Market scales record high
The Sensex advanced 528.34 points to settle at 33685.56 while the Nifty gained 129.45 points to close at 10452.50 for the week ending Friday, 3 November 2017.
On the macro-economic data, India’s fiscal deficit was at Rs.4.99 lakh crore for April-September 2017 or 91.3% of the budgeted target for the current fiscal year that ends on 31 March 2018. Net tax receipts in the first six months of FY18 were Rs.5.42 lakh crore.
India's annual infrastructure output in September 2017 surged 5.2% from a year ago, driven by higher production of coal and refinery products. During April-September 2017, the annual output growth was 3.3%. Coal production grew 10.6% in September 2017 from a year ago while refinery products output grew 8.1%. India's eight infrastructure sectors include coal, crude oil, natural gas, refinery products, electricity, steel, cement and fertiliser, accounting for ~40% weight in the index of industrial production.
India is likely to stick to its fiscal deficit target of 3.2% of GDP and may accelerate sales of government stakes in lenders and other companies as part of its effort to recapitalise banks, an adviser to the India's PM stated.
The government has already used up nearly all of its budget for the current fiscal year and tax revenues are expected to fall far short of initial expectations. At the same time, economic growth has slowed, sparking calls for more stimulus. Mr. Surjit Bhalla, a member of the Prime Minister’s Economic Advisory Council (PMEAC), stated that the government had stuck to its fiscal deficit targets over the past three years and is expected to do so this year as well. The central bank has warned that missing the fiscal deficit target could lead to a spike in inflation, hurting the macroeconomic stability.
Indian stocks slid last month on reports that a stimulus package of up to Rs.500 bn ($7.7 billion) might be in the works - one that would widen the deficit to 3.7% of GDP. Economic growth slipped to its lowest level in three years in the first quarter, logging an annual rate of 5.7%. But Bhalla said that there were signs of recovery. “I am more optimistic on the economy than I was two weeks ago”, adding that last week's industrial output and export data suggested that the fears about a slowdown were exaggerated. He also said that the GDP growth could be close to 6.5% for the fiscal year although the forecast is lower than the central bank's latest estimate of 6.7%.
Last week, new estimates were released by SBI’s Economic Research Department. While there could be a shortfall of Rs.1.1 lakh crore in the revenue receipts, disinvestments receipts worth Rs.72500 crore and expenditure cuts are likely to offset the impact.
“We estimate that the government may cut about Rs.70000 crore from the capital expenditure”, the report said. However, it noted that budgeted disinvestment receipts are on track to realizing Rs.72500 crore. Further, the report observed that the government has accumulated Rs.40491 crore in the National Small Savings Fund during the first five months of this fiscal. It could thus receive Rs.1 lakh crore in small savings in FY18 and would be able to do a buyback of Rs.75000 crore, which was contingent upon that. This in turn implies that the government would be able to meet its net borrowing target of Rs.3.48 lakh crore, it added.
Out of the total estimated shortfall of Rs.1.1 lakh crore in revenue receipts, around Rs.77,000 crore shortfall may be from tax revenue on account of reduction in excise duty on petroleum products, tax refunds under GST and revenue compensation to states for GST implementation. The non-tax revenue may decline by Rs.38000 crore because of lower spectrum proceeds among others, the SBI report said.
On the US front, President Donald Trump tapped Federal Reserve Governor Jerome Powell to become head of the US central bank, breaking with precedent by denying Ms. Yellen a second term but signalling a continuation of her cautious monetary policies.
Mr. Trump said, “If we are to sustain all this progress, our economy requires sound monetary policy and prudent oversight. We need strong and steady leadership at the US Federal. He will provide exactly that”.
Key index moved up on Monday, 30 October
2017, on buying of equities on positive cues. The
Sensex gained 108.94 points (+0.33%) to settle at 33266.16.
Key index edged lower on Tuesday, 31 October
2017, on profit-booking. The Sensex was down
53.03 points (-0.16%) to settle at 33213.13.
Key index surged on Wednesday, 1 November
2017, on consolidated buying by foreign funds.
The Sensex advanced 387.14 points (+1.17%) to settle at 33600.27.
Key index fell on Thursday, 2 November 2017, on selling of equities. The Sensex was down 27.05 points (-0.08%) to close at 33573.22.
Key index settled higher on Friday, 3 November 2017, on positive buying of equities by FIIs. The Sensex gained 112.34 points (+0.33%) to settle at 33685.56.
Events like national and global macro-economic figures as well as the earnings season will dictate the movement of the markets and influence investor sentiment in the near future.
On India’s macro-economic data, the HSBC Manufacturing PMI and HSBC Services PMI for October 2017 is scheduled for release in the first week of November 2017.
On the inflation data, the government is scheduled to release data based on WPI and CPI for October 2017 for urban and rural India by mid-November 2017.
USA’s macro-economic data for October 2017 is scheduled for release in the first week of November 2017.