Market downtrends, Infosys tax issues!

Investors in India are well aware of the positive and negative surprises of the volatile market. After four days of consecutive rise, indices of both the Indian bourses fell from near two and half year high. While the sensex fell 62.14 points (0.31 percent) to end at 20,223.98, the Nifty fell 30.40 points (0.49 percent) to end at 6,156.90.

Among the major losers were banks led by ICICI Bank; profit booking of rate sensitive stocks led to the fall. Drug makers were equally hit with the government’s announcement of a new drug pricing policy, directed towards increasing the number of drugs (subject to price caps) considered essential.

On the other hand, Infosys Ltd is creating news related to tax issues. The country’s second largest software services provider is all geared up to challenge the Indian income tax authorities of their raising of a tax demand of 5.77 billion rupees earlier this month.

The big market downtrend and inflation slowdown!

Delivering surprises are but humdrum affairs for both the indices of the Indian bourses. A positive sentiment pervaded across the Indian market when the sensex crossed the 20,000 mark. And then, it declined 2.14 percent to end at 19,691.67 today. The Nifty exhibited a similar downtrend, falling 2.08 percent to end at 5,980.45.

The biggest loser was ITC Ltd. that slumped by 5.2 percent on profit booking. Amid other major losers is TCS, falling by 2.6 percent on continued apprehension about a US immigration bill. It was indeed a panicky situation for investors and stock brokers alike.

Meanwhile, another breaking market news is CPI data or India's annual consumer price inflation slowing to 9.39 percent for the second straight month in April. While food prices mounted an annual 10.61 percent in April against 10.61 percent in March, consumer prices went up 10.39 percent in March. Inflation recorded in April eased to 5.50 percent, its lowest level since November 2009.

Gold hits 19 month low!

Indian Gold futures hovered around it's 19 month low today, boosted by a Stronger Rupee and losses in the Global markets.

The morning session witnessed price of MCX gold down around Rs.270 at Rs.25497/10grams, while the Rupee was trading around 53.82/USD. With a stronger rupee, a strong slide in the price of yellow metal is seen.

India is world's biggest buyer of Gold, which the government considers as a dead investment piling up a record-high current account deficit, hence barring economic growth. Government has taken a lot of measures to minimize gold import in India, raising the import duty on gold by 50 percent to 6 percent this January being the latest move. However, such measures would be restricted in the future to avoid gold smuggling.

With festivals like Akshaya tritya and wedding season around, today's gold movement is certainly an invitation to Indians to invest in the so called dead investment. Gold demand is surely going to rise due to this major dip in Gold Price in India today.

Significant plunge for Sensex and Infosys today!

Indices of the Indian bourses slumping and gaining are humdrum affairs. But when the plunge happens significantly, concerns are raised. The Sensex slumped to its lowest close in seven months following Infosys q4 results beating market estimates. Revenue guidance provided by the country’s second largest IT service provider failed to meet expectations with lower-than-expected revenue. It recorded a 3.4 percent rise in quarterly profit, achieving Rs 40,352 crore against a projected Rs 40,746 crore in revenues besides not achieving the 10 percent projected target.

While Sensex provisionally plunged 300 points to 1.7 percent at 18,242.56, Infosys Ltd NSE shares fell 22.1 percent. It was only during the last two sessions that the index gained 316 points. Though consumer price inflation data and industrial production exhibited better-than-expected figures yet market sentiments were hurt. For sensex, the fall was the biggest since September 13; for Infosys, it was the biggest plunge since April 4, 2003.

SBI NSE Stocks – Lucrative Bets

For some time banks were in the news on threats to their ratings because of bad loans and low quality of assets. SBI, India’s largest bank, is no exception. A gradual recovery is being witnessed at present, and hence, no major threat to their ratings! According to market experts the issue of non-performing loans may continue for few more months affecting the SBI NSE stocks.

SBI NSE is trending at present. According to the last 52 week price statistics, price of the stock was perched lowest at Rs. 1802.30 and highest at Rs. 2551.70.

According to the Chairman of the bank, q4 (January-March) would register better figures compared to q3 because of lower non-performing assets in addition to better recoveries in retail NPAs. A positive gaining is also expected from the bank’s agriculture portfolio.

Going by year-on-year performance, SBI NSE stocks are lucrative bets for the long term. For short term, cautiousness should be the mantra! And that's the same case with BSE Banking Index.

On the BSE Banking Index, ICICI Bank is up 3.4 pct, Yes Bank up 1.3 pct, HDFC Bank rises 0.7 pct, SBI up 0.5 pct

Reliance Communications & Reliance Industries to share Fibre Optic Network!

Reliance Communications Ltd - India’s second largest telecom operator is currently in the news for a deal between Reliance communications ltd and Reliance Industries ltd in which the latter would be using the fibre optic network of Reliance Communications. The deal is expected to be benefitting both the companies. The news triggered the surging of Reliance Communications Ltd. on NSE and BSE. Presently the stock is trending petite and saw a gain of 7.3%. According to the last 52-week price change dynamics, it was perched lowest at Rs.46.55 and highest at Rs. 91.85.

Moreover, a bullish feature has been created for Reliance Communication with Morgan Stanley investment bank upgrading the company’s status from ‘equal weight’ to ‘overweight’. It is the Rs 12 billion fibre optic network sharing deal that raised the stature of the company. Furthermore, the company’s fiscal earning is estimated to rise by 125 percent in 2014. Additional deals, according to Morgan Stanley, could cut the company’s net debt by 77 billion rupees. Morgan Stanley upgraded Reliance Industries to "overweight" from "underweight" earlier in March '13 where it raised it's price to 961 rupees from 798 rupees.

Also, the market sentiment for Reliance has also improved on the fact that the friction between the Ambani brothers seems loosing with the sharing of fibre optic network giving advantage to both Reliance Communications as well as Reliance Industries.

The Rising Inflation Phenomenon!

It is no big surprise for inflation to go high. India February inflation data well justifies the fact. The Feb WPI (main inflation indicator) went up to an annual 6.84 percent, which is higher by 0.30 percent of what analysts estimated. It was 6.62 percent in January. Non-food inflation slowed to 3.8 percent during the same period. February Inflation data report surged the otherwise falling India Stock market.

To add to this economic disadvantage is incessant weakness in economic activities. The situation has generated hopes amongst analysts about a possible rate cut by the RBI by at least 25 basis points in the meeting scheduled on Tuesday, March 19.

It was in January that the RBI had cut its key lending rate by 25 basis points after a gap of 9 months. A rate cut would only help handling the crisis. With the govt all geared up to reduce the country’s fiscal deficit, more RBI rate cuts are probable in the forthcoming months.

Nifty and Sensex showed improvement after the Feb WPI report came and the main contributors were banking stocks!

Mixed criticisms for Budget 2013

Had not welfare spending given some importance in Budget 2013 (though not the big way), extreme poverty could not be tackled. But then overall, Union Budget 2013 is practical! An unchanged sovereign rating is another outcome of the budget.

No wonder structural imbalances cause macro-economic challenges and the budget hardly addresses them. It is rightly conjectured Mauritius tax treaty could have been avoided, especially when statistics prove that 40 percent of foreign in-flows come through this path.

Measures like additional tax break for first home owners, implementation of the Goods and Services Tax, higher govt. borrowing, are indeed appreciable not to mention debt fund investments (for a year). The common man’s struggle against inflation and negative real return on investments and income seem to continue. ‘Taxing on the rich’ is no big solution! The Direct Taxes Code can only deliver some change.

The big challenge for Chidambaram now remains of meeting the 4.8 percent of GDP fiscal deficit target next fiscal. You can read the complete article here
http://blogs.reuters.com/india-expertzone/2013/03/05/budget-2013-a-rather-ambitious-budget/

Reaction of rating agencies for Budget 2013

Yes, Union Budget 2013 is indeed realistic. Reaction of rating agencies substantiates the fact. Moody's Investor Service said that the initiatives introduced can help meeting India's fiscal deficit target at 4.8 percent of GDP, which will pave the way for positive credit ratings. But this is an overall comment; there are issues that are challenging. Meeting the growth targets in few areas will remain challenging. The revenue and spending issue cannot be ignored as well.

So, India is all geared up for an economic growth revival. According to reaction of rating agencies such as Moody's it was sharp spending cuts that has helped the country meet its fiscal deficit target of 5.2 percent of GDP, ending March fiscal 2013. The same commitment needs to be retained ahead.

According to Moody's, the selling of stakes in public companies was less, which led to raising of less money though at the same time budget targets being not met during the past several years.

You can read the complete article here –
http://in.reuters.com/article/2013/03/04/india-ratings-moodys-budget-idINDEE92303I20130304

Chidambaram’s boldness well exhibited in Union Budget 2013

Yes, P. Chidambaram did live up to the country’s expectations, as exhibited by his Budget 2013. Problems facing India at the time when he held the finance minister’s portfolio were slow economic growth, downgrade credit rating, growth, high fiscal deficit, high interest rates, stubborn inflation, high budget, and insufficient investment. Union Budget 2013 explicitly focuses on these setbacks; Chidamabaram is resisting fiscal suicide!

Union Budget 2013 Show Ups
·        Limit to govt spending
·        No big expansion in subsidies
·        Limit govt net borrowings to 4.84 trillion rupees
·        Ending of the arresting of household financial savings
·        Levy of 10 percent surcharge for rich taxpayers
·        Focus on in-flow of foreign funds
·        Hopes of 19 percent increase in tax collections next year.

Fiscal consolidation measures of the Union Budget 2013 should certainly improve the nation's overall financial savings. But investors of the stock market are disappointed on the cuts in govt. spending. Thanks to Chidambaram’s tough and bold decision. It is now to wait and watch the implementation and outcomes of Budget 2013!

The above post is based on the expert opinion of Andy Mukherjee. You can read the complete article here:
http://in.reuters.com/article/2013/02/28/india-union-budget2013-breakingviews-idINDEE91R09L20130228?type=economicNews

Budget 2013 to boost investor confidence

Yes, it is a poll-year Union budget and P. Chidambaram is all geared up to prop up investor confidence by implementing measures rather than on pre-election spending, recommending his cabinet colleagues to maintain austerity. Stressing on the fact that wasteful expenditure may further downgrade rating of Indian economy to ‘junk’ besides setting off an economic meltdown, the finance minister advocated tackling the bloated fiscal deficit as priority, pointing out that India is on the right track.

Chidambaram’s recent road show has been an attempt to attract in-flow of foreign funds. Only tax revenues cannot be relied upon to meet the growth objectives. Other areas which are expected to be given priorities in the Union Budget are avoiding unnerving investors, slashing public spending, ensuring efficient tax collection, and more.

Few cabinet colleagues are against Chidambaram’s cuts on welfare spending. But if spending is not cut, the fiscal deficit would be further hit; glaring example is Delhi missing its fiscal deficit target due to over-spending on social welfare and subsidies.

The above post on India Budget 2013, You can read the complete article here -

http://in.reuters.com/article/2013/02/26/india-budget-chidambaram-populist-electi-idINDEE91O0KJ20130226

India Budget 2013 – reviewing incentives and exemptions

To reduce budget deficit, it is saving every rupee that P. Chidambaram has committed. This very commitment is expected to be met in the India Budget 2013. One of the measures towards meeting this objective is certainly withdrawing of tax incentives which have outlived their purpose. Incentives are the loss of revenue caused by the difference between prescribed rates in general and effective rates of taxation. Of course, incentives and exemptions are measures implemented to defuse inflation, promote exports, and benefiting backward areas.

Total loss from taxation is estimated at 936 billion rupees including 148 billion rupees from the corporate sector, 284 billion rupees from individual tax payers from savings incentives, 4.35 trillion rupees (major loss) from excise and customs; firms are no exception. Effectiveness of all incentives should be reviewed. Change of non-effective incentives is suggested while those no longer necessary should be withdrawn.

The above post on India Budget 2013 is based on expert opinion by D H Pai Panandiker, President, RPG Foundation. You can read the complete article here -
http://blogs.reuters.com/india-expertzone/2013/02/13/union-budget-2013-need-to-review-tax-incentives/