Standard Chartered has advised caution in its new report, citing macroeconomic headwinds and key economic reforms as key for new finance minister to boost growth
Slowing growth, stubbornly high inflation, a deteriorating twin deficit and a perception of inaction on the policy front have clouded the investment climate in India for the last few quarters, says Standard Chartered in a report titled "Hope in Challenging Times".
"We have not yet observed any meaningful improvement in India's macro trends but a few other developments do provide a ray of hope that some macro issues might be addressed going forward," the bank said.
Investor perception received a boost last week when prime minister Manmohan Singh stepped up and took charge of the finance portfolio. He promised to revive "animal spirits" and clarified the position on the General Anti-Avoidance Rules (GAAR), or foreign investment taxation proposals. The sense of urgency at which the new finance minister took cognisance was welcome by the investor community and has improved sentiment greatly. The so called "animal spirits" refers to reviving the sentiment of the Indian economy and markets.
However, there are several macro-economic headwinds to tackle, and sentiment alone isn't enough. The main problem that needs to be tackled is inflation. The deficient monsoons have been factored in and forced the bank to raise inflation forecast from 7.2% to 7.6%, which isn't a good sign. "More than a 30% deficiency in monsoon rains has prompted us to build higher food prices into our forecasts and we raise our average FY12-13 (year ending March 2013) inflation forecast to 7.6% from 7.2%," the bank said in its report.
While a higher inflation will hurt the momentum of India's growth story, cutting interest rates will not be the solution as it will only make inflation worse. Therefore, the bank believes that the Reserve Bank of India (RBI) is unlikely to ease its monetary policy until the final quarter of the 2012-13 fiscal. In other words, the bank is unlikely to cut interest rates to infuse more money into the system. In order to address the growth dilemma without changing interest rates, Standard Chartered hopes that the government will address some of the supply side concerns and undertake much needed economic reforms. The report said, "In our view, this is necessary to keep investment sentiment buoyant until the macros start to improve. Otherwise, the market may refocus on macro challenges, and there is little evidence of an imminent improvement here."
The twin problem of deficits-fiscal and current account deficits-is another one that needs to be tackled by the new finance minister. For instance, one of the key sticking points for economic reforms has been liberalisation of petroleum prices and subsequent reduction in subsidies, which form a large part of India's burgeoning fiscal deficit. Subsidies form roughly 5.76% of the gross domestic product (GDP), a high figure. The report said, "Failure to revive investment demand and a lack of progress on subsidy reduction could trigger rating downgrades."
Standard & Poor's has already downgraded India to 'negative' while Fitch has done the same thing as well, citing "heightened risks".
e-IPOs will help in fast-track the IPO process and lower costs, besides allowing investors to apply for shares and buy them at a click on computers without the need for signature on bulky physical documents
New Delhi: In a bid to revitalise the primary issue segment, capital market regulator Securities and Exchange Board of India (SEBI) will soon announce guidelines to sell shares through electronic initial public offers (e-IPOs), reports PTI.
"We are trying to reform whole process...we will soon announce guidelines for e-IPOs. This will help in increasing the reach of distribution of IPOs," Rajeev Kumar Agarwal, Whole-Time member of SEBI, said at an Assocham event in the capital.
An e-IPO is a mechanism through which investment in public offerings can be done online without signing any physical documents.
e-IPOs will help in fast-track the public offer process and lower costs, besides allowing investors to apply for shares and buy them at a click on computers without the need for signature on bulky physical documents.
Though the e-IPO concept has been in the pipeline for some time, a formal decision could not be taken because of various regulatory issues.
In fact, the SEBI board was informed on 24th November that implementing an e-IPO requires amendments to the Companies Act, dispensing with the requirements of an investor to agree in writing to the offer, as there would be no physical form submission in a demat application.
The Nifty has to close below the level of 5,265 for the uptrend to break
The sideways market closed marginally lower on nervousness ahead of the quarterly earnings season, which kicks off next week. Although the Nifty made a lower high today it maintained its low at 5,288, which was almost the same as level as yesterday. Now the index has to keep itself above 5,265. If it closes below this level, the uptrend may break; else we may see the upmove going up to the level of 5,450. The National Stock Exchange (NSE) saw a lower volume of 73.33 crore shares.
The market started off on a flat note on the back of negative cues from the global arena. China, on Thursday, joined two other central banks, as it cut interest rates for the second time in over four weeks in a bid to boost growth. Earlier this week the European Central Bank cut interest rates to a record low while the Bank of England said it would purchase 50 billion pounds ($78 billion) of assets with newly printed money, in its move to help the economy. The moves by the three central banks signal a worrisome slowdown in global growth.
Back home, the Nifty opened two points down at 5,325 and the Sensex resumed trade at 17,546, up seven points from its previous close. Negative global sentiments soon pushed the Sensex into the red, as well.
Profit taking resulted in the market falling to its intraday low at around 10.30 am. At the lows, the Nifty fell to 5,288 and the Sensex fell to 17,425.
The market was range-bound and remained in the negative till the noon session as the key European indices opened lower. However, select buying pushed the indices higher enabling them to hit their highs. At the highs the Nifty rose to 5,327 and the Sensex went up to 17,555.
The choppy market pared its gains once more and snapping its three-day gaining streak, settled marginally lower. The Nifty shed 10 points at 5,317 and the Sensex lost 18 points to close at 17,521.
The advance-decline ratio on the NSE was in favour of the losers at 581:875.
The broader indices underperformed the Sensex today, as the BSE Mid-cap index declined 0.56% and the BSE Small-cap index fell 0.21%.
BSE Fast Moving Consumer Goods (up 0.67%) and BSE Bankex (up 0.18%) were the only sectoral gainers. The losers were led by BSE Realty (down 1.20%); BSE Metal (down 1.09%); BSE Consumer Durables (down 1.08%); BSE Capital Goods (down 1.03%) and BSE Power (down 0.83%).
The top gainers on the Sensex were ICICI Bank (up 1.55%); HDFC (up 1.27%); Mahindra & Mahindra (up1.16%); Hindustan Unilever (up 1.15%) and Cipla (up 1.08%). The main losers on the index were Jindal Steel (down 3.17%); Sterlite Industries (down 2%); Tata Power (down 1.99%); Maruti Suzuki (down 1.93%) and Hero MotoCorp (down 1.74%).
The top two A Group gainers on the BSE were-IFCI (up 2.87%) and Suzlon Energy (up 2.60%).
The top two A Group losers on the BSE were-Shree Cement (down 4.30%) and Wockhardt (down 3.48%).
The top two B Group gainers on the BSE were-Pearl Polymers and Windsor Machines (up 20% each).
The top two B Group losers on the BSE were-Quintegra Solutions (down 17.04%) and Ram Kayshap Investment (down 10.32%).
The Nifty gainers were led by ICICI Bank (up 1.65%); M&M (up 1.41%); HUL (up 1.17%); HDFC (up 1.08%) and Cipla (up 1.05%). The key losers on the index were Jindal Steel (down 3.45%); Sesa Goa (down 2.03%); Maruti Suzuki (down 1.97%); Asian Paints (down 1.89%) and Sterlite Ind (down 1.73%).
Markets across Asia closed lower as investors awaited US jobs data, due later today, for further directions. Besides, the International Monetary Fund (IMF) will reduce its estimate for global growth this year on weakness in investment, jobs and manufacturing in Europe, the US, Brazil, India and China, IMF managing director Christine Lagarde said in Tokyo today.
The Hang Seng shed 0.04%; the Jakarta Composite fell 0.36%; the Nikkei 225 declined 0.65%; the KOSPI Composite dropped 0.92% and the Taiwan Weighted lost 0.26%. Bucking the trend, the Shanghai Composite surged 1.01%; the KLSE Composite gained 0.38% and the Straits Times rose 0.24%.
At the time of writing, the key European indices were trading with losses between 0.07% and 0.38% and the US stock futures were in the negative, pointing to a lower opening of the US markets.
Back home, foreign institutional investors were net buyers of shares totalling Rs429.22 crore on Thursday whereas domestic institutional investors were net sellers of stocks worth Rs203.03 crore.
Micro irrigation major Jain Irrigation Systems has obtained regulatory approval from the Reserve Bank of India (RBI) to launch a non-banking financial company (NBFC), named Sustainable Agro-commercial Finance (SAFL). The NBFC, to commence business activities in the post-monsoon period, will focus its activities on farms and farmers only and operate in the rural and semi-urban geographies of the country. The stock gained 1.88% to settle at Rs89.25 on the NSE.
Fortis Healthcare and GE Healthcare have joined hands to provide care to critically ill patients in small towns in India through an electronic remote monitoring programme, CritiNext. Initially, 34 beds in two small hospitals based in Raipur and Dehradun will be covered by an electronic intensive care unit (eICU) under CritiNext. This will be extended to 500 beds by 2014 in different hospitals across the country. Fortis Healthcare declined 2.33% to close at Rs105 on the NSE.
Central Bank of India has made all National Electronic Funds Transfer transactions up to Rs1 lakh free from levy of any charges with effect from 1 July 2012. This move is aimed at promoting payments through electronic mode to increase efficiency and reduce cost. The stock slipped 0.60% to end at Rs83.40 on the NSE.