Money Bol

Poor Monsoon – affected Rabi and Kharif crops
India weathered the crisis well
Supporting and delivering services and not giving directly to the citizens
2009-10 – Challenging year attributed to 2008-09 Q3, Q4
GDP
FY 2008-09 – GDP 6.7 % Substantial fiscal expansion
Q1 2009-10 – GDP 6.1%
Q2 2009-10 – GDP 7.9%
Q3 & Q4 – expected higher than 7.2%
Hope to reach 10% GDP shortly
Negative growth in agriculture
Renewed growth in Manufacturing – Dec 2009 – 18% (highest in past 2 decades)
Since Dec 2009 – food prices transmitted to other non food items
Budget to reflect Govt’s vision for development
Ensure better management of Food security
Move towards Fiscal consolidation
Make growth more broad based and ensure demand supply are better managed and matched
Need to review the public spending, mobilize resources
Exit strategy from Expansionary fiscal stance in past 2 years

Fiscal consolidation
Explicit reduction in Domestic Public Debt FM to come out with a report
To introduce Simple Tax system which includes Voluntary compliance
Direct Tax Code (DTC) – To be in a position to implement DTC from 1-April 2011
GST – To finalize the structure of GST and implement by 1-April-2011
Disinvestment program – PSU
Oil India, NHPC, NTPC, Rural Electrification Corp; NMDC, SVJN
Raise Rs 25000 Cr in FY 2010
Proceed to utilize Capex for social sector for creating new assets
Unlock value for all stakeholders
Adhered to fiscal roadmap

Simplify FDI regime
Defined indirect investment by foreign companies in Indian Companies
Automatic route – Payment for Royalties etc
Clarity and predictability for FDI policy

Banks
To extend geographic coverage of Banks
RBI considering additional banking licensing to Pvt Sectors and NBFC (if meet RBI eligibility criteria)
Rs 1900 Cr as Tier I capital in 4 Pub Banks infused
Rs 16500 Cr infused to maintain min 8% Tier I Capital Ratio in Public sector banks
Increase lending to rural economy
Interest subvention of 2% preshipment export credit – extended to 1 more year (handicraft, handloom, carpet and SMEs)

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Introduction
In 2009, the U.A.E. witnessed a significant slowdown in growth and strains in the banking system as a result of the global financial crisis, the decline in oil prices, and the continuing fallout from the bursting of the Dubai property bubble. The ramifications of the DW debt event will depend on the scope and modalities of the debt restructuring, its impact on the financial sector, and the strategy being developed by the Government of Dubai (GD) to put Dubai World (DW) and possibly other corporate entities on a viable economic and financial footing.

Improved global conditions, especially out of Asia, will fuel Dubai’s logistics and service sector. However, the correction in the over-extended property and construction sector renders the overall outlook highly uncertain. With foreign investor confidence shaken and international capital markets less accessible, Abu Dhabi’s policy of selective support to Dubai will play an important role in limiting contagion to the U.A.E. economy and the banking system.

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Key issues

• The contrast between growth based on hydrocarbon resources and that based on non hydrocarbon diversification funded by maturity-mismatched leverage
• The spillover effects and financial support structures in the federation
• The volatility of markets in response to a lack of information disclosure and transparency
• In particular, the debt announcement undermined the widely held market perception of implicit government support, including from Abu Dhabi

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Macro economic expectations
Budget 2010-11 will be presented against a backdrop of reviving economic conditions. The year 2009-10 saw all the economic indicators painting a healthy picture of the economy after a year of subdued growth. GDP has started to accelerate; IIP has gone into a double digit growth trajectory. Exports have entered into positive growth zone. All these indicate a robust economy but these are still incipient signs and the economy still faces a huge risk in the form of inflation which is expected to reach double digit by this fiscal end. Finance Minister Pranab Mukherjee faces dilemma in the form of managing inflation and at the same time pushing the economy firmly on the growth path. In order to maintain growth momentum, fiscal stimulus needs to be maintained but the cost of retaining fiscal stimulus is high fiscal deficit which the country cannot afford. What strategy he adopts to balance all these contrasting factors would be unveiled on Feb 26, but this is what we expect the budget 2010-11 to come up with.

Government Revenue
Corporate sector is lobbying to bring down the corporate tax rate but considering the deficit reduction target of Govt and implementation of Direct tax code and Goods and services tax, we do not expect any change in the corporate or individual tax rate. A hike in the tax revenues is projected, seeing the buoyancy in the corporate bottom lines. Tax revenues can be expected to grow at a healthy rate of 20% as against a decline witnessed in the current year. With a robust growth observed in the industrial production, the customs and excise collections too may be projected to rise after the decline observed in the current year. The current Budget that penciled in only Rs.1,120 Cr as disinvestment proceeds, marked a conservative approach in budgeting Non-Debt Capital Receipts. However the estimates for disinvestment proceeds for FY 2010-11 could be buoyant at Rs.30,000 – 35,000 Cr. Proceeds from 3G auction are also expected to be realized next year and thus we expect a non-tax revenue of Rs 1,40,000 cr in this budget year. Overall, revenue receipts are expected to grow by 15.4% over that of the budgeted figure for 2009-10. Total receipts are expected to grow about 20% to Rs 7,43, 061 cr in the year 2010-11.

Government Expenditure
Budget 2009-10 saw expenditure burgeoning 13.3% to Rs 10,20,838 cr. This year emphasis would remain on reining in expenditure. The Plan Expenditure would be in line with the Gross Budgetary Support approved by the Center. It is estimated at Rs.3,73,000 Cr for FY 2010-11 marking a YoY growth of 14.7%. This fiscal would not be burdened with extraordinary inclusions such as 6th Pay Commission Arrears or the farm loan waiver scheme. Marking a trend based growth in the expenditure for various other heads, the total non-plan expenditure is estimated around Rs.7,40,000 Cr. The total expenditure for the year to come is projected in the range of around Rs.11,12,200 Cr.

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Dear readers, apologies yet again for the delay in posting January’s economic review but due to certain unavoidable circumstances the review could not be posted on time. Hope this review is useful and informative.

Equity
The BSE stock index started the year on a positive note, rising for the first 2 days to reach 17686. The markets remained strong for all most the entire month touching a high of 17790 on Jan 6. During the later part of the month on account of selling pressure markets reached a low of 15790 at the end.

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The USD/INR retraced the highs of 45.28 and has settled at around 45.78 levels. Equity markets were directionless with the Sensex and the Nifty closing a tad lower than last week. The high point from the data point was the 11.3 % growth in IIP against expectation of 10%. Inflation for the month of December was 7.31% which was as per expectation. In Euro news, the ECB kept rates unchanged but reiterated the need for fiscal discipline from its member states. While we expect the USD/INR to be more weighed by foreign inflows and underlying strength of the Indian economy, momentary surges in the US dollars may take the pair back above 46 levels.

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Do we need IFRS in India?

Indian Companies are listed on overseas stock exchange and have to prepare accounts with respect to GAAP followed in respective countries. Foreign companies having subsidiary in India have to prepare there accounts in order to meet overseas reporting.

FDI and FII’s are more comfortable with one global accounting language which can be understood globally.

Applicability of IFRS for Indian concerns

Currently IFRS has been made applicable from the reporting year 2011 (or 2011-12, as the case may be) by Ministry of Corporate Affairs for the following:

-Listed companies

-Bank, Insurance companies, mutual funds and Financial Institutions Read the rest of this entry »

Excellent Opportunity: Opening as professional trader with KREDENT

We are glad to invite applications for our Professional Derivatives Trading desk.

Kredent trading desk is one of the largest trading desk in India with substantial market share in exchange’s volume and liquidity. Kredent is the direct clearing and trading member of the NSE, MCX-SX, MCX, NCDEX and BSE. Read the rest of this entry »

Infosys declared its third quarter result today. The results came better than than the street expectations. The sales were around 3% above the Bloomberg consensus estimate, whereas the net profit was around 12% below, which was boosted on account of higher other income.

BSE                    :              INFOSYS

NSE                   :              INFOSYSTCH

Bloomberg     :              INFO IS Equity

CMP                  :              Rs. 2,587.45

Sector              :              IT Services

View                 :          Neutral with positive bias

RESULT HIGHLIGHTS:

• The consolidated net sales for the quarter ended December 09 contracted by 1% to Rs. 5,741 cr, this was mainly on account of recovery by the North American Financial Services Sector
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• The IIP figure for November stood at 11.7%, taking everybody’s breath away. It stunned everybody since the market’s expected figures was hovering around 10%.The same index registered a growth of 2.4% y-o-y in Nov’08 whereas a growth of 10.3% (revised) y-o-y in the last month
• It grew at its fastest pace in two years which was the after-effects of the festive season and also strong global cues. It thus supported the story of improved industrial activity in the last few months and thus, is an indication of a faster economic recovery in India
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• In a first of its kind scenario in 2010 , at least 14 national brands will promote the same value proposition- mobile voice
• With the advent of new players and introduction of the tariff wars the listed telecom companies have already shed close to $40 billion in market value
• While the top four operators own about three-fourth of the market of around 500 million users, Idea and Aircel who are relatively younger and the new entrants are clear threats to the established lot
• The biggest challenge for a mega brand is to fight brand fatigue and the new entrants push the larger players to lower tariffs to their entire base, hitting them where it hurts most
• These brand wars are both unprecedented and unaffordable
• A two-year battle can make the ride rough for the mega brands

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