Thursday, 18 January 2018

Sensex Crosses 35000 as govt Moves to Contain Fiscal Deficit

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Indian stocks crossed new milestones on Wednesday on hopes of a corporate earnings recovery and the government’s effort to limit a fiscal slippage in the current financial year. However, high crude oil prices and interest rate hikes by foreign central banks remain key risks to the rally.

The BSE’s benchmark Sensex closed at 35,081.82 points, up 310.77 points, or 0.89%, crossing the 35,000-point mark for the first time. The National Stock Exchange’s Nifty ended at 10,788.55 points, up 88.10 points, or 0.82%.



Early on Wednesday, the government pared its additional borrowing programme in the year to 31 March to Rs20,000 crore from the Rs50,000 crore it announced last month, giving investors hope that the fiscal slippage will be contained. The fiscal deficit reached 112% of the full-year budget in November. Investors have also been fretful that the government may stray off the fiscal consolidation path in the 1 February budget, its last before the 2019 general elections.

The abatement of some of these worries, along with optimism of an earnings recovery, continued to pull in money. Analysts are expecting the first signs of a rebound in corporate earnings growth in the December quarter owing to the favourable effect of a low base a year ago and higher consumer spending in the festive season.

Those expectations have overriden concerns over high valuations. Currently, the Sensex is trading at 20.39 times expected earnings for the next 12 months.

“High valuations will be justified once economic revival and earnings growth start catching up,” said Dhiraj Sachdev, who helps manage Rs11,252 crore at HSBC Asset Management.

Opening bell: Asian Markets open Higher; Bharti Airtel, Ultratech Earnings in Focus

US stocks end higher; Asian shares surge in early trade

Stocks traded higher on Wednesday, following the release of stronger-than-expected quarterly results from some of the biggest US companies.

Stock indices in Asia on Thursday bounced back from declines in the last session, tracking substantial overnight gains on Wall Street. Investors also awaited a raft of China data, as well as interest rate decisions from South Korea’s and Indonesia’s central banks due later in the day.

Newgen Software IPO gets 70% subscription on Day 2

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The initial public offering (IPO) of IT firm Newgen Software Technologies was subscribed 70% on the second day of the share sale on Wednesday.

Amber Enterprises IPO fully subscribed on Day 1

The Rs600-crore initial share public offering (IPO) of Amber Enterprises was fully subscribed on the first day of its bidding.

Puravankara to invest Rs600 crore on low-cost housing project

Realty firm Puravankara Ltd said it will invest Rs600 crore to construct an affordable housing project in Bengaluru.

Amalgamation scheme: Tata Power shareholders’ meet on 19 February

Tata Power said it will convene shareholders’ meeting on 19 February to seek approval for the proposed amalgamation of four group entities with the company.

HUL Q3 profit rises 28% to Rs1,326 crore

Hindustan Unilever Ltd posted a 28% rise in its third-quarter profit, underpinned by higher sales from its personal care business.

Earnings corner

Adani Power, Bharti Airtel, Hindustan Zinc, Mastek, Yes Bank and UltraTech Cement are among the companies that will be announcing their December quarter earnings on Thursday.

Budget 2018: Long-term Capital gains on Equities—is a Bird in hand Better?

What happens if, in the forthcoming Union Budget 2018, a tax is reinstated on long-term capital gains (LTCG) on listed shares? After an initial shock, the stock markets should stabilize. Domestic investors will realize that equities yield better post-tax returns than other asset classes and India will continue to be a part of the emerging market portfolio of foreign investors.

Once the chaos dies down, the focus will shift to whether revenue increases for the government, which is the underlying objective of any tax proposal.

Here, the question is if LTCG will be imposed in addition to the securities transaction tax (STT) or in place of it. If it is an additional levy, STT collections will continue to add to revenues, while LTCG will be the icing on the top. The worst that can happen is tax collections from equities don’t increase much.

If LTCG replaces STT, then that decision makes sense only if the government is confident of earning more from LTCG than what it makes from STT, on a sustained basis. What could make this difficult? Capital gains are like having a rich mineral underground. Till it is extracted, it is of no use to the tax authorities.

Investors must sell shares they have held for 12 months or more to earn gains and then pay LTCG tax. Now, under STT, they are paying tax when they buy or sell shares. With a tax on long-term sale, investors have one more variable to consider apart from their investment outlook influencing their selling decision. If they decide to delay selling, that delays tax revenue to the exchequer.

Also, when they sell shares, it does not necessarily mean the entire gains get taxed. Indexation will be available. Depending on when they bought the shares, the acquisition cost will be padded up to account for inflation. That can lower the taxable gains. And then there is capital loss as well; they may have shares or other eligible assets that have been sold at a loss. The tax laws allow investors to offset certain losses they have suffered from their gains, to arrive at net gain and therefore the tax payable. If they have losses that have not been set off against gains, they can carry them forward to offset in future years.

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The government can’t calculate potential gains and losses in advance, as that depends on the date of purchase, how listed shares move throughout the fiscal year, all of which eventually will determine net gains (or losses) in the taxpayer’s hands. When P. Chidambaram first introduced STT in the 2003-04 budget, he said that his calculation showed STT can result in a win-win situation. That implied that the revenue lost from exempting the tax would be made up by STT.

The thing about STT is that it is collected in both good and bad years for investors. The tax collection happens automatically at source. The tax department would be spending very little money on auditing this revenue, relative to the amount earned. But LTCG relies on the taxpayer to calculate and pay tax, and declare it in the tax returns. Scrutiny requires more effort from the tax department.

Then there is tax planning, a legitimate way used to lower tax liability. In capital gains, this can involve timing the sale of an asset or selling a pool of assets with gains and losses, to lower the tax outgo. There is the illegal side too, which was seen in cases that had come to light before LTCG on listed shares was abolished. Taxpayers with capital gains would enter into sham transactions showing a capital loss, allowing them to lower their net gains.

Thursday, 4 January 2018

Opening bell: Asian Markets Open Higher; HDFC, Novartis India in News

US stocks end higher; Asian markets follow suit

US stocks rose to all-time highs on Wednesday as a gain in chip stocks propelled the tech sector higher.

Major Asian markets traded higher on Thursday, following the stronger lead seen on Wall Street. Investors in the region will also keep an eye on Caixin’s China services and composite PMI later in the morning after the Caixin manufacturing PMI beat estimates and the country’s official PMI met expectations.

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RBI to issue new Rs10 notes in chocolate brown colour

The Reserve Bank of India (RBI) will shortly issue new Rs10 notes under the Mahatma Gandhi series. The central bank has already printed around 1 billion pieces of the new Rs10 note.

HDFC to keep Rs1,575 crore from HDFC Standard Life IPO as special provision

Housing Development and Finance Corp. Ltd (HDFC) will make a special provision of Rs1,575 crore, using a part of the proceeds from the initial public offering (IPO) of HDFC Standard Life Insurance.

Novartis’s diclofinac injection flagged by health ministry panel

A health ministry panel has raised concerns about the safety of painkiller injection diclofenac marketed by drug maker Novartis India and made by Themis Medicare Ltd, after Troikaa Pharmaceuticals alleged that the painkiller injection contains Transcutol, which damages kidneys.

Reliance Industries likely to see big cash flow boost, says CLSA report

Reliance Industries Ltd is likely to see a big cash-flow boost as projects of over $40 billion start to deliver in full swing this fiscal while capex falls, international brokerage house CLSA said on Wednesday.

Sebi allows commodity bourses to raise transaction charges

Capital markets regulator Securities and Exchange Board of India (Sebi) has allowed the commodity derivative exchanges to keep the highest transaction charge in turnover slab of any contract at a maximum of double the lowest charge in the same segment.

New launches boost Skoda volume 30% in 2017

Volkswagen Group company Skoda said its sales spiked 30% to 17,438 units in 2017 over the previous year, driven by the latest launch, the Kodiaq SUV, besides rollout of three refreshed versions of its popular sedans.

Tata Motors MD tells staff to bolster accountability, performance

Homegrown auto major Tata Motors Ltd managing director and chief executive officer Guenter Butschek has called employees to bolster accountability and drive performance within the organisation as the firm seeks to build on the positives of its turnaround drive that is expected to be completed by March.

Thursday, 28 December 2017

Opening bell: Asian Markets open flat; Kolte-Patil, Cairn India in News

US stocks close mildly higher; Asian markets open flat

US stocks eked out a positive close Wednesday, with gains in real estate and utilities offsetting declines in energy and telecommunications stocks.

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Asian markets were little changed early on Thursday after an oil rally fizzled and copper prices soared overnight.

Govt cuts small savings interest rate by 0.2 percentage points

The government has cut the interest rate on small savings schemes, including Public Provident Fund (PPF), National Savings Certificate (NSC) and Kisan Vikas Patra, by 0.2 percentage points for the January-March quarter, a move that will prompt banks to lower deposit rates.


Cairn India acquires 51% stake in AvanStrate from Carlyle Group

Cairn India Holdings Ltd, a unit of metals and mining firm Vedanta Resources Plc, has acquired a controlling equity stake in Japanese company AvanStrate Inc. for $158 million, Vedanta said.

KKR commits Rs193 crore in Kolte-Patil’s township

KKR and Co. has committed Rs193 crore for a township project being developed by a joint venture between Pune-based Kolte-Patil Developers Ltd and ICICI Venture Funds Management Co. Ltd.

RCom shares surge over 150% in last six trading sessions

Shares of Reliance Communications Ltd (RCom) surged over 150% in the last six trading sessions after the company announced a Rs39,000-crore debt resolution plan.

DLF looks to raise Rs3,500 crore via debentures, warrants to promoters

Realty major DLF’s shareholders approved an issue of debentures and warrants to promoters in lieu of Rs11,250 crore equity infusion into the company to reduce company’s net debt significantly. The company is looking to raise more than Rs3,500 crore through this process.

Online retail industry grows 23% to $17.8 billion: report

After nearly 18 months, India’s e-commerce market finally picked up sharply in the second half of the year, driven by strong growth at Flipkart Ltd and Amazon India and new entrant Paytm E-commerce, according to RedSeer Management Consulting, a market research and consulting firm.

Thursday, 21 December 2017

RBI Monetary Policy Committee is united in worry but divided on the cure

The rise in retail inflation and an uncertain recovery of economic growth are worries shared by all members of the monetary policy committee (MPC).

The overwhelming message from the minutes of the December meeting of the MPC was that the recent inflation rise has disturbed every member. Even the lone dove in the six-member MPC, Ravindra Dholakia, pared down his pitch for a rate cut to 25 basis points this time from around 40bps in the previous meeting.

Members were worried over the swift rise in retail inflation in October and the fact that it was more broad-based than the previous months added to their concern. So much so that Chetan Ghate observed that the conquest of Indian inflation is certainly not a done deal. Retail inflation had jumped to a seven-month high of 3.58% in October from 3.28% in September. The incessant rise in global crude oil prices and the resultant increase in domestic prices, the hike in minimum support prices for wheat, the expected upside from pay revision for government employees all added to a disturbing outlook for inflation, which each member noted.

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Barring Dholakia, all members felt that inflation has the potential to stay above the target level and an expected pick-up in growth would only ensure this. The Reserve Bank of India (RBI) had increased its inflation forecast for the second time in December and now expects retail inflation to be 4.3-4.7% for the second half of the current fiscal year.

The members also shared the worry over growth as they observed that gross value added (GVA) for September quarter was slightly below forecast. Known hawk and RBI official Michael Patra stated that he is far from being sanguine on growth. Dholakia is of course the most worried and unlike other members believes the output gap is unlikely to close.

While the output gap continued to be the main feud among members particularly Dholakia and Patra, members also differed on what should RBI pay attention to—growth or inflation. Dholakia downplayed RBI’s forecasts on inflation and argued that the sagging investment warrants a rate cut. Deputy governor Viral Acharya prescribed better transmission of past policy rate cuts onto lending rates to revive investment instead of more rate cuts. Patra believed that reforms are the only way to reinvigorate investment and not monetary stimulus.

It is clear that MPC is united in its worry but divided in the cure. Perhaps another round of economic data would unite them about the cure too.

Tuesday, 12 December 2017

Markets Live: Sensex trades lower, Nifty below 10,300, Dr Reddy’s shares rise 5%

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The BSE Sensex and the NSE Nifty were trading lower on Tuesday ahead of key inflation data. The government will announce Consumer Price Index (CPI) and Index of Industrial Production (IIP) data later in the day.

Market update

BSE Sensex trades lower by 81.14 points, or 0.24%, at 33,374.65, while the Nifty 50 falls 31.70 points, or 0.31%, to 10,290.55.

Dr Reddy’s shares rise 5% after USFDA issues EIR

Dr Reddy’s Laboratories Ltd rose 5% to Rs2,287.85 after the company said the US Food and Drug Administration (FDA) issued an Establishment Inspection Report (EIR), stating closure of audit for the company’s formulations manufacturing plant 3 at Bachupally in Hyderabad.

10-year bond yield hits near 17-month high

The 10-year bond yield was at 7.226%, a level last seen on 27 July 2016, compared to its previous close of 7.175%. Bond yields and prices move in opposite directions. It gained for the fourth session to hit nearly 17-month high.

Rupee opens lower against US dollar

The rupee was trading at 64.44 a dollar, down 0.11% from its Monday’s close of 64.37. The rupee opened at 64.46 a dollar on Tuesday.

Sensex, Nifty open in the red

BSE Sensex trades lower by 76.56 points, or 0.23%, at 33,379.23, while the Nifty 50 falls 29.10 points, or 0.28%, to 10,293.

Opening bell: Asian Markets open Subdued; Tata Communications, EIH in News

Asian stocks little changed in morning trade

Asian markets opened subdued. According to Bloomberg, market participants are awaiting the US and European central bank meetings this week for further clues. Overnight, the US stocks closed with modest gains. S&P 500 at 2,659 points is up 0.3%.

Tata Communications’s 15-year wait to spin off land assets nears end

Tata Communications Ltd will soon hive its property holdings into a separate company, which will subsequently be listed, capping 15-year effort of the firm, reports Bloomberg.
Eight Capital, Centrum eye stake in Hindustan Dorr-Oliver

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Eight Capital Group and Centrum Capital Ltd are in a race to pick up a majority stake in Hindustan Dorr-Oliver Ltd, which is currently facing corporate insolvency proceedings. 

EIH’s Oberoi hotel in Delhi to reopen

EIH Ltd’s The Oberoi hotel in Delhi is set to welcome guests after renovation, reports Business Standard. According to the report, the company is estimated to have spent approximately Rs600 crore on renovation.

Canara Bank plans to hire bankers for up to Rs3,500 crore QIP

State-owned Canara Bank Ltd plans to raise capital by selling shares and is looking to hire merchant bankers for the same, reports Mint. The bank is planning to raise up to Rs3,500 crore through qualified institutional placement (QIP).

November consumer inflation data today

India’s retail inflation likely breached the central bank’s 4% medium-term target in November after unseasonably heavy rains sent food prices soaring, a Reuters poll showed. The consumer retail inflation data due to be released on Tuesday is seen rising to 4.2% in November, the report adds.

Wall Street closes higher Ahead of Fed Meeting; Stocks Rise Worldwide

US stocks closed higher on Monday as investors prepared for an expected Federal Reserve rate hike later in the week, while stocks rose around the world on continued solid global economic growth indicators.

The Dow Jones Industrial Average and the S&P 500 opened flat after news of an explosion in New York's busy Port Authority commuter hub which New York Mayor Bill de Blasio described as an "attempted terrorist attack."

US stocks edged higher after worries receded over the explosion.

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"The market makes an assessment almost immediately as soon as new information comes in, and this is what you're seeing," said Quincy Krosby, chief market strategist at Prudential Financial in New Jersey. "You're seeing the equity market move higher and the Treasury yields climb just a bit."

The Dow Jones Industrial Average rose 56.87 points, or 0.23 percent, to 24,386.03, the S&P 500 gained 8.49 points, or 0.32 percent, to 2,659.99 and the Nasdaq Composite added 35.00 points, or 0.51 percent, to 6,875.08.

Gains in the energy and technology indexes helped boost Wall Street. CenturyLink rose 8.18 percent after the telecom provider signed a 5-year contract with the Commonwealth of Pennsylvania.

MSCI's gauge of stocks across the globe gained 0.38 percent.
"There's somewhat of an enthusiasm that global growth is more synchronized than it's been in a long time, and it's synchronized in the right direction," said Scott Wren, a senior global equity strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

MSCI's emerging market stock index rose 0.83 percent. Its broadest index of Asia-Pacific shares outside Japan closed 0.81 percent higher, while Japan's Nikkei rose 0.56 percent.

The pan-European FTSEurofirst 300 index lost 0.01 percent.

Tuesday, 5 December 2017

Bitcoin Bigger than Buffett, Boeing, New Zealand's Economy

Bitcoin’s extraordinary price surge means its market capitalisation now exceeds the annual output of whole economies, and the estimated worth of some of the world’s top billionaires.

With debate over its bubble status still raging, the flagship cryptocurrency continued its march higher on Monday, solidifying above $11,000 and bringing its climb this year to more than 1,000 per cent. With market tracker Coinmarketcap.com putting the total value of all bitcoins in circulation at $190 billion, it’s come a long way from August, when one coin could buy you a hefty supply of avocados.

Here are five things that have been eclipsed by bitcoin in terms of market capitalisation:

New Zealand’s GDP

The South Pacific nation’s farm-and-tourism-led economy is valued at $185 billion, according to World Bank data as of July, putting it some $5 billion below bitcoin. The cryptocurrency’s market cap is also bigger than the likes of Qatar, Kuwait and Hungary.

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Goldman Sachs, UBS

Bitcoin’s run-up has even seen it valued more highly than two of the world’s most influential banks. Goldman Sachs Group Inc’s market cap was $97 billion as of Friday, while Zurich-based UBS Group AG came in at about $67 billion. Add those numbers together and it still falls short of bitcoin.
Both financial heavyweights have taken a hands-off approach to the digital currency, with Goldman chief executive Lloyd Blankfein saying it’s too early to draft a bitcoin strategy and UBS — the world’s biggest wealth manager — saying it won’t allocate it in portfolios because of the threat of a government crackdown.

Boeing

It makes jumbo jets but Boeing Co’s market cap of $162 billion is also less than that of a digital currency that didn’t exist 10 years ago. The Chicago-based company, which describes itself as the world’s largest aerospace firm, is more than a century old and employs 140,000 people in more than 65 countries, according to its website. Rival Airbus SE fares no better — it’s got a market value of ^66 billion ($78 billion).

Fourteen aircraft carriers

If bitcoin’s market cap could be used to buy military equipment, it would pack a mighty punch. USS Gerald R Ford, first of a new class of nuclear-powered supercarriers, was delivered to the US Navy in May. It cost an estimated $13 billion. So if investors put all their bitcoins together they would be able to buy a fleet of 14 ships.

Bill Gates, Buffett, the Queen

They sit atop Bloomberg’s Billionaires Index, but even if Bill Gates and Warren Buffett pooled their fortunes they wouldn’t have enough to buy all the bitcoins in circulation. Gates is worth $90 billion and Buffett has $83 billion, according to the index. Not even Queen Elizabeth II could get them over the line if she brought her $383 million to the table. While we don’t know what he told Katy Perry, Buffett has called bitcoin a “real bubble” in the past.