Control on Expenditure for Positive Economic Growth!

P. Chidambaram was well aware of Union Budget 2012 being not up to expectations. With elections round the corner and with the country exhibiting decelerating economic growth, the finance minister is expected this time to present a positive Union Budget 2013 with special emphasis on growth.

Yes, Union Budget 2013 can fuel the economy; P. Chidambaram should give the big push now. Special emphasis should be laid on trimming expenditure. With GDP growth going lower than 5.3 percent and with the urgent need to implement measures to control fiscal deficit, restraint on expenditure is a must. Because if expenditure, which is at 14 percent at present, is not trimmed, taxation will see a rise! And changing income tax rates will not only dampen foreign investor confidence but also affect the industry and common man alike. Though GST can boost revenues, its implementation is unfeasible for roughly another two years.

What the finance minister can do is taxing conspicuous consumption, reduce spending on subsidies, and follow more measures.

The above post 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/2013/01/30/budget-2013-should-trim-expenditure/

Budget 2013 - Creating the Lost Interest!

The same routine measures, policy paralysis, non-innovative and non-inventive inclusions – for over a decade these are what the budget delved on, thus losing its wow factor. But Union Budget 2013 is generating some interest!

Besides dealing with fiscal and current account, P. Chidambaram has to make the citizens happy (thanks to the approaching elections!). For bringing down deficit to 3 percent of GDP in five years, as projected, Union Budget 2013 should focus on the following:

· Cut down on plan expenditure sensibly
· Reduce subsidy using Aadhaar
· Introduce welfare schemes for the poor
· Bring more service sunder tax net
· Rationalize the indirect tax structure
· Border-less movement of products within India (via GST implementation)
· Implement tax measures to raise the tax-to-GDP ratio
· Encourage household savings
· Effectively implement Rajiv Gandhi Equity Savings Scheme
· Accelerate momentum of exports
· Ease credit norms
· Remove infrastructure bottlenecks
· Encourage FII and FDI fund flows
· Limit borrowing and wasteful expenditure
· Control of inflation, and more.
 

The above post is based on expert opinion by Rajagopal is the Head Advisory and a member of the investment committee at Kotak Mahindra (UK) Ltd. You can read the complete article here -
http://blogs.reuters.com/india-expertzone/2013/02/14/union-budget-2013-awe-factor-kotak-rajagopal/.

Breaking News of Indian stock market!

Yes, it is a war of the bourses now, with the country’s new stock exchange MCX-SX commencing trading of shares today. The volume was thin, though the challenge was building liquidity and winning market share against the two bourses, NSE and BSE.

While NSE saw its value of shares traded at 34.3 billion rupees, MCX-SX was at 1.5 million rupees. It is to wait and watch. Only time will tell!

What is breaking news in the Indian market, especially related to quarterly results, is Tata Power Company Ltd shares registering a third quarter loss, surprising investors and analysts at large. Yes, analysts expected a net profit of 2.7 billion rupees.

Cause of the loss was a blend of foreign exchange losses and higher finance and depreciation costs. Compared to profit generated at Rs. 2.98 billion rupees in December 2011, a net loss of 3.29 billion rupees in December 2012 is posted.

What the IT sector wants from Union Budget 2013?

What NASSCOM has portrayed about IT as a booming industry despite global economic volatility is well attested by the positive performance of the many IT companies. IT contributes 7.5 percent of India’s GDP besides sustaining the livelihoods of 11.7 million plus Indians.

So, what does the IT industry want from the Union Budget 2013? Here are key expectations:
·        Resolving of existing hassles over tax (direct and indirect) issues
·        Implementation of fair amendments in GAAR
·        Discontinuation or reduction of Minimum Alternate Tax (MAT) levied on SEZs
·        Clarity on transfer pricing, removing confusion regarding taxation of multiple companies of the same group.

The spate of reforms introduced by the government since September has moderately contributed towards economic boost. The IT industry likewise expects Union Budget 2013 to focus on reformative measures the big way. It is then that this sector will earn global acclaim – the evolution from BPO (business process outsourcing) to BPM (business process management).

The above post is based on expert opinion by Keshav R. Murugesh,CEO and member Board of Directors of WNS Global Services. You can read the complete article here -
http://blogs.reuters.com/india-expertzone/2013/02/07/budget-2013-wishlist-it-industry-expects-policy-changes/

NTPC stake sale and HDFC’s reduction of floating interest rates!

Good news is an indication of further good news! With the government selling stake in NTPC, inflow of foreign funds saw a rise. The sale was executed, towards raising about $2 billion, in an effort to raise funds. The raised amount would be used to meet its fiscal deficit target. This event saw the rupee strengthening to its highest closing level in three-and-a-half months.

With the NTPC stake sale, the rupee would have gained further had not domestic shares weakened and oil importers had not demanded for the greenback.

Another event worth mentioning is India's biggest housing finance company, Housing Development Finance Corporation (HDFC), announcing its move to reduce its prime lending rate by 10 basis points.

The bank’s floating interest rates are high and this move would reduce the same:
· For loans of up to 3 million rupees - 10.15 percent reduction
· For loans of more than 3 million rupees - 10.40 percent reduction.

RBI cuts Repo Rate and CRR by 25 basis points!

What investors and analysts waited with bated breath for a rate cut by the RBI has eventually ended in the positive. The central bank today, after nine months, lowered its policy repo rate by 25 basis points (bps) to 7.75 percent.

Further easing is possible in the future depending on whether the bulbous fiscal deficit is brought under control by the government's upcoming budget or not. The Indian economy has posted its slowest annual growth in a decade. The rate cut is done to boost a decaying Indian economy towards growth as well as controlling a possible flaring inflation. RBI has been cautious in its approach of not affecting external stability with its policy moves.

What was unexpected from the RBI is its reduction of the cash reserve ratio (CRR) by 25 bps to 4 percent. This move will help infuse into the banking system an extra Rs. 180 billion.

RBI Policy Reviews have always been key to move Indian Stock Market like today.

Earning Results Season: HDFC, ITC, and Wipro earnings!

The Indian market is trending much beyond expectations; thanks to the diesel price hike and satisfactory quarterly earnings of a bunch of companies. HDFC and ITC have registered good growth while Wipro earnings did not have much of a positive impact as expected.

It is after four quarters of sluggish growth that ITC registered profit, rising at Rs. 20.5 billion for the quarter ended December 31. Net sales rose to Rs. 76.3 billion at 23 percent. Launch of low-cost products and improvement of cigarette volumes triggered the growth.

HDFC in its Q3 earnings posted registered a 30 percent rise in profits; the triggering parameters are stable asset quality, better fee income, and a higher loan growth.

Wipro earnings, compared to performance of other software giants, did not meet market expectations. Though Wipro posted an 18 percent gain this December quarter, yet its shares slumped high – the highest fall in nine months.

2-year delay of GAAR implementation and inflation dynamics!

The possible RBI rate cut rise scheduled later this January has gathered enough grounds with the country’s headline inflation slowing to its lowest level in three years. India has posted its most sluggish economic growth in a decade and rate cut is one of the boosters to growth. 

Part of the cause of the decaying economy was a fall in investment flows into India last year following India's moves to toughen tax collection by implementing The General Anti-Avoidance Rules (GAAR) from April 2014. The minimal amount applicable to fall under GAAR would be 30 million rupees; investors and companies, routing the said or more amount through tax havens such as Mauritius, are aimed at.

The Finance Minister P. Chidambaram announcing delay of the implementation of GAAR by another two years (i.e., to be effective from April 1, 2016), has had a positive impact in the Indian stock market. The economy may witness moderate boost following capital inflows owing to the move.

Expectations on Tata Motors NSE and TCS stocks

It is good news, to say, the best news for investors of Tata Motors NSE stocks. Yes, the stocks saw a 4.2 percent rise on Wednesday after rising over 5 percent during trade. Thanks to rating upgradation of Tata Motors NSE stocks from ‘underperform’ to ‘outperform’, by Credit Suisse and CLSA, raising hope amongst investors. The company’s sales of the Range Rover series are projected to bump up, especially in countries like China.

As a whole, the Tata Group is estimated to exhibit good growth in the future. Hence, it is no surprise to find investors being equally interested in Tata Consultancy Services NSE stocks. Compared to the same group company’s auto stocks, the IT stocks are far behind when it comes to performance. But they are trending. Like the performance of all other companies, Tata Consultancy Services NSE stocks are also influenced by volatility. Cautious investment is the mantra here!

Sensex and Nifty Performance in the New Year

It is the beginning of a New Year and investors have great hopes from the year 2013. A positive market upbeat prevailed with both the indices of the Indian bourses, i.e. the Sensex and nifty trending for the third day at a stretch. Thanks to hopes of a rate cut by the RBI later this month plus better than expected quarterly earnings, and US ‘fiscal cliff’ negotiations (problems getting postponed, not solved) benefiting global markets.

As projected by market analysts, the year 2013 would no wonder be full of surprises. The year 2012 saw a 25.7 percent gain in the benchmark index. It is to wait and watch! And you never know what the markets have in store. Amid volatility if the sensex and Nifty are trending today, a downtrend is certain soon. Unless government measures are implemented and interest rates paraphernalia be resolved by the central bank, economical growth would be a far fetched affair.

Performance of blue chip stocks in 2012!

So, which is the blue chip gainer for the year 2012 in the Indian stock market? It is perceptibly Tata Motors. Deemed the best stocks of 2012, Tata Motors stocks exceeded market expectations in price rise. Thanks to hopes of its luxury unit Jaguar Land Rover of exhibiting a turnaround in its performance!

Amongst the worst of performers in blue chip Stocks 2012, is Infosys Ltd. Continual apprehensions about global demand for software services have led to the fall of these IT stocks. Among the various sectors, lenders performed the best followed by real estate and FMCG. The banking index of the BSE  Sensex went up by 57 percent. ICICI gained 60 plus percent while HDFC Bank rose more than 50 percent. Equal gainers in this category include L&T and Maruti at 60 percent plus and Sun Pharma at 50 percent plus.

The RBI, after a 50 basis points rate cut in April, may further cut the repo rate more firmly next year.

Repo rate hold by the RBI!

RBI’s holding of the repo rate is no big surprise as it was already reported that a rate cut was ‘highly improbable’ though India's main inflation gauge WPI rose 7.24 percent from a year earlier against the expectations of 7.6 percent. Of course, a rate cut of 8 percent is possible in January and leading international economists forecast a series of rate cuts in 2013 and this will definitely show gains in the BSE Banking Index. Thanks to possible easing of inflation in the next few months!

The RBI kept interest rates on hold though the government put pressure on the central bank to reduce borrowing costs. The bank assured of a rate cut in January and shifted focus towards enhancing a flagging Indian economy. BSE Banking Index at NSE went up with both the sensex and nifty trending at a moderate rate.

One of the reasons for the RBI holding the repo rate was the low GDP growth (below 6 percent) posted for the past three quarters.