Indian stocks surged after the Economic Survey 2014-15 tabled in Parliament by Finance Minister Arun Jaitley today, 27 February 2015, stated that the government remains committed to fiscal consolidation and said that there is a scope for Big Bang economic reforms. The Survey stated that the government has undertaken several reforms and more are on the anvil. The rally on the bourses was broad based. The barometer index, the S&P BSE Sensex, regained the psychological 29,000 mark. The Sensex was provisionally up 470.84 points or 1.64% at 29,217.49. The market breadth indicating the overall health of the market was strong. The BSE Mid-Cap index was up 1.89%, outperforming the Sensex. The BSE Small-Cap index was up 1.37%, underperforming the Sensex.
The Economic Survey 2014-15 was presented a day before the Finance Minister presents Union Budget 2015-16 in the parliament tomorrow, 28 February 2015.
Banking, capital goods, metals and mining and power generation stocks rose. Index heavyweight and cigarette major ITC slipped on high volume after multiple bulk deals were executed on the counter. Realty stocks edged higher amid expectations that there will be clarity on taxation with regard to Real Estate Investment Trust (REIT) in Union Budget 2015-16 tomorrow, 28 February 2015.
Foreign portfolio investors (FPIs) bought shares worth a net Rs 2312.15 crore yesterday, 26 February 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 340.79 crore yesterday, 26 February 2015, as per provisional data.
In the foreign exchange market, the rupee edged lower against the dollar.
Brent crude oil futures edged higher as supply outages in the North Sea and renewed fears of gas supply disruption in Europe supported prices.
In overseas markets, European stocks edged lower. Asian stocks also edged lower. In the US yesterday, 26 February 2015, small-cap companies outperformed large as downbeat economic reports and selling pressure from the energy sector weighed on the benchmark S&P 500 index.
As per provisional closing, the S&P BSE Sensex was up 470.84 points or 1.64% at 29,217.49. The index jumped 507.37 points at the day's high of 29,254.02 in late trade, its highest level since 25 February 2015. The index rose 90.41 points at the day's low of 28,837.06 in mid-morning trade.
The CNX Nifty was up 160.75 points or 1.85% at 8,844.60. The index hit a high of 8,856.95 in intraday trade, its highest level since 23 February 2015. The index hit a low of 8,717.45 in intraday trade.
The market breadth indicating the overall health of the market was strong. On BSE, 1,792 shares gained and 1,084 shares fell. A total of 122 shares were unchanged.
The BSE Mid-Cap index was up 200.59 points or 1.89% at 10,816.87, outperforming the Sensex. The BSE Small-Cap index was up 152.47 points or 1.37% at 11,316.23, underperforming the Sensex.
The total turnover on BSE amounted to Rs 4340 crore, lower than Rs 4867.74 crore during the previous trading session.
Index heavyweight and cigarette major ITC slipped 0.92% to Rs 392. The stock hit high of Rs 396.45 and low of Rs 384.05. On BSE, 40.33 lakh shares were traded in the counter as against average daily volume of 4.78 lakh shares in the past quarter. Multiple bulk deals were executed on the counter on BSE today, 27 February 2015.
Bajaj Auto rose 0.75% to Rs 2,151. The stock hit high of Rs 2,159 and low of Rs 2,105. On BSE, 20.11 lakh shares were traded in the counter as against average daily volume of 49,019 shares in the past quarter. A bulk deal of 19.67 lakh shares was executed on the counter at Rs 2,119.95 at 10:31 IST on BSE today, 27 February 2015.
Shares of companies operating in the capital goods sector rose across the board. Bharat Electronics (up 3.27%), Punj Lloyd (up 6.27%), Crompton Greaves (up 3.37%), Bharat Heavy Electricals (Bhel) (up 1.74%), BEML (up 1.16%), Siemens (up 3.23%), ABB (up 1.48%) and Thermax (up 0.18%), edged higher.
Engineering & construction major L&T gained 4.93%. Tata Power Company gained 5.31%. Tata Power Company announced after market hours yesterday, 26 February 2015, that its Strategic Engineering Division (Tata Power SED), in a consortium with L&T, is one of the two down-selected Development Agencies for Ministry of Defence's prestigious "MAKE" Program "Battlefield Management System (BMS)". Tata Power SED is the lead of the consortium.
BMS is a Network Centric Program being indigenously developed for the Indian Army under the MAKE category of Defence Procurement Procedure. It is the second such Program that Tata Power SED and L&T are collaborating for. In next 5-7 years, when BMS will be deployed by the Army, it will cover more than 70% of soldiers while digitizing the Tactical Battlefield and creating a secure IoT (Internet of Things) for the Army.
The down-selection of Tata Power SED - L&T consortium enables it to participate in the Prototype Development Phase of this MAKE Program followed by a Production Order, which will be decided by the MoD after successful completion of the Prototype. Tata Power SED is one of the few private companies with a track record of over four decades in Defence R&D and Production. Project BMS is of special importance as it gives an opportunity to serve a very large section of the Indian Army.
Realty stocks edged higher amid expectations that there will be clarity on taxation with regard to Real Estate Investment Trust (REIT) in Union Budget 2015-16 tomorrow, 28 February 2015. Unitech (up 16.8%), Indiabulls Real Estate (up 5.59%), Housing Development and Infrastructure (up 5.83%), Oberoi Realty (up 3.2%), D B Realty (up 2.83%), Sobha (up 3.26%) and Parsvnath Developers (up 2.75%) gained.
The real estate sector has sought tax clarity with regards to Real Estate Investment Trust (REIT). Abolishing capital gains tax, minimum alternate tax (MAT) applicability and dividend distribution tax (DDT) would make REITs attractive for both retail and institutional investors and bring about much needed liquidity for commercial projects specifically.
DLF gained 3.79% to Rs 156, with the stock reversing initial fall. The stock hit high of Rs 156.55 and low of Rs 147.10. DLF before market hours today, 27 February 2015, said that the company has been made aware of adjudication orders passed by Securities and Exchange Board of India (Sebi) under Section 15 of the Sebi Act, 1992 against DLF, its directors and other notices. The company is presently reviewing the said Orders and after taking appropriate legal advice, the company will challenge the said Orders in appeal, DLF said. On similar facts, Sebi had earlier passed an Order dated 10 October 2014 inter alia under Section 11 of the Sebi Act, 1992 against DLF and its directors, which Order was challenged by the company before the Hon'ble Securities Appellate Tribunal. DLF will defend itself to the fullest extent against any adverse findings and measures contained in the Orders passed by Sebi, the company said.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 61.82, compared with its close of 61.76 during the previous trading session.
Brent crude oil futures edged higher as supply outages in the North Sea and renewed fears of gas supply disruption in Europe supported prices. Brent for April settlement was up $1.17 a barrel at $61.22 a barrel. The contract had declined $1.58 a barrel or 2.56% to settle at $60.05 a barrel during the previous trading session.
The stock exchanges have decided to keep the stock market open tomorrow, 28 February 2015, just like any other normal trading session when the Finance Minister Arun Jaitley presents the first full-fledged Budget of the Narendra Modi government. Trading will start at 9:15 IST and conclude at 15:30 IST.
The Economic Survey 2014-15 tabled in Parliament by Finance Minister Arun Jaitley today, 27 February 2015, stated that the government remains committed to fiscal consolidation and that the deficit target of 4.1% as envisaged in the Budget 2014-15 will be met. According to the survey, India needs to create additional fiscal space in order to ensure macro stability and to create buffers for future economic downturns. As per a medium-term fiscal strategy, there is a need to reduce fiscal deficit over the medium term to the established target of 3% of GDP. There is a need to ensure that the government's borrowing over the cycle is only for capital formation.
With regard to government expenditure, the Survey advocates a shift away from consumption, by reducing subsidies, towards investment. The Survey, however, states that eliminating or phasing down subsidies is neither feasible nor desirable. The Survey states that converting all government subsidies into direct benefit transfers is a laudable goal of government policy.
The Economic Survey 2014-15 has acknowledged that the Food Subsidy Bill has increased substantially in the past few years putting a severe strain on the public exchequer. Rationalization of subsidies and better targeting of beneficiaries would release resources for public investment in agriculture.
The Economic Survey taking into consideration the change of base year by the Central Statistics Office of the National Accounts series from 2004-05 to 2011-12, states that GDP growth at market prices for 2015-16 is expected to be 8.1% to 8.5%. The growth rate in GDP at constant (2011-12) market prices in 2012-13 was 5.1%, which increased to 6.9% in 2013-14 and it is expected to further increase to 7.4% in 2014-15 (according to advanced estimates). As the new government is to present its first full year budget, the Economic Survey states that it appears that India has reached a sweet spot and that there is a scope for Big Bang reforms now.
According to the Survey, India's medium-term growth prospects will be conditioned by the "balance sheet syndrome with Indian characteristics" that has the potential to hold back rapid increases in private sector investment. The Survey also states that India faces an export challenge, reflected in the fact that the share of manufacturing and services exports in GDP has stagnated in the last five years. According to the survey, the outlook is favourable for the current account deficit (CAD) and the financing of the CAD.
The Survey stated that the government has undertaken several reforms and more are on the anvil. The introduction of the nationwide Goods and Services Tax (GST) and expanding direct benefit transfers can be game-changers.
On investments, the Survey has significantly commented that while private investment must remain the primary engine of long-run growth, the public investment, especially in the railways, will have to play an important role at least in the interim, to revive growth and to deepen physical connectivity. The Economic Survey has expressed a serious concern that several projects have been stalled and such a tendency is increased over the past years. In the same breadth, the Survey notes that such stalling of projects seems to have plateaued. It suggested revitalizing public private partnership model of investment.
To improve the investment climate and reduce the backlog of stalled projects, the Survey advocates revival of public investment in short term, to act as an engine of growth in infrastructure sector. It argues that public investment cannot be a substitute for private investment; but is required as a complement and to crowd it in. The Survey highlights the need for reorientation and restructuring of the public private partnership (PPP) model. Creative solutions need to be devised to strengthen institutions relating to bankruptcy, says the Survey. The total stock of stalled projects currently stands at Rs 8.8 lakh crore or 7% of GDP.
With regard to infrastructure development, the Survey mentions that the focus of the government has been on resolving long pending issues like pricing of gas, establishing processes and procedures for transparent auction of coal and minerals and improving power generation and distribution.
All eyes are now on Union Budget 2015-16. Jaitley will begin his speech at 11:00 IST in Lok Sabha tomorrow, 28 February 2015, as he tables the Union Budget 2015-16 in the parliament. Analysts will scrutinize measures in the Budget for financing infrastructure projects as well as the government's own capital expenditure on infrastructure for the year ahead. This is the first full fledged Budget of the Narendra Modi government and analysts will look for a roadmap for economic growth for the next few years.
Changes in rates of dividend distribution tax, capital gains tax on sale of shares, Securities Transaction Tax (STT) and Minimum Alternate Tax (MAT), if any, will be closely watched. The dividend distribution tax is currently at 15%. The minimum alternate tax is currently at 18.5% of book profits. Short term capital gains tax on sale of shares is currently at 15% while there is zero long capital gains tax on sale of shares held for a period of more than one year.
Analysts are awaiting further progress on the Goods and Services Tax (GST) during the ongoing Budget session of Parliament after the Constitution Amendment Bill for the introduction of GST was tabled in the Lok Sabha during the winter session of parliament. GST, touted as the single biggest indirect taxation reforms since independence, will simplify and harmonise the indirect tax regime in the country. Central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc. will be subsumed in GST. At the state level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST.
European stocks edged lower today, 27 February 2015. Key benchmark indices in UK, France and Germany were off 0.04% to 0.1%.
In France, consumer spending--the largest factor of French economic growth--rose 0.6% in January from December and was 2.6% higher on year, national statistics agency Insee said today, 27 February 2015. That marked the third straight month of rising consumer spending. Insee also revised the December increase up by 0.1% points to 1.6% on month.
In Germany, the lawmakers are expected to give Greece's bailout extension the green light in a vote today, 27 February 2015. A positive vote is a condition of Germany's approval for the extension. Eurozone finance ministers early this week approved new reforms proposed by Greece in exchange for a four-month financial lifeline that will keep the country afloat and in the single currency for the time being. Several parliaments, including Germany's, must now approve the extension before the current bailout expires tomorrow, 28 February 2015.
Most Asian stocks edged lower mixed today, 27 February 2015. Key benchmark indices in Hong Kong, Indonesia, South Korea and Singapore were off 0.02% to 0.68%. Key benchmark indices in China and Japan were up 0.06% to 0.36%. Markets in Taiwan are closed today, 27 February 2015 in observance of Peace Memorial Day.
Japanese industrial production rose 4% in January 2015 -the second straight on-month increase, following the 0.8% increase in December 2014, data showed today, 27 February 2015.
Trading in US index futures indicated that the Dow could fall 14 points at the opening bell today, 27 February 2015. US stocks ended mixed yesterday, 26 February 2015 in another lackluster performance, amid uncertainty about the near-term outlook for the markets.
Investors are now waiting on revised fourth quarter US gross domestic product data due later today, 27 February 2015 for another health check of the world's largest economy.
In economic news, the consumer-price index fell 0.7% in January 2015 from December 2014, the Labor Department said yesterday, 26 February 2015. Prices slipped 0.1% from a year earlier, marking the first year-over-year decline since October 2009. Another data showed that weekly jobless claims rose to 313,000 last week, above the 283,000 in the previous week. Durable goods orders figures for January increased 2.8%, after a 3.4% decline in the prior month.
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