Market Unstoppable

WHAT LIES AHEAD FOR INDIAN MARKETS?

Markets are always a little ahead of the events. An NDA loss was pre-empted by the Markets reflecting in lighter positions both at an Institutional and Individual level.

What are the positives likely to happen?

Power Sector restructuring of Loans takes place over the next 2-3 quarters. These Loans account for half the NPA pie and this would help streamline capital as well as make banks more capital efficient.

Interest rate cut by another 50 bps cannot be ruled out. When we see global turmoil on the FED increasing rates/currency devaluation we are likely to see an regulatory intervention especially since Brent Crude is 44$ to a barrel.

The impact of Government spending will be reflected maximum over the next 2 quarters.

The earnings growth for Top 1000 companies is in the 9-9.5% range which is expected to touch around 10-12% on the back of retail consumption rising and Dr Rajan's strategy to break the back of inflation.

Negatives

China might devalue its currency to gain advantage in the export markets.

Fed would likely raise rates in December which is temporarily a volatility creating situation however ultimately is good for the Indian Economy as a Strong US is good for India.

A strong opposition comes together to fence off NDA in other state elections like UP and Bengal which would not make it easy for the NDA to get Legislative Business passed.

Interesting developments to watch out for -

If a reconciliatory approach is taken by the NDA chances are growth will accelerate particularly on the GST and the Insolvency regulator-similar to Chapter 11 in the USA.

The Budget would look at a lower tax rate for Corporates

Tax saving exemptions might go up if oil sustains at current levels

The fed rate hike happening

It is a buy on dips market to build the portfolio from a 3-5 years point of view.

Considering the below factors, does it mean the Government can accelerate its Capex? We doubt it. So while we believe the 3.9% FD/GDP still remains sacrosanct, we do not expect any additional fiscal space to spend above budgeted amounts.

The fiscal balances so far reflect a mixed bag of factors, a few comforting while a few concerning:

Few comforting factors:
• Higher RBI surplus transfer: The RBI announced a surplus transfer of almost Rs 660bn, higher than budgeted, providing some cushion on the receipts front
• Robust indirect tax growth: Receipts would be supported by strong indirect tax growth reported at ~36% y-o-y against a budgeted target of ~19%
• Lower subsidy bill: The steep fall in the crude oil price and the direct subsidy transfer for LPG is likely to lower the leakages and the overall subsidy bill
• Improved spend mix: Government spending so far reflects an improved capital revenue spending mix.

Few concerning factors:
• Disinvestment: Weak disinvestment receipts to the tune of Rs128bn upto Aug raise the risks of a shortfall in the FY16 target: Rs 695bn
• Direct tax growth: Direct taxes growth of 8.5% y-o-y in Apr-Aug is below the budgeted target (16.1%)
• OROP: Additional estimated expenditure to the tune of around Rs100-120 bn. Government spending has already accelerated versus budgeted growth.

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From gold monetisation to spectrum trading, 7 things Cabinet cleared

Read more at:
http://economictimes.indiatimes.com/articleshow/48884601.cms?intenttarget=no&utm_source=newsletter&utm_medium=email&utm_campaign=Dailynewsletter&ncode=88638ad4e8c85852079098a19be9ff45&from=mdr&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

From gold monetisation to spectrum trading, 7 things Cabinet cleared today - The Economic Times The Cabinet cleared gold Monetisation scheme to reduce the metal's demand in physical form and fish out idle gold lying with households and other entities.

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