Sen­sex reg­is­ters huge gains

Money Times - - Market Review - By Deven­dra A Singh

The Sen­sex surged 1,213.28 points to set­tle at 36194.3 while the Nifty closed at 10876.75 ris­ing 350 points for the week ended Fri­day, 30 Novem­ber 2018.

On the macro-eco­nomic data, In­dia's GDP growth slowed to 7.1% in Q2FY19 due to high crude oil prices and the weak­ness of the . The In­dian econ­omy grew at 7.1% in the July-Septem­ber 2018 pe­riod against 8.2% in the June 2018 quar­ter.

Still, the gross do­mes­tic prod­uct (GDP) for the Q2 of the fi­nan­cial year out­paced neigh­bor­ing China's 6.5% growth. Higher fuel prices and a weak ru­pee were the pri­mary fac­tors drag­ging growth, while an un­even and sub-par mon­soon, flood­ing some ar­eas on late with­drawal of the mon­soon rains, with in­stances of crop dam­age and pest at­tacks hurt the farm sec­tor.

In­dia Rat­ings agency said that In­dia’s fis­cal deficit tar­get for FY19 may be missed due to a short­fall in rev­enues and lower-than-tar­geted dis­in­vest­ment pro­ceeds.

The FY19 fis­cal deficit tar­get has been pegged at 3.3% of GDP or Rs.6.24 lakh crore ($88.45 bil­lion). How­ever, a rat­ing agency es­ti­mates the fis­cal deficit at Rs.6.67 lakh crore or 3.5% of In­dia’s GDP.

The pres­sure on gov­ern­ment fi­nances is ris­ing mainly from the rev­enue side, par­tic­u­larly from in­di­rect taxes and non­tax rev­enue, the re­port added.

PM Modi is seek­ing a sec­ond term in the Gen­eral Elec­tions of 2019 but his plans to keep the fis­cal deficit at 3.3% of GDP have come un­der pres­sure due to the muted re­sponse from new GST in ad­di­tion to wel­fare ben­e­fit schemes, par­tic­u­larly for farm­ers ahead of the 2019 gen­eral elec­tions.

The abrupt roll-out of GST last year has hit busi­nesses hard and led to uncer­tainty around rev­enue col­lec­tions. The agency said that de­spite the re­forms help­ing plug leak­ages in GST col­lec­tions, ag­gre­gate in­di­rect tax col­lec­tions grew only 4.3% in the first half of the year com­pared to a tar­geted growth of 22.2% for the full year. The GST col­lec­tion in fis­cal 2017-18 was 98% of the bud­geted tar­get.

The gov­ern­ment is also likely to miss its dis­in­vest­ment tar­get of Rs.80000 crore in FY19 given that it had re­ceived only Rs.15247 crore till end Oc­to­ber 2018.

By re­duc­ing cap­i­tal ex­pen­di­ture, the gov­ern­ment will again try to re­duce the ad­verse im­pact of both ris­ing rev­enue ex­pen­di­ture and short­fall in re­ceipts in the fis­cal deficit, the In­dia

Rat­ings added.

The Fed­er­a­tion of In­dian

Ex­port Or­gan­i­sa­tions

(FIEO) has re­peat­edly called for en­chanc­ing the credit flow to the ex­port sec­tor so as not to hurt the growth of ex­ports. Ac­cord­ing to one es­ti­mate, out­stand­ing ex­port credit as on 31

March 2018 stood at Rs.28300 crore which de­clined to Rs.22300 crore as on 22 June 2018.

The credit squeeze felt by ex­porters is a part of the over­all liq­uid­ity crunch in the econ­omy that is also af­fects in­dus­trial growth and which sparked off the re­cent tiff be­tween the cen­tral gov­ern­ment and the Re­serve Bank of In­dia

(RBI).

The gov­ern­ment’s dif­fer­ences with the RBI cen­tres on four is­sues the gov­ern­ment wanted liq­uid­ity sup­port to head off any credit freeze risk, a re­lax­ation in cap­i­tal re­quire­ments for lenders, re­lax­ing the prompt cor­rec­tive ac­tion (PCA) rules for banks strug­gling with ac­cu­mu­lated non­per­form­ing as­sets (NPAs)

or bad loans and sup­port for mi­cro, small and medium en­ter­prises (MSMEs). While the NPA cri­sis is a legacy of the lend­ing boom dur­ing the high-growth years up to 2010 the cur­rent liq­uid­ity crunch par­tic­u­larly among non-bank­ing fi­nance com­pa­nies (NBFCs) which fol­lows a se­ries of de­faults last month by the pri­vately-run In­fra­struc­ture Leas­ing and Fi­nan­cial Ser­vices (IL&FS) and banks hes­i­tat­ing to lend af­ter a se­ries of bank­ing frauds.

Mr. Suresh Prabhu at an event while an­nounc­ing the ‘Logix In­dia 2019’ global lo­gis­tics meet to be held in Jan­uary 2019 stated that one of the main chal­lenges for ex­port is fi­nance. There is a de­cline in ex­port fi­nance so we have taken up the is­sue with the Fi­nance Min­istry. I think, the Fi­nance Min­is­ter is also look­ing into how we can im­prove the credit flow into the ex­port sec­tor.

Key in­dex gained on Mon­day, 26 Novem­ber 2018 on cool­ing crude-oil prices im­proved the mar­ket sen­ti­ment. The Sen­sex was up 373.06 points to close at 35354.08.

Key in­dex ended above on Tues­day, 27 Novem­ber 2018 on buy­ing of eq­ui­ties by for­eign funds. The Sen­sex was up 159.06 points to close at 35513.14.

Key in­dex ad­vanced on Wed­nes­day, 28 Novem­ber 2018 on the back of the ap­pre­ci­at­ing. The Sen­sex was up 203.81 points to close at 35716.95.

Key in­dex surged on Thurs­day, 29 Novem­ber 2018 on con­sol­i­dated buy­ing of stocks by FIIs ahead of G20 meet in the city of Buenos Aires, Ar­gentina. The Sen­sex zoomed 453.46 points to close at 36170.41 on the set­tle­ment day. Key in­dex set­tled higher on Fri­day, 30 Novem­ber 2018 on last-day trad­ing ses­sion of this month. The Sen­sex was up 23.89 points to close at 36194.30.

For fu­ture events both na­tional & global macro-eco­nomic data will dic­tate the fi­nan­cial mar­kets trend. On the ru­pee sce­nario, mar­ket par­tic­i­pants will closely watch the In­dian ru­pee trend against the US Dol­lar hav­ing is ap­pre­ci­ated to INR 69 against the USD.

The Re­serve Bank of In­dia (RBI) mon­e­tary pol­icy re­view meet is sched­uled on 5 De­cem­ber 2018. The out­look of the meet­ing will surely dic­tate the mar­ket trend and sen­ti­ment.

The HSBC Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex (PMI) and the HSBC Ser­vices PMI for Novem­ber 2018 is sched­uled for re­lease in the first week of De­cem­ber 2018. The gov­ern­ment is sched­uled to re­lease data based on whole­sale price in­dex (WPI) and the com­bined con­sumer price in­dices (CPI) for ur­ban and ru­ral In­dia for Novem­ber 2018 by mid­De­cem­ber 2018.

On the global front, United States and other Euro-na­tions macro-eco­nomic data for Novem­ber 2018 is sched­uled to be re­leased this week of De­cem­ber 2018.

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