Key benchmark indices edged higher on the first trading session of the week after the Finance Minister P Chidambaram said that the fiscal deficit will be contained at 4.6% of GDP for the year ending 31 March 2014 (2013-14) and will be pruned further to 4.1% of GDP in 2014-15 and that the current account deficit (CAD) will be contained at $45 billion in 2013-14. The barometer index, the S&P BSE Sensex, was provisionally up 110.19 points or 0.54%, up close to 140 points from the day's low and off about 15 points from the day's high. The market breadth, indicating the overall health of the market was negative.
Auto stocks gained in volatile trade after the finance minister announced reduction in excise duty on cars, commercial vehicles, sports utility vehicles (SUVs), motorcycles and scooters. Most PSU bank stocks declined after the Finance Minister said at the time of presentation of Interim Budget for 2014-15 that the government has set aside Rs 11200 crore for capital infusion in public sector banks.
Finance Minister P Chidambaram said fiscal deficit will be contained at 4.6% of GDP for the year ending 31 March 2014 (2013-14), smaller than the 4.8% originally forecast toward the start of the financial year. The Finance Minister said that current account deficit (CAD) will be contained at $45 billion in 2013-14. He said that the government and the RBI have acted in tandem to curtail inflation. Food inflation is still the main worry, although it has declined sharply from a high of 13.6% to 6.2%, Chidambaram said.
India's merchandise exports are projected to expand 6.3% to $326 billion in 2013-14. However, imports are down, and this does not augur well for either manufacturing or domestic trade, the Finance Minister said. "Our aim must be robust growth in both exports and imports, with trade in balance over a period of time", the Finance Minister said.
The deceleration in investment in manufacturing is particularly worrying, the Finance Minister said. Consequently, there is no uptick yet in manufacturing, he said.
GDP growth in third and fourth quarters of 2013-14 will be at least 5.2%, the Finance Minister said. Chidambaram said that $15 billion will be added to foreign exchange reserves by the end of the fiscal year. Declining fiscal deficit, moderation of CAD, stable exchange rate and increase in project implementation is a result of hard work, he said.
Chidambaram expressed confidence that the economy is more stable today than what it was two years ago. At a time when it appeared that a number of projects would fail because of the logjam, the government took the bold step to set up the Cabinet Committee on Investment and the Project Monitoring Group, he said. Thanks to the swift decisions taken by them, by the end of January 2014, the way was cleared for completing 296 projects with an estimated project cost of Rs 660000 crore, the Finance Minister said.
The government will allocate Rs 2.24 lakh crore to defence sector in 2014-15, an increase of 10% over the Budget Estimate for 2013-14. The government will provide capital infusion of Rs 11200 crore in state-run banks in 2014-15. Total spending on food, fertiliser and fuel subsidies will be at Rs 2.46 lakh crore in 2014-15. This is higher than the revised estimate of Rs 2.45 lakh crore in 2013-14.
Chidambaram said that in keeping with the conventions, he does not propose to make any announcements regarding changes to the tax laws in the interim budget. The finance minister cut excise duty on cars, sports utility vehicles (SUVs), commercial vehicles and two wheelers for the period up to 30 June 2014 so as to give relief to the automobile industry. The Finance Minister also announced reduction in excise duty from 12% to 10% on all goods falling under chapter 84 and chapter 85 of the Schedule to the Central Excise Tariff Act for the period up to 30 June 2014 with an intention to stimulate growth in the capital goods and consumer non-durables sectors.
The changes in indirect taxes don't need Parliament sanction and can be made through government orders.
The government has envisaged number of steps to deepen the Indian Financial markets, Chidambaram said.
The estimate of plan expenditure is Rs 5.55 lakh crore for 2014-15. Non-plan expenditure is estimated at Rs 12.07 lakh crore. Revenue for the next fiscal year is projected at Rs 11.29 lakh crore, higher than Rs 10.29 lakh crore this year. Fiscal deficit for 2014-15 is expected at 4.1% of GDP.
The objective of a Vote-on-Account is to get Parliament's nod for expenditure to be incurred in the months prior to elections.
The next full-fledged budget will be presented by the new government which comes to power after the Lok Sabha polls in April-May 2014.
As per provisional figures, the S&P BSE Sensex was up 110.19 points or 0.54% to 20,477.01. The index jumped 125.61 points at the day's high of 20,492.43 in late trade, its highest level since 13 February 2014. The index fell 27.87 points at the day's low of 20,338.95 in mid-morning trade.
The CNX Nifty was up 30.75 points or 0.51% to 6,079.10, as per provisional figures. The index hit a high of 6,080.65 in intraday trade, its highest level since 13 February 2014. The index hit a low of 6,038.30 in intraday trade.
The BSE Mid-Cap index was down 8.74 points or 0.14% at 6,303.14. The BSE Small-Cap index was up 2.41 points or 0.04% at 6,282.10. Both these indices underperformed the Sensex.
The total turnover on BSE amounted to Rs 1515 crore, lower than Rs 1732.10 crore on Friday, 14 February 2014.
The market breadth, indicating the overall health of the market was negative. On BSE, 1,372 shares dropped and 1,236 rose. A total of 157 shares were unchanged.
Among the 30-share Sensex pack, 20 stocks rose and rest fell. Tata Power Company (up 4.74%), Dr. Reddy's Laboratories (up 2.45%) and ICICI Bank (up 2.43%) edged higher from the Sensex pack.
DLF fell 1% after announcing weak Q3 results. The company's consolidated net profit fell 48.98% to Rs 145.29 crore on 13% increase in revenue to Rs 2590.20 crore in Q3 December 2013 over Q3 December 2012. Earnings before interest, taxation, depreciation and amortization (EBITDA) rose 7% to Rs 1144 crore in Q3 December 2013 over Q3 December 2012. The company announced the result after market hours on Friday, 14 February 2014.
DLF said that normalised sales, EBITDA and normalised PAT, after excluding the impact of divestment transactions were at Rs 2290 crore, Rs 844 crore and Rs 125 crore respectively in Q3 December 2013.
DLF said that the company has met the goals of non-core divestments with the successful consummation of divestiture transactions such as Aman Resorts, Pramerica Insurance JV and final settlement with DDA on the Dwarka land piece. With this the company is poised to meet its guidance of reducing the net debt to Rs 17500-18000 crore by end of FY 2014. As on date, the net debt stands at about Rs 17400 crore. DLF said that the company is comfortable with its current net debt levels and expects these to continue at similar levels till the economic cycle improves. However, the quality of debt shall continue to improve as annuity incomes continue to grow, DLF said in a statement. Currently almost 70% of the net debt is backed by annuity flows, DFL said.
During the last two quarters, the economic environment in the country has further worsened leading to slowdown in demand in all sectors including real estate. The company expects slow growth and high interest rate environment to continue atleast for the next two quarters i.e. till middle of FY 2015. In spite of these economic conditions, the company will continue to invest capex in creating high quality annuity yielding assets and invest in the upgradation of land through requisite approvals, consolidation and investment in infrastructure, DLF said. The company will continue to focus on growth through aggressive construction of projects, hence creating high value, high quality real estate products ready to be unlocked as and when the economic cycle turns positive, DLF said.
Tech Mahindra fell 0.52%. The company announced during market hours global strategic business partnership with Acidaes Solutions, the owners of CRMnext Solution, which will primarily focus on the global banking and financial services sector. The partnership aims to develop and deliver scalable enterprise CRM solutions in the banking and financial services space. This space is expected to grow exponentially by 2015, Tech Mahindra said. This partnership will empower Tech Mahindra and CRMnext to be at the forefront of the customer experience revolution. Tech Mahindra and CRMnext will jointly develop strategies and solutions orm CRM implementations, in the BFSI space.
Auto stocks gained in volatile trade after the finance minister announced reduction in excise duty on cars, commercial vehicles, sports utility vehicles (SUVs), motorcycles and scooters for the period up to 30 June 2014. M&M (up 3.7%), Maruti Suzuki India (up 1.74%), Bajaj Auto (up 0.43%), Hero MotoCorp (up 2.34%) and TVS Motor Company (up 3.31%) gained. Tata Motors (down 0.37%) and Ashok Leyland (down 1.6%) declined.
The Finance Minster announced cut in excise duty on small cars, two-wheelers and commercial vehicles to 8% from 12%. The excise duty on SUVs has been reduced to 24% from 30%. The excise duty on large and mid-segment cars has been reduced to 24/20% from 27/24%.
PSU bank stocks declined after the Finance Minister said that the government has set aside Rs 11200 crore for capital infusion in public sector banks.
Punjab National Bank (down 0.76%), Bank of Baroda (down 0.76%) and Bank of India (down 0.46%) dropped.
Union Bank of India rose 0.34%
The Finance Minister has extended interest subvention scheme on farm loans for one more year. There is a subvention of 2% and an incentive of 3% for prompt payment, thus reducing the effective rate of interest on farm loans to 4%. So far, Rs 23924 crore has been released under the scheme, the Finance Minister said.
Chidambaram said that banks are set to exceed the target of Rs 7 lakh crore of agricultural credit in 2013-14. The Finance Minister has set a target of agricultural credit of Rs 8 lakh crore for 2014-15.
State Bank of India rose 0.12%. The bank said on Saturday, 15 February 2014, that it has revised downwards the interest rates on bulk term deposits for Rs 1 crore and above effective from 18 February 2014. It has also decided to revise the interest rates on retail term deposits for below Rs 1 crore effective from 18 February 2014.
Jet Airways rose 3.38% on reports Etihad may be forced to make an open offer to retail shareholders as market regulator has served notice to the Abu Dhabi-based airline. According to reports, Sebi has served a notice on Etihad Airways for alleged violation of the takeover code regulations while acquiring 24% stake in Jet Airways.
ABG Shipyard lost 5.03% after the company reported a net loss of Rs 156.08 crore in Q3 December 2013 as against net profit of Rs 18.62 crore in Q3 December 2012. The Q3 result was announced after market hours on Friday, 14 February 2014. ABG Shipyard's net sales declined 39.2% to Rs 284.55 crore in Q3 December 2013 over Q3 December 2012.
Punj Lloyd lost 4.34% after the company reported consolidated net loss of Rs 139.48 crore in Q3 December 2013 as against net profit of Rs 8.77 crore in Q3 December 2012. The Q3 result was announced after market hours on Friday, 14 February 2014.
Punj Lloyd's consolidated net sales declined 2.3% to Rs 2710.76 crore in Q3 December 2013 over Q3 December 2012. EBITDA (earnings before interest, taxation, depreciation and amortization) declined 45.57% to Rs 160 crore in Q3 December 2013 over Q3 December 2012.
Commenting on the company's financial performance, Atul Punj, Chairman, Punj Lloyd Group said, "While the environment continues to be challenging, initiatives and developments at Punj Lloyd make us cautious but optimistic about the future. With Director and Group CEO, J P Chalasani at the helm, Group operations will strengthen with a focus on project earnings. We will continue to pursue new markets with special focus on MRT and railways. Encouragingly, our project in Libya has recommenced and we have begun to receive some payments. Additionally, we have taken several steps towards making Punj Lloyd a more lean, efficient and responsive organization. I am confident of the macro environment gradually improving and as it does. I am equally confident that Punj Lloyd under the able stewardship of Mr Chalasani and a highly capable management team, is well positioned to leverage the opportunities that unfold. The Group's order backlog stands at Rs 18852 crore. The order backlog is the value of unexpected orders on 31 December 2013 plus new orders received after that date".
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 62.06, compared with its close of 61.925/935 on Friday, 14 February 2014.
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.
European stocks edged higher on Monday, 17 February 2014. Key benchmark indices in Germany and UK rose 0.01% to 0.64%. France's CAC 40 fell 0.07%.
Asian stocks edged higher on Monday, 17 February 2014, after China's new credit increased to a record in January, boosting optimism the world's second-largest economy can maintain its growth momentum. Key benchmark indices in China, Hong Kong, South Korea, Indonesia, Taiwan, Japan and Singapore rose by 0.07% to 1.07%.
Japan's economy grew less than forecast in the fourth quarter, according to a report today, underscoring risks to the recovery as a sales-tax increase looms in April. Gross domestic product expanded an annualized 1% from the previous quarter, the Cabinet Office said in Tokyo.
US stocks edged higher on Friday, 14 February 2014, as investors shrugged off a report showing poor industrial output last month as mainly weather-related. The US stock market is closed today, 17 February 2014, for a holiday.
US industrial output unexpectedly fell 0.3% in January but the Federal Reserve said that was partly due to the severe weather that curtailed production in some regions.
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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