Government yet to cut back spending, says Nomura
The fiscal situation has been under stress because of weak revenue collection amid a slowing economy, yet-to-materialise asset sales and still-elevated spending, says Nomura in a research note
The government’s fiscal deficit in the first nine months (April-December 2013) of FY14 reached 95.2% of the full-year budgeted target compared with 78.8% in the same period last year, reports Nomura in its research note.
According to Nomura, the fiscal situation has been under stress because of weak revenue collection amid a slowing economy, yet-to-materialise asset sales and still-elevated spending.
Nomura’s fiscal run rate monitor indicates that last year the government had started to cut back on expenditure from October 2012, whereas this year the spending cuts are yet to happen even though the run rate on non-debt receipts is much weaker than last year (Please see Figure 1).
The government is likely to miss its revenue target owing to weaker-than-budgeted GDP growth, lower tax buoyancy and lower-than-budgeted asset sales, says the research note. Nomura expects the government to cut back spending sharply in the January-March 2014 quarter to enable it to meet its fiscal deficit target of 4.8% of GDP in FY14 at the expense of hurting growth. Nomura expects the government partly to cut planned expenditure and partly to delay payments until the next fiscal year in order to meet the fiscal deficit target, which would hurt GDP growth in H1 2014 (Please see Figure 2). 
Media reports suggest that the government is planning to ask for higher dividends from public sector companies, sell minority stakes in some companies and reduce expenditure by approximately Rs1,100 billion (1% of GDP).


Sensex, Nifty may stage a small rally: Monday closing report

A close above 6,060 may lead to a small rally in Nifty

In Friday’s report we had mentioned that if the Nifty goes below 6,060, it may test 6,000 or lower. Today, except for the time when the index hit the day’s high for the entire session the benchmark traded below the level of 6,060 and closed almost near 6,000. The market sentiment was affected by the data on slowdown in Chinese manufacturing growth and back home the government revised the GDP growth rate for the year ended 31 March 2013 downwards to 4.5% from 5% reported earlier.


The Sensex opened at 20,479 while the Nifty opened at 6,059. The Sensex reached the level of 20,182 after hitting the day’s high almost at the start of the day at 20,480 while the Nifty moved down to the level of 5,994 from the level of 6,075. The Sensex closed at 20,209 (down 305 points or 1.48%) while the Nifty closed at 6,002 (down 88 points or 1.44%). The NSE recorded a volume of 50.53 crore shares.


Among the other indices on the NSE, the only two gainers were Pharma (1.13%) and Media (0.15%) while the top five losers were Metal (2.98%); PSU Bank (2.48%); Realty (2.10%); Commodities (2.09%) and Auto (1.95%).


Of the 50 stocks on the Nifty, 7 ended in the green. The top five gainers were Lupin (4.56%); Gail (2.12%); Dr Reddy (1.16%); Sun Pharma (0.56%) and Cipla (0.55%). The top five losers were Hindalco (5.89%); Tata Steel (3.90%); Bhel (3.88%); Jaiprakash Associates (3.85%) and Bajaj Auto (3.80%).


Of the 1,481 companies on the NSE, 511 companies closed in the green, 880 companies closed in the red while 90 closed flat.


The eight core industries having a combined weight of 37.9% in the Index of Industrial Production (IIP) increased by 2.1% in December 2013 compared with a growth of 7.5% growth in December 2012 and 1.7% growth in November 2013, data released by the government after trading hours on Friday, 31 January 2014, showed.


HSBC India Purchasing Managers' Index (PMI) posted a reading of 51.4 for January 2014, up from 50.7 for December 2013. The latest reading was the highest since March 2013, but pointed to a marginal pace of expansion that was well below the series average (55.1). January saw new orders expand at the quickest rate in ten months, with survey participants reporting stronger demand from both domestic and overseas clients.


Among other data, the employment rose for the fourth month running in January, with all three broad areas of the manufacturing economy posting job creation. Companies operating in the Indian manufacturing sector signaled pressure on operating capacity in January, as backlogs of work increased solidly. Meanwhile, supplier performance improved in the latest month for the first time since September 2013.


Rajasthan has become the second state, after Delhi, to withdraw approval for FDI in multi-brand retail following a change of government after the assembly elections held in November-December. The Congress lost to the Bharatiya Janata Party in Rajasthan and to the Aam Aadmi Party in Delhi. The central government permitted 51% FDI in multi-brand retail trading in September 2012 and left its implementation to the states.


US indices closed in the red on Friday. All the Asian indices which were trading today closed lower. Nikkei 225 was the top loser which fell 1.98%.


A Chinese manufacturing gauge fell to a six-month low in January as output and orders slowed. The Purchasing Managers' Index was at 50.5 in January 2014, compared with December's 51 reading, the National Bureau of Statistics and China Federation of Logistics and Purchasing said Feb. 1 in Beijing. The survey showed jobs and export orders shrinking.


Growth in China's services sector cooled in January to its slowest pace in at least a year, data showed on Monday. The official non-manufacturing Purchasing Managers' Index slipped to 53.4 from December's 54.6.


European indices were trading flat while the US Futures were trading higher.


Stagflation Risks

The earning season has thrown up mixed results


The earning season has thrown up...

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