Markets rise on expectations that economy will grow, and economy grows when industries invest more capital in their businesses (called Capital Formation) to increase capacity, to launch new products, or to diversify in other areas.
Gross Fixed Capital Formation in India increased to Rs.5356 Billion in the first quarter of 2014 from Rs 5037 Billion in the fourth quarter of 2013.This is an all-time high.
It is a strong indicator that industrialists are hopeful of acceleration of economic growth in India.Source: Ministry of Statistics and Program Implementation (MOSPI).
Several midcap, small-cap, and infrastructure stocks have not appreciated, offering excellent opportunity to investors to enter at current levels. Some slow moving cyclical stocks may surprise the markets.
The markets still offer opportunities for medium to long term investors in Equity Mutual Funds.
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The first Budget of Namo Government is expected to be growth oriented with definite direction towards higher Tax compliance, lowering of Subsidies and reduction in Taxes. Markets may read into the long term implications which should lead to a continued bullish trend.
Domestic indications for the Budget:
- Services activity rises to 17-month high on strong order flow in the first month of NDA,
- June factory activity grows at fastest pace in 4 months,
- June car sales rise hinting at recovery,
- After a dry June, monsoon is expected to advance,
- Venture capital investments in India rose 40% in first half of 2014,
- M&A at 7 year high, volume rose to $6.9 billion in April from $1.8 billion a year ago,
- QIPs rise 10 fold in April-June,
- Fitch raised India’s growth targets to 5.5% in 2014-15 and 6.5% the next year,
- Overseas investors have poured in a staggering Rs 19,772 crores (USD 3.35 billion) into the Indian debt markets in May, the highest monthly inflow in about two and a half years, and
- Indian households’ savings in physical assets (including gold) are at 10 years’ highest levels whereas savings in financial assets are at 10 years’ lowest level.
These positions are expected to change and we expect big inflows from physical assets to more productive financial assets after budget, driving the markets further higher.
- Worst of Iraq crisis is over and has been discounted by markets as reflected in falling crude prices,
- Growth at US factories held near the fastest pace of the year, and
- China and Japan gained pace in manufacturing activity.
Major Path-breaking Decisions Expected from Budget (That will boost markets post budget):
- First major revamp in decades of India’s archaic labor laws to take place soon leading to revival of flagging economy, boost to manufacturing, and creation of millions of jobs. Labor reforms can create a virtuous cycle in Indian manufacturing. Rajasthan has already started working on it.
- GST (Goods and services tax) is expected to be introduced which would result in a major rationalization and simplification of the consumption tax structure at both the center and state levels by replacing all central and state level indirect taxes such as value added tax (VAT), excise duty, service tax, entertainment tax among others bringing relief to the common man.
GST is the most ambitious indirect tax reform in India ever attempted and aims to create one “borderless domestic market”.
If GST is implemented without many exemptions and with a single rate, the following benefits will accrue: * Macro: Successful pan-India implementation will add 1-1.7 % to the GDP and boost the tax/GDP ratio. * Micro: Incidence of tax will come down in case of manufactured goods. However, in case of services the incidence and coverage of tax may rise resulting in higher prices. * Industry: Volume growth will accrue as incidence of taxation is minimized. Also, supply chain efficiencies will accrue as there will be no need for multiple depots and warehouses.
Gold may not be able to enter an uptrend as long as it remains below 28800. It has breached the first support of speed resistance lines and within 4-8 months it may reach 25000 (its Jun 2013 low) which is an important 38.2% Fibonacci level as well as the second support by speed resistance lines. If support of 25000 is broken, gold may fall to 18000 by 2015 to 2016. We expect it to fall below 25k and it may reach 18000.
Improving global economies and falling risks is taking away the investors from investing in safe assets. Avoid investing in gold or gold ETF now. Rather invest in stocks or equity funds, check our earlier recommendations for selecting the right sectors and stocks.
For other reports please visit:- http://www.rrfinance.com/Reserch/ResearchHome.aspx
Volatility continued in late trade as the key benchmark indices hovered in negative zone. The barometer index, the S&P BSE Sensex, close down 78.86 points or 0.32%, up 110 points from the day’s low and off 140.37 points from the day’s high. The market breadth, indicating the overall health of the market was strong. The BSE Small-Cap index was up close to 2%. The BSE Mid-Cap index was up close to 1.5%.
Who Moved and Why
1) NIIT spurts after strong Q4 earnings.
2) Readymade Steel gains after winning orders.
3) M&M declines on plan to stop production for 3 days.
4) Sun Pharma slips after Karkhadi unit gets warning letter from USFDA.
5) MRPL surges after turnaround Q4 results.
6) Essar Oil spurts after robust Q4 results.
7) VIP Industries jumps after strong Q4 results.
8) Gati gains on foreign fund buying.
Read detail analysis report here: – http://rrfinance.com/Reserch/Pdf/07-July/DMR/21_may_equity_closing_update.pdf
Read more articles here:- http://www.moneycontrol.com/news/results-boardroom/see-sales-jumpfy15-op-leverage-to-boost-margins-niit_1090323.html
Optimism that elections now under way in India will usher in a government capable of improving the economy would support local energy companies’ efforts to secure foreign-currency funding for acquisitions, according to Mumbai-based brokerage Ambit Investment Advisors Pvt. Ltd.
Bond risk for Indian companies declined this year. The average cost of credit-default swaps protecting the debt of eight Indian issuers has slid to 297 basis points from 337 at the end of 2013, according to data provider CMA. The rupee rose 1.9% in 2014 to 60.6250 per dollar, while 10-year sovereign bond yields climbed six basis points to 8.89%.
“The economy has bottomed out and from here GDP growth is likely to go up, increasing investor confidence,” Vaibhav Sanghavi, a Mumbai-based director at Ambit Investment Advisors, said in an interview on 25 April. Add to that the prospects of a stable new government, and the state-run oil companies can dream of becoming truly global.
India’s state oil companies are leading overseas borrowings by the nation’s businesses as they build on last year’s record $5.5 billion of energy acquisitions. Government-run refiners and explorers increased the amount raised from dollar bonds and loans by 80% to $4.18 billion so far in 2014 from a year earlier, 34% of the total by local firms, data compiled by Bloomberg show. Indian Oil Corp. Ltd (IOC), which plans to buy stakes in Petroliam Nasional Bhd’s (Petronas’s) projects in Canada, was the top borrower with $1.4 billion. Oil India Ltd, weighing bids for assets in Malaysia and Nigeria, ranked second with $1 billion, Indian oil companies are increasing global acquisitions to secure energy supplies and meet demand in the world’s second-most populous nation that’s expected to surge almost 40% by 2020 from 2010 levels. Overseas funding has gained appeal after Indian firms’ dollar debt costs relative to US yields slid 54 basis points this year to a 2007 low of 266 on 2 April, JPMorgan Chase and Co. data show. The spread is now 277 basis points, versus 352 for Chinese companies.
India’s success in reining the current-account deficit and inflation and the prospect of a pickup in the nation’s economy are helping revive confidence, supporting local companies’ bids to rein in overseas funding costs. The shortfall in the country’s broadest measure of trade probably narrowed 60% in the year ended 31 March from a record, according to finance minister P. Chidambaram. Consumer inflation has cooled to 8.3% from a peak of 11.2% in November. Economic expansion quickened to 4.9% last fiscal year from a decade-low 4.5% in the preceding period, according to government estimates.
For detail analysis report please visit:- http://www.rrfinance.com/reserch/pdf/other-pdf/Debt_Fortnightly.pdf
A bout of volatility was witnessed in late trade as key benchmark indices provisionally settled marginally lower after turning positive after cutting entire intraday losses. Investors remained wary ahead of the announcement of Federal Reserve’s monetary policy review later in the global day today, 30 April 2014. The market breadth, indicating the overall health of the market, was weak. The BSE Mid-Cap index fell nearly 1% and the BSE Small-Cap index slipped over 1%. Fed’s bond-buying program has been a source of liquidity for most Asian and emerging markets. The BSE Sensex closed at 22417.80 and 48.39 point down.
Equity Closing Update
Who Moved and Why
1) Marico turns volatile after Q4 earnings.
2) Shriram Transport Finance slips after weak Q4 numbers.
3) OBC slips on muted growth in Q4 net profit.
4) BASF India drops after weak Q4 results.
5) Strong Q4 result powers Swaraj Engines.
6) Advanta gains after strong Q1 earnings.
7) Cipla gains in volatile trade after clarification.
8) Kesoram Industries tumbles as net loss widens in Q4.
9) TVS Motor spurts 11.55% in two days on turnaround Q4 results.