What an eventful month first it was Chinese President Xi Jinping’s India visit followed by the Prime Minister Mr. Narendra Modi’s Visit to the USA.
The Chinese President’s Visit resulted in a commitment of $20 billion dollars in a fast train corridor and a new strategic road. The investments announced were much below the heavily hyped expectations of $100 billion. The meet had a sense of Déjà vu though; in the 1960s, Nehru and Zhou En Lai met and announced “Hindi-Chini Bhai Bhai” while the Chinese military were intruding into Tibet Arunachal and Ladakh. In 2014 when the Xi Jinping –Modi, were meeting in Ahmedabad, Indian and Chinese armed forces were locked into a border stand-off.
“Kem Cho” — this is how US President Barack Obama welcomed Prime Minister Narendra Modi in Gujarati at the doorstep of the White House, ahead of the rare private dinner hosted in his honour. Mr. Modi’s visit have been one of the most remarkable visits abroad, it witnessed a surprising response from the people, with at least seven speeches, numerous interactions with smaller groups, and almost two dozen bilateral meetings with US officials, CEOs, and political and civic leaders. Some of the major outcome of the US visits are lower barriers for travel (including visas on arrival for US tourists beginning in 2015), joint cooperation on smart cities focused on Ajmer, Vishakhapatnam, and Allahabad, and $1 billion for financing India’s transition into a low carbon and climate resilient economy. The US also agreed to back India’s membership of the Missile Technology Control Regime and Nuclear Suppliers Group, which would mark India’s further integration into the global nuclear mainstream.
But, it was at Madison Square where history was created, “Namo! Namo! Namo!” the audience chanted. He reciprocated by promising to promote Indian economic growth and clean up the polluted Ganges River. He further promised to make it easier for those of Indian descent to obtain visas, so that members of the Indian Diaspora might bring their talents back to the homeland.
In his speech, Modi promised to fight corruption and champion India’s poor people. He also highlighted the country’s rising status as a technology giant, joking that it was no longer known a place of “snake charmers.” “Our country used to play with a snake, now we play with the mouse,” he said, to laughter.
India scripted history with the success of its Mars mission. Mangalyaan entered the Mars orbit, making India the first country in the world to make it to the Planet in the first attempt. $74 million were spent on the project, making it by far the cheapest of recent missions to Mars. The U.S. spent $671 million getting its Maven satellite to Mars orbit. Earlier PM Mr. Modi has said that India had spent less than Hollywood had on producing the film “Gravity” to reach the red planet
“Make in India” – Promising effective and easy governance along with a stable regime, Prime Minister Mr. Modi made a strong pitch before domestic and foreign companies to make India a manufacturing hub. He, however, indicated that instead of providing sops the government would provide an enabling environment to the industry to invest and grow in India. Government has identified 25 sectors including pharma, automobiles, textiles, aviation, mining, chemicals and others which have potential to make India a leader in these fields.
“We want to chart out new path wherein business entities are extended proverbial red carpet welcome… We are fully committed to delicensing, deregulation and radical changes as we go along. We have an open mind,”………………. Commerce and Industry Minister, Mrs. Nirmala Sitharaman said at the launch of the ‘Make In India’ campaign
On the macro Front, India’s fiscal deficit was 3.98 trillion rupees ($64.4 billion) during April-August, or about 74.9 percent of the full-year target, the fiscal deficit for the first five months of 2014-15 is 75 per cent of the Government’s Budget estimate. Finance ministry is increasingly optimistic that it can meet a tough fiscal deficit target, helped by a 12% decline in global crude oil prices since May.
Trade deficit widened to $14.25 billion in September as gold imports surged about 450 per cent to $3.75 billion. Merchandise imports surged nearly 26 per cent last month year-on-year to $43.2 billion and exports grew a meagre 2.73 per cent to $28.9 billion. The deficit stood at $10.84 billion in August.
Wholesale inflation rate plunged to 2.38% in September, the lowest in five years, aided by a sharp drop in vegetable and petrol prices, rejuvenating hopes that the Reserve Bank of India will cut interest rates soon. However, the sharp fall in inflation can be attributed to a favorable base effect, moderation in food prices, and a drop in crude prices.
Retail Inflation eased to 6.46 per cent, the lowest in 33 months in September. The overall food inflation as measured by CPI fell to 7.67 per cent as against 9.35 per cent in the previous month and 11.75 per cent in September 2013. Retail inflation, has been on decline since July and is below the RBI target of 8 per cent by January 2015. However, withthe 12 percent deficiency in monsoon, the RBI will probably wait for a few more quarters to see its impact on food prices and it is unlikely that the RBI would cut rates too soon.
August IIP grew 0.4% YoY in August 2014, however remained unchanged from the previous month. Manufacturing growth recorded contraction (-1.4%) for the second consecutive month. Consumer goods index falling 6.9% from a year ago is another area which causes concern. although a part of the slowdown has been attributed to one-off factors, such as the closure of Nokia’s Chennai factory.
Globally, The Federal Reserve renewed its pledge to keep interest rates near zero for a “considerable time,” but also indicated it could raise borrowing costs faster than expected when it starts moving. In a statement after a two-day meeting of its policy-setting, it announced a further $10 billion reduction in its monthly purchases, leaving the program on course to be shuttered next month.
Alibaba’s initial public offering now ranks as the worlds biggest at $25 billion. Overwhelming demand saw the IPO initially raise $21.8 billion, and then sent Alibaba Group Holding Ltd’s stock surging 38 percent on its debut. That prompted underwriters to exercise an option to sell an additional 48 million shares.
Back home, World Steel Association (WSA) said thatIndia’s steel demand is likely to grow at 3.4 per cent in the current year; it has pegged growth for the next year even higher at six per cent as against 1.8 per cent in 2013. Moody’s Investor Service had in August said steel consumption in India would pick up once the government’s infrastructure spending policies are put in place.
Sectorally, the mining and metals space is likely to witness headwinds in the near future with the Supreme Court cancelling all but four of the 218 coal block allocations it had declared illegal and arbitrary in its August 25, 2014 verdict. On the Centre’s request to save 40 functional coal blocks and six ready-to-function ones, the court said 42 of them would continue to function for the next 6 months, till March 31, 2015, The court order exempted four blocks. These include two ultra mega power projects — Moher and Moher Amroli Extension — allocated to Sasan Power Ltd, Tasra allotted to Steel Authority of India Ltd. and Pakri Barwadih coal block of the National Thermal Power Corporation.
There seems to be no end to the woes of the Aviation sector, as per media reports, Jet Airways has sought a month’s time to clear about Rs 100 crore worth of salary arrears of its pilots, who have been expressing their ire against the delay in making the payment. Jet Airways, in which the Gulf carrier Etihad is a strategic partner with 24 percent stake, has 1,100 pilots on its rolls. Its pilots had struck work for several weeks in 2009 against sacking of two of their colleagues for forming a union.
Realty was another sector which was in limelight with Sebi cracking down on DLF by barring six top executives, including promoter-chairman KP Singh, from accessing the securities market for three years, thereby obstructing its options to raise funds. The order has been in connection to disclosure lapses in the company’s IPO in 2007.
Retail has become the centre of attraction with major Online Players offering hefty discounts and offline players going up in arms against them. Flipkart one of the major players in the online retail segment was in the news for its discount Sale. Proclaimed as a ‘Big Billion Day’ by Flipkart, the big sale has proved to be a nightmare for many customers. Huge discount offers, publicity campaigns, and a one-day time limit for the offer resulted in a mad rush, leading to the website to crash within minutes of the sale kicking off, the lucky few who managed to get to have access found the products offered had run out of stock. “Even Rajnikanth is not able to buy on Flipkart today” went a joke. The ED is investigating whether any norms were violated during the sale day or not. A separate probe on Flipkart is underway since 2012 for alleged violation of the Foreign Exchange Management Act (FEMA). Industry insiders say that Flipkart could be served with a notice of about Rs 1,000 crore soon.
Global ratings agency Standard & Poor’s raised India’s sovereign outlook from “negative” to “stable.” The stable outlook means lower borrowing costs for companies seeking to raise funds
Domestic Equity Markets have been on a roll, with almost 30% return in Nifty and many midcaps turning multi baggers since last Diwali, equity investors have been on a winning spree. The markets have though seen a bad patch in the last few trading sessions with Foreign Institutional Investors (FII) who have been constant buyers resorting to selling in the last one month. Stocks worth Rs. 3800 crores have been sold by FII’s in the period. Readers would appreciate that we have mentioned in our September issue that “investors would be better off being cautious as the near term upside looks a little difficult”.
Going forward, the markets might witness pressure in the short term on fears about the strength of global growth, conflict in the Middle East, slowing growth in China and Germany as well as the spread of the Ebola virus from West Africa. The medium to long term view though remains bullish. With number of positives in its favour – falling oil prices, commodity prices touching five-year lows, sliding gold and stable rupee, fall in CPI and WPI, it seems to be the best of time for the country. The icing on the cake could be a rate cut from the RBI in coming days, all these taken together would lead the economy towards a growth path and achieving 7% growth in FY16 would not be a distant dream. We believe that despite the run up there is enough room for growth and any fall should be taken as an opportunity to accumulate. One should be cautious though on quality of the stock and focus should be on companies with strong fundamentals, sound management, proper growth outlook and good corporate governance.
“Chalein Saath Saath“, forward together we go”, is how the India-US joint vision statement, released after Prime Minister Narendra Modi’s meeting with President Barack Obama, begins. “As leaders of two great democratic nations with diverse traditions and faiths, we share a vision for a partnership in which the United States and India work together, not just for the benefit of both our nations, but for the benefit of the world,” the statement said. When two great nations join hands there seems to be little doubt on the long term aspects of this togetherness. This would go a long way in the country achieving new horizons.
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(Working as Head-Research at Eastern Financiers Ltd, am a post graduate in commerce from Calcutta University, and have gained wide experience in the last 18 years. Prior to joining Eastern Financiers, I have gained in depth knowledge of the Financial Markets while working with Capital Market Publishers, Lohia Securities & CD Equisearch. As head of the Equity Research Wing, I appear regularly as Guest Analyst at CNBC, Awaaz, CNN-IBN, NDTV Profit , Zee Business,Bloomberg UTV, ET Now & R Plus.)