Key benchmark indices extended gains and hit fresh intraday high in early afternoon trade. The market sentiment was boosted by Finance Minister P Chidambaram cutting the fiscal deficit target to 4.1% of GDP for 2014-15 at the time of announcement of the Interim Budget for 2014-15 on Monday, 17 February 2014, his statement that the government will contain fiscal deficit at 4.6% of GDP in 2013-14 and the government's announcement of lower-than-expected gross market borrowing of Rs 5.97 lakh crore for 2014-15. The market sentiment was also boosted by data showing that foreign funds were net buyers of Indian stocks on Monday, 17 February 2014, as the barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty, both, hit their highest level in almost three weeks. The Sensex was up 191.17 points or 0.93%, up about 220 points from the day's low. The market breadth, indicating the overall health of the market, was positive. Gains in Asian stocks also underpinned sentiment on the domestic bourses.
Index heavyweight and cigarette major ITC fell in choppy trade. Another index heavyweight Reliance Industries (RIL) edged higher in volatile trade. Auto stocks rose for the second day in a row after the government reduced excise duty on cars, commercial vehicles, sports utility vehicles (SUVs), motorcycles and scooters for the period up to 30 June 2014 the in the Interim Budget for 2014-15 on Monday, 17 February 2014. Most IT stocks gained.
The market edged lower amid initial volatilty. The Sensex reversed initial losses in morning trade. The Sensex extended gains and hit fresh intraday high in mid-morning trade. The Sensex further extended gains and hit fresh intraday high in early afternoon trade.
Asian stocks edged higher on Tuesday, 18 February 2014, after the Bank of Japan maintained unprecedented asset purchases and boosted lending programs.
The market sentiment was boosted by data showing that foreign funds were net buyers of Indian stocks on Monday, 17 February 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 522.82 crore on Monday, 17 February 2014, as per provisional data from the stock exchanges.
At 12:20 IST, the S&P BSE Sensex was up 191.17 points or 0.93% to 20,655.23. The index jumped 194.07 points at the day's high of 20,658.13 in early afternoon trade, its highest level since 29 January 2014. The index fell 27.58 points at the day's low of 20,436.48 in early trade.
The CNX Nifty was up 57.65 points or 0.95% to 6,130.95. The index hit a high of 6,134.20 in intraday trade, its highest level since 29 January 2014. The index hit a low of 6,066.80 in intraday trade.
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The BSE Mid-Cap index was up 42.22 points or 0.67% at 6,342.89. The BSE Small-Cap index was up 32.39 points or 0.52% at 6,312.99. Both these indices underperformed the Sensex.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,280 shares rose and 968 shares fell. A total of 157 shares were unchanged.
Among the 30-share Sensex pack, 22 stocks rose and rest fell. HDFC (up 3%), ICICI Bank (up 2.91%) and AXIS Bank (up 3.47%) edged higher from the Sensex pack.
Most IT stocks gained. Wipro (up 0.12%) Infosys (up 0.11%), and TCS (up 0.27%) gained. HCL Technologies (down 1.02%) and Tech Mahindra (down 0.4%) declined.
Index heavyweight and cigarette major ITC was off 0.25% at Rs 319.15. The stock hit a high of Rs 321.55 and low of Rs 317.25 so far during the day.
Index heavyweight Reliance Industries (RIL) was up 0.6% at Rs 816.50. The scrip hit high of Rs 817.90 and low of Rs 809 so far during the day.
Auto stocks rose for the second day in a row after the government reduced excise duty on cars, commercial vehicles, sports utility vehicles (SUVs), motorcycles and scooters for the period up to 30 June 2014 the in the Interim Budget for 2014-15 on Monday, 17 February 2014. M&M (up 0.16%), Maruti Suzuki India (up 0.65%), Ashok Leyland (up 1.31%), Hero MotoCorp (up 0.5%) and TVS Motor Company (up 0.12%) gained. Bajaj Auto declined 0.15%.
The excise duty on small cars, two-wheelers and commercial vehicles has been reduced to 8% from 12%. The excise duty on SUVs has been reduced to 24% from 30%. The excise duty on large cars has been cut to 24% from 27%. The excise duty on mid-segment cars has been cut to 20% from 24%.
Bond prices rose after the government's announcement of lower-than-expected gross market borrowing of Rs 5.97 lakh crore for 2014-15 at the time of announcement of the Interim Budget for 2014-15 on Monday, 17 February 2014. The yield on 10-year benchmark federal paper, 8.83% GS 2023, was hovering at 8.763%, lower than its close of 8.8047% on Monday, 17 February 2014. Bond yield and bond prices move in opposition direction.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 62.12, compared with its close of 61.84/85 on Monday, 17 February 2014.
Commenting on the interim budget, Mr. Rana Kapoor, President, The Associated Chambers of Commerce and Industry of India (ASSOCHAM), on Monday, 17 February 2014, said: "Despite being low on expectations in an election year, Finance Minister P Chidambaram's Interim Budget has given a pleasant surprise at least partly to the manufacturing sector which has been bleeding. The excise duty cut on automobiles and capital goods will provide a much-needed relief to these sectors". However, the industry would expect a much larger package from the new government to revive the manufacturing sector when a regular budget is presented some times in July, the ASSOCHAM chief said. More importantly, the Finance Minister deserves to be complimented since he is leaving behind the government treasury in a sound shape with the result that the overall macro picture of the Indian economy today looks far better than it was about eight months back, the ASSOCHAM chief said.
The external sector today is far more stable with exports picking up and the current account deficit capped at USD 45 billion, a little less than half the worrisome level of USD 88 billion in 2012-13. The fiscal deficit has also been contained at 4.6 per cent, though it has been achieved by a big cut in the Plan expenditure, ASSOCHAM said. But, here the Finance Minister did not have many choices either, ASSOCHAM said. The ASSOCHAM feels that there is an imperative need to cap the non-plan expenditure of the Central Government. The Non-Plan expenditure of over Rs 12 lakh crore gives an impression of a fat government which needs to reduce its size so that more resources are left for development, the ASSOCHAM said in a statement.
The Finance Minister also needs a pat for not yielding to pressures of populism, which is generally evident in an election year, ASSOCHAM said. However, a ballooning subsidy budget of Rs 2.46 crore remains a big burden on the exchequer and needs to be pruned to a sustainable level by better targeting the subsidies in food, fuel and fertilizer, it said.
Despite being a vote on account, the initiatives on skill development, and the MSME innovation are laudable, ASSOCHAM said. "While the industry too is disappointed for the country not being able to usher in the major tax reforms in the form of GST, we look forward to the new government to complete the task. The ASSOCHAM would like to see a government which is stable and decisive so that India reverts back to 8-9 per cent growth sooner than later. For us, there are no choices than to grow at a rapid pace whichever political combination is voted to power," the ASSOCHAM said.
Commenting on the Vote on Account, Mr. Sidharth Birla, President, Federation of Indian Chambers of Commerce and Industry (FICCI), on Monday, 17 February 2014, said: "The statement made by the Finance Minister was balanced and largely on expected lines. While industry expectations were limited from an interim budget formality, the emphasis laid on turning around the growth trajectory and reviving the manufacturing sector in particular are well received." The maximum focus this time was on the fiscal deficit number, a figure being closely watched by all investors. "The Finance Minister has stuck to what he had promised with fiscal deficit being kept at 4.6% of GDP in fiscal 2014 and lower than the budget estimate of 4.8%. The future direction being given with regard to central government finances is also good. While this was the last budget of the government, yet the Finance Minister refrained from announcing any large populist measures", added Mr. Birla.
Industry has welcomed the initiative of a ten point charter outlining the vision for future of the Indian economy, FICCI said in a press release issued on Monday, 17 February 2014. Many of the points mentioned such as need for fiscal consolidation, importance of foreign investments for financing CAD, creating a balance between price stability and growth, deepening the financial sector reforms, intensifying efforts on infrastructure development, boosting manufacturing growth with zero taxing of exports and minimum tariff protection to encourage domestic value addition, containing subsidies, having planned urbanisation and pushing skill development have been highlighted by FICCI even in its most recently launched 'Economic Agenda for Growth', FICCI said. "While many of these points are aspirational, these are all achievable through concerted effort and a coordinated approach between the centre and the states", said Mr. Birla.
The financial markets also received well deserved attention in the Vote on Account statement with announcements pertaining to revamping of the ADR/GDR Scheme, liberalising the rupee denominated corporate debt market, deepening and strengthening the currency derivatives market, creating one record for all financial assets of individuals, enabling smoother clearing and settlement for international investors for investing in Indian bonds, the FICCI said. "These measures will help in further broadening of the Indian financial market and efficient availability and utilisation of risk capital", said Mr. Birla. "On the excise duty reduction that was affected in select sectors, FICCI feels that the Finance Minister has chosen the areas carefully based on the recent performance of the industrial sector. While the period of relief is small, this move could provide some reprieve to the identified industries," added Mr. Birla.
The Finance Minister's statement that the government remains fully committed to 'Aadhaar', which is a key tool for empowerment, is re-assuring. FICCI also welcomes the Finance Minister's allocation of Rs 100 crore to the India Inclusive Innovation Fund for promoting innovation amongst the MSMEs which form the backbone of India's industrial economy, FICCI said.
Welcoming the Interim Budget presented by the outgoing government, Mr. Kris Gopalakrishnan, President, Confederation of Indian Industry (CII), on Monday 17 February 2014, said that the vision presented in the Budget is very much in line with what CII believes in. The Finance Minister has highlighted the importance of the manufacturing sector, which is key to reviving the economy, Mr. Gopalakrishnan said. The performance of the manufacturing sector over the last one year has been consistently poor and is in need of intervention by the government. "On behalf of CII, I must thank the Finance Minister for recognising this need and reducing excise in some of the most affected subsectors of manufacturing. The reduction in excise duty on sectors such as automobiles, capital goods and consumer electronics is indeed welcome, as this will help revive demand in these sectors," Mr. Gopalakrishnan said.
Since the Finance Minister made a special mention of the forward looking policy to promote electronics sector, CII hopes that the association's recommendation of abolition of SAD and reduction in CST for electronics sector will be taken up in the regular budget, Mr. Gopalakrishnan said. This is important as electronics is a zero duty sector on account of ITA I. The restructuring of excise duty on handsets to include 1% excise duty without CENVAT credit on inputs is welcome as this will encourage handset manufacturing in India, the CII said in a press release.
The CII President also welcomed the fiscal figures outlined by the Finance Minister in the Interim Budget speech. "It is clear that the government has stayed on the fiscal discipline roadmap and achieving a 4.6% fiscal deficit is no small feat. The fact that deficit has been targeted at 4.1% for the next fiscal sends a strong signal and should help confidence in the economy. While the Interim Budget maintained overall expenditure on a tight leash, the Finance Minister manages to make some important allocations. Given the stressed assets in the banking sector, the Finance Minister's allocation of Rs 11300 crore for strengthening the capital base of public sector banks is welcome," said Mr Gopalakrishnan.
In the 10-point vision laid out by the Finance Minister, besides mentioning reduction in the twin deficits, emphasis was also given to a balanced monetary policy, implementation of infrastructure projects and development of cities. CII hopes that the new government will further strengthen the support given to industry and extend the support to other sectors. The implementation of GST should also be a priority for the coming government, the CII release said.
Bharatiya Janata Party (BJP) National Treasurer and Member of Parliament from Rajya Sabha Mr. Piyush Goyal on Monday, 17 February 2014, said that creation of over 200 million jobs over the next 10 years is going to be the priority of the BJP. Addressing the National Council meeting of the Confederation of Indian Industry (CII), Mr. Goyal said affordable housing alone could provide the kind of spur to manufacturing which the country needed. If the country took up the agenda of creating 100 million affordable homes then 15 million jobs could easily be created every year, he said. Ruing the fact that the National Skill Development Council (NSDC) had not been able to get the funds that it had been promised after all these years, Mr. Goyal said it was regrettable that only 3 lakh people had been imparted skills against a target of several millions. He suggested dovetailing of skill development of 200 million people with the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) so that people could actually be provided with funds to gain skills. Four areas where skills could be built, he said, were tourism, manufacturing, housing and infrastructure.
Answering a question on the issue of goods and services tax (GST), Mr. Goyal said BJP is not against GST provided certain issues are addressed. These included issues such as the needs of states in situations of natural calamities. "If these contentious points are addressed then BJP stands committed to the approval of GST," said Mr Goyal. On the issue of land acquisition he said the government should have increased compensation and simplified the procedures but "it had ended up making the law so draconian that had not Mr Arun Jaitley, leader of the Opposition in the Rajya Sabha, insisted on keeping four-five sectors out of its purview, the entire business would have come to a standstill".
Maintaining the party's opposition to multi-brand FDI in retail, Mr Goyal said that unless the country's manufacturing base was strengthened, it was not going to allow foreign brands to enter India as they were not going to work on strengthening the backend systems and supply chains.
In his first public interaction with CII at its National Council Meeting in New Delhi on Moday, 17 February 2014, Mr. Arvind Kejriwal, leader of the Aam Aadmi Party and former Chief Minister of Delhi said that the key issue today is "governance". The need of the hour, he said, is "honest and efficient governance" which has been lacking all these years, and due to which even though India was led by the best economists in the recent past, the country's growth has faltered. Addressing industry leaders from diverse sectors, Mr. Kejriwal emphasized that he supported business and was not against capitalism, but against crony capitalism adding that "a small section of people are looting the country". He praised industry for driving economic and inclusive growth and said that it was business that is best suited to address needs such as "inclusive growth" through the creation of jobs. The government, he said, cannot create jobs; it can only create an eco-system that supports the creation of jobs. Elaborating on the role of the government, Mr. Kejriwal said that the government must provide "security, justice and corruption-free governance" for growth and development to take place.
Sharing his views on improving governance and therefore the eco-system within the country, Mr. Kejriwal said that "we want to end inspector and license raj and corruption". He spoke of measures such as creating a strong deterrence to corruption, revisiting the existing systems, using technology efficiently, and decentralizing power that would help them achieve their goal. "We need to simplify laws, the judicial system and have a stable tax regime, among other measures that will all work together to boost India's growth, and would like industry's views on how it can be done", he said.
The Reserve Bank of India next undertakes monetary policy review on 1 April 2014. Sighting elevated consumer price inflation, the Reserve Bank of India raised its key lending rates by 25 basis points after Third Quarter Review of Monetary Policy for 2013-14 on 28 January 2014.
Asian stocks edged higher on Tuesday, 18 February 2014, after the Bank of Japan maintained unprecedented asset purchases and boosted lending programs. Key benchmark indices in South Korea, Indonesia and Taiwan rose 0.03% to 0.43%. Key benchmark indices in Hong Kong and Singapore fell 0.06% to 0.1%.
Japan's Nikkei Avergae jumped 3.13%. At the end of a monetary policy review, Japan's central bank today, 18 February 2014, pledged to maintain plans to expand the monetary base by 60 trillion yen to 70 trillion yen ($686 billion) per year. It also doubled a funding facility to 7 trillion yen and said individual banks could borrow twice as much low-interest money as previously under a second lending facility.
China's Shanghai Composite fell 0.83%. China's central bank sold repurchase contracts for the first time since June, draining funds from the banking system and driving money-market rates higher.
China's foreign direct investment climbed 16.1% to $10.76 billion in January from a year earlier, according to a government report released today, 18 February 2014.
Trading in US index futures indicated that the Dow could advance 45 points at the opening bell on Tuesday, 18 February 2014. US stock markets were closed on Monday, 17 February 2014 for a holiday.
Federal Reserve Chairwoman Janet Yellen said last week that US growth has strengthened and that only a "notable change in the outlook" for the economy would prompt policy makers to slow the pace of cuts to the monthly bond-buying program.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review on 18-19 March 2014. After a monetary policy review, the FOMC on 29 January 2014 announced it will reduce monthly bond purchases by another $10 billion to $65 billion. The Fed also signaled that it is likely to keep reducing bond purchases in the coming months, citing a pickup in US economic activity and improvement in the US labor market.
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