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Saturday, July 26, 2014
Sunday, July 20, 2014
Weekly Market Commentary - July 14, 2014 - July 18, 2014
Markets started off the week low as absence of any big bang reform from the budget continues to irk some investors. Now that the budget euphoria is over and reality has kicked in, many investors are realizing the strong undercurrents in the economy. The macro environment is improving, the trade esp. exports numbers are picking up, inflation showed a decline and RBI in tandem with the govt. came to the rescue of ailing infrastructure sector with its exemption on reserve requirements.
The best part is that the govt. knows its task and is very devoted to achieve it. Next month it is going to take a call on the sale of $3.0bn worth of PSU stake.
I’ll say that the budget was just a starting point not the ending. Picture abhi baaki hai mere dost!
Sensex ended this week up by 2.5% while Nifty was up by 2.7% and Midcap up by 4.8%
Monday - Sensex down by 0.1%, Nifty down by 0.1%, Midcap up by 0.2%
Benchmark indices continued to trade on weak momentum, falling for the fifth consecutive session. FIIs have turned sellers and have disposed $120.6mn worth of stock on Friday, after been continuously buying $1.6bn worth stocks for previous six sessions into the budget.
There was a major setback for drug industry after India's drug pricing regulator cut and capped the prices of more than 100 drugs used to treat diseases. Sanofi India, with the largest basket of anti-diabetes and heart disease medicine lost more than 10% as its revenue is expected to hit by Rs.139 crores in this fiscal year alone.
Tuesday - Sensex up by 0.9%, Nifty up by 1.0%, Midcap up by 2.3%
Sensex and Nifty took a break from falling and rose about 1% each after June inflation data showed consumer inflation slowing to the lowest since January 2012. CPI eased to 7.31% after Modi govt. curbed farm exports.
Wednesday - Sensex up by 1.3%, Nifty up by 1.3%, Midcap up by 1.5%
Infrastructure and related stocks went up as RBI exempted long term bonds raised for lending to the sector from reserve requirements. Investors are happy as banks, and hence the infra companies would now have access to more funds at lower costs. India also released its trade data, which showed 10.22% y-o-y rise in exports in June as external demand picked up amid weaker currency environment.
Thursday - Sensex flat, Nifty up by 0.2%, Midcap up by 1.2%
Sensex and Nifty continued to trade in green led by infra related stocks which remained buoyed on previous day’s news. Improved rain prospects also led to some sentiment improvement. The focus has now moved to corporate earnings with TCS set to release its numbers later in the day.
Friday - Sensex up by 0.3%, Nifty up by 0.3%, Midcap down by 0.5%
IT stocks rallied on the great set of numbers from TCS, which reported a 45% growth in its bottomline. Lenders continued to gain after the reserve requirement relied from RBI. Shares of NBFCs which take gold as collateral, surged after RBI issued draft guidelines for those seeking a license to set up a payments banks or a small bank.
The best part is that the govt. knows its task and is very devoted to achieve it. Next month it is going to take a call on the sale of $3.0bn worth of PSU stake.
I’ll say that the budget was just a starting point not the ending. Picture abhi baaki hai mere dost!
Sensex ended this week up by 2.5% while Nifty was up by 2.7% and Midcap up by 4.8%
Monday - Sensex down by 0.1%, Nifty down by 0.1%, Midcap up by 0.2%
Benchmark indices continued to trade on weak momentum, falling for the fifth consecutive session. FIIs have turned sellers and have disposed $120.6mn worth of stock on Friday, after been continuously buying $1.6bn worth stocks for previous six sessions into the budget.
There was a major setback for drug industry after India's drug pricing regulator cut and capped the prices of more than 100 drugs used to treat diseases. Sanofi India, with the largest basket of anti-diabetes and heart disease medicine lost more than 10% as its revenue is expected to hit by Rs.139 crores in this fiscal year alone.
Tuesday - Sensex up by 0.9%, Nifty up by 1.0%, Midcap up by 2.3%
Sensex and Nifty took a break from falling and rose about 1% each after June inflation data showed consumer inflation slowing to the lowest since January 2012. CPI eased to 7.31% after Modi govt. curbed farm exports.
Wednesday - Sensex up by 1.3%, Nifty up by 1.3%, Midcap up by 1.5%
Infrastructure and related stocks went up as RBI exempted long term bonds raised for lending to the sector from reserve requirements. Investors are happy as banks, and hence the infra companies would now have access to more funds at lower costs. India also released its trade data, which showed 10.22% y-o-y rise in exports in June as external demand picked up amid weaker currency environment.
Thursday - Sensex flat, Nifty up by 0.2%, Midcap up by 1.2%
Sensex and Nifty continued to trade in green led by infra related stocks which remained buoyed on previous day’s news. Improved rain prospects also led to some sentiment improvement. The focus has now moved to corporate earnings with TCS set to release its numbers later in the day.
Friday - Sensex up by 0.3%, Nifty up by 0.3%, Midcap down by 0.5%
IT stocks rallied on the great set of numbers from TCS, which reported a 45% growth in its bottomline. Lenders continued to gain after the reserve requirement relied from RBI. Shares of NBFCs which take gold as collateral, surged after RBI issued draft guidelines for those seeking a license to set up a payments banks or a small bank.
Saturday, July 19, 2014
Paranormal Activity - How Para 102 is a hidden gem in Jaitley's budget
Majority of people missed a very important piece of announcement on the budget day. Even I did not think about it till I decided to read the full budget transcript this Friday evening – yeah, that’s how I spend my Friday nights.
I found a hidden gem in the orgy of information and announcement in the para 102 – just where the discussion about MSME sector starts. Here is the snapshot:
And now why this para is important. Before I start torturing my keyboard, here is a snapshot from India Market Strategy Report from Credit Suisse published in July 2013 – exactly a year ago.
The report cites and analyses National Statistics Commission data and reckon that Half of India’s GDP and a whopping 90% of its employment is generated in informal sector. The report also mentions that “Unlike in the developed economies where informality is purely a deliberate choice to avoid taxation or regulations, in India it is more structural: a reflection of the lack of development and limited government reach.”
This does not mean that GDP of India is underestimated by 50%. Nah. GDP of any country is anyway an estimated number – but this estimate is particularly doubtful and is bound to get revised, hopefully upwards, if 50% is outside the reach of government surveyors. Government conducts surveys, updates its methodologies and its GDP calculation series every few years. Last time it was done GDP calculation jumped by 0.6% annualized for all years in the series. See the chart below.
This data has implications for taxpayers also. It is a well-known fact that India is one of the most taxed countries in the world. And it is by definition, informal sector is outside the purview of tax authorities. So the formal part of the economy gets taxed heavily.
What Arun Jaitley has tried to do in his maiden budget is sort of recognize the contribution made by the informal sector – Own account enterprises and decided to set up a committee to study ways to reach, cover, finance and then maybe tax them.
When countries around the globe are busy finding ways to generate income from erstwhile illegal activities – for example, sale of marijuana in some US states (read here, here and here), India already has all the money on the table but not in the record books.
If India is able to make some significant progress in this area, not only India will have higher reported GDP, better employment records but also better insurance and banking penetrations, more people under social security net and in the meanwhile tax net will increase and will bring more equity to the taxpayers around the country.
Wonder, where is the debate over this?
I found a hidden gem in the orgy of information and announcement in the para 102 – just where the discussion about MSME sector starts. Here is the snapshot:
And now why this para is important. Before I start torturing my keyboard, here is a snapshot from India Market Strategy Report from Credit Suisse published in July 2013 – exactly a year ago.
The report cites and analyses National Statistics Commission data and reckon that Half of India’s GDP and a whopping 90% of its employment is generated in informal sector. The report also mentions that “Unlike in the developed economies where informality is purely a deliberate choice to avoid taxation or regulations, in India it is more structural: a reflection of the lack of development and limited government reach.”
This does not mean that GDP of India is underestimated by 50%. Nah. GDP of any country is anyway an estimated number – but this estimate is particularly doubtful and is bound to get revised, hopefully upwards, if 50% is outside the reach of government surveyors. Government conducts surveys, updates its methodologies and its GDP calculation series every few years. Last time it was done GDP calculation jumped by 0.6% annualized for all years in the series. See the chart below.
This data has implications for taxpayers also. It is a well-known fact that India is one of the most taxed countries in the world. And it is by definition, informal sector is outside the purview of tax authorities. So the formal part of the economy gets taxed heavily.
What Arun Jaitley has tried to do in his maiden budget is sort of recognize the contribution made by the informal sector – Own account enterprises and decided to set up a committee to study ways to reach, cover, finance and then maybe tax them.
When countries around the globe are busy finding ways to generate income from erstwhile illegal activities – for example, sale of marijuana in some US states (read here, here and here), India already has all the money on the table but not in the record books.
If India is able to make some significant progress in this area, not only India will have higher reported GDP, better employment records but also better insurance and banking penetrations, more people under social security net and in the meanwhile tax net will increase and will bring more equity to the taxpayers around the country.
Wonder, where is the debate over this?
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