Economy
India's July manufacturing PMI index hits four-month high
The country's manufacturing sector saw a significant uptrend in July registering the highest reading since April this year, as both production and new orders rose, a key macro-economic data showed on Monday.
 
The Nikkei India Manufacturing Purchasing Managers' Index (PMI) -- a composite indicator of manufacturing performance -- rose to 51.8 in July from 51.7 in June.
 
An index reading of above 50 indicates an overall increase in the economic activity, and below 50, an overall decrease.
 
According to the financial services firm IHS Markit, which compiles the monthly report, India's manufacturing economy revived at the beginning of the second half of 2016 after the slowdown seen in the April-June quarter, as growth of both production and new orders continued to strengthen in July.
 
"Although output expanded at the fastest rate since March and backlog accumulation intensified, businesses refrained from creating jobs. The ongoing muted trend for employment indicates that companies remain somewhat uncertain regarding the sustainability of the upturn," said Pollyanna De Lima, economist at Markit and author of the report.
 
Delving deeper into the data we see that the consumer goods sub-sector kept its place as the prime driver of the overall upturn. Although demand for plant and machinery improved, investment goods output dropped, De Lima said.
 
"Separately, the depreciation of the rupee supported Indian exporters as survey data pointed to the quickest rise in new business from abroad since January," she said.
 
De Lima said that offering respite to firms, cost burdens rose at a modest and slower rate and the improving demand environment meant that businesses were able to raise their own charges in July.
 
"With inflation rates remaining lower than their respective long-run averages, it wouldn't be surprising to see the RBI (Reserve Bank of India) loosening monetary policy at its August meeting in an effort to encourage investment," she added.
 
The Indian economy grew at 7.9% in the fourth quarter of 2015-16, taking the overall GDP growth to 7.6% for the entire fiscal.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  

 

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1QFY17 results helped by non-operating factors
The June quarter results of Indian companies have so far been good with net profits of the Nifty-50 Index (25 companies have reported so far) being 5.5% ahead of expectations. But in several cases, the results are helped at net level by non-operating factors, says a research report.
 
In a note, Kotak Institutional Equities Research, says, "India’s macro continues to look good with the recent sharp decline in crude oil prices, fall in bond yields and decent monsoons. The chances of goods and services tax (GST) implementation are also looking better. Thus, the dilemma over our positive top-down view and dwindling number of good bottom-up ideas has become deeper."
 
While 1QFY17 results have been good so far, EBITDA is in line with only RIL and ZEE, surprising positively meaningful, the report says. "Also, the outperformance in net profits has come from higher non-interest income (private banks), lower selling, general and administrative (SG&A) costs (IT companies), adventitious gains (RIL), lower finance cost (Bharti Airtel), lower depreciation, depletion and amortization (DD&A) due to change in depreciation rates (Maruti Suzuki India Ltd) and extraordinary gains (HDFC).” Below table gives details of the nature of the earnings outperformance. Without RIL’s adventitious gains, the overall results look less impressive, it added.
 
 
 
According to Kotak, during the June quarter, volume growth continues to be sluggish and summer months may have aggravated demand. It says, "We note that revenue and volume growth has been disappointing in general while cement and consumer staples volumes have been weak in particular (see table below). We note that that 1QFY17 coincided with India’s summer season and water scarcity in several parts of the country, which may have exacerbated an already-weak rural demand. It would be too much to expect high soaps and shampoo usage and construction activity without water."
 
 
Due to the good monsoon and the seventh pay commission-related payouts, Kotak hopes that there would be a pickup in overall consumption demand. "For now, we attribute the slowdown in recent economic activity over the past one-two months (see table below) and weak 1QFY17 volumes for the companies that have reported so far to severe weather conditions and water scarcity. Of course, many parts of India including certain cities are now facing floods, which may disrupt demand in 2QFY17 too. As an aside, droughts and floods are a telling commentary on the state of India’s infrastructure and its growth and investment challenges and opportunities, if policies and politics permit," the report added.
 
 
Kotak feels that the valuations in the Indian market, except a few areas where stocks are trading near its FY2018-E-based fair valuations, are expensive based on any reasonable parameter or timeframe. "Without a strong economic and earnings recovery in second half of FY17, we see further earnings downgrades, which would make valuations even more expensive. However, valuations hardly matter these days. The more interesting part is that almost all market participants acknowledge the expensive valuations but most are reluctant to act on the same. It seems to us that passive investment has taken a new form," the report concluded.

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Government seeks Rs1.03 lakh crore additional spending
The government on Monday sought Parliament's nod for additional spending of Rs 1.03 lakh crore, though the cash outgo will only be Rs 20,948.26 crore.
 
"Approval of Parliament is sought to authorise gross additional expenditure of Rs 1,03,013.74 crore. Of this, the proposals involving net cash outgo aggregate to Rs 20,948.26 crore and gross additional expenditure," a Finance Ministry document tabled in the Lok Sabha said.
 
This is in addition to the total expenditure of Rs 19.78 lakh crore, consisting of Rs 5.50 lakh crore under Plan and Rs 14.28 lakh crore under Non-Plan, projected in the Union Budget 2016-17.
 
Presenting the Supplementary Demands for Grants for 2016-17 in the Lok Sabha, Finance Minister Arun Jaitley sought Parliament's approval for transfer of Rs 5,000 crore towards National Employment Guarantee Fund and Rs 1,000 crore for providing funds to Indian Strategic Petroleum Reserves for Sovereign Strategic Crude Oil Reserve at Vizag, Mangalore and Pudur.
 
The Demands For Grants also include Rs 40,000 crore as Ways and Means Advance to Food Corporation of India (FCI) to meet the working capital requirements towards procurement of food grain for targeted public distribution system.
 
The government has also sought Rs 5,000 crore towards Mahatma Gandhi National Rural Employment Guarantee Scheme (MNGREGA).
 
The Demands for Grants include 51 grants and one appropriation.
 
Jaitley sought approval for additional assistance of Rs 2,000 crore to states affected by natural calamities like hailstorm and non-seasonal rain under National Disaster Response Fund (NDRF).
 
Among other sectors, the government sought Parliament's approval for providing Rs 31,957 crore to the Ministry of Road Transport and Highways under various heads.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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