Traders’ Diary: Top midcap, smallcap stock picks for Budget
Underpinned by gains in banking, IT and FMCG heavyweights, equity benchmark Sensex ended in the green zone for the fourth consecutive session on Thursday.
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ETMarkets Special Podcast: Economic Survey lacks concrete targets
ICICI Bank’s expectations from Budget FY20
Fiscal deficit target of 3.4%, could be difficult to achieve, in light of revenue constraints, expenditure priorities in the face of slowing growth and promised economic and welfare schemes to the electorate.
As such, we expect slippage on the fiscal deficit interim target by 20 bps to 3.6% of the GDP.
We expect the dated issuances to remain unchanged. Government is likely to fund the increased deficit through increased reliance on NSSF funds, T-Bills and drawdown on cash balances.
Once Budget is out of the way, environment is likely to be bond supportive on expectations of more rate cuts, adequate liquidity provision, benign oil prices and supportive global monetary policy environment amid global growth concerns
We feel from a philosophical standpoint this Government continues to believe strongly in the need to adhere to a credible fiscal consolidation path.
We expect the net tax collections in FY 2020 to witness another slip of ~INR 600 bn from the FY 2020 interim budget estimate and is likely to weigh on the fiscal deficit of the government.
We have assumed the Government’s revenue expenditure will be budgeted 22% above the actual INR 20.1 tn spending seen in FY2019, and slightly exceed the Interim Budget figure
We assume the Government to budget a mildly lower capex of INR 3.2 tn as compared to the target set in the Interim Budget (INR 3.4 tn).
IndiaNivesh’s top picks for Budget 2019
Key challenges that Nirmala Sitharaman will face in Budget
Growth slowdown has been worse than anticipated, warranting a fiscal push to revive the economy.
However, lower growth also implies downside risks to revenue targets of the government for FY20 (compared to what was pencilled in the interim budget).
Given the stressed revenue situation, the government faces a tough trade-off between sticking to its fiscal consolidation path and providing fiscal stimulus.
If the government decides to give a higher weightage to growth and expand its fiscal deficit target, the impact is likely to be on interest rates, in the form of higher bond yields. This is what we call the trilemma – pushing growth while keeping a check on fiscal consolidation and borrowing costs.
Even if the government decides to solely focus on fiscal consolidation (to adjust for lower revenue), it may find it difficult to pull back the expenditure commitments already made under the interim budget (new schemes PM Kisan Yojna, pension scheme for the traders). The govt. would also need to set aside funds to deliver on its election promises (such as the introduction of the “Nal se Jal” scheme etc.).
One way to meet its fiscal deficit target, atleast optically, is that the government could resort to other sources of financing – NSSF, off-budget expenditure through PSEs, rollover of expenditure. The probability of this scenario is high and this could provide some support to growth. But even in this case there could be some upside impact on the bond yields as the market could see through this window dressing.\
The joker of the pack is the transfer of reserve surplus from the RBI to the government. The most optimistic estimate for the transfer is close to Rs 3 trillion
which could help the government break the trilemma. However, in our baseline case, we think that the amount could be close to Rs 0.75 to Rs1 trillion (in the baseline) and would be staggered rather than paid as a one-time transfer.
(Abheek Barua, Chief Economist, HDFC Bank)
Given the clear-cut mandate, the government has never before opportunity to make bold announcements in this budget. Apart from privatization or corporatization of the government institutions to limit the drag on the balance sheet, measures to drive investments, which have been under pressure, would be welcome. Reforms in the agriculture sector to boost the income of the farmers could be a major focus. To further stimulate economic growth and accelerate corporate earnings, the government should also consider a reduction in the corporate tax rate for all the companies. Changes in the regulatory framework and simplifying the corporate tax law should be addressed in the budget as it could attract foreign investors to invest in India without any technical or procedural restrictions. In order to check the slowdown in the capex, the government is also expected to take steps to encourage investment in private capital assets creation. A middle-class salaried person is expecting an increase in the standard deduction to Rs. 1 lakh, income tax exemption limit to be revised to Rs. 5 lakh & home loan interest deduction u/s 24 to Rs be 2.5 lakh. Overall we expect this budget to have a reform-driven approach with measures to stimulate consumption, investment, and ease of doing business
- Arun Thukral, MD & CEO at Axis Securities
Nifty and Nifty Bank forming doji kind of candle pattern since three four sessions suggest indecision in the markets before Budget. Nifty has strong resistance around 12,000 mark any decisive break above 12,000 will only lead in strong move towards 12,100-12,200 zone or else every rise will use for profit booking, support for index is coming near 11,900-11,850 zone. Nifty Bank has support near 31,270-31,050 zone and resistance for index is coming near 31,700-32,000 zone
- Rohit Singre, Senior Technical Analyst - LKP Securities
Markets will react to the Union Budget tomorrow and that could result in volatile move across the board. Since Nifty is trading closer to its crucial hurdle of 12,000, we suggest keeping extra caution in long trades. Also, we advise keeping leveraged positions hedged before the event. In case of decline, 11,800 would act as strong cushion
- Jayant Manglik, President - Retail Distribution, Religare Broking Ltd
The survey’s projection of 7 percent growth for FY indicates that growth has bottomed out and recovery is on the cards. The Survey’s emphasis on fiscal prudence, at a time when there is an all round clamour for fiscal stimulus, is laudable. It is important to appreciate the fact that in FY 20 the PSBR (Public Sector Borrowing Requirement) would be close to 9 percent of the GDP and in this context further fiscal stimulus would do more harm than good. If the survey’s hope that 'political stability can ignite the animal spirits and usher in a virtuous cycle of growth’ is to bear fruit, Nirmala Sitaraman should rise to the occasion and deliver a reform-oriented growth budget
- VK Vijayakumar, CIS at Geojit Financial Services
This Economic Survey stresses on private investment as the driver of growth, jobs, exports and demand. It gives the example of China supporting this virtuous cycle view, where the share of Savings/Investments and exports in GDP evolved for China as a function of the log of GDP per capita in recent years. To achieve these objectives, the economic survey focuses on a sustained GDP growth of 8% and inflation of sub 4%. To start with, in 2020 it focuses on a GDP growth of 7%. The survey argues that nudging behaviour change is the simplest way to solve many economic issues also
CLOSING BELL: Sensex edges 69 pts up as Economic Survey fails to enthuse the bulls, Nifty ends at 11,947; Quess, Thomas Cook tank up to 14%
Quess Corp tanks 20%; company says business as usual
Shares of Quess Corp tumbled 20 per cent in Thursday's trade even as the company said it was following standard accounting practices.
In an interview to ET Now, Quess Corp CMD Ajit Issac said the fall in the stock prices could be related to perception in the market. Isaac insisted the company is doing business as usual.
The company has recently deferred a decision on a fund-raising proposal. It said its board will take the decision at a later date. It also changed the role and designation of Chief Financial Officer (CFO) Manoj Jain from to the role of a Business Head. Subramanian Ramakrishnan was made CFO of the company from deputy CFO.
The Economic Survey 2019 has set the broad aim of achieving a sustained higher growth and the framework needed to achieve it. The primary idea of linking private investment, productivity, demand generation, exports, and job creation in order to achieve a sustained 8% real GDP growth could go a long way if followed in earnest in policy making. The focus on MSME sector was much needed as bulk of the job creation and growth support needs to come from this segment. The economics of “nudge” at the household level, judicial reforms to smoothen out enforcing of contracts, and investment reforms should bode well to provide guidance to the market in terms of the next few focus areas. While these may not necessarily have a reflection on the upcoming Union Budget, these should form the basis of policy decisions in terms of legislative and executive decisions of the government positively to impact the long term growth story.
The auto industry needs urgent measures by the government to come out of the current gloomy scenario, said Rajan Wadhera, President, SIAM (Society of Indian Automobile Manufacturers).
Talking to ET NOW, Wadhera said the government needs to address the liquidity issue in the NBFC space to prop up sales of automobiles.
Top 10 NSE losers
Price as on 04 Jul, 2019 01:28 PM, Click on company names for their live prices.
Why Eco Survey has a blue sky cover this time?
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Industry-wise Deployment of Bank Credit by Major Sectors (YoY, per cent)
Credit growth dips to 11.9% in April
Credit growth has come down from 13.8 per cent in November 2018 to 11.9 per cent in April 2019. The main contributor to this moderation has been the services sector which has decelerated from 28.1 per cent to 16.8 per cent between November 2018 and April 2019. The growth in bank credit to large industries have improved in recent months
New Ideas on Indian Economy
Indian Economic Survey 2019: Shifting Gears #ETMarkets https://t.co/KMWJs7CM98
Dewan Housing Finance Corp., an Indian mortgage lender that has delayed payment on some of its obligations, plans to ask banks to lend 15 billion rupees ($217 million) every month to help revive the company, a person with knowledge of the proposal said.
The financier, which has about 800 billion rupees of obligations, will submit the resolution plan on July 10 to a consortium of seven lenders led by state-run Union Bank of India, the person said, asking not to be identified as the discussions are private. The other proposals include increasing the tenor of some loans and converting part of its debt into equity, according to the person.
A sustained rally in select PSU bank stocks took the country’s biggest lender State Bank of India (SBI) to its highest level of Rs 370 on Dalal Street in morning trade on Thursday. At these heights, the stock appears to have broken out of its multi-year consolidation zone placed Rs 350 and Rs 150 levels.
Analysts said the primary reason that can be attributed to this rally is hopes of government making fresh capital provisions for PSU banks in the forthcoming Union Budget.
SBI stock is hitting fresh 52-week highs over the past several days. From a technical perspective, the stock formed a Symmetrical Triangle pattern on the weekly chart over the past one year. This pattern was resolved with an upward breakout from Rs 298 level in March. After a small throwback, the stock has continued with the breakout and inched higher.
Vedanta to seek court order saying Zambia's ZCCM breached shareholder pact
Vedanta, in the middle of a dispute with the Zambian government over its Konkola Copper Mines (KCM) business, said it would seek an interim court order declaring that Zambian firm ZCCM had breached the terms of KCM's shareholders' agreement.
Economic Survey 2019: Investment rates seem to have bottomed out
Economic Survey presented in Parliament
: Key Pointers
FY20 GDP growth seen at 7% on stable macros
Greenshoots of investment activity seem to be taking hold
General fiscal deficit seen at 5.8% in FY19
Declining NPAs should help push capex cycle
Farmers may have produced less in FY19 on fall in food prices
GDP growth averaged at a high of 7.5% in last five years
IndiaMART InterMESH on Thursday made a strong market debut, as the scrip got listed at Rs 1,180 on BSE, a premium of 21.27 per cent over its issue price of Rs 973. This made it the top mainboard listing so far this year. The Rs 475-crore IPO, which was sold in Rs 970-973 price band was subscribed 36.21 times. The strong response to the issue was seen, even as a few brokerages had an avoid rating on the issue.
Today, USDINR pair is expected to quote in the range of 68.70 and 69.35
- Motilal Oswal Financial Service
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OPENING BELL: Sensex gains 50 pts, Nifty nears 11,950; Corporation Bank, Manpasand jump 5% each
Nifty futures on the Singapore Exchange were trading 7 points, or 0.06 per cent, higher at 11,955, indicating a flat start for Dalal Street.
Tech view: Nifty forms indecisive Doji
Nifty50 settled with marginal gains on Wednesday after facing strong resistance around the 11,950 mark. The index formed higher highs and lows for the third straight session, and showed a bullish crossover on MACD, but could only manage an indecisive Doji on the daily chart. This, along with weak advance-decline ratio, suggests the index remains prone to profit taking unless it takes out the 11,920 level sustainably.
Asian stocks up tracking US markets
Asian stocks advanced on Thursday, tracking sharp gains on Wall Street as recent data from multiple sectors pointed to slowing economic growth in the United States, bolstering the prospect of rate cuts by the Federal Reserve. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent as did Japan's benchmark Nikkei, and Australia was up 0.6 per cent.
Oil prices edge lower
Oil prices inched lower on Thursday after solid gains the day before, pressured by data showing a smaller-than-expected decline in US crude stockpiles. Front-month Brent crude futures were down 0.4 per cent at $63.60 per barrel. Brent closed up 2.3 per cent on Wednesday.
Wall-St stocks gain in a holiday-shortened day
Investors extended a rally through a holiday-shortened day and pushed the S&P 500 index to its third straight record high close on Wednesday, AP reported. The S&P500 index rose 22.81 points, or 0.8 per cent, to close at 2,995.82. The Dow Jones Industrial Average index also reached a record, gaining 179.32 points, or 0.7 per cent, to close at 26,966.
Nifty cos may report 29% rise in Q1 net
Net profits of Nifty50 companies could climb 29 per cent on-year in the June quarter on expectations that some of the banks, which had shown significant asset stress a year ago, would perform better. Revenue will likely expand 7.4 per cent and log single-digit growth for the first time in nine quarters, reflecting higher base effect and slowing demand.
IndiaMART InterMESH to make market debut today
The provider of India’s largest online B2B marketplace for business products and services will make market debut today. The Rs 475-crore IPO was subscribed 36.21 times, receiving bids for 9,74,93,895 shares against the total size of 26,92,824.
FIIs sell Rs 390 cr worth equities
Net-net, foreign portfolio investors (FPIs) were net sellers of domestic stocks to the tune of Rs 390 crore on Wednesday, data available with NSE suggested. DIIs were net buyers to the tune of Rs 288 crore, data suggests.
Sensex on Wednesday
With nominal gains, Sensex and Nifty extended gains for the third consecutive day, with support from select heavyweights like IndusInd Bank, ITC, L&T and RIL. Sensex settled with a gain of 23 points at 39,839, while Nifty finished 6 points higher at 11,916.
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