30 Mar 2015
The Budget session of the Indian parliament drew to a close with a surprisingly productive record: fourteen new bills passed into law, including a Mining and Coal Mines Act and the Insurance Act. The Land Acquisition Bill has been allowed to lapse and has been passed to the states for the next phase of action. The Mining Act brought two key reforms: the launch of auction-based license allocation and commercial coal mining. The benefits of these reforms are expected to be an increase in exploration and production, including $50bn of stalled projects; $300bn of transfers from the private sector to government over 30 years for auction premia and a predictable regulatory environment. Already, 33 coal mines have been allocated to the private sector and 38 to central and state PSUs for a consideration of $32bn over mine-life, compared to a cash drain of a similar size under the old system.
29 Mar 2015
Global markets swooned this week on two stories: the oil price jumped when Saudi Arabia led an air attack on rebels in Yemen and China’s PMI index for March slipped to 49.7 indicating contraction. India’s Nifty was in the red for the third consecutive week, shedding 230 points to end the week 2.7% down at 8341 after trading in a range of 4.3%. Daily trading volumes averaged $3.3bn, a little below the twelve-month trailing average, even as both FIIs and domestic institutions were net buyers, of $233mil and $89mil respectively. Market breadth was negative, with declines outpacing advances by four to one and some concentrations in IT, public sector banks and consumer heavyweights. Volatility stayed subdued, the India Vix staying in the low teens, closing at 15 for a gain of a point. After a low rollover in the futures market, the three months’ contract ended the week at a premium of 2.3% to cash.
26 Mar 2015
Weather experts from the US, Japan and Europe are predicting that El Nino effects this year will be weak overall, so there will be little impact on the southwest monsoon. The market may tread water now until the fourth quarter results start around mid-April.
25 Mar 2015
Infosys, whose stock traded strongly last week, is promoting its Infosys Automation Platform (IAP) which allows customers to create intelligent robots. It currently has eighteen users but is projecting an eventual total of 900. TCS has set up a 1,000-seat centre in Singapore to support the banking and financial services sector. HDFC Bank has launched a mobile app which allows money transfers to be made to any person in a user’s phonebook. ICICI Bank has sold its profitable Russian subsidiary to Sovcombank in a transaction which closed on March 17th; the bank has now exited the Russian market. Lupin has signed an agreement to raise its stake in the South African company Pharma Dynamics from 60 to 100%; no details of monetary consideration were released.
24 Mar 2015
India enjoyed the benefit of $4.5bn in FDI in January, double the value of the previous month and the highest level since $4.7bn was received in September 2012. Year-to-date, FDI has reached a cumulative value of $25.5bn. The largest channel of flows was Mauritius, with $7.7bn, followed by Singapore, with $5.3bn. Meanwhile, the Cabinet has cleared a new Bill on black money concealed offshore which will be presented to the Lok Sabha in the current parliamentary session. The OECD has adjusted its forecast for GDP growth in India in the current calendar year to 7.7%, followed by 8% in 2016. It is predicting that India might become the fastest growing major economy.
23 Mar 2015
Infosys contributed ten points to the index on the upside while the FMCG majors, ITC and HUL cost the index nearly half the total points’ loss for the week. The benign inflation scenario was confirmed by WPI numbers for February: -2.1% compared to -0.4% in January and 5.0% a year ago. This is the lowest number in the present series, that dates from FY05. The big contributor was fuel, with a decline of 14.7%; primary articles rose by 1.4%, manufactures by 0.3% and food by 7.7%. Improving control over food prices, soft commodity prices and low capacity utilisation look like sustaining the favourable environment for some time. The monthly trade deficit has fallen to $6.9bn, the lowest level since September 2013. Exports and Imports both fell by 15% but the impact of the crude oil price on imports was much the more pronounced. The trade deficit for the year is now projected to be $134bn, which should reduce the current account deficit to just 1.2% of GDP, at $25bn. The RBI says that the country is well placed to deal with any negative fallout from monetary tightening in the US.
22 Mar 2015
Markets mostly spent this week first anticipating the latest FOMC meeting and then parsing the Fed’s statement for nuances about monetary tightening, looking for excuses for another 'taper tantrum'. In the event, the Fed’s stance was interpreted as positive for equities and markets responded accordingly. In India, however, the Nifty went the other way, giving up 77 points to close in the red for the second week running, down 0.9%. The average daily trading volume was right on the trailing twelve-month average at $3.5bn, as FIIs were marginal net buyers, of $76mil in cash equities, while domestic institutions sold a net $146mil. Declines outpaced advances by three to two in the absence of significant concentrations. Volatility continued to subside, the India VIX trading almost wholly to the downside, closing at 14 for a drop of a point on the week. Index futures closed at a premium of 1.9% to cash.
20 Mar 2015
Keen to mobilize its stalled political agenda and burnish its reform credentials, the government is encouraging negotiations across parliamentary lines as well as at state level in order to avoid having to exercise the 'nuclear option' of a joint session of parliament. The most important reform of all, the introduction of GST on April 1st, 2016 is being promoted through an empowered committee of national and state representatives where progress is good. This single reform is expected to deliver and eventual boost of 1-1.5% to GDP growth. This is particularly significant in the context of FM Jaitley’s comment that India needs GDP to grow at 9-10% for a sustained period in order to achieve development and inclusion targets. With more monetary easing in prospect the current market relapse might be seen as a rare buying opportunity.
Posted by #richardneve at 3/20/2015
19 Mar 2015
In the corporate sector, Pidilite announced the appointment of a new Managing Director: Bharat Puri is the former President of Mondelez/Cadbury for South Asia. ONGC Videsh is in negotiations to acquire stakes in two more Siberian oilfields. Meanwhile, the company, along with OIL India and Indian Oil Company, has been identified by the US government as being involved in business with Iran and potentially subject to sanctions. Infosys has opened a business process outsourcing (BPO) centre in Puerto Rico to deliver complex 'order-to-cash' business processes aimed at the aviation sector from a 250-man, 12,500 square foot office. The company has won a five-year contract from TNT of The Netherlands to simplify and transform its IT capability. Bajaj Auto has encountered delays in launching its RE60 quadricycle in Sri Lanka due to safety concerns; the company has launched its Patina electric ignition 100cc motorcycle, the most fuel efficient in class at 96.9kmp/l.
Posted by #richardneve at 3/19/2015
18 Mar 2015
Following the Budget, the government now moves forward into the trickier part of the current parliamentary session: forcing through long-delayed reforms. One piece of good news on this front has been the eventual approval by both houses of the Insurance sector FDI reform: the increase in the FDI limit to 49% has at last been passed after Congress opposition in the Upper House was overcome. Other essential reforms such as land acquisition can now move up the agenda. As the government tries to improve business conditions and attract growing FDI inflows, it was announced that new FDI in the Services sector grew by 44% in the first nine months of FY15, to $2.3bn. The latest telecom spectrum auction was kicked off at the beginning of the month with some aggressive bidding: based on the latest round of bidding, the auction looks like raising $15.5bn for the treasury.
Posted by #richardneve at 3/18/2015
17 Mar 2015
The Finance Ministry and the RBI have agreed a revised decision making framework for the RBI, based on inflation targeting, as the governor recommended. The initial target has been set at 4% by the end of March 2017, with a 2% range of tolerance either side. The governor signalled his support for the Budget and the new operating framework by delivering another surprise 25 basis point cut in the repo rate. Subsequent data points have been supportive with the CPI for February coming in at 5.4%. This was a bit higher than expected but the major components seem range-bound for the moment, providing a continuing benign backdrop. The old RBI target of 6% by end FY16 seems safe, allowing scope for more interest rate cuts in FY16. The HSBC Services PMI for February showed firm underlying growth, advancing from 52.4 to 53.9, though the Manufacturing PMI slipped a little from 52.9 to 51.2. January’s IIP brought a positive surprise, at 2.6% compared to 1.7% in December; this was well above expectations.
Posted by #richardneve at 3/17/2015
16 Mar 2015
Equity markets have been dominated by the Greek/German strife and the re-emergence of US monetary tightening scares while China and Japan have been advancing on stimulus action. India meanwhile has been digesting a budget which has gone down well overall. Following the Holi festival, however, the Nifty has gone into reverse, recoiling from record highs to lose 254 points so far in March, down 2.9% at 8648 after trading in a range of 5.6%. Average daily trading volumes dropped back a little to $3.6bn as FIIs were net buyers of $715mil and domestic institutions were net sellers of $123mil. Advancing counters were swamped by decliners four to one with heavy concentration in financial stocks as they gave back initial heavy gains following the repo rate cut. Volatility swooned with the India VIX retreating from the high teens, trading as low as 13 before closing at 15. Nifty futures closed at a premium of 1.7% to cash.
Posted by #richardneve at 3/16/2015
12 Mar 2015
The Index of Industrial Production (IIP) for the month of January was reported at 2.6% versus 1.7% in December. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of January 2015 stand at 135.3, 200.5 and 175.8 respectively, with the corresponding growth rates of (-) 2.8%, 3.3% and 2.7% as compared to January 2014.
The Indian economy is a 'bright spot' on the global economic landscape. Last Wednesday IMF raised its forecast for the current fiscal to 7.2 per cent growth, yet the IMF asked the Indian government to focus on revitalizing the investment cycle and accelerate structural reforms. In its annual assessment IMF also wrote India has emerged as one of the fastest-growing big emerging market economies and the growth rate would further accelerate structural reforms in the country. IMF expects India to grow by 7.5 per cent next year, a further acceleration. Emerging markets' output growth rose to a 5-month high in February, and manufacturing as well as services sector in India expanded at a faster pace than China during the month, as stated in a HSBC report last month.