Archive for February, 2010

Indian Stock Market Reaction To Indian Budget :)

Indian stock markets, reacted positively to the budget, with a benchmark index breaking free to close 237 points higher than its previous weekly close. 馃檪

The 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE) moved up 237.92 points or 1.47 percent to end Friday at 16,429.55 points, 237 points above its previous weekly close at 16,191.63 points.

The broader S&P CNX Nifty of the National Stock Exchange (NSE) too posted gains to end the week at 4,922.3 points, up 77.4 points or 1.57 percent.

Broader market indices, however, ended the week in the red with the BSE midcap index closing 0.54 percent down and the BSE smallcap index 1.67 percent lower.

“Though it is not possible to keep everyone happy, the finance minister has done a commendable job. This was evident from the way markets reacted to the announcements,” said Jagannadham Thunuguntla, the equity head for brokerage firm SMC Capitals.

“The budget did help in breaking from the side-ways movement, but it is not going to help much going forward. A lot of the budget news has been factored in and one should not expect a major rally,” he added.

The top gainers during the week included Hindalco (up 7.7 percent), Maruti Suzuki (up 6.8 percent), L&T (up 6.2 percent), Hero Honda (up 5.5 percent) and ICICI Bank (up 5 percent).

Among top losers were ITC (down 6.5 percent), Reliance Communications (down 2.8 percent), Tata Power (down 2.2 percent), Hindustan Unilever (down 2.2 percent) and Reliance Industries (down 0.6 percent).

Data with markets watchdog Securities and Exchange Board of India (SEBI) showed that foreign funds were net buyers during the week, having bought scrips worth $313.56 million.

Benchmark indices in the US ended slightly lower this week with Dow Jones industrial average dipping 0.8 percent, the Standard and Poor’s 500 Index 500 down 0.4 percent and the Nasdaq composite falling 0.3 percent.

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Points Discussed in Budget :)

  • Excise duty on silver rose to 10%
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  • Surcharge on domestic cos reduced to 7.5% from 10%..
  • Excise duty on oil rose to 10%.
  • Fiscal deficit will be at 5.5% in 10-11, at 4.8% in 11-12 and 4.1% in 12-13
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  • Revised income tax slabs 馃檪
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  • Net market borrowing for 2010-11 at Rs 3, 45,010..
  • Extended 1% interest subsidy scheme for affordable housing.
  • Rs 5400 cr of funds allocated for urban development..
  • Defense allocation rose to Rs 147344 cr.
  • Rs 48000 cr allocated for Bharat Nirman.
  • Farmer loans extended for 6 months to June 30th 2011.
  • Allocated Rs1.73 lakh cr for infrastructure..
  • Agriculture credit flow targets at Rs. 375000cr.
  • FDI worth $20.9 bn in April to Dec 2009.
  • Proposed Rs 16500 cr for PSU banks.
  • Challenge for a 9% growth, need to review stimulus.
  • Stay Tuned聽for More updates 馃檪

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    Note : For More Latest Industry, Stock Market and Economy News and Updates, please聽click here

    India World”s 10th Largest Gold-Holding Country :)

    The Economic Survey, which was tabled in the Parliament by the Finance Minister today noted that the year 2009-10 witnessed India becoming the world”s 10th largest gold-holding country, from a nation that pledged its bullion two decades ago to pay for imports.

    The gold purchase by the government of 200 tonnes from the International Monetary Fund (IMF) took its total reserves to 557.7 tonnes, or about 6 per cent of the total foreign exchange reserves.

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    India in 1991 had to pledge its gold to the Bank of England in order to pay for its imports.

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    The survey said “Post-purchase, India has become the 10th largest official gold-holding country in the world,”.

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    The Reserve Bank of India (RBI) in November last year concluded 200 tonnes of gold purchase from IMF as part of the country”s foreign exchange reserve management operation.

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    The purchase, which was executed over two weeks during October, was an official-sector off-market transaction.

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    Earlier, Finance Minister Pranab Mukherjee had said that the purchase of gold provided a healing touch to the pride of the nation, which was dented about two decades earlier when the country sold its gold for a few hundred million dollars.

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    Meanwhile, the survey sates that IMF”s Executive Board, on September 18, 2009 announced its decision to sell 403.3 metric tonnes of gold as a central element of its New Income Model and in order to increase its resources for lending to low-income countries.

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    The IMF also decided that the initial offer of the sale would be directly to official holders, including the central banks. Consequent of this, the RBI concluded the purchase of 200 metric tonnes of gold from IMF, under the IMF”s limited gold sales programme, at the cost of US$ 6.7 billion, in November 2009, as part of its foreign exchange reserves management operation.

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    The purchase was an official- sector off-market transaction and was executed over a two-week period during October 19-30, 2009 at market-based prices.

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    With this purchase, gold holdings in the country”s foreign exchange reserves have increased to 557.7 tonnes from 357.7 tonnes, which is about 6 per cent of the reserves. Post-purchase, India has become the 10th largest official gold-holding country in the world.

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    Stay Tuned for More updates.

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    Note : For More Latest Industry, Stock Market and Economy News and Updates, please聽click here

    BUDGET PREVIEW 2011 – Final Part :)

    Continuing The Final Part Of The Budget Preview 馃檪

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    We believe that this year Finance Minister will take a gradual move towards fiscal consolidation by聽increase in Excise duty. Excise duty forms around 40% of Indirect Tax collections. Excise duty collections were聽down by 13% in April to December period to close to Rs. 70,000 crore comprising around 66% of Budgeted聽Estimates of Rs. 1,06,477 crore. The factors that contribute to our belief are; 馃榾

    路Though the growth in corporate sales is not astonishing but profitability has improved to due to various聽cost control efforts which is quite evident by the corporate tax collection that have shown a growth of聽44% in December 2009. Cumulatively Net direct tax collections increased by 8.5 per cent during April-聽December 2009.

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    路India being a consumption story has shown healthy growth in sales of consumer durables. For instance Automobile industry’s sales聽went up by 32 per cent in December over the same month in 2009. It is believed that a gradual hike in duty will get absorbed聽without affecting medium term prospects of the industry.

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    路Partial rollback would also help the finance ministry effect a calibrated integration of excise duty with the services tax by the end聽of the next financial year, when the proposal for a Goods and Services Tax is likely to be implemented.

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    路Finance Minister had indicated that he would like the fiscal deficit for 2010-11 to be around 5.5 per cent of GDP. The proposal to聽raise excise duty by two hundred basis points is being endorsed also to help the finance ministry raise more revenue and stick to聽the projected fiscal deficit target.

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    Disinvestment would be the key focal point in the Budget. We believe that the Finance Minister would place high targets from the PSU sale proceeds. The factors that contribute to our belief are:

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    路In order to bring Fiscal deficit under control that would subsequently ease upward pressure on interest rates.

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    路This will help Investment in social sector projects which promote education, health care and employment & will also help in聽Capital investment.

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    On the Corporate Tax front, we believe that the Finance Minster is unlikely to lower tax to 25% from the current 30% as per Industry demands. The rationale behind our belief is:

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    路The direct tax code that proposes corporate tax to be 25% will be implemented in fiscal 2011 鈥 2012 & Industry have to wait till its聽implementation as it will replace the existing Income Tax act.

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    路Already, government is trying to make up more tax revenue & is unlikely to take step in this direction as it may come as an聽obstacle in order to control fiscal deficit.

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    On deregulation of Petroleum sector, we believe that in order to cut down on subsidies government could provide the road map for partial deregulation of the petroleum sector. The road map may provide OMC’s to review the prices of petrol and diesel on a聽regular basis however, LPG and kerosene could continue to be administered by the government. Factors that complement to our belief:

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    路In view of the commitment of the UPA regime to flagship social security programmes聽that require huge allocations, Mr. Mukherjee has told Mr. Deora that it would not be聽possible to provide huge subsidies to the OMCs in future.

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    On the External Economy side, we expect that the Finance Minister may continue to聽provide certain concessions like interest subsidy and extension of other export oriented聽schemes. The rationale to our belief:

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    路In the recent two months i.e. November & December, merchandise exports registered a聽positive growth of 18.2% & 9.3% respectively. But in the period of April to December聽2009, the exports were still negative to the tune of 20% as compared to the聽corresponding period.

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    路The world economic recovery especially in US & Europe is still questionable & the regions constitute approximately 15% & 21%聽respectively of our merchandise exports, thus directly affecting the trade.

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    路Sectors such as engineering goods, jute, carpets, handicrafts and leather goods are continue to be in bad shape, others such as聽gems & jewelry drugs, plastics and petroleum products are showing improvement.

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    路Concluding, the main point is that it may not be a good time to take back the stimulus so soon that may derail the recovery.

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    Note : For More Latest Industry, Stock Market and Economy News and Updates, please聽click here

    BUDGET PREVIEW 2011 – Part 1 :)

    At last the much talked topic 鈥淏UDGET鈥 among AAM ADMI, CORPORATES or聽INVESTORS that comes to INDIA 鈥 is approaching. 鈥淭he million dollar question is that will 2010 budget be another year to cheer the聽economy by giving some relief in indirect taxes, personal income tax and by聽implementing various schemes to induce social & infrastructure sector in聽order to maintain high trajectory growth鈥.

    Generally, it is seen that the聽incentives which are given in the period of recession or slow down and moreover,聽when the government in power is about to complete its tenure, are above from聽expectations. It is seen that budget in two years usually comes good when the聽Govt. is in the last year of power & in the first year of the rule as a vote of thanks.The mid three years out of the five year term usually remains tight on the聽policies.

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    For the common man, we expect that Finance Minister may raise the exemption limit in personal income tax & investment聽limit Under Sec.80C. The reason to our belief:

    馃檪

    1. The rocketing prices of food articles like sugar, pulses and vegetables have been cutting the pockets of a middle class.

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    2. By coming out with these measures (above mentioned) the government will lower the tax incidence on the common man & will聽also help it to put the opposition on backfoot.

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    By & large everyone is aware of the level of fiscal deficits globally and many of us know that it is essential to minimize deficits &聽returning to fiscal consolidation is necessary. The main question is why it is so important. Let’s look at the consequences of high聽fiscal deficit:

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    A risk to high government borrowings leads to more debt servicing that cuts expenditure on various social welfare schemes, if TAX聽revenues do not matchup. In the current financial year, out of the 4 lakh crore borrowing, more than 50% has gone towards interest聽payments.

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    Secondly, the higher government borrowing from market means less availability of funds to private borrowers. In the current Fiscal year, due to dismal credit growth, we haven’t seen pressure on Interest rates. But going forward we foresee normal聽credit growth in the next financial year. However as the government borrowing is expected to remain at same level in the next聽fiscal, pressure on interest rate is expected.

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    So, this year the theme of Budget would any way be to maintain economic recovery through investment for building infrastructure聽rather than funding the expenses/consumption. But at the same time focus will be to bring down the fiscal deficit.

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    The catch here is聽bringing down deficit by cutting expenditure means risk to growth & the other alternative is to increase revenues. While the direct聽tax collections are encouraging, on the indirect taxes front the government is still struggling to get desired revenues. This is聽because after September 2008, when the global financial system collapsed, the government came out with stimulus packages to聽keep up the desired growth pace.

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    Excise rates since December 2008 had been progressively cut from 16, 12 and 8 per cent to 10, 8聽and 4 per cent respectively depending on the product in question. Service tax was also reduced from 12 to 10 per cent.

    Weekly Update of The Market (15th – 19th February)

    Hello Friends, here, we bring you the weekly overview of the Indian as well as of the Global economy and latest global business and industry updates.

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    Weekly Update of The Market (15th - 19th February)

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    The much awaited gains in global markets which came in the week gone by, was a big relief for investors.

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    Improving Australian Jobless rate (falling) to 5.3% from 5.5% & China‘s lending surged to 1.39 trillion yuan ($203 billion) in January, more than in the previous three months together lowered the concerns of global economic recovery and proved to be some of the triggers for the global markets gain.

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    European Union statement that it is ready to support Greece somewhat eased pressure but China central bank another move to hike reserve requirement by 50 basis point to rein the credit growth spoiled the mood of the markets.

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    Chinese banks disbursed 19% of the lending target in January alone.

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    The existing reserve requirements stood at 16 percent for the biggest banks and 14 percent for smaller ones.

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    馃檪

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    Back at home, CSO expectations of decline in farm output to be contained within 0.2 per cent & robust recovery in industrial performance rejoiced the markets that GDP growth may come even better for the current fiscal year.

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    On the flip side, market is cautious from budget outcomes on expected move towards fiscal consolidation.

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    High fiscal deficit together with high inflation pose some long term risk for the equity market.

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    The much awaited reforms in the areas FDI, BFSI & fuel and fertilizer subsidiary & a roadmap for implementation of Goods & Services Tax & Direct Tax Code can spark the rally in the domestic market.

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    In the coming week, we may see some activity in capital goods sector on the back of very good IIP numbers.

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    Industrial production witnessed a growth of 16.8% on Year on Year basis while cumulative growth for the April to December period has now inched up to 8.6% over the corresponding period.

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    Overall the trend of most asset classes including stock markets around the world is down due to rising dollar index.

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    Going ahead in the budget, we expect volatility to increase and markets to see big moves up and down.

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    馃檪

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    International cues are positive on the fundamental side but Europe problems and stimulus withdrawal along with rising inflation are having negative effect.

    One should remain cautious going ahead.

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    Nifty faces resistance between 4900-5000 levels and Sensex between 16400-17000 levels.

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    A pick up in investor’s sentiments, softer dollar amid expectation of rescue plan for Greece have rejuvenated most of the commodities, especially metals and energy.

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    We are expecting a thin trading in the beginning of the week, as US market is closed on Monday on the occasion of 鈥President Day鈥.

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    Absence of participation of Chinese market due to celebration of New Year holidays can limit the volatility of commodities further.

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    If we talk about the trend, overall commodities may trade in a range now.

    Any improvement in Japanese GDP data can give further boost in the prices.

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    馃檪

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    Stay Tuned for More on weekly updates.

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    Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here