Review of Indian Economy & Markets - Week ended 26th September 2015

  • With Bihar Assembly elections in the month of October and Prime Minister’s Visit to USA to attend UN General Assembly and meet CEOs of Silicon valley companies for investments in India, nothing much happened domestically. Many of the ministers of Ruling Party BJP are camping in Bihar for campaign with each of them camping there for at least 2-3 days and one Public Holiday in the middle of the week, this week can be taken as rather dull.
  • As per the figures released by the Reserve Bank of India, Corporate India’s foreign borrowings increased by around 48% in the month of August 2015 compared to same month previous year. This is by both automatic approval route as well as External Commercial Borrowings. The borrowings in August 2016 stood at USD 750.76 Million in August 2015 compared to USD 507.40 Million in August 2014.
  • The Reserve Bank of India (RBI) has notified norms that allow banks to upgrade credit facilities extended to borrowing entities upon a change in ownership, so long as the ownership has been changed outside ‘Strategic Debt Restructuring Scheme’. The move would “further enhance banks’ ability to bring in a change in ownership of borrowing entities which are under stress primarily due to operational/ managerial inefficiencies despite substantial sacrifices made by the lending banks.
  • In a big relief to foreign firms, government announced that the Income Tax Act will be amended with retrospective effect to exempt from minimum alternate tax (MAT) the overseas companies that covered under double taxation avoidance agreements (DTAAs). Foreign companies that do not have a permanent establishment in India will be exempt from paying MAT on profits from April 2001. The provisions of Section 115JB of Income Tax will not apply to foreign companies with effect from April 1, 2001, if they are resident of a country with which India has DTAA and they do not have a permanent establishment (PE) in India, said an official statement.
  • As per the advance estimates of Ministry of Agriculture, the output of Groundnut, Coarse Cereals, Tur (Redgram), Cotton, Maize, Rice in Khariff may be down while that of Urad (Blackgram), Castor Seed and Soy bean are expected to go up.
  • With the anticipated arrivals of the imported goods, the prices of pulses eased by around 4-5% in wholesale markets. Same is the case with Onions. However, not much change is observed in rates of Pulses in Retail Markets. However Onion prices started coming down marginally during this week.
  • With Urea imports surging by 43% in April – August period compared to last year and the deficient monsoon till September, the country is sitting on a stockpile of the fertilizer.

Markets
Indian Equity markets closed this truncated week lower by 1.4%. Both the stock market indices viz., Sensex and Nifty ended lower due to weakening of Indian Currency against USD, weakness in global markets. Metal stocks ended lower due to continued weakness in Chinese Economy and stockpiling of metal stocks with that country. Net flows from FIIs turned negative. The declines were more than advances as the Nifty fell by nearly 169 points before recovering marginally.

Following are the top gainers and losers in Nifty during the week
Ganiers
% change
Losers
% change
IDFC
5.2
Tata Motors
-8.1
Lupin
4.8
NMDC
-8.1
Cairn India
4.6
Coal India
-7.3
Maruti
3.8
Bharti Airtel
-6.7
Infosys
3.3
JSPL
-6.5

Market focus now shifts to Reserve Bank of India which expected to come out with Monetary Policy on 29th September 2015. With a lot of pressure both direct and indirect on the Reserve Bank Governor, the general consensus is that the benchmark rates may be cut by 25 basis points. We can expect choppy markets if this does not turnout as expected.
Currency



USD strengthened against INR during this week from INR 65.868 on 18th September to INR 66.16 on 23rd September 2015 due to the expectation of a rate hike later this month by Fed as well as increase in month-end demand from importers. Sustained outflows by Foreign Portfolio Investors to the tune of nearly USD 190 – 195 Million also contributed for this weakening of INR against USD. 

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