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Wednesday, February 25, 2015

Budgeting To Takeoff

The budget of 2015 to be presented in the February 2015 will decide the course of India, with high expectations from the budget along with the tagline of the Make In India will be the crux of the pace of the things to follow. The budget will assure that the economy will grow by 8% at least in the 2015-16 fiscal year and moreover India has to change the way it measures its economic activities to confirm with the international standards resulting in the huge upwards revisions to boost the growth figures and a bit of downward adjustment to the size of Asia’s third largest economies. The GDP growth is to be set at atleast 8% for the next fiscal year as the manufacturing sector has shown a good performance. Although the country’s GDP growth has picked up but the concern is on the slower growth in the tax collections and with the limited scope for boosting the tax revenues the other option is to step up the pace of the sales of the state assets and curb the spending to hit the government’s deficit reduction target in the coming fiscal year. Also that the steps will have to be taken to speeden up the sale of the shares in the cash rich oil companies which will eventually help the government to meet the fiscal deficit target of 3.6% of the GDP. From the business point of view the government along with the Reserve Bank Of India the data revisions have transformed India’s 2.1 trillion economy into one of the world’s fastest growing economies and now it is imperative to search the actual reliable indicator for these underlining current responsible for these activities.

 Even the Indian economy outgrew the Chinese economy by the December 2014 cloaking 7.5% year on year. The trio of the consumer, investor and the tax payer has very high expectations from the budget as the last year’s budget had led to the big cuts in the tax. The earnings over Rs 10 Lakhs a year were able to reduce annual tax liability by over Rs 20,000/-, and on the other hand the direct tax proposals including the tax payers had led to an estimated loss of Rs 22,000 crores to the exchequer, let us say for example for every benefit and the tax cut which are conceded will eventually impact the exchequer, even a mere deduction of Rs10, 000 crores translates into a loss of roughly Rs3, 000 crores to the exchequer.

 To quote another example the exempted limit of the of the senior citizen is above the 60 years is Rs50,000/- which is higher than the ordinary tax payer and so the revenue loss due to benefit is estimated to be 10% of the additional Rs50,000 exemption. The tax payer in the higher income brackets obviously wants the section 80 c limit to be hiked.

Analyzing the fundamentals India is overvalued in the equity markets. The key focus in the banking budget in 2015-16:-

Ø  The public sector unit banks to be recapitalized and the PSU banks actually requires huge capital to remain relevant in the business the capital infusion of about Rs 20,000 crores is expected in 2015-16 and as per the basal three implementation and the deterioting asset quality.
Ø  The disinvestment of the PSU as there is great expectation of the aggressive disinvestment of the PSUs like the BSNL and the LIC.
Ø  The monetary policy framework has to be redone, and the policy rates and the interest rates are to be finalized.
Ø  The reforms in the banking like to convert the cooperative banks into the full fledged banks thereby supporting the financial inclusion.

Ø  The forming of the sovereign fund because of the colossal financial needs of the infrastructure projects won’t be met by the banks or the non banking financial companies (NBFC) so this is the reason for the need to setup a sovereign fund for raising such recourses is felt.

 As the budget is to be presented with a tagline of – Make In India and will act as a catalyst to trigger in the correct direction so the focus will be on the tax and the expenditure measures like lowering of the taxes and enhancing the concessions for the maximum area and spending in the area of the productive activity and lesser disbursements which is also called the non development expenditure and all this is to be achieved by controlling the fiscal deficit and borrowing of the government so that the monetary policy remains unaffected while taking the above mentioned measures. Here the ratio of the fiscal deficit to the GDP has to be focused.

The focus is to be upon improving the delivery of the various social programmes. The disinvestment programme is to be on the prime agenda.

The budget is to enhance the scope under the section of the section 80 c and also enhance the limit for the tax exemption as it will help in increasing the consumer spending which is a bit on the lower side now. The announcement of the Make In India with 100 smart cities will be the key central point which will herald the push affecting the various sectors like – power, renewable energy, roads, warehousing and the real-estate as these sectors will receive the support through the higher allocation in the expenditure plans.

 Further more in the Make In India campaign the concessions will be on the area of the tax holiday, SEZ, limited duty cuts for the specific sectors and bringing in the private participation and no major changes in the tax structures is expected as the direct tax code and the goods and the service tax (GST) is not at the point of debate at the moment. So these are the times which will go down in the history as the launching pad of the India to a much greater highs.  

Thursday, February 19, 2015

MARCH With Midas Touch

There has always been a marked concern on as to whether there is some fix pattern for some months or season which are predictable as far as the returns on the stocks are concerned and if this is so than as an investor will be obviously compelled to invest in that ideal time frame to invest in the markets. Like all the past years in question as far as the similarities are concerned is just one that all the years are different with no similarities what so ever and just like the pattern of the years even the equity markets are no different and hence there is no pattern, clarity and season-ability which are the indicators of determining your entry and exit levels.

 Come what may the March is a Very Good month to get into the investments and ensure that you get some decent dividend to take back home and August is usually considered to be a lackluster month for most of the investors as there are less number of the participants in the markets due to the exhaustion and there is a common sentiment of inaction or lethargy due to the financial yearend in general. Then if we take a look at December likewise, the last week of December is called as the Santa Claus rally which triggers the rally by a rise in the stock price in the month of December which generally emerges in the final week of the trading prior to the New Year and this is also called the December effect. Actually the term Santa Claus rally has its root in the US where this effect has been making its presence felt and has xeroxed its effect even in the domestic markets during the December month however this effect in India is more due to the aura of the New Year perspective than any other factor but none the less the rally is in evident, even though the FIIs take a back seat and so also the investors take a break due to the long line of the festive season and so also the long new year celebration vacation mood.

The Happy New Year Effect or the January effect is seen as a trend which emerges as a high tide wave between the December 31 and the first week of the January and is coined as the January effect as it is very significant in predicting the trend of the stock markets for the rest of the calendar year because there is considerable selling of the stock holdings to claim the capital losses that would benefit the investors from the tax point of view and as the calendar year rolls over the investors plough this amount back into the markets which only helps in pushing the prices up there by creating a effect of a roller coaster ride of sorts. The same stocks which have been sold off to cover-up the losses will than trade at a discount, and the intraday poachers creep in to such laggards to ride this sort of the short term wave.

 As an investor one must be wise sector wise and investing in the equities through advices from research and fundamental evaluation done by research based advisory firms and makes it a habit of investing regularly and systematically. There are several market participants like FIIs for long as well as the short term investments, mutual funds for the long term investments, corporate for the wealth creation as well as protecting the stakes. Investors for savings, traders for the usual business activity, then there are speculators with the gambling instincts and the operators create the interest in the scrip.

There are various sensex sectors like the information technology, finance, oil and gas, FMCG, Transport, Healthcare, Capital goods, Metal & mining, power and the telecom. Now there are various reasons affecting the equity markets like the ratio of the imports and exports, news about the various companies, their quarterly reports reflecting upon the company’s earnings, number of layoff days in the company, the exchange rates, economy, the interest rates, oil prices, inflation rate, global news, national and the regional news, the terrorist attacks, the stock momentum, the hype created, supply and the demand ratio, current market position and the targets projected by the analysts, stocks of an industry the fear and greed factor effect the sentiments of the market.

 Actually the fundamental analysis is the first benchmark which involves the financial statement of both the quantitative as well as the qualitative analysis of the revenue, expenses, assets and liabilities, focus on the over current as well as the undercurrent of the underlying factors of the company’s actual business and so also its future prospects, and analysis of the economy, sector, industry as well as the company. Why March – Indian economy is on the go and India is the fastest growing economy of the world, we have strong consumption, the growth of the economy is sustained, and most of the companies are having a very strong shareholders return over the period of time. India has a great earning visibility in most of the listed Indian companies.

 Equity has a very strong demographic profile with the emphasis on the large pool of the qualified manpower, good track record in the service delivery sectors like the IT, medical sector and the education sector too. With proper efforts to flourish the tourism and the budget by the end of February and the ongoing auction of coal and the spectrum is bound to have a very positive effect market rally.    

Saturday, February 14, 2015

Equity Funds Are Back


The investors and even the corporate investors are back hovering on the equity funds and that too after almost close to half a decade of consistent declines and the outflows the mutual fund industry has now seen a surge in the number of equity folios and the net investments in the equity schemes. Almost close to 12 lakhs of equity folios have been added since April 2014 and more than 10 lakh of these folios are owned by the retail investors and 2.4 lakhs of the folios are held by the HNI clients, any client making an investment of more than 5 lakhs are called as high net worth clients. More over the return of the retail investors comes as a relief to the fund houses.

 It is all due to the positive sentiment wave in the year of 2014 which helped in reversing the trends so far so much that equity funds have registered net inflows of Rs 55,872 crores since 1.4.2014 and out of this Rs 5,850 crores came in the January of 2015 itself and since this April however one fifth of the net inflows have been in the close ended schemes only raking in Rs 10,124 crores for the industry since the past 10 months and the rally as well as the HNIs have been more instrumental in creating the high tide in the equity funds as their folios have risen from 3.38 lakhs to 5.76 lakhs which is a whopping 70% rise and even the AUM of this category rocketed from Rs 40,751 crores on the 31.3.2014 to Rs 93,655 crores by the year end. Although the equity folios have grown but have stilol a long way to go as still they are below the 2009 figures and the best side of the story is that we are witnessing a net inflows after a long long time. 

Tuesday, February 10, 2015

Mutual Funds – Back Into the Reckoning

Since the last nine months the wealth of the individual investors in the mutual funds have increased by 32% and is Rs 5.24 lakh crores this was in December 2014 and increased by 32% than what it was in March 2014. This all has happened due to the positive sentiment.

 Almost 72% of the investments came from the top 15 locations and the countries 45 mutual funds are managing more than 11 lakh crores of the investments. In the mutual funds most of the investments have come in the equity related schemes and searching such likewise instruments as even the pace of the sensex has been instrumental in its growth as sensex rose by 23%.

 In the mutual funds there are 4.03 crores of portfolios of the investors out of which there are 99% of the folios are of the individual investors. The rising interest of the investors in the mutual funds can be accessed by the fact that the mutual funds in the March 2014 was 9.02 lakhs crores and grew to 11.34 lakh crores in Dec 2014.
Whenever the markets are bullish the investors interest rises in the mutual funds and this only proves that the interest of the investors besides the major 15 cities have also come up. Mostly the interest is in the equity mutual funds and the same will continue to grow in many years to come. 

Adani Power: Stock For Investment

The Adani power is all set to bid for all the six coal blocks reserved for the power sector in the auction of the 23 operational mines which are to be held soon and in the race are many companies like TATA Power, West Bengal Power Development Corp, Adani Power, GMR Energy, Jindal Power, Essar Power, Lanco Infratech and Sesa Sterlite are to submit the bids for the blocks are in Jharkhand.

This block with 2.32 million tons of coal production capacity annually with train connectivity within vicinity. The last date for the submission of the bid is the 3rd of February.

The expected bidders for various coal blocks are :- Talabira in Odisha has bidders like Jindal Power, Sesa Sterlite,Adani Power,Simhapuri Energy.  Amelia North in MP will be bid by Dhariwal Infrastructure, GVK Power, Adani Power, Simhapuri Energy, Lanco Infratech, Essar Power and Jindal Power. Trans Damodar in West Bengal to be bid by West Bengal Power Development, TATA Power, Simhapuri Energy, CESE,JSW and Adani Power, Gare Palma Iv/2 and Iv/3 in Chhatisgarh to be bid by GMR Energy, Jindal Power, Adani Power, Lanco Infratec, Simhapuri Energy, Reliance Power, Sesa Sterlite and KSK Energy. Sarisatolli in West Bengal to be bid by Simhapuri Energy, Jindal Power, CESC Ltd, Adani Power and TATA Power, Tokisud North in Jharkhand is to be bid by Adani Power, TATA Power,  Simhapuri Energy, Essar Power, GMR Energy, LancoInfratec and Sesa Sterlite.

After raising Rs23,000/-crores by disinvesting a 10% stake through a public offer with got ample support from the LIC and the domestic funds and so now the government further plans to disinvest 5% of Coal India in the coming months. However a part will be reserved for the employees who may get some discount on the sale price of the price actual offered to the retail investors, as the government requires reducing its stake by 5% more just to allow the coal India to meet the regulatory requirements of at least 25% of the public shareholdings for the listed companies as per the listed norms

Tuesday, February 3, 2015

No Granted repetition in Markets

The new investors commonly feel that there will be some repetition of sorts today but such type of thinking is very fatal because movement of the market in either direction has no fixed path, yes but with the expert advice one can be doubly sure. As such there are the days when the market is bullish or bearish.
Of late mostly the market has been bullish and sometimes some correction causes the market to crumble and this is just a temporary phase, and mostly the corrections have been effected due to the quarterly reports were not as expected or the slide in crude oil prices, interest rate cut. As an investor one must never overlook the basic principles of investing. The markets usually test your emotions and also that what are your investing habits and also that how much good you are as an investor.

However it is only takes an expert to advice you about investments and its timing because it is only an expert who analyses the past trends, international and national events and policies and their effects on the market and analyze the future course of the market. Getting overexcited and at times fretting is uncalled for and believe me no two days are identical so that is to say that tomorrow cannot be like yesterday or even like today, and just in case of the first signs of correction the investors flee thinking that this is the beginning of negative trends of the market and so exit the market at the very first opportunity in haste.

Making loss at the times when the markets were zooming up and so also making losses when the markets were on corrections is just a result of lack of far-sightedness. It is a common phenomenon that usually all eyes are glued only on upward trends of the markets and it is seldom that one even pauses to analyze the causes behind the behavior of the market and rule out and over look any chances of market corrections. One way is to think that the shares are overpriced and the other way is to just keep investing in anticipation of a bright future.

As the economic indicators are at all time best, crude prices have come down reasonably down, the quarterly reports are also encouraging and the corporate mood is also upbeat. In the year 2014 the mutual funds netted Rs12,220 crores by launching 75 equity NFOs started 51 closed ended schemes of Rs9,600 crores and by the Dec end of 2014  the mutual funds increased to Rs4,027 crores indicating the bright future is here to stay for good.

Monday, February 2, 2015

The Defence Stocks to Zoom

The shares of the defence show signs of raring to strive ahead, the equipment manufactures for the defence forces like BEML, Bharat Forge, Pipnav Defence, Bharat Electronics, Walchandnagar Industries, Ashok Leyland and Astra Microwave Products etc have responded too well close to even 60% since this quarter this response was in anticipation that there will be greater emphasis on the indigenous manufacturing of the defence equipments and liberal allocation in the defence sector in the coming budget session.
 As India meets 70% of its defence requirements through imports and this trend will be soon reversed and to the joy of the investors who are always on the lookout of such sectors which have just started moving and will be hitting the headlines in near future and these two drivers are sufficient to keep the defence shares buoyancy.

More over the defence budget allocation in India is in top ten in the world and India happens to be the topmost importer of the defence equipments and even the increase in the FDI limit from 26% to 49% has a lot to do with the sentiments soaring in this sector more over there is sudden boom in the area of defence space and the earnings of the companies involved in the manufacturing facilities of the defence sector will be rerated in the coming years. 

Since there are only few listed players in the defence related stocks and obviously such stocks have a scarcity premium and so they are a great buy at any entry levels whatsoever. The defence sector is bound to provide the much awaited significant opportunity to both the abroad players as well as the domestic players. In the coming decade there will be total modernization of the Indian defence forces with expected pumping of $250 billion in the defence sector long way to go!!!!!