12 Nov 2012

New horizon in politics

The Congress party held a large rally in Delhi last weekend at which the PM, accompanied by Rahul Gandhi and the Finance minister, for the first time claimed a reformist mantle for the party. The parliament will convene for its next session at the end of the month. Congress is going to have to stand firm on the policy actions it took after the close of the last session. In December, we will see state elections in Gujarat which will probably see the return of first minister Modi and propel him into the national leadership of the BJP. This holds the prospect of galvanizing the opposition at a national level and offering voters a real choice in the elections which are due in 2014. This will be far preferable to a fractious collection of state level parties dominating the campaign with local interests. It is worth recalling that the BJP, during its period in office which ended in 2004, oversaw the last period of substantive reform in India.
In the short-term, we depend on the Finance Minster sustaining sentiment with investor-friendly policies until the RBI decides it can ignite the next monetary easing cycle, probably in the next quarter.

Stability all around

President Obama was re-elected comfortably but the Congress was effectively unchanged, so markets looked at the fiscal cliff and took a nosedive. The week ended with pretty much everywhere in the red. India only marginally so: the Nifty dropped twelve points to close 0.2% down at 5686 after trading in a range of 1.7%. Average daily trading volume stayed at the soft end at $2.3bn. On the downside, five stocks worth 23% of Nifty market cap cost the index 30 points while in the other direction, four stocks representing 15% of market cap added 24 points.
Following the relaxation of debt allocation norms, FIIs invested a net $1.5bn in Indian debt securities in October, the highest figure for eight months. The Finance Minister has convened two sub-committees to help resolve two key issues in fiscal consolidation. The first will be charged with determining compensation to states for loss of revenue from CST and the second will finalize the design of the eventual replacement: GST. The National Investment Board chaired by the Prime Minister, which is to provide single-window clearance for large infrastructure projects will be launched within three weeks. The Finance Minister says it is time to address the accumulation of wealth by introducing an inheritance tax. The government has approved the divestment of 10% of the equity in Hindustan Aerospace Ltd., India’s premier aerospace business. It has also approved a proposal to levy a $4.4bn one-time charge on mobile operators holding spectrum above a certain limit.

6 Nov 2012

A quite week, focus on politics

This was a quiet week globally, with investors watching in shock as the US east coast was devastated by hurricane Sandy, which shut the New York stock exchange for two days besides costing up to a hundred lives and causing tens of billions of dollars in damage. Decent US jobless and consumer confidence numbers were little consolation. Most markets were around a point or so in the black. Except China that which added 2,5% on signs of stimulus and a smooth transfer of power next week. India was in the ‘peloton’ with the Nifty adding 34 points to close 0,6% up at 5798 after trading in a range of 2.3%. Volume remained soft at € 2.2bn a day.
As expected, the policy sector dominated the news this week. The Prime Minister completed a cabinet re-shuffle, bringing in seven new cabinet ministers and fifteen new ministers of state with a much younger overall age profile. A number of key ministerial posts changed hands. The new names did not include Rahul Gandhi but several of the new younger appointments seems to be associated with his power base. It is now widely assumed that he will succeed Manmohan Singh as Prime Minister if Congress gets to form the next government in 2014.