Posts Tagged ‘stimulus’

Indian Industry Expanded At A Fastest Rate in 25 Months :)

Indian Industry Expanded At A Fastest Rate in 25 Months

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India’s industrial output rose at a faster-than-expected 11.7 per cent in November  from a year earlier, due to stimulus-backed demand for manufactured goods, particularly consumer goods.

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Part of the industrial growth, measured by IIP is no doubt due to a low base of last year but it is mostly attributable to stimulus-driven demand.

Stimulus measures have boosted domestic demand for sure.

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However, industrial growth was just 2.5% in November 2008.

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India’s factory production in November was the fastest in 25 months, raising a debate on whether stimulus provided to spur the economy should continue.

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Meanwhile, manufactured goods, which have around 80% weight in the Index of Industrial Production, which measures industrial growth, grew by 12.7% in November 2009 compared to 2.7% in the same month a year ago.

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Within this category, consumer durable goods production expanded by 37.3% in the month against just 0.3% a year ago  while industrial output in Q1 of 2009-10 stood at 3.8% and in Q2 at 9.2%.

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Moreover, with better-than-expected performance in November,  industrial production in the first 2 months of Q3 now expanded at more than 10%, as it grew by 10.3% in October.

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As such, if the trend is maintained in December, industry would expand at faster pace in the third quarter.

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On the other hand, the continuous rise of industrial production gives enough hope that the recovery is on a firm footing.

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Though it is going to fuel the debate whether stimulus provided by the government to boost the economy should be withdrawn now or not.

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Market experts believe that with respect to stimulus, there could be some withdrawal on the indirect taxes side. This could be required to make up for the fiscal deficit.

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As part of stimulus, government had cut excise duty by six per cent and service tax by two per cent, besides stepping up Plan expenditure taking the total value of stimulus to Rs 1,86,000 crore.

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Morning News Capsules

Hello Friends, here, we bring you the latest updates from the Indian market and Industry.

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SMC Morning News Capsules

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NEWS CAPSULES

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• Backed by government stimulus measures and a low base effect,  growth in industrial output touched a two-year high in November 2009.

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The index of industrial production (IIP) grew 11.7 per cent, primarily due to growth in manufacturing (12.68 per cent in November as against 2.7 per cent last year),
fuelling a debate on withdrawal of fiscal and monetary stimulus measures.

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•  Maruti Suzuki, India’s largest manufacturer of passenger cars, launched Eeco, a multipurpose vehicle (MPV) in Ahmedabad.

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With Maruti Omni being largely used by the cargo segment, and the Versa failing to create a buzz in the market, the company needed to focus on the passenger side.

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Introduced in three variants at a price range of Rs 2.58-2.89 lakh, Eeco aims at fulfilling this gap.

Currently the company sells 550 Omni each month.

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•  Telecom major, Bharti Airtel, has announced that it has agreed to acquire 70% stake in Bangladesh-based, Warid Telecom.

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Bharti plans to make $300 million fresh investment in the company, thus taking the overall investment to $1 billion.

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The new funding will be for capacity expansion, coverage and innovative products.

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• FMCG major Dabur said it has tied up with a Belgium firm for technical collaboration to reduce carbon emissions in its plants and has invested Rs 5 crore for the purpose.

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The company said it is rolling out a host of initiatives at its various manufacturing facilities spread across India and Nepal to reduce carbon emissions and become more energy efficient.

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• Central electricity distribution firm PowerGrid would sign an agreement with Bangladesh later next month for setting up a transmission link with the neighboring country.

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Punj Lloyd has bagged orders worth Rs 947 crore from Ind-Barath Energy.

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The company informed that it has won an order for partial balance of plant and civil work on a two 350 MW thermal power project by Ind-Barath Energy, Orissa.

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• New Delhi Television (NDTV) has informed BSE that NDTV Worldwide, a NDTV Group company has entered into an agreement with Beximco Group, Bangladesh.

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The company would be providing consultancy to set tip and assist in the business management and operations of a 24-hour news and current affairs channel proposed to be launched in Bangladesh by Beximco Group.

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Infosys Technologies, India’s second-largest software services exporter, has reported a 3.6 per cent year-on-year (Y-o-Y) decline in net profit to Rs 1,582 crore for the third quarter ended December 31, 2009.

Total income, too, saw a decline of close to 1 per cent to Rs 5,741 crore.

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• Two – wheeler giant Bajaj Auto reported a smashing 189.24 per cent increase in its net profit at Rs 475.14 crore for the third quarter ended December 31, 2009.

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The company had a net profit of Rs 164.27 crore in the corresponding quarter a year ago.

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•  IT firm Mastek reported a 24.8 per cent decline in its net profit at Rs 23.54 crore for the quarter ended December 31, 2009.

It had a net profit of Rs 31.33 crore in the same period previous fiscal.

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India’s Merchandise Exports Rise After 13 Months of Sliding

India’s Merchandise Exports Rise After 13 Months of Sliding

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The economy really got a cheerful start to the New Year.

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After 13 consecutive months of sliding, India’s merchandise exports — which contribute a fifth to GDP — rose 18.2% in November to $13.2 billion.

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Imports remained in the negative zone declining by 2.6% to $22.88 billion.

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This has led to a lower trade gap of $9.69 billion during the month under review against $12.32 billion in the same period a year ago.

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🙂

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For April-November, exports were lower by 22.3% at $104.2 billion from a year-ago period, much lower than the 26% gap seen up to October.

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But as an indicator to a pickup in the econmic activity, contraction in imports during November was much lower than 15% seen in October.

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But industry and analysts alike cautioned against taking the year-on-year growth in exports as a sign of firm revival.

That is because part of the growth is due to the lower base of exports last year during this period.

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Notwithstanding the lower base, it is also a fact that there has been a revival in global demand too.

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Market analysts feel that 2010 could belong to exporters provided government continue with the stimulus, particularly interest subsidy.

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Exporters however feels that it would be difficult to sustain double-digit growth as the November rise is partly due to pre-Christmas orders from abroad.

So despite the positive growth, the country’s overseas shipments in the current fiscal will be much lower than the $185 billion notched last year.

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Positive Undertones in the Economy – Part 2 :)

Positive Undertones In The Economy

Extending to the yesterday’s post on the positive undertones of the economy in the markets and investors tips, here we coming up with the more factors which investors should use for picking up fundamentally good stocks.

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1. Reality companies hike rates by 15%

Reality sector is witnessing a substantial demand, especially in the mature markets, after the prices dropped a few months ago.

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With the gradual return of residential property buyers, prices in NCR and Mumbai areas have moved up 10-15%.

How long these prices will sustain is hard to determine, but this indicates the confidence of investors.

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2. India..in Better Position

India can be considered as “balanced” in terms of investment and consumption with savings rate of 35% and consumption of 65% of its GDP.

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The fastest growing China leans towards investment, whereas most of the western countries are weighted more towards consumption.

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If we compare India’s Sensitive Index with its other Asian peers, Sensex is valued at 17.6 times estimated earnings where as China’s Shanghai Composite Index trades at 22 times earnings and the MSCI Asia Pacific Index is valued at 24 times.

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So, India remains very attractive and it is an opportune time for Indian companies to grab market share.

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3. Developments in the rest of the economy 🙂

If we see the positive economic numbers across the globe, it seems that world economy is moving towards recovery.

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Australian economy surprised with a jump in growth in the second quarter.

US have witnessed a growth in the current quarter GDP, US manufacturing and housing sectors appears to be gathering pace, quarter’s results came better than expected.

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European economies like France and Germany continued their gradual emergence from the worst crisis in decades and company results showed an upturn.

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4. Concerns Over Weak Monsoon!

Everyone is expecting that poor rains would push up food prices in the short-term, due to the reduced yield of kharif crop and it would add to inflationary pressures.

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But at the same time, we should also know that Indian agriculture is not limited to agro commodities only, but it is well diversified into horticulture, livestock and fisheries and their share in total output of the agricultural sector is increasing.

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Total agricultural output accounts for only 18.5 % of the gross domestic product and the kharif crops like cereals, pulses and oilseeds account for only 20% of it.

Moreover, government spending in rural areas will mitigate the effect of diminished monsoon rains.

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So, Looking at the above factors, India growth story remains strong in the long run.

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So, one can go for the companies, which will benefit from “Economic growth” like power plants, roads, service providers like banking and engineering sector.

Thanks 🙂

Positive Undertones in the Economy – Part 1 :)

positive undertones of economy

We had a positive Q1FY10 result, which boosted the sentiments of investors regarding the economic recovery.

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But are we actually out of it?

Though the earnings were encouraging but if we analyze it, the results had a “bottom-line growth”… may be because of the lower costs of raw material, huge cost cutting, profit from other sources like stake sale or stock market trading etc.

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With lower interest rates, government spending in rural areas and lower base year, I am very much optimistic for Q2FY10 that these results would be “revenue driven”.

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Top line growth is not only good for the company and stock market but also for the economy as a whole.

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Apart from the Q2FY10 numbers, there are positive undertones in the markets and investors should use these undertones for picking up fundamentally good stocks.

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Those are :

1. Measures for fiscal deficit

The GoI is taking several measures to reduce the fiscal deficit.

Disinvestment is high on the priority list.

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As private spending is increasing, Govt. is reducing need for stimulus.

A large part of deficit is contributed by the oil subsidy.

For this, the ministry of petroleum is lowering the subsidy burden in Kerosene and LPG.

Recently, improved tax compliance with new tax code and enforcement through the recently initiated Unique Identification Project are other steps to control the deficit.

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2. Accelerating production

India’s industrial production posted the fastest pace in the last 16 months in June, which shows that India has endured the worst of the global recession.

The reason can be low interest rates, which has given confidence to the consumers to borrow to buy vehicles or other factory-made goods.

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3. Capital flows to India

Another positive trigger can be the capital flows to India, which is expected to increase because of better medium-term growth and faster recovery prospects.

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The Q1FY10 early indicators suggest that NRI deposits, FII portfolio inflows and inward FDI flows have generally been strong, as compared to the net capital outflows witnessed in the last two quarters of 2008-09.

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4. Exports seen at $167 bn in FY10

For Indian Export Organisations, India’s exports are expected to touch around $167 billion, almost the same level of last year in FY10.

The commerce ministry looks ambitious and optimistic and has come up with foreign trade policy for the next 5 years, whereby; it aims to have an export of $ 200 billion by FY11.

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This will ultimately improve the declining trend of exports and will give thrust to employment-oriented sector like Textiles and Gem Jewellery.

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5. The New Tax Code

The new tax code has simplified the tax laws and will result in better compliance and a broader tax base.

The resulting incremental tax revenues will first reduce the fiscal deficit. This is a net positive.

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People, there are many other factors and Positive undertones in the economy which indicates towards the betterment of the economy and stock market.

We would come up with the rest of factors in Part 2 of the topic in next blog. 🙂

Stay Tuned 😉

India’s industrial production posted the fastest pace in the last 16 months in June, which shows that India has endured the worst of

the global recession. The reason can be low interest rates, which has given confidence to the consumers to borrow to buy vehicles

or other factory-made goods.