Nifty, Sensex waiting for India-Pakistan to cool off – Wednesday closing report -The Total Investment & Insurance Solutions

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27 February 2019

The major indices of the Indian stock market opened higher and went up further but fell sharply in a few hours due to escalating geo-political tensions between India and Pakistan. On the NSE, there were 792 advances, 942 declines and 329 unchanged. The trends of the major indices in the course of Wednesday’s trading are given in the table below:

Sensex fell over 600 points during a highly volatile day when tension between India and Pakistan appeared to have further escalated. Investor’s sentiments dampened over reports that Pakistani jets had violated Indian airspace causing a steep fall on the BSE Sensex between 11 a.m. and 12.30 p.m. However, market pared its major losses around 2 p.m., and the S&P BSE Sensex traded 16.66 points or 0.05 per cent down at 35,957.05, from its previous close of 35,973.71. While the broader Nifty50 traded 12.05 points or 0.11 per cent lower at 10,823.25. Barring the Nifty PSU Bank index and pharma index all the sectoral stocks traded in the red. 

A day after Reserve Bank of India (RBI) took off Allahabad Bank, Corporation Bank and Dhanlaxmi Bank from the Prompt Corrective Action (PCA) framework, the stocks of PSU banks surged. Among the Sensex stocks which fell in the 1-2 per cent range were Tata Motors (DVR), Tata Motors, Vedanta, Hindustan Uniliver, Kotak Mahindra Bank. While the index toppers were Bajaj Auto, Sun Pharma, Larsen and Toubro, Axis Bank and TCS.

Finnish telecommunication giant Nokia on Wednesday said Bharti Airtel would deploy solution from Nokia’s Nuage Networks to upgrade its data centres. Nuage Networks is a Nokia venture focused on software-defined networking solution. Airtel will deploy Nuage Networks VSP (virtualised services platform) solution in 15 circles (service areas) in the northern and southern parts of the country to automate its data centre networks, Nokia said in a statement.

Credit rating agency Ind-Ra released a report on the cement sector. Ind-Ra believes the capacity utilisations of the cement industry may improve gradually over the next two years on account of limited capacity additions amidst the turnaround of acquired assets. Domestic cement demand is expected to register a modest growth of 6-8 percent in fiscal 2020 mainly driven by the diminishing base effect, increased thrust on infrastructure by the Central government and the affordable housing segment, the report said.

The top gainers and top losers of the major indices are given in the table below:

The closing values of the major Asian indices are given in the table below:

Major Indices (The Total Investment & Insurance Solutions)

India's economy seen losing momentum ahead of election -The Total Investment & Insurance Solutions

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27 February 2019

 

India's economy (The Total Investment & Insurance Solutions)

India's economy appeared to be losing momentum in the approach to a general election that must be held by May, as a Reuters survey of economists forecast that growth slipped to 6.9 percent annually in the October-December quarter. If the forecast proves accurate, India will post its slowest growth in five quarters, making it harder for Prime Minister Party to persuade voters that government policies were delivering economic success. The gross domestic product and the second advance estimates for the 2018/19 fiscal year ending in March will be released on Thursday around 1200 GMT. Weaker domestic and external demand were key factors behind the economists expectations of sub-7 percent growth. India would still be growing faster than China's 6.4 percent growth in the same quarter, but its economy has decelerated from the more than two-year high of 8.2 percent growth posted in the April-June quarter.

The current growth numbers may look respectable, but Modi faces a criticism that he has not done enough for the manufacturing sector and create enough jobs for millions of youth entering the jobs market every month. Growing signs of weakness in India, most alarmingly the desperation of rural communities whose income have been hit by falling prices for farm produce, forced Modi earlier this month to increase state spending, and make direct cash transfers to farmers. That could marginally help growth rates, but it will increase the government's debt.

This month, the Reserve Bank of India (RBI) cut its policy interest rate by 25 basis points to 6.25 percent, and changed its stance to "neutral" to boost a slowing economy as inflation has come down sharply. "The economic growth slowed in December quarter following weaker consumption as reflected by auto sales and slowdown in credit after a crisis in non-banking financial company sector," A. Prasanna, chief economist at ICICI Securities Primary Dealership in Mumbai said. Prasanna said economic growth in December quarter could fall to as low as 6.4 percent. Economic growth could suffer from a possible slowdown in state spending in the two months before the election.

But, Prasanna and other analysts still expected a pick up in coming quarters due to rising private investments and consumer demand, helped by lower interest rates and a fall in global oil prices. Average industrial capacity utilisation during the four quarters that ended in September 2018 was about 74.5 per cent although the new orders growth has moderated, according to the RBI estimates released earlier this month. Year-on-year growth in the industrial output in November and December 2018 were low at 0.3 per cent and 2.4 per cent, compared to the average growth of 5.7 per cent in the preceding seven months of 2018-19.

The country has underperformed in the manufacturing sector - though emerging as the world's sixth biggest auto manufacturer, and expanding production of smart phones. Manufacturing's share of GDP has risen just 1.5 percent in last three years to stand at nearly 18 percent, and investors complain that higher taxes, lack of efficient infrastructure and regulatory red tape make India a difficult place to work. Inflows of foreign direct investment has slowed, dropping 7 percent to $33.5 billion in the nine months between April and December 2018, reflecting investors concerns that Modi's business-friendly government faced a tough contest and whoever wins the election could have a hard time pressing forward with needed reforms. "The government needs to focus on addressing issues related to land, labour tax, the policy regime related to infrastructure, and overall ease of doing business," Upasana Chachra, an economist at Morgan Stanley said in a note earlier this week. The Total Investment & Insurance Solutions

Bank Recapitalisation May Not Unlock Faster Growth: Fitch Ratings -The Total Investment & Insurance Solutions

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27 February 2019

 

Bank (The Total Investment & Insurance Solutions)

The Indian government's announcement to inject $7 billion into public sector banks (PSBs) under its recapitalisation plan is likely to help banks meet minimum regulatory requirements, but is not sufficient to support significantly stronger lending growth, says Fitch Ratings. 

In a note, the ratings agency says, "A large proportion of the government's latest round of recapitalisation is still likely to go towards addressing regulatory shortfalls rather than to support asset growth. More will be needed as a cushion against future losses at some state banks, as borrower defaults and slow bad loan resolution continue to put pressure on non-performing loan (NPL) provisions." 

"PSBs' provision cover ratio was around 50% at end-September, still short of the 65% that we believe may ultimately be needed. Much of the capital already injected by the government into state banks over the last few years has been consumed by large financial losses caused by loan loss provisions," it added. 

Fitch Ratings estimate that banks will need an additional $23 billion in 2019, after these latest injections, to sufficiently meet minimum Basel III capital standards, achieve 65% NPL cover, and leave surplus capital for growth. Capital needs have fallen from estimate of $65 billion in September 2017, but progress has not been significant enough to spur loan growth, it added.

According to Fitch, the Indian authorities' approach to the banking sector has clearly shifted towards spurring lending in recent months. 

Last month, the Reserve Bank of India (RBI) deferred implementation of the final tranche of the capital conservation buffer (CCB) of 0.625% to end-March 2020. The RBI has also lowered risk weights for some lending to non-bank financial companies (NBFCs), despite these companies facing increased liquidity stress in the past year. 

These steps, along with capital injections, have eased but not removed capital constraints on state banks' growth, Fitch says, adding, "Six of the 12 state banks that are due to receive the latest government capital injections were below the 7.375% minimum common equity Tier 1 requirement as of end-December 2018. Three more are below the 8% requirement that will apply from end-March 2020, assuming there are no further deferments of CCB implementation." 

The injections have allowed Allahabad Bank and Corporation Bank to leave the RBI's prompt corrective action (PCA) framework, following earlier exits by Bank of India, Bank of Maharashtra and Oriental Bank of Commerce. 

"This frees these banks from tight restrictions on their management and growth. However, leaving the PCA framework will not remove the constraints on growth imposed by weak capitalisation, unless the state injects more capital into these banks or there is strong turnaround in profitability that support internal capital generation, which looks unlikely," the ratings agency says.

The Indian government had announced a $32 billion recapitalisation programme in October 2017, split between the fiscal year ending March 2018 (FY18) and FY19. It planned to provide $21 billion by issuing recapitalisation bonds and $3 billion from the budget, leaving the rest to be raised by banks from the equity capital markets. 

However, Fitch says many state banks have been unable to access capital markets, and the government announced in December 2018 that it would provide an additional $6 billion. The latest injections represent the remainder of these previously allocated funds. 

Fitch has a negative sector outlook on Indian banks to reflect the near-term pressures from the sector's NPL stock and elevated credit costs on bank earnings and capitalisation. 

"Absolute NPL and gross NPL ratios fell slightly in the nine months to December 2018 across many banks, but credit costs continue to outweigh weak income buffers. We expect continued weakness in the near term, although substantial resolution of bad assets could put banks on a faster path to recovery," the ratings agency concluded.The Total Investment & Insurance Solutions

Panel to overhaul Direct Tax law seeks 3 months extension-The Total Investment & Insurance Solutions

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27 February 2019

taxlaw (The Total Investment & Insurance Solutions)

The task force set up to draft a new direct taxlaw to replace the existing Income Tax Act has sought 2- 3 months extension from Finance Minister Arun Jaitley to submit its report. The task force was scheduled to submit the report by February 28. The Finance Ministry in November last year appointed Akhilesh Ranjan, Member (Legislation), CBDT, as convenor of the task force after the retirement of Arbind Modi. "The task force apprised the Finance Minister on progress made by the panel so far. It sought an extension of 2-3 months for submission of report," an official said. Other members of the task force include Girish Ahuja (chartered accountant), Rajiv Memani (Chairman and Regional Managing Partner of EY), Mukesh Patel (Practicing Tax Advocate), Mansi Kedia (Consultant, ICRIER) and G C Srivastava (retired IRS and Advocate). Even with a 3-month extension, the report of the task force would come well before the final budget for 2019-20 fiscal — which will be presented sometime in July after the general elections.

Prime Minister Narendra Modi, during the annual conference of tax officers in September 2017, had observed that the Income-tax Act, 1961 was drafted more than 50 years ago and it needs to be redrafted. The task force was assigned to draft direct tax laws in line with the norms prevalent in other countries, incorporating international best practices, and keeping in mind the economic needs of the country. The ministry had in November, 2017, set up a 6-member task force to rewrite the over 50 year old Income Tax laws. The panel was initially supposed to submit its report to the government, within 6 months, by May 22, 2018. On May 22, the Finance Ministry extended the term of the task force by another three months till August 22. The committee did not submit report within that deadline as well. The then convenor of the panel, Arbind Modi, retired on September 30, which left the report of the task force in limbo.

Following this, Ranjan was appointed as the convenor of the panel in November, last year. Former finance minister P Chidambaram had in 2009 proposed the original direct tax code to replace the cumbersome IT law with a clean new law and to embody the principle of keeping taxes low and removing exemptions. The NDA government, since coming to power in 2014, has already implemented general antiavoidance rules GAAR. In 2016, Jaitley had promised to lower corporate tax rate to 25 per cent in 5 years.The Total Investment & Insurance Solutions

Global Shares Trend Lower As World Eyes Trump-Kim Summit-The Total Investment & Insurance Solutions

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27 February 2019

Financial Markets (The Total Investment & Insurance Solutions)

Global shares were mostly lower in muted trading Wednesday as investors awaited the outcome of a summit between U.S. President Donald Trump and North Korean leader Kim Jong Un in Vietnam.

France's CAC 40 was down 0.2 percent in midday trading at 5,228, while Germany's DAX fell 0.5 percent to 11,475. Britain's FTSE 100 dropped 0.5 percent to 7,098 as the pound continued to rise, hurting the index's many multinationals. The pound is up after Prime Minister Theresa May said she would allow Parliament the chance to delay the country's scheduled March 29 departure if lawmakers don't approve her divorce agreement with the bloc. That eases the risk of a damaging exit without a deal.

U.S. shares were headed for a lower open, with the future contract for the Dow Jones Industrial Average slipping 0.3 percent to 25,972. S&P 500 futures also fell 0.3 percent to 2,785.

Kim and Trump were due to have a private dinner Wednesday evening, following up on their Singapore summit in June, which was long on pageantry but short on any enforceable agreements for North Korea to give up its nuclear arsenal.

Progress toward further dismantling of the North's nuclear program could help reduce tensions left over from the 1950-53 Korean War, dousing a longtime flashpoint in the region.

But the event was absorbing less attention than the first meeting, said Jasper Lawler of London Capital Group.

"Traders will keep an eye on developments, but the intensity of the focus will be nothing like the first meeting which came following months of hot-headed comments from both sides," Lawler said in a research note.

Shares were mixed in Asia, where Japan's benchmark Nikkei 225 added 0.5 percent to finish at 21,556.51. Australia's S&P/ASX 200 gained 0.4 percent to 6,150.30 and South Korea's Kospi edged up 0.4 percent to 2,234.79.

India's Sensex dropped 0.3 percent to 35,870.91 as tensions with neighboring Pakistan surged following a pre-dawn airstrike by India that New Delhi said targeted a terrorist training camp.

Pakistan said its air force shot down two Indian warplanes after they crossed the boundary in the disputed region of Kashmir and captured two Indian pilots, as Pakistan's Civil Aviation Authority closed the country's air space to all commercial flights.

ELSEWHERE IN ASIA: Hong Kong's Hang Seng erased earlier gains to slip nearly 0.2 percent to 28,727.36, while the Shanghai Composite index gained 0.4 percent to 2,953.82. Shares fell in Singapore and Taiwan but rose in Thailand.

ENERGY: U.S. benchmark crude added $1.02 cents to $56.52 a barrel in electronic trading on the New York Mercantile Exchange. It was essentially flat at $55.50 a barrel in New York overnight. Brent crude, used to price international oils, gained 86 cents to $66.07 a barrel.

CURRENCIES: The dollar slipped to 110.47 yen from 110.58 yen. The euro rose to $1.1397 from $1.1388 on Tuesday.The Total Investment & Insurance Solutions

Nifty, Sensex May Still Head Higher – Tuesday closing report-The Total Investment & Insurance Solutions

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26 February 2019

The major indices of the Indian stock markets suffered a correction on Tuesday because of Indian Air Force (IAF) strike early morning in Pakistan Occupied Kashmir (PoK). On the NSE, there were 605 advances, 1115 declines and 340 unchanged. The trends of the major indices in the course of Tuesday’s trading are given in the table below:

The benchmark index Sensex fell over 500 points on Tuesday after Pakistan claimed that Indian Air Force (IAF) fighter jets crossed the Line of Control (LoC) and returned after dropping a payload. The Nifty also slipped below the 10,800 mark. All the sectoral indices witnessed heavy selling pressure both on NSE and BSE. At 10.31 a.m., the Sensex traded 351.42 points or 0.97% lower at 35,861.96 while the Nifty declined over 107.95 points at 10,772.15. Banks and metal companies faced the brunt of the selling pressure in the morning session. However. both Nifty and Sensex trimmed their losses to some extent after tanking in the early morning trade.

Global markets continued to gain on easing trade tension between US and China and declining crude oil prices. Among the sectors which gained were auto, IT and and media stocks.

The Enforcement Directorate (ED) on Tuesday said it has attached properties of absconding diamantaire Nirav Modi and his associate companies to the tune of Rs 147 crore in connection with its ongoing probe into the Punjab National Bank (PNB) fraud case. The agency in a statement said that the action was taken under sections of the Prevention of Money Laundering Act (PMLA) 2002. The ED claimed that during investigation, it was revealed that substantial proceeds of crime obtained fraudulently by the Nirav Modi-owned group of firms Solar Exports, Stellar Diamonds, Diamond RUS from PNB were diverted to the absconding diamantaire, his relatives and entities controlled by him.  The ED had earlier attached properties in India and abroad to the tune of Rs 1,725.36 crore. Besides the properties, the ED had also attached gold, diamond, bullions, jewellery and other valuables worth Rs 489.75 crore.

Foreign direct investment (FDI) into India in April-December 2018 declined by 7% to $33.5 billion over $36 billion received during the same period of the last fiscal, according to latest official data. The Department for Promotion of Industry and Internal Trade (DPIIT) data showed that India's total FDI inflows, including reinvested earnings and other capital flows, was $46.62 billion in April-December of the current fiscal.

Kotak Mahindra Bank has raised the limit on total shareholding of foreign institutional investors and foreign portfolio investors in the company to 45% from 43%. The hike in the shareholding limit is due to the central bank directive on reducing its Chief Executive Uday Kotak's stake in the bank.

The Indian drug regulator may give partial and full waiver on clinical trials to companies developing specific orphan drugs. The government is expected to come out with a clear policy on approvals of orphan drugs in the New Drugs and Clinical trials Rules, 2018. Currently, medicines used in treatment of rare diseases with less than five lakh patients typically fall under the category of orphan drugs.

The top gainers and top losers of the major indices are given in the table below:

The closing values of the major Asian indices are given in the table below: The Total Investment & Insurance Solutions

Major Indices (The Total Investment & Insurance Solutions)

Fiscal deficit touches 121.5% of full-year target in January -The Total Investment & Insurance Solutions

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26 February 2019

 

Fiscal Defficit (The Total Invesitment & Insurance Solutions)

Fiscal deficit touched 121.5 per cent of the full-year revised target of Rs 6.34 lakh crore at the end of January on account of lower revenue collections, government data showed on Tuesday. 

The fiscal deficit, or the gap between the government's expenditure and revenue, stood at Rs 7.70 lakh crore during April-January of the current financial year ending March. 

At the end of January 2018, the deficit was 113.7 per cent of the Revised Estimate (RE). 

The government had budgeted to cut the fiscal deficit to 3.3 per cent of GDP or Rs 6.24 lakh crore in 2018-19, from 3.53 per cent in the previous financial year. However, in the Interim Budget 2019-20, the fiscal deficit was revised upwards marginally to 3.4 per cent of GDP or over Rs 6.34 lakh crore, on account of additional outlay of Rs 20,000 crore for funding income scheme for small farmers. According to the data released by the Controller General of Accounts (CGA), the revenue receipts of the government totalled Rs 11.81 lakh crore or 68.3 per cent of RE till January in 2018-19, compared with 72.8 per cent during the same period last fiscal.

According to RE, the government expects to mop up Rs 17.29 lakh crore revenue during the current fiscal, from Rs 17.25 lakh crore budgeted originally. Tax revenue was 68.7 per cent of RE, compared with 76.5 per cent in the comparable period of the previous year. According to the CGA data, the total expenditure of the government at January-end was Rs 20.01 lakh crore or 81.5 per cent of RE. The total expenditure for the current fiscal has been raised to Rs 24.57 lakh crore in the RE, from the budgeted Rs 24.42 lakh crore. The Total Investment & Insurance Solutions

India's growth momentum likely slowed in late 2018: Reuters poll -The Total Investment & Insurance Solutions

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26 February 2019

Growth (The Total Investment & Insurance Solutions)

India's economy likely grew at its slowest pace in over a year in the October-December quarter as weaker rural incomes and softer urban demand weighed on consumption, a Reuters poll showed. The median forecast from more than 55 economists polled on Feb. 19-25 was for growth of 6.9 percent, compared with 7.1 percent in July-September. "Consumption drivers should remain modest as tight liquidity persisted through most of the quarter and farm distress restrained rural consumption," said Charu Chanana, emerging Asia economist at Continuum Economics

Forecasts for the GDP number, due for release on Feb. 28 at 1200 GMT, ranged between 6.3 percent and 7.9 percent, and suggested a significant drop from a more than two-year high of 8.2 percent in April-June 2018. The latest poll was conducted amid political uncertainty ahead of a general election due by May and a weakening global economy. A slowdown in growth momentum supported the Reserve Bank of India's sudden dovish turn in early February when it cut rates and changed its policy stance to "neutral" to boost expansion after a sharp fall in inflation. The Total Investment & Insurance Solutions

However, global uncertainty over trade conflicts, Brexit and oil prices could add to growth headwinds in India, the RBI's Monetary Policy Committee said. "The RBI's commentary on growth and the upcoming GDP data should support the central bank's surprise cut... there should be more dovishness in the next meeting, because of the ongoing slowdown," said Shashank Mendiratta, economist at IBM. A slowing economy could be a concern for Prime Minister Narendra Modi's government, which wants to boost lending and lift growth before the election. In its final budget for this term, the government introduced several tax cuts to support spending and growth in a bid to lure middle-class voters.

"I think their stance from here would be to show that they have pulled out all the stops and that they've got a few more rabbits to pull out of the hat if they were to win the election," said Vishnu Varathan, head of economics and strategy for Asia at Mizuho Bank. Gross value added growth (GVA), the government's preferred measure, is expected to be 6.7 percent in the October-December quarter, marginally down from 6.9 percent in the previous three months.

India delays levying retaliatory tariff on U.S. goods to April 1 -The Total Investment & Insurance Solutions

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26 February 2019

U.S. goods(The Total Investment & Insurance Solutions)

India has once again delayed implementation of higher tariffs on some goods imported from the United States to April 1, according to a government order issued on Tuesday. 

The new tariff structure was to come into force from March 2. 

Angered by Washington's refusal to exempt it from new steel and aluminium tariffs, New Delhi decided in June to raise the import tax from Aug. 4 on some U.S. products including almonds, walnuts and apples. 

But since then, New Delhi has repeatedly delayed the implementation of the new tariff. The Total Investment & Insurance Solutions

Stocks Fall Back As Investors Await News From US-China Talks-The Total Investment & Insurance Solutions

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26 February 2019

financial markets (The Total Investment & Insurance Solutions)

 World shares fell and Wall Street was set to open lower Tuesday as investors awaited news from the talks between the U.S. and China on their ongoing trade war.

Britain's FTSE 100 lost 0.8 percent to 7,102 in midday trading as the pound rose on hopes for a delay to Brexit or even a second popular vote. The stronger pound hurts earnings for many of the multinationals listed on the FTSE.

Meanwhile, the CAC 40 in France fell 0.3 percent to 5,215 and Germany's DAX also dropped 0.3 percent to 11,467.

U.S. markets also pointed to a lower open. The future for the Dow Jones Industrial Average was down 0.3 percent at 26,009 and the same measure for the S&P 500 fell 0.2 percent to 2,790.

In Asia, the Shanghai Composite retreated from its early advance, losing 0.7 percent on Tuesday to 2,941.52 as traders cashed in recent gains. Japan's Nikkei 225 index dropped 0.4 percent to 21,449.39 and the Hang Seng in Hong Kong sank 0.7 percent to 28,772.06.

Australia's S&P ASX 200 lost 0.9 percent to 6,128.40 as falling prices for oil and other commodities hit energy companies.

Tuesday's declines reflected waning confidence in negotiations between the U.S. and China over Washington's complaints that Beijing steals technology or pressures companies to hand it over.

The Trump administration's decision to hold off on a March 2 increase in punitive duties on $200 billion worth of Chinese spurred buying Monday.

But many questions remain about the prospects for a deal that would unwind the tariffs already slapped by both sides on billions of dollars of each other's goods. Although both sides have reported progress in the negotiations, few details emerged.

Trump's conflicting comments on the status of the talks have added to the uncertainty, said Jingyi Pan of IG.

"As it is, we continue to view the trade matter through an opaque screen and make assumptions from the shadows of President Donald Trump," Pan said in a commentary.

ELSEWHERE IN ASIA: South Korea's Kospi lost 0.3 percent and India's Sensex fell 0.2 percent amid mounting tensions with neighboring Pakistan. Shares were lower in Southeast Asia.

ENERGY: U.S. crude oil gained 2 cents to $55.50 per barrel in electronic trading on the New York Mercantile Exchange. It lost 3.1 percent to settle at $55.48 a barrel in New York after Trump criticized rising oil prices in an early morning tweet. Brent crude rebounded, gaining 45 cents to $65.21 per barrel.

CURRENCIES: The pound surged to $1.3222 from $1.3097 after the U.K. Labour Party said it would back a second vote on Brexit. The dollar fell to 110.86 yen from 111.04 yen on Monday. The euro strengthened to $1.1363 from $1.1356.The Total Investment & Insurance Solutions