal
Union Budget 2016- Rocking or shocking for the stock market?
Union Budget 2016 turned out to be largely neutral for equity market, especially investors’ community. By keeping the fiscal deficit targets intact and not tinkering around with LTCG, Union Budget though managed to evade large disappointment, however the proposal of hiking STT on options trading and extra DTT pay hit the sentiment. Further, no further deferral to GAAR also led to some dismay.
Key takeaways from Union Budget 2016 for Stock Market:
No LTCG Rejig: Much against the fears, the government maintained a status quo stance on the time limit for the applicability of long-term capital gains tax in equities to one year.
Impact: Sentiment improved after Jaitley avoided any hike in the time frame on long-term capital gains tax in equities. Reports suggested of government mulling upon the investment for increasing the time limit on the applicability of the long-term capital gains tax from one year to three years. However, any change in long term capital gain tax would have a sharp impact on the market.
Hike in STT on options trading: The Finance Minister during Union Budget 2016 paying deaf ear to investors’ community went ahead and hiked securities transaction tax (STT) on options trading to 0.05% from 0.017% earlier. However, it has maintained (STT) at 0.12 per cent
Impact: Reports suggested that STT brings around Rs 5,000-7,000 crore annually to the government coffers and any hike in the STT rate from 0.1% at present to even around 0.123% could add Rs 1,000-1,800 crore to the government's kitty. Nevertheless, street was wishing for lowering of securities transaction tax (STT) or removal of dividend distribution tax- a demand which was unmet. However, present proposal could reduce the trading volumes as a consequence of the higher tax could mitigate the revenue upside anyway...Read More
FM's decision to stick fiscal deficit target of 3.5% is commendable : Chanda Kochhar
FM has delivered a fiscally responsible budget: N Chandrasekaran, TCS
India Budget credit positive but uncertainties remain: Fitch
FM has presented a balanced budget with a strong push for agriculture: Rajesh Sud
Budget was positive towards the start-up ecosystem
Union Budget 2016 prepares a ground for further rate cut: Future Generali India Life Insurance
Budget will boost the demand for retail stores on high streets significantly
Budget has a very obvious rural development focus: Arun Nagpal
Only healthcare related component of the budget is health insurance: Mandar Kulkarni
Click Here To Read All Industry and Fund Budget Reactions
Jan eight core industrial output climbs 2.9% YoY
The Eight Core Industries comprise nearly 38 % of the weight of items included in the Index of Industrial Production (IIP). The combined Index of Eight Core Industries stands at 180.7 in January, 2016, which was 2.9 % higher compared to the index of January, 2015. Its cumulative growth during April to January, 2015-16 was 2.0 %.
Coal production (weight: 4.38 %) increased by 9.1 % in January, 2016 over January, 2015. Its cumulative index during April to January, 2015-16 increased by 5.1 % over corresponding period of previous year.
Crude Oil production (weight: 5.22 %) decreased by 4.6 % in January, 2016 over January, 2015. Its cumulative index during April to January, 2015-16 decreased by 1.2 % over the corresponding period of previous year.
The Natural Gas production (weight: 1.71 %) declined by 15.3 % in January, 2016 over January, 2015. Its cumulative index during April to January, 2015-16 declined by 4.0 % over the corresponding period of previous year...Read More
Sustained growth: India Feb Manufacturing PMI at 51.1
At 51.1 in February, unchanged from January’s reading, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index(PMI)– a composite single-figure indicator of manufacturing performance – pointed to a second consecutive monthly improvement in business conditions across the sector. Reflecting sustained growth of new work, Indian manufacturers raised their production volumes in February. That said, the rate of expansion eased since January and was marginal overall. Incoming new work increased for the second straight month and at the quickest rate since last September. According to survey members, underlying demand continued to improve. New business from abroad also rose, although February saw a loss of growth momentum. Manufacturing business conditions in India continued to improve, with new orders, exports, output and purchasing activity all rising in February.However, a faster expansion in new business inflows failed to lift growth of output and workforce numbers were left broadly unchanged again. PMI data also highlighted a weaker rise in costs and the first reduction in selling prices since September 2015...Read More
February 2016 Auto sales: Maruti sales decline; M&M registers double digit growth
February turned out to be a good month for the M&HCV and LCV segments of the auto industry, but passenger vehicles did not ignite the fireworks. Maruti's total sales remained flat on a year on year basis as it suffered production losses after Jat agitation, while Mahindra & Mahindra (M&M) registered double digit growth. In the two-wheelers segment, Hero MotoCorp registered 13.5% growth in sales.
Maruti's passenger car sales declined by 3.9% to 87,149 units as against 90,728 units in the Jan'15. Utility vehicles (Gypsy, Ertiga, S-Cross) registered a surge in sales volume of nearly 44% yoy, with sales clocking 8,484 units. Super compact Dzire Tour had impressive numbers with sales up by 38% yoy. Mahindra & Mahindra's PV segment sold 23,718 units and grew by 25% yoy in Feb 2016. Tata Motors did not have a good run in February, with PV sales declining by 20%. Cumulative sales of vehicles in this category remained flat.
Medium and Heavy Commercial Vehicles (M&HCV)
Perhaps the sole bright spot in the auto segment right now, M&HCV sales of Tata Motors rose by 22% in Feb 2016. Hinduja group's flagship company, Ashok Leyland saw 31% yoy growth clocking 10,798 units. M&M's segment sold 479 units registering a growth of 47%. Eicher branded trucks and buses have recorded total sales of 4936 units in February 2016 as compared to 3100 units in February 2015, representing a growth of 59.2%...Read More
All the Auto numbers you need to know about February 2016 sales
Government looking Offshore to diversify its Largely Domestic Debt portfolio
For long, India has depended primarily on domestic debt for its borrowing needs. The low share of external debt might be the reason why India has been protected from uncertainties of global markets. But the approach taken by India is very different to what other emerging nations have done. Like most of those countries, India still does not have an international sovereign bond issuance program. But foreign investors are looking for high yield debts, in a world that is increasingly becoming a low-rate market. So it might actually be the right time for government to issue offshore sovereign bonds. Low interest rates in international markets indicate that it might be cost effective to borrow from abroad. Another benefit of this will be that it will add to the foreign exchange reserves of the country and more importantly, establish a benchmark for pricing rupee bonds offshore. But experts feel that the decision to launch such bonds cannot be made based solely on the cost-benefit and should also consider the impact on Balance of Payments of the country. The need to access low-cost international markets should be justified in the context of overall savings for the economy. Apart from that, just going for one-time issuance might not be sufficed. There is a need to put out a regular schedule for such issues as it will create and build up interest among investors and also bring in predictability about the schedule of redemptions in future...Read More
Three-month low! Muted activity dips India's February Nikkei Services PMI at 51.4
Falling to a three-month low of 51.4 in February,from 54.3 in January, the seasonally adjusted Nikkei Services Business Activity Index. highlighted a softer expansion of output that was only marginal. Where growth was seen, businesses reported higher levels of incoming new work. Data indicated that output rose in four of the six tracked categories, the exceptions being Post & Telecommunication and Transport & Storage. February data showed that services firms and goods producers alike registered weaker increases in activity. As a consequence, the Nikkei India Composite PMI Output Index dipped from January’s 11-month high of 53.3 to 51.2, a reading that was well below the long-run series average(55.7). Although new orders at services firms continued to rise in February, the rate of expansion eased to the weakest since last November as firms reportedly faced strong competition for new work during themonth. A quicker increase in order book volumes inthe manufacturing economy was insufficient toprevent growth of private sector new orders from easing to a three-month low...Read More
Union Budget: FM pulls off a great balancing act, where did the money come from?
One surprising element of Finance Minister Arun Jaitley’s Union Budget, unveiled on Monday, was that he managed to cater to all major needs of key sectors and the broader economy without putting too much of a tax burden on the taxpayers or swaying from the target for fiscal prudence as specified under the FRBM rules. Jaitley doled out big money to the rural and social sector, set aside huge capital for the public sector banks and also infrastructure sector and also meet other smaller needs of the economy. He did all of that without altering the personal income-tax slabs. Instead, he offered some extra incentives to the individual taxpayers on rent allowance and others. There was no tweaking of the long-term capital gains tax, something the market had widely feared. There was no hike in the service tax, neither did the list of areas under the service tax bracket grew. He didn’t raise duties for too many goods or commodities also. He only taxed tobacco and tobacco-related products, slapped a green cess on both small cars and SUVs and put a luxury tax on high-end cars and other select goods. Yet, he managed to stick to fiscal discipline. The money set aside for banks was small. But the Finance Minister clarified that the amount mentioned is what he has frontloaded and that he would provide more as and when required. The market borrowing target was pegged at Rs 6,00,000 crore, which was less than last year and far below market projections. Higher government borrowing is considered bad for corporate India, as it tends to crowd out funds for the private sector. So, where will the money come from? There was no visible expenditure cut, but allocations rose across sectors. However, the government looked focused on the quality of spending...Read More
Union Budget 2016: Jaitley has the cake and eats it too
Chinas vocational training 16 times Indias: Can budget push help?
Bankruptcy, Insolvency code- a revival step for financial sector
Union Budget: Day after, a big question mark over FM's deficit target
RBI to slash interest rates?
With the Government setting the fiscal deficit target of 3.5 percent of GDP in 2016-17, during the Union Budget 2016-17, chances of a rate cut have only increased. The sentiment in the stock market has improved with market participants now bracing up for a cut in the interest rate. Last year, the RBI cut the benchmark repo rate, within five days of the Budget being announced, stating that it was convinced about the government’s fiscal consolidation plan. Experts note that they are looking forward to something similar this time as well. The Macro Economic Survey had suggested that the government stick to its fiscal prudence plan, and also called for an easier monetary policy from the RBI. Going by the current numbers, inflation too has remained within the Reserve Bank of India’s (RBI) indicated trajectory. Consumer Price Inflation or the CPI stands at 5.69 percent in February, lower than RBI’s projected target of 6 percent for January 2016. The RBI had categorically stated in the run-up to the Budget that any slippage in the fiscal deficit target on part of the government would tie its hands as far as rate cuts were concerned. Analysts had noted that the RBI decided to maintain a status quo on its key policy rates, in its last monetary policy, as it was waiting to take a cue from the Government's annual budget statement to decide if they should cut interest rates further. As of now, if the RBI goes for a rate cut, off-cycle, it will only further lift the mood in the stock market. The repo rate stands at 6.75 per cent...Read More
Record farm funding, up 84%; Crises also record-breaking
Continuing the poetic trend seen in budget speeches, Finance Minister Arun Jaitley started with these lines, signalling the fiscal path of his government towards budget management during a global slowdown and farm distress at home. With agriculture growth contracting 1% in the October to December quarter of 2015 and growing only 1.1% in the financial year 2015-16 (advance estimate, obtained by extrapolation of latest available data); back-to-back droughts, the worst in 30 years; and winter (rabi) crop sowing dropping below 60 million hectares, the worst in four years; and a few thousand farmers committing suicide in 2015—Jaitley, 63, kept his budget for 2016-17 focused on the 834 million people who live in rural India. In addition, rural workers’ wages (inflation adjusted) declined for the first time in half a century, Jawaharlal Nehru University economist Himanshu wrote in the Indian Express. Jaitley’s budget has nine pillars: Agriculture, rural development, health, education and jobs, infrastructure, financial reforms, governance and ease of doing business, prudent fiscal management, and tax-administration reforms. With the rural-focus explicit, stockmarkets (BSE Sensex) tanked 2% during the speech and then recovered, as Jaitley laid out accelerated reforms in tax compliance and administration, especially for small and medium enterprises, and closed 0.66% below.
Jaitley’s aim–to double farmer income by 2020–is very tough
Jaitley set aside the most money ever for agriculture and farmer welfare: Rs 47,912 crore ($7 billion), a rise of 84% from Rs 25,988 ($4 billion) last year. This includes Rs 6,000 crore for groundwater management, Rs 12,500 crore for irrigation and Rs 5,500 crore for crop insurance. Changing irrigation, insurance and groundwater-use patterns will not be easy...Read More
Before Ease, let’s change India’s Way of Doing Business
Whilst our Prime Minister has rightfully stressed on the need to improve India’s Ease of Doing Business rankings, the country is yet way far from being a default destination for private investors who, quite obviously, play a crucial role in boosting economic growth. It’s high time we moved from acronyms to action, and from intent to initiative. The 2016 budget, contrary to great expectations, didn’t do anything substantial to boost India’s image as a hassle-free investment destination. A mere reassurance of opportunity of a one-time scheme of dispute resolution for firms affected by the retrospective amendment is certainly not synonymous with addressing the retrospective tax tangle. But it’s not just the ease of doing business, we must change the way we do business as well. And here the Indian promoters can’t leave the hard work to the government. They must promote this cause themselves. The ‘India story’ has an inherent value prop. Our exceptional human resource talent creates countless possibilities of innovation on a horizon that is vast and vague in the same breath. No wonder, both global and domestic PE players steer umpteen sector-specific fund raising rounds, betting big on the entrepreneurial architects of India, notwithstanding India’s regulatory constraints and its reputation of delayed exits. It’s only imperative that these catalysts get some respite on the regulatory front, and more importantly, commensurate respect from Indian promoters. But what’s imperative to the world is often reduced to an option in India...Read More
Will India see a rise in Tax-GDP ratio in the long term?
There is a growing debate that is it worthwhile to track an indicator like Tax-GDP Ratio? The debate is fueled by the fact that in India, this ratio is low when compared with any other historical benchmark or countries. Even then, the country can be said to be more or less macro-economically stable. Interestingly, the government claims that in last 60 years, India’s tax to GDP ratio has increased from 6% to 17%. But fact is that most of this growth has come pre-liberalization. Since 1991, the ratio has remained closer to 17% and hence, almost nothing has happened in last 25 years on this front. Some argue that low taxes are the reason why India is facing the problem of economic equality. But there is no data to back that argument. So is it true that tax to GDP ratio rises with increase in per capita income? India seems to be out of sync with the previous statement. Though per capita income has risen substantially in last 25 years, there has been zero increase in tax-GDP ratio. But it’s also possible that there is no link between the two. There is some logic in saying that states can tax more as GDP increases. Hereby allowing taxes (in absolute sense) to rise. But once the government has decided how much it wants to spend (funded through taxes), the tax-GDP will then be dependent on the spending mandate of the government and not growth in GDP...Read More
The Great Correction: How Flipkart lost $4 billion in one day
India's e-commerce has been growing at a fierce pace over the last couple of years, and leading the pack is the poster boy of online retail and early mover in the segment, Flipkart. With investors bullish on the 8-year old company, touted as India's largest e-commerce firm, Flipkart's valuation has surged over the years to nearly $15 billion. However, it took one decision of Morgan Stanley to make a noticable dent in the ballooning wealth of Flipkart and the overall market. Morgan Stanley marked down its stake in Flipkart to $103.97 per share, 27 per cent below the price of its last fundraising round. Last year, Morgan Stanley had valued Flipkart’s per share little over $142 per share. As per new price, the company is now valued at $11 billion. The mark down does not come as a surprise for many investors and hedge funds, as there are growing concern regarding overvaluation of several "Unicorns" and start-ups. Several experts including the likes of ace investor Rakesh Jhunjhunwala and ex-Infy Board Member Mohandas Pai have raised speculation regarding the valuation of start-ups, saying that they don't have a sustainable business model. Jhunjhunwala, at a retail conference in Mumbai had opined that he will invest in Flipkart if its valuation is $100 million, while adding, "I will believe in it (the e-commerce model) when they (e-commerce firms) sell at an economical price."...Read More
Indian rupee: Calling for a review
Heading into 2016 there were high expectations that the Indian rupee (INR) would be one of the better performing currencies in Asia. So far, it has failed to deliver. Hopefully, the latest budget from India's government reinvigorates the appeal for the currency, even if indirectly.
The recent underperformance of the INR has been partly due to the market's concern with three main risks, including: