Stocks
Nifty, Sensex still in a short-term uptrend – Thursday closing report
We had mentioned in Wednesday’s closing report that Nifty, Sensex were still bullish. The major indices of the Indian stock markets made a minor rally on Thursday and closed with small gains of a little less than 0.50% over Wednesday’s close. The trends of the major indices in the course of Thursday’s gains are given in the table below:
 
 
Healthy quarterly results, consistent buying by foreign funds and a rise in global crude oil prices buoyed the Indian equity markets on Thursday. The key indices closed the day's trade in the green as healthy buying was witnessed in stocks of healthcare, automobile and consumer durables. However, gains were capped due to profit booking at higher levels and caution ahead of a key global financial event. The BSE market breadth was tilted in favour of the bulls -- with 1,608 advances and 1,151 declines. On the NSE, on Thursday, there were 905 advances, 552 declines and 68 unchanged.
 
ICICI Bank on Thursday became the first bank in India to deploy ‘software robots that emulate human action, in its over 200 business processes thereby reducing the response time to customers by up to 60%. "The bank is the first in the country and among few, globally, to deploy ‘software robotics' that emulates human actions to automate and perform repetitive, high volume and time consuming business tasks cutting across multiple applications," ICICI Bank said. "We have re-engineered over 200 business processes which are powered by software robots across various functions of the bank. We plan to more than double the software robots to over 500 by end of this fiscal," Chanda Kochhar, MD and CEO, ICICI Bank, said. This initiative marks a milestone in the banking innovation in the Indian banking industry as it joins a select group of overseas organisations which have deployed this unique state-of-the-art robotic technology in such a large way, Kochhar said. The innovation is likely to increase the lead of hi-tech private banks over public sector banks. The Bank Nifty rose 0.05% in Thursday’s trading.
 
US stocks closed mixed with the Nasdaq Composite Index refreshing previous day's closing record, as Wall Street digested the Federal Reserve's Beige Book. The Dow Jones Industrial Average on Wednesday fell 11.98 points, or 0.06%, to 18,526.14. The S&P 500 edged down 0.33 point, or 0.02%, to 2,186.15. The Nasdaq increased 8.02 points, or 0.15%, to 5,283.93. According to the Beige Book released in the afternoon, reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest pace on balance during the reporting period of July through late August. "Labour market conditions remained tight in most districts, with moderate payroll growth noted in general. Price increases remained slight overall," said the Beige Book. The Fed has been in focus recently, with investors pondering over when the US central bank will decide to raise interest rates. The Federal Open Market Committee, the Fed's monetary policy arm, is set to meet on September 20-21. On the economic front, the number of job openings increased to 5.9 million on the last business day of July, the US Labour Department reported on Wednesday.
 
State-run gas utility GAIL India (GAIL) on Wednesday posted 244 per cent jump in its net profit for the first quarter which ended in June at Rs 1,335 crore on the back of a turnaround in its petrochemical business and the stake sale in Mahanagar Gas. The company's net profit in the April-June quarter of 2015 was at Rs 388 crore, it said in a statement.  "GAIL's PAT excluding gain from stake sale in Mahanagar Gas Ltd is Rs 846 crore, signifying an increase by 118%," it said. Moreover, during the quarter, production and sales of GAIL's petrochemical business jumped 149% and 121% respectively, resulting in a revenue increase of 95% to Rs 1,133 crore. The profit in this segment stood at Rs 9 crore as against a loss of Rs 397 crore in the corresponding period of last year. Gail India shares closed at Rs388.90, down 1.92% on the BSE.
 
State-run explorer Oil and Natural Gas Corp (ONGC) on Wednesday posted a 21.14 per cent fall in net profit for the first quarter ended June at Rs 4,232 crore, as compared to Rs 5,386 crore in the same quarter a year ago caused by lower crude prices. The company's gross revenue for the quarter in consideration also fell by a similar 21.4% to Rs 17,784 crore, as compared to Rs 22,628 crore in the first quarter of the last fiscal. Operating income or EBITDA (earnings before interest, taxes, depreciation and amortization) during the quarter in question also fell, coming in at Rs 8,484 crore, as against Rs 10,636 crore in the same quarter last year. The shares of the company closed at Rs246.25, up 0.47% on the BSE. Among the index stocks, TCS fell sharply after it announced that business outlook of some of its major customers was muted. There was all-round buying of pharma stocks.
 
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:
 

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Why inflation is headed below 4%
The inflation based on Consumer Price Index (CPI) would fall below 4% in December 2016 and at least four-five readings in FY2017 would be sub 4.5%, says a report.
 
In the Ecowrap research note, State Bank of India (SBI), says, there are several reasons for the decline in inflation trajectory. "First, pulse prices are on a declining trajectory, and from historical data it can be inferred that there is a clear downside of at least 60 basis points to headline CPI numbers over the medium term as pulse prices start to mean revert. This alone will pull down CPI to sub-4.5%. Second, the distribution of core CPI over the last 20 months indicates a nicely shaped Bell curve, with mean CPI at 4.5%," it added.
 
 
Another point is steps announced in the Budget to increase agricultural productivity through better irrigation, insurance and other mechanisms. The Ecowrap feels that this could drive down food prices structurally over the long run. 
 
"In this context," the report says, "we recently did a study to understand the dynamics of behaviour of inter-sectoral prices in case of India. Our results showed that agricultural prices and manufacturing prices are now being determined by separate forces, while the first is guided by minimum support prices the second is primarily driven by changes in productivity and wage structure in India. For example, our research showed that labour productivity, estimated as the per capita manufacturing real GDP at constant prices, is exhibiting upward trend and sharp changes has taken place in labour productivity since late 1990’s."
 
Because of this productivity increase, manufacturing WPI had declined from a high of 12.3% in FY1995 to as low as 2.4% in FY2006. In fact, manufacturing prices consistently used to be lower in 2000 and the average manufacturing was less than 4% in those years, just before the crisis. 
 
Lastly, the projection of ‘above-normal’ monsoon for the current year will boost agricultural production in the country, which will subsequently impact the food inflation in downward direction, SBI Ecowrap says. 
 
According to the report, one interesting fact that will also emerge in the coming months is that the wholesale price index (WPI) will be greater than CPI. This has happened previously during entire 2011, except in September that year, when WPI was greater than CPI by average 60 bps.  However, it says, this time the difference will be not so significant and though WPI will be greater than CPI, both will possibly move in tandem, sans any global volatility. This is eminently good news given the fact that India recently adopted an inflation targeting framework, the report says.
 
"Simultaneously, history will repeat with India forecast to post a high current account surplus 0.6% of GDP in first quarter of FY17, the first time after 2004. The only thing that now needs to happen is a pickup in investment! Hopefully this may happen in second quarter of FY17," the SBI Ecowrap concluded.

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COMMENTS

Aqeel Qureshi

8 months ago

Who is the Economic Research Department of SBI trying to please through these one sided skewed reports?
It looks like is intended to palter more and enlighten less.

All assumed factors for drop in inflation have been covered and exaggeratedly so.
But where are the factors that might work towards hike in inflation?

Remember the UPA regime ministers blaming higher disposable income in India's hinterlands for inflation?
What about crude oil?
The bonanza to Indian middle income group coming from the recent Pay Commission recommendations?

All these unanswered questions look like having been ignored intentionally to arrive at the conclusion that has been arrived at.

Another glaring example of the PSU culture to please the babus and the netas.
And we were expecting the current boss here to head the RBI.
Close Shave Indeed!!!!

Mahesh S Bhatt

8 months ago

Neither Acche din which are dim nor aam aadmi ka haath hamare saath? Work & pay taxes no income tax rebate/no inflation discounts stagflations staring all doctored econo-mines waiting to explode
Mahesh

s.harihara puthran

8 months ago

All these forecasts are fiction. I am a senior citizen and my only source of income is interest on FDs. While the interest rates have come down by about 30% i am buying all day today essentials at the same prices i used to buy2013.
What is the meaning of Inflation has come down for people like me. While our
income has come down the prices of essentials have only increased.

REPLY

Ramesh Mehta

In Reply to s.harihara puthran 8 months ago

Sir,
reduction in inflation means "rate of increase of prices" is reduced. net price does not come down in low inflation. Its just that the "rate of increase of prices" is low. i.e. prices go up but at a slower pace

s.harihara puthran

8 months ago

All these forecasts are fiction. I am a senior citizen and my only source of income is interest on FDs. While the interest rates have come down by about 30% i am buying all day today essentials at the same prices i used to buy2013.
What is the meaning of Inflation has come down for people like me. While our
income has come down the prices of essentials have only increased.

s.harihara puthran

8 months ago

All these forecasts are fiction. I am a senior citizen and my only source of income is interest on FDs. While the interest rates have come down by about 30% i am buying all day today essentials at the same prices i used to buy2013.
What is the meaning of Inflation has come down for people like me. While our
income has come down the prices of essentials have only increased.

s.harihara puthran

8 months ago

All these forecasts are fiction. I am a senior citizen and my only source of income is interest on FDs. While the interest rates have come down by about 30% i am buying all day today essentials at the same prices i used to buy2013.
What is the meaning of Inflation has come down for people like me. While our
income has come down the prices of essentials have only increased.

After president's nod, next steps ahead on GST
After the nod from President Pranab Mukherjee to the Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, and its Gazette notification, the process remains long in implementing the pan-India Goods and Services Tax (GST) regime:
 
- The parliament will once again have to take up three relevant bills -- one to permit the central government to levy a Central GST, another for an Integrated GST where more than one state is involved and then a model bill to facilitate states to levy their respective State GST.
 
- In tandem, the states will have to enact their own legislation for their respective State GSTs. This is because the GST regime will involve the imposition of both a Central and a State levy, both at preferably identical rates.
 
- Another main issue to be addressed is: What will be the GST rate? This remains a matter of hot debate and the various base rates recommended by experts and stakeholders vary from around 15.5 percent to as high as 26 percent.
 
- The rate has to be decided by the soon-to-be-formed GST Council, which will be chaired by the Union Finance Minister with all state finance ministers as members.
 
- The GST Council also has to put in place a dispute resolution mechanism. 
 
- The necessary IT infrastructure, too, has to be set up. Towards this, a non-government company was constituted in 2013 -- Goods and Services Tax Network. This company has mandated Infosys to provide the IT backbone. The progress in this regard, officials maintain, is as per schedule.
 
- The Goods and Services Tax Network has targeted October for the commencement of transferring all existing assessees to the new system, along with software and hardware tests.
 
- Training will also begin for some 100,000 officials at the central and state levels who are involved with indirect taxes.
 
- The coding of items and the rates of tax into the software is to commence in December, followed by beta runs from February.
 
- The system, officials said, is expected to be fully functional by mid-February for trials -- in time to meet the targeted roll-out date of April 1, 2017.
 
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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