US rate hike decision to determine Indian markets’ movements

Dec 13, 2015 0

By Rohit Vaid
MUMBAI– An imminent US rate hike, coupled with upcoming macro data and developments on passing the goods and services tax (GST) bill passage during the winter session of parliament, will dictate the trajectory of not only Indian equities but also the rupee during the week ahead, market observers said on Sunday.

Bombay Stock Exchange

Bombay Stock Exchange

“The focal point will be the outcome of the US Federal Reserve (US Fed) meeting. The probability of a rate rise up to 25 basis points is now more than 70 percent. The US Fed driven volatility and year-end inactivity will keep the markets on a leash,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“Global cues remain important, including the movement of the yuan.”

The chances of a US interest rate hike has been heightened with positive macro economic data and after US Fed Chairperson Janet Yellen said that she is looking forward to an interest rate hike, which will be seen as a testament to the country’s economic recovery.

The US Fed will conduct its FOMC (Federal Open Market Committee) meeting on Wednesday. A hike in interest rates which have been at near-zero levels since the last decade will send shock waves across the world’s capital markets.

A rate hike could potentially lead to a massive pull-back of foreign funds from emerging economies like India. It is expected to dent business margins as access to capital from the US will become expensive.

In addition to the US, Indian markets can come in for a bombardment as frantic dollar buying will devalue the rupee.

On a weekly basis, the rupee weakened by 17 paise at 66.89 (66.8850) (December 11) to a US dollar from its previous close of 66.70 (December 4).

“The rupee value is expected to be under pressure till the Fed conducts its FOMC,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

“It is expected that the Fed will likely increase the interest rates during its meeting slated for next week. This will not only dent the Indian rupee but all the other EM (emerging market) currencies as well.”

Moreover, the FOMC decision will point to the future course of action of foreign investors, who have been on a selling spree in the Indian markets since March.

“It would be interesting to see the Fed’s roadmap for the next 12 months as it will certainly influence the decisions of foreign investors. This is extremely relevant for Indian markets,” Pankaj Sharma, head of equities for Equirus Securities, told IANS.

The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) were net sellers during the week ended December 11. They sold Rs.3,495.29 crore or $522.98 million in equity and debt markets during December 7-11.

The data with stock exchanges showed that the FPIs sold stocks worth Rs.1,437.46 crore in the week ended December 11.

Besides, foreign investors have taken out Rs.23,352 crore during August-September. In November, foreign investors off-loaded stocks worth around Rs.9,000 crore.

The silver lining on the cloudy horizon is the hope that consensus finally builds between the government and the opposition on the GST bill.

“One big hope locally is that the Congress may allow the GST bill to go through after the party’s strategy of linking the National Herald case with disruption in parliament has not really been successful,” Sharma cited.

Besides the GST, volatility is expected next week on account of other major events like the release of domestic inflation data points of the consumer price index (CPI) and wholesale price index (WPI).

“Investors will watch out for consumer inflation data on Monday which is expected to inch up marginally to 5.4 percent. The US will also release its core CPI data on Tuesday which could impact the markets,” Vaibhav Agarwal, vice president and research head at Angel Broking, told IANS.

Furthermore, the Indian markets are expected to open Monday’s trade on a positive note after domestic monthly factory output data showed robust growth, Agarwal said.

The Index of Industrial Production (IIP) data showed that India’s factory output rose sharply by 9.8 percent in October, due mainly to a robust 10.6-percent growth in the manufacturing sector.

The growth had decelerated to 3.84 percent in October, and was at (-)2.7 percent last October.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), declined by 594 points or 2.31 percent to 25,044.43 points from its previous weekly close at 25,638.11 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) receded during the week under review. It ended lower by 171.45 points or 2.20 percent to 7,610.45 points.

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Indian Business Briefs

Dec 11, 2015 0

Indian Electronics Sector Attracts $18 Billion in Investment Proposals
The electronics manufacturing sector has attracted investment proposals worth $18 billion since the Government launched its “Make in India” program last year, said Ajay Kumar, Additional Secretary in the Ministry of Communications, who added that the figure is expected to jump in 2016.

Mobility concept

Mobility concept

India, U.S. Foreign Office Consultation Held
Foreign Secretary S. Jaishankar and U.S. Deputy Secretary of State Antony Blinken deliberated on a range of key issues of mutual interest as part of the India-U.S. Foreign Office Consultation. Jaishankar and Blinken also reviewed implementation of decisions taken during President Obama’s visit to India in January in addition to reviewing the security scenario in the region.

Report: India Sees 21% Jump in Smart Phone Shipments
One out of every three smart phones shipped to India in the third quarter of 2015 are 4G-enabled, said a report by the International Data Corporation (IDC). According to IDC, 28.3 million smart phones were shipped to India in the third quarter of 2015 – up 21.4 percent from the same period last year. In the third quarter, the 4G-enabled devices have witnessed almost a threefold increase in shipments over the previous quarter in 2015.

Bill Gates Calls on PM Modi
Bill Gates called on the Prime Minister Modi to discuss clean energy initiatives, financial inclusion, sanitation, health and nutrition. Gates was appreciative of the work done in India in the field of renewable energy and emphasized the need to lower the cost of clean energy to reduce the level of hydrocarbons.

Pfizer, IIT Delhi Launch ‘Innovation & IP Program’
Pfizer with IIT Delhi have announced the launch of “The Pfizer IIT-Delhi Innovation and IP Program,” an incubation accelerator initiative open to Indian nationals, individuals and startup companies. The program will provide two years of residential incubation at IIT Delhi, funding, mentoring support from IIT Delhi’s faculty and other services.

Govt. OKs Skill Training to 5 Million
The Government will provide skill training to more than 5 million people through its Skill India program with $1 billion in World Bank assistance. The Skill Training for Employability Leveraging Public Private Partnership project was cleared by the Department of Economic Affairs.

Govt. Has OK’d National Highway Projects Worth $16 Billion in Past 18 Months
Since the new Government came to power in May 2014, a total of 599 highways projects have been sanctioned, covering more than 8,000 miles of national highways and spending more than $16 billion, said Minister of Road Transport and Highways, and Shipping Nitin Gadkari. He added that regular meetings of the infrastructure committee are held for clearing bottlenecks and other projects.

Finance Minister Gets Report on Tax Reform
The Finance Minister received a report on tax reform that the submitting committee characterized as a historic opportunity for India to implement a game-changing tax reform. Domestically, it will help improve governance, strengthen tax institutions, facilitate “Make in India by Making One India,” and impart buoyancy to the tax base.

PM Modi’s Pro-Poor Programs Bear Fruit, LPG Subsidies Set Guinness World Record
After bringing millions of poor people into the banking network through his financial inclusion plan, Prime Minister Modi’s liquefied petroleum gas (LPG) cash transfer plan is providing subsidies for millions more households. It is such a success that the Guinness Book of World Records recognized the LPG subsidies as the largest cash transfer program in the world.

Email is Now Primary Communication For Tax Matters
The Central Board of Direct Taxes said that email is the new mode of communication between tax officials and taxpayers, as part of the Government’s e-initiative to reduce human interface and complaints of harassment and corruption in conducting tax related jobs.

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Indian economy to become 100 percent digitised by 2020

Dec 10, 2015 0

NEW DELHI– The Indian economy, which is currently 50 percent digitized, is expected to reach 100 percent by 2020, a top official said on Thursday,

The digital transformation is being fueled by rapid innovation in the technology space, said National Cyber Security Coordinator Gulshan Rai at the 3rd edition of the National CIO Summit organized by Confederation of Indian Industry.

On the flip side, this transformation makes any country vulnerable to cyber threats, he said. India ranks amongst the five top most countries for malware penetration and security breaches.

Mobility, social networking, customer centricity and optimization of supply chain are four key forces driving the digital transformation, said KPMG director Arnab Mitra.

Organisations need to build capabilities to walk through this transformation, he said, adding successful digital transformation depend on degree of simplicity from adoption perspective, the risks identified and a proper mitigation plan needs to be in place.

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Improved governance to make India world’s highest growth nation: IBM

Dec 10, 2015 0

NEW DELHI–India, with improved governance and strong social and physical infrastructure, can become the world’s highest growth nation in the 21st century, says a new IBM study.

“India is witnessing a transformation that promises to minimise constraints and support economic advancement. The build out of social and digital infrastructure, powered by local innovations, will help India become an integral part of the global ecosystem,” said IBM India managing director Vanitha Narayanan, while releasing the findings here on Thursday.

In the study titled “Indian Century: Defining India’s Place in a Rapidly Changing Global Economy”, the IBM Institute for Business Value predicted how India could become the world’s highest growth nation in the 21st century.

The study is based on interviews with 1,088 Indian executives across large enterprises (73 percent), start-ups (11 percent), academia (5 percent) and government (11 percent) to get their perspective on opportunities and roadblocks for the Indian economy.

Nearly 51 percent of the Indian executives highlighted improved governance as a key driver for sustainable growth, while social (46 percent) and physical (45 percent) infrastructure were ranked important growth drivers on second and third spots respectively.

Nearly 43 percent executives placed access to capital on fourth spot and said this key factor has been a hindrance in sustainable growth.

“About 40 percent executives backed availability of skilled resources as the fifth key driver to bring sustainable growth in India,” the findings showed.

According to the study, India benefits from entrepreneurialism and diversity and is currently ranking as the fourth-largest source of technology start-ups globally.

“A young population equipped with the right skills and growing middle class will reinforce economic activity through increased consumption and investment,” it highlighted, noting that by 2020, India will constitute 30 percent of the world’s workforce and by 2030, the nation is projected to have the largest middle-class population in the world.

“The study rightly points out that India has immense potential to leapfrog traditional growth paradigms. If we are able to capitalise on the opportunities present in front of us, the next decade can definitely mark the beginning of the Indian Century,” Narayanan emphasised.

Based on unique advantages that India has and the recognition that economic transformation is essential for India’s long-term well-being, the country is already on the path of economic advancement, said the study.

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Cabinet clears policy to boost shipbuilding in India

Dec 9, 2015 0

NEW DELHI– A Rs.4,000 crore ten-year policy aimed at boosting shipbuilding and ship repair industry in India under the ‘Make in India’ initiative was cleared on Wednesday by the Union Cabinet.

The policy includes grant of a ‘Right of First Refusal’ for Indian shipyards for government purchases; tax incentives and grant of infrastructure status for shipbuilding and ship repair industry.

Shipbuilding and ship repair industry in India is important because it has the same impact as infrastructure sector due to higher multiplier effect on investment and turnover, Shipping Ministry statement said.

“A policy for the grant of financial assistance to shipyards, after delivery of ship, to counter cost disadvantages at 20 percent of the contract price or the fair price, whichever is lower; such assistance is to be reduced at three percent every three years and will be given for all types of ships,” it added.

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Nearly 70 percent of Indian farms are very small, census shows

Dec 9, 2015 0

NEW DELHI– As much as 67 percent of India’s farmland is held by the marginal farmers with holdings below one hectare, against less than 1 percent in large holdings of 10 hectares and above, the latest Agriculture Census shows.

“The average size of the holding has been estimated as 1.15 hectare. The average size of these holdings has shown a steady declining trend over various Agriculture Censuses since 1970-71,” an official statement said on Wednesday.

Nonetheless, the percentage of area that was actually operated under larger holdings was more than 10 times the actual land held at 10.59 percent, while for marginal farmers it was three times lower at 22.50 percent.

This clearly shows the stress that marginal farmers undergo in India.

Another cause for concern is that in 2010-11, the proportion of net irrigated area to net area sown was 45.70 percent, which shows that for half the country’s farmland irrigation is yet to reach farmers, who rely entirely on rains for their crops.

Among the sources of irrigation, tube-wells was main source followed by canals.

While the cropped area in India is estimated at 193.76 million hectares, nine states accounted for 78 percent of it — Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Maharashtra, Rajasthan, Uttar Pradesh, Punjab, and West Bengal.

Out of the total 64.57 million hectare net irrigated area, 48.16 percent is accounted for by small and marginal holdings, 43.77 percent by semi-medium and Medium holdings and 8.07 percent by large holdings, the census shows.

Agriculture Census in India is conducted at five-yearly intervals for collection of information about structural aspects of farm holdings in the country. The basic unit for data is the area under operational holding.

The Agriculture Census data is collected in three phases – first on primary subjects like the numbers and area of operational holdings, followed by a detailed one based on samples from 20 percent of villages on tenancy, land use, irrigation and finally on pattern of input use.

The concept of agricultural operational holdings does not include those holdings which are not operating any agricultural land and are engaged exclusively in subjects such as livestock, poultry and fishing.

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