Improving India’s global image
The disconnect between polity and economy is a distant happening. Yet, the promotion of India by 30 ranks on ease of doing business is a matter not to be overlooked. If we Indians remain critical of the little pains for bigger gains, global outcomes like this are there to reassure us.
The consolidation of the market even at these levels is ample proof of the large appetite the DIIs and retail investors have for sharing the creation of wealth. Surely, five years is too short a period for the PM and his team to bring reforms like demonetisation and GST to their logical end. Surely, the pain in both shall easily take two more years to subside and during this journey, NaMo may seek a second term to continue the reforms and battle corruption. Last week, we had raised questions whether the current rally will last the Gujarat/Haryana test. The market dismissed this hesitancy in its moves in the last eight sessions. The market moved up selectively and the demand for select stocks was seen. It is this rising flow of retail money flowing into equity both directly and through mutual funds which is deciding the market moves.
Apart from politics and the battles therein, the government is preparing to do its best in the ensuing budget. The budget this January may be the last budget by this government. Next year, if the elections are held in May 2019, then only vote on account will follow and the new FM shall present the budget in his new ‘avatar’. Thus, the BJP’s last full budget will see the social sector getting 30% higher allocation. We may also see increased allotment for agriculture, rural development, education, infrastructure, etc.
Official sources say that traditionally, pre-election Union Budgets are populist where fiscal prudence goes for a toss. But the government also has to do the balancing act to ensure that the growth momentum is retained in the economy after it fell to 5.7% in the April-June 2017 quarter. This has to be done in tandem with mobilising adequate funds to finance schemes that affect a large section of the vote bank and help the government get a positive pro-welfare image. To balance the additional expenditures, the government is working out ways to raise non-tax revenues like dividends, PSU profits, revenue receipts and spectrum auction receipts to keep the next year’s fiscal deficit within the target of 3% even on higher expenditure, sources said. The increase in infrastructure spending by the government is another vital cog in the next budget’s wheel.
The Diwali lights may have faded by now but some sectors like realty will enjoy continued festivity. The growing confidence among home buyers has made realty stocks climb as much as
18% on the first day following Diwali. This is indicative as to what could be in store for this sector from hereon to next Diwali.
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Realty developers with a good track record like Kolte Patil Developers, Sunteck Realty, Purvankara and Sobha registered fresh 52-week highs while stocks like Arihant Superstructures, Ansal Buildwell, DLF, Anant Raj, Godrej Properties and Peninsula Land also joined in the rally rising 3-8%. Mutual Funds and HNIs at Dalal Street see Pharma stocks on the recovery path. Both categories of investors are seen buying Pharma companies believing that the worst in terms of regulatory and competition concerns have been priced in. Rakesh Jhunjhunwala raised his stake in Lupin by 0.13% to 1.89% in the September quarter. Mutual Funds have raised stake in Lupin, Sun Pharmaceutical Industries, Torrent Pharmaceuticals, Cadila Healthcare and Natco Pharma. FIIs have played a mix of cutting stakes in Lupin, Sun Pharmaceutical Industries, Aurobindo Pharma, Torrent Pharmaceuticals, Cadila Healtchare and Natco Pharma and simultaneously raised stakes in Biocon, Jubilant Life Sciences, Divi’s Laboratories and Glaxosmithkline Consumer Healthcare. From the long-term perspective, pharma looks interestingly attractive. E-vehicles have been in the news and strategy to identify companies which may have a busy schedule in this transition is on. MOIL is one such stock which comes to the mind given the booming prospects of manganese. Market indices may be steading around 33K Sensex and 10.3K Nifty but a re-look at the market cap club makes an interesting study.
If a $2.5 trillion GDP is heading for $7 trillion by 2023, we leave the market cap and creation of wealth figures to your imagination.