Expert Zone

Straight from the Specialists

India Markets Weekahead: ‎Book out of high-beta stocks

(Any opinions expressed here are those of the author and not of Thomson Reuters)

Finance Minister Arun Jaitley (C) poses as he leaves his office to present the federal budget for the 2014/15 fiscal year, in New Delhi July 10, 2014. REUTERS/StringerThe Narendra Modi government presented its maiden budget on Thursday. Although the budget was welcomed by industry leaders, the market meltdown seems to be telling a different story, with the Nifty posting its biggest weekly loss in 15 months.

Should it have been a path-breaking budget or is it prudent to build the economy brick-by-brick by walking the middle path? The much hyped “bitter pill” turned out to be a “bland” one.

Achieving a fiscal deficit of 4.1 percent would be a daunting task unless the economy kick-starts immediately. Budget revenues are highly dependent on a robust economy and a booming capital market. The latest IIP growth of 4.7 percent, the best since October 2012, cannot be termed as a harbinger, unless we see a follow-through in subsequent months.

Although the intent of the finance minister would have been to facilitate the infrastructure, manufacturing, real estate and the SME sector, I wonder whether the next seven months would be enough. Looking at the fiscal health of the country, it was expected that Arun Jaitley would dilute the populist measures taken by the UPA government and even the tax doleouts were to be symbolic. It was strongly expected that he would lay the road map for ease of doing business in India. Instead, it was the usual fare with an added focus on infrastructure.

National agenda to bring $100 billion of domestic household savings in capital markets in next five years

(Rajiv Deep Bajaj is the Vice Chairman and Managing Director of Bajaj Capital Ltd. The views expressed in this column are his own and do not represent those of Thomson Reuters)

Currency of different denominations are seen in this picture illustration taken in Mumbai April 30, 2012. REUTERS/Vivek Prakash/FilesIndia is an attractive investment destination for foreign institutional investors, due to its vibrant economy, favourable demographics, high growth potential and well diversified capital markets. In fact, the benchmark Nifty has representation from 10 broad sectors, four with weightage in double digits.

Modi’s first budget can be a great start


(Any opinions expressed here are those of the author and not of Thomson Reuters)

There are few opportune moments for a nation to enact bold economic reforms. For India, this week is one of them as Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) government unveil their first budget since sweeping to power in a landslide victory last May.

India needs the sort of shock therapy it administered in response to the 1991 crisis when foreign exchange reserves had dropped to just $1 billion. While current circumstances may be less urgent, they are no less critical. Economic growth has dropped to the 4-5 percent range, half the peak level of a decade ago. Inflation has risen between 9 and 11 percent over the past five years, crippling consumer purchasing power.

India’s Iraq problem


(This piece comes from Project Syndicate. The opinions expressed are the author’s own)

Iraq seems to be falling apart, with the rapid advance of the militant Islamic State in Iraq and Syria (ISIS) threatening to lead to the country’s division into Shia, Sunni, and Kurdish entities, while blurring its border with its turbulent western neighbor. Moreover, the tumult is now threatening to spread to two more nearby countries, Afghanistan and Pakistan, which already are facing myriad internal challenges. For India, the message is clear: its national security interests are at risk.

‎India Markets Weekahead: Correction could follow budget week


(Any opinions expressed here are those of the author and not of Thomson Reuters)

Last week’s robust pre-budget rally belied expectations, with the Nifty closing up more than 3 percent at a record high of 7,751‎. Automobile sales, manufacturing PMI as well as services PMI showed an uptick. The Iraq turmoil seems to have taken a back seat with oil prices receding from a nine-month peak. A rally in world markets, with life highs for the DJIA and S&P 500, also aided sentiment.

India’s fiscal deficit in the first two months has already touched 45.6 percent of the full-year target. Though this would have been a negative indicator, the markets welcomed Finance Minister Arun Jaitley’s remarks about focusing on fiscal consolidation against “mindless populism“.

The crisis in Iraq and an Afghanistan prognosis


(Any opinions expressed here are those of the author and not of Thomson Reuters)

The Islamic State of Iraq and the Levant (ISIL) has rampaged through western Iraq. A few thousand kilometres away in Afghanistan, the International Security Assistance Force (ISAF) is withdrawing, with Americans contemplating less than 10,000 troops on ground.

The Iraqi and Afghan landscapes have festering ethnic and sectarian divides in common. In Iraq, the ISIL has crafted one of the best success stories for radical Islamists in recent history. Is a similar manoeuvre on the cards in Afghanistan?

India Markets Weekahead: Wait for post-budget opportunities


(Any opinions expressed here are those of the author and not of Thomson Reuters)

Markets were fairly volatile last week, reacting to tough measures taken by the Narendra Modi government to get India’s economy back on track amid worries over monsoon rains and the situation in Iraq.
cfcd208495d565ef66e7dff9f98764da.jpgLong-term investors hailed the hike in railway freight and passenger fares as a step in the right direction to bring down indirect subsidies. However, the government rolled back the hikes on suburban fares to a large extent due to political considerations.

Monsoon rains have started on a weak note but if the rains pick up in July and the El Nino effect is tempered, it would have a direct impact on inflation and interest rates.

Higher tax revenue from higher growth


(Any opinions expressed here are those of the author and not of Thomson Reuters)

The 2013-14 budget got completely out of hand because of a whopping shortfall in tax revenue. Development outlays had to be drastically cut to manage the fiscal deficit.

The key to the budget is revenue. The ratio of gross tax revenue to GDP reached a high of 11.9 percent when GDP growth was at its peak of more than 9 percent in 2007-08. Since then, both declined and the ratio has been in the narrow range of 10-10.7 percent. GDP growth is a painless way of raising revenue.

Currencies and the collapse of globalisation


(Any opinions expressed here are those of the author and not of Thomson Reuters)

We live in stirring times. The president of the European Central Bank, Mario Draghi, crossed the monetary policy Rubicon and cut one of the euro area’s key interest rates into negative territory. This is dramatic stuff, as even the most economically oblivious are likely to recognise that negative interest rates are a radical policy.A picture illustration of Euro banknotes and coins taken in central Bosnian town of Zenica

At the same time, the United States Federal Reserve is gracefully gliding out of its quantitative policy position – and by October that money printing process is likely to be effectively at an end. The question from most investors is therefore “what next for U.S. monetary policy?”.

Nehru’s last stand?


(This piece comes from Project Syndicate. The opinions expressed are the author’s own)

The victory of the Bharatiya Janata Party and its leader, Narendra Modi, in India’s general election last month has raised a crucial question about the country’s future. With the BJP sweeping to power on a platform of aggressive nationalism and business-friendly corporatism, has the socioeconomic consensus dating to India’s first prime minister, the democratic socialist Jawaharlal Nehru, come to an end?

  • Editors & Key Contributors