Month: February 2015

Hopes for a new, more open India aren’t dead yet

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A recent shock defeat by India’s leading, reform-minded party may make some investors nervous, but experts say it’s unlikely to derail liberalization of the Indian economy – and the country’s real challenges lie elsewhere, anyway.

Since the election of Narendra Modi as prime minister in May 2014, Indian stock market investors have cheered Modi’s relatively liberal economic policies, pushing the benchmark BSE Sensex up 30 percent since the election and 5.4 percent so far this year.

That optimism blanched a bit this month, when Modi’s party was thrashed in state elections in Delhi by Arvind Kejriwal and his upstart AAP party, raising fears that Modi will lose the political leverage he needs to carry through with his economic, regulatory and fiscal goals.

Experts who spoke to CNBC said the election won’t stop Modi or his reforms, but he still faces big challenges.

Read more: Oil briefly turns positive on OPEC meeting report

Improved foreign investment or the country’s new “Make in India” campaign—part of an effort to transform India into a manufacturing hub—are barely affected by the Delhi vote, said Anubhav Gupta, senior program advisor for the Asian Society Policy Institute. What’s really needed is a clear policy framework, which some hope Modi will define in the upcoming fiscal 2015 budget draft, due Feb. 28.

“Modi’s economic agenda was fairly abstract during the election campaign,” Gupta said. “We didn’t get a lot of economic reform agenda we were told he would focus on and the budget that came out last year was disappointing”.

Alyssa Ayres, senior fellow for India, Pakistan and South Asia at the Council on Foreign Relations, said she does not see the Delhi defeat as a hindrance to Modi’s economic vision, because proposals from newly elected Delhi Chief Minister Kejriwal—for half-priced electricity and free water—are mostly populist in nature and likely to run into problems.

ndia traders at the Motilal Oswal Financial Services Ltd. office in Mumbai, India.
A recent shock defeat by India’s leading, reform-minded party may make some investors nervous, but experts say it’s unlikely to derail liberalization of the Indian economy – and the country’s real challenges lie elsewhere, anyway.

An employee hammers a metal ring an Ishwar Engineering factory in Mumbai, India.
Since the election of Narendra Modi as prime minister in May 2014, Indian stock market investors have cheered Modi’s relatively liberal economic policies, pushing the benchmark BSE Sensex up 30 percent since the election and 5.4 percent so far this year.

That optimism blanched a bit this month, when Modi’s party was thrashed in state elections in Delhi by Arvind Kejriwal and his upstart AAP party, raising fears that Modi will lose the political leverage he needs to carry through with his economic, regulatory and fiscal goals.

Experts who spoke to CNBC said the election won’t stop Modi or his reforms, but he still faces big challenges.

Read More: Oil briefly turns positive on OPEC meeting report

Improved foreign investment or the country’s new “Make in India” campaign – part of an effort to transform India into a manufacturing hub – are barely affected by the Delhi vote, said Anubhav Gupta, senior program advisor for the Asian Society Policy Institute. What’s really needed is a clear policy framework, which some hope Modi will define in the upcoming fiscal 2015 budget draft, due Feb. 28.

“Modi’s economic agenda was fairly abstract during the election campaign,” Gupta said. “We didn’t get a lot of economic reform agenda we were told he would focus on and the budget that came out last year was disappointing.”
Alyssa Ayres, senior fellow for India, Pakistan and South Asia at the Council on Foreign Relations, said she does not see the Delhi defeat as a hindrance to Modi’s economic vision, because proposals from newly elected Delhi Chief Minister Kejriwal – or half-priced electricity and free water – are mostly populist in nature and likely to run into problems.

As far as growth-seeking global investors are concerned, Roy Kamphausen, senior advisor at the National Bureau of Asian Research, said Modi’s India has shown a great deal of initiative with international partnerships. But Modi’s biggest challenge lies in overcoming internal bureaucracy, rather than worrying about Kejriwal or his AAP party.

“I think international partners take Mr. Modi at his word, as an ambitious, trustworthy energetic leader,” Kamphausen said. “They sense that he is saying exactly what he is going to accomplish, but he faces an enormous uphill battle in dealing with his own bureaucracy – the part everyone senses is going to be a challenge.”

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Jonah Blank, senior political scientist at Rand Corp., said businesses and investors in the United States should actually be heartened by the Delhi election, since it could mean an end to the city’s endemic corruption. Kejriwal ran on an anti-corruption platform.

“The only investors who should be threatened are those who have benefited from corrupt practices,” he said, “and those are the kind of investors India shouldn’t rely on anyway.”
Another major component of Modi’s economic agenda is a uniform tax policy, something economists and others have called for in a country where currently only about 3 percent of the population pays income tax. While Kejriwal claims to agree with the simplification of India’s tax policy, Gupta said implementation is difficult, no matter who stays in power.

“The challenge is harmonizing the tax policy in India,” he said. “The election in Delhi doesn’t really change that because it has always been an issue that’s far bigger than Delhi itself and involves a lot of states in the country.”

As for the BJP party’s defeat turning into a trend in other states like Bihar and West Bengal that are soon to hold their own elections, Blank said the Delhi results are likely to serve as a wake-up call for Modi and his BJP to buckle down and deliver on economic growth.

India is expected to show 6 percent GDP growth in 2015, according to the International Monetary Fund, down from 7.4 percent in 2014.

“The most important things about these victories is that the parties tapped into a deep, deep desire in the Indian electorate,” Blank said. “It doesn’t matter whether it’s (the formerly ruling Congress party) or BJP or AAP, people don’t like the old way of doing things. So whichever party comes up with a true way to break from the past will indeed do well for the future.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian equities turn broadly higher to hover near highs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian indices mostly rose early Tuesday, shaking off earlier cautious sentiment following a mixed finish on Wall Street due to lower energy prices, and as Australian markets brushed off mixed corporate earnings.

Overnight, US stocks pulled back from Friday’s records to close narrowly mixed on the back of weakness in oil prices and ahead of Federal Reserve Chair Janet Yellen’s testimony over the next two days. The Dow Jones Industrial Average and the S&P 500 settled slightly below the flatline, while the tech-heavy Nasdaq closed up 0.1 percent as Apple closed at another all-time high.

China markets remained shut for the Chinese New Year holiday.

Sydney rebounds 0.3 percent

Australia’s S&P ASX 200 index recouped losses as the banking sector turned mixed and as a surprisingly resilient energy sector helped to offset losses.

The big four lenders erased earlier losses to trade broadly higher, with Australia and New Zealand Banking, Commonwealth Bank of Australia and Westpac surfacing above the flatline with gains of nearly half a percent. However, a more than USD 1 drop in oil prices overnight failed to dent sentiment; Santos and Woodside Petroleum made gains of nearly 1 percent each, while Oil Search elevated 1.6 percent following a surge in profit results.

Focus was on BHP Billiton, which posted a 31 percent drop in half-year profit amid a collapse in oil and iron ore prices, but the global miner managed to beat market forecasts. Hence, BHP shares widened gains to 2.6 percent.

Meanwhile, QBE Insurance Group – the country’s largest insurer by premium income – pared losses to notch up 5.1 percent despite the release of a lower-than-expected full-year net profit. Travel retailer Flight Centre soared above 10 percent after maintaining its full-year guidance as revenue grew 4.6 percent for the six months to December.

Nikkei flat

Japan’s Nikkei 225 index rebounded above the flatline early Tuesday, remaining in sight of a 15-year high, as the yen bobbed near the 119 handle.

Honda halved losses to 0.5 percent following a leadership shakeup announced late Monday. After being at the helm for the last six years, CEO Takanobu Ito will step down in June and will be replaced by 55-year-old engineer Takahiro Hachigo. Other Japanese automakers like Nissan and Suzuki Motor also lost 1.8 and 0.8 percent, respectively.

Among other exporters, electronic players such as Nintendo and Panasonic dropped 0.5 percent each.

Kospi up 0.3 percent

South Korea’s Kospi index notched up nearer to a two-and-a-half-month high attained on Monday, helped by a robust performance among tech shares.

Index heavyweight Samsung Electronics tacked on 1.2 percent, while its affiliate Samsung SDI rocketed over 3 percent on news that it is acquiring the battery pack business of Austria-based automobile manufacturer Magna Steyr.

Taiex rises 0.9 percent

Taiwanese stocks charged up to their highest level since November 2007, with tech shares leading the rally. Apple suppliers rode on the momentum of the iPhone maker, with Pegatron rising 2.8 percent, and Quanta, Wistron and Catcher making more than 1 percent gains.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Walmart to kill 1-day wait for sick leave

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Walmart Stores will tweak its labor policy to allow full-time employees to use their sick days as soon as they get ill, the company announced during a media call earlier this week.

As of now, US workers do not receive paid sick time until the second day they’re out sick. Employees must use their personal days in order to be compensated on the first day out ill.

“[A]s we’ve been getting around and listening to our associates, we know that one thing that they would be keen for us to do is to eliminate the one-day waiting period for sick leave. So we’ll be taking action on that next year,” Walmart US President Greg Foran said Thursday while discussing news around the retailer’s plan to hike its minimum wage.

Walmart will eliminate the one-day waiting period next year as it takes a new approach to employment offerings.

The company’s US arm announced a package of changes, including comprehensive shift in its hiring, training and scheduling programs.

Among the most immediate changes is a move to raise the wage for some 500,000 current employees to at least $9 an hour in April. By February of 2016, all current associates will earn at least $10 an hour, the company said.

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It also laid out a plan to allow workers to contribute to 401(k) plans from their first day of employment instead of waiting a year.

The changes come as the company faces macroeconomic headwinds.

Walmart struggled with moderate sales growth, lower share counts and flat operating margins in its 2014 fiscal year, according to S&P Capital IQ, which has a “hold” rating on the company’s shares.

Despite a 39.5 percent decline in gasoline prices since June, overall consumer spending has been soft in the past two months. Specifically, Walmart’s core customers are expected to spend cautiously over the near term given government benefit reductions and job market uncertainties, economists say.

As of Friday’s close, shares of the world’s largest retailer had gained roughly 15 percent from a year ago, underperforming its peers Target and Costco, which are up about 36 percent and 32 percent, respectively.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Yellen to shed light on market’s biggest mystery

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Some fresh light could soon be shed on the market’s biggest mystery.

On Tuesday and Wednesday, Federal Reserve chair Janet Yellen is set to testify before the US Senate and House, respectively. Investors will likely be listening with keen ears, hoping for a hint about when the Fed will finally hike interest rates from their crisis-era lows.

In the minutes from their January meeting released on Wednesday, Fed policymakers appeared a bit less eager to hike rates than investors had anticipated.

In somewhat opaque language, the central bank’s policy committee said that “many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time.”

The perceived dovishness calmed fears of a June rate hike, leading short-term yields to fall sharply on the week. Currently, federal funds futures contracts are pricing in just a 15 percent chance of a rate hike by June, according to CME Group’s Fed Watch tool.

However, that meeting occurred nearly a month ago, which before the release of January employment report that bested expectations. In a separate but related note, Walmart announced that it was increasing its minimum pay to USD 9 an hour by April, and USD 10 by February 2016.

That may indicate that the growing labor market is finally creating a bit of wage inflation, a sorely missing part of the recovery equation that could reduce concerns that inflation will drop on the back of a rate hike.

On the other hand, recent economic data points like the Empire State Manufacturing and the Philadelphia Fed surveys have disappointed, indicating that growth could be moderating a bit. Meanwhile, worries about the global economic situation have not gone away.

Being too early, or too late, on a rate hike

It is into the midst of this maelstrom of mixed signals, market volatility and ever-adjusting expectations that the Fed chair will step this week.

“I don’t envy her at all. She’s in completely uncharted territory right now,” said Karissa McDonough, director of fixed income strategy for People’s United Bank Wealth Management.

“It seems to me that she’s going to be extraordinarily careful with her wording,” McDonough said, noting the Fed’s nervous discussion over the risks of dropping the word “patient” from its January statement. Some policymakers fretted that if the word was dropped, “financial markets would overreact, resulting in undesirably tight financial conditions,” the meeting minutes report.

Read More: Fed won’t let a bond crash happen: Nomura’s Goncalves

But for Michael Cloherty, head of US. rates strategy with RBC Capital Markets, the Fed’s bigger fear now is not upsetting the market by implying that a rate hike is on deck. To the contrary, he believes that the Fed is now looking to hike in June (despite their qualifier of being “data dependent”) and doesn’t want the move to be too much of a shock.

“I think we’ll hear more of a push toward June tightening,” he said. “The Fed will really want to prep the market for the first rate hike. And the window for that sort of signal is closing. The March meeting is a little close, and the April meeting is probably too late.”

“In fact, if we don’t get hawkish language, we may have to slide back our expectations to the third quarter,” Cloherty added. “But we think that they’re going to go in June,” which means Yellen is likely to send some sort of warning to the market this week.

Despite market sentiments, the strategist insists that in order to facilitate a gradual hiking of rates back, the Fed is eager to get started with its first small hike.

That would allow the Fed to avoid getting caught flat-footed if inflation does rear its head, but also to methodically observe the consequences of rate hikes in this brave new central banking world.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asia stocks open higher, with Nikkei at new 15-year highs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian markets rose on the first trading day of the Year of the Sheep, buoyed by a bailout deal between Greece and the euro zone last week. However, trading volumes remain light with China, Taiwan and Vietnam still closed for the Chinese New Year holiday.

Wall Street set the positive mood by closing at highs last Friday after Greek and euro zone finance ministers agreed to extend the country’s financial rescue by four months. The Dow Jones Industrial Average closed up 0.9 percent, while both the S&P 500 and Nasdaq finished 0.6 percent higher.

However, there are analysts who remain cautious, saying the Greek crisis may not be “out of the woods yet.” “[Greece] has until today to submit their list of reforms to the Europeans so there’s still anxiety in the markets about whether the list will satisfy the Germans. [Bailout extension] is a positive signal but there’s more to come,” Clive McDonnell, head of Equity Strategy at Standard Chartered, told CNBC Asia’s “Squawk Box.”

Nikkei jumps 0.9 percent

Japan’s key Nikkei 225 index hit fresh 15-year highs at 18,499 for the third consecutive session on Monday, as the yen continued to trade in the 119 territory.

Among blue-chip exporter stocks, Mitsubishi Electric and Toyota Motor piled on more than 1 percent, while Sony, Canon and Toshiba added 0.7 percent each.

Airbag maker Takata underperformed the bourse with a slump of nearly 3 percent, after being slapped with a USD 14,000 per day fine by US regulators for failing to fully cooperate with a probe into its faulty airbags, which have been linked to six deaths and dozens of injuries.

Meanwhile, three members of the Bank of Japan’s policy board expressed doubts the central bank can meet its inflation target due to falling oil prices, minutes from the BOJ’s last policy meeting showed.

ASX adds 0.5 percent

Australia’s benchmark S&P ASX 200 index edged up in early trade, with market attention squarely on corporate earnings releases.

Construction group Lend Lease bounced 0.6 percent after posting a 25 percent improvement on its profits in the six months to December 31, supported by a positive residential housing market. Boart Longyear halved its full year loss to USD 333 million, but warns its earnings remain under pressure. Shares of the world’s biggest supplier of mine drilling services doubled gains to 10 percent.

Among other companies reporting earnings, miner Bluescope Steel was the underperformer, down nearly 10 percent, despite delivering a 62 percent jump in its underlying half-year profit on the back of a weaker Australian dollar and stronger steel margins. A better-than-expected 48 percent rise in annual profit also failed to boost Caltex Australia, which dropped 0.8 percent.

Kospi rises 0.4 percent

South Korea’s Kospi index retreated slightly from a two-and-a-half-month opening high on its first day of trade after being shut since last Wednesday, led higher by index heavyweights.

Samsung Electronics climbed 0.4 percent on news that it would buy US-based mobile wallet provider LoopPay.

Singapore in focus

Singapore shares traded flat ahead of its inflation data for January at 1300 SIN/HK. The consumer price index (CPI) probably fell 0.3 percent from a year earlier for the third straight month, according to a Reuters poll, due to lower oil prices and transportation costs. Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam will deliver the 2015 budget statement in the Parliament at 1530 SIN/HK, with analysts expecting it to be a “people’s budget.”

Meanwhile, markets may keep an eye on news that Singapore’s founding father and former prime minister, Lee Kuan Yew, has been hospitalized for severe pneumonia over the past two weeks. According to a government statement on Saturday, the 91-year-old’s condition has since stabilized.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Moody’s downgrades Russia sovereign debt to junk

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Moody’s Investors Service downgraded Russia’s sovereign debt to junk status on Friday, citing the crisis in Ukraine and the falling price of oil.

Moody’s cut Russia’s rating to Ba1 from Baa3, with a negative outlook.

“Russia is expected to experience a deep recession in 2015 and a continued contraction in 2016,” the ratings agency said in a statement.

Moody’s also warned of the – still remote – possibility that Russia could decide on an extreme response to Western pressure over Ukraine.

“The risk is rising, although still very low, that the international response to the military conflict in Ukraine triggers a decision by the Russian authorities that directly or indirectly undermines timely payments on external debt service,” it said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Currency security breaches hidden by Indian govt: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s currency suffered a security breach that government officials kept hidden, according to a new report.

While printing the rupee, certain security features were compromised in 2012, CNN-IBN reported Thursday.

An internal investigation revealed that officials intentionally hid the breach after it was discovered, the report said.

Read More: Will India’s new GDP thwart stimulus plans?

CNN-IBN’s report said that a security thread inserted in rupee paper notes at the Hoshangabad Security Paper Mill were from an Islamic nation and “examination of the 10 rupee notes showed indecipherable text on the security thread, the notes either had Arabic text inscribed on the security thread or did not have any security thread at all.”

The defective thread was reportedly supplied by Aristocraft International, but the firm declined to comment to CNN-IBN.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asia stocks mixed on Greece; Nikkei at new 15-year high

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian equities were mixed on the last trading day of the week as traders are playing wait-and-see whether Greece will apply for an extension of its bailout program before the Friday deadline.

“Expectations are fairly high that an agreement can be reached. While this is only a short-term solution in preparation for deeper negotiations in coming months, it should be enough to alleviate some of the near-term pressure investors were concerned about,” said Stan Shamu, market strategist at IG, in a note.

Trading volumes will likely be thin for a second day due to market closures in China, Hong Kong, South Korea, Singapore, Taiwan and Malaysia.

News that Greece applied for an extension of euro zone financial support a day ahead of its Friday deadline underpinned gains. The Greek government requested a six-month assistance package, rather than an extension of the bailout. However, the request was rejected by Germany and will be discussed at a Eurogroup meeting scheduled later on Friday.

Overnight, Wall Street shares closed narrowly mixed on Thursday, with the Nasdaq higher for seven days of gains – its strongest winning streak in a year – while the S&P 500 touched a new intraday record high.

Nikkei up 0.4 percent

Japanese shares rose to fresh fifteen-year highs for the second straight session, boosted by a weaker currency. The yen traded in sight of 119 per dollar in early trade.

Japan Display jumped 8 percent on news it may be building a new factory plant in Japan to supply screen panels for Apple devices, according to local media.

Banks that rallied on Thursday fell on profit-taking, with Mizuho and Sumitomo Mitsui Financial both 0.5 percent lower.

ASX dips 0.3 percent

Australia’s benchmark S&P ASX 200 extended the previous session’s modest losses with corporate earnings report continuing to be the market’s main driver.

Medibank Private slumped over 5 percent despite posting a 10.8 percent rise in adjusted first-half net profit. Meanwhile, insurer Covermore dropped over 7 percent despite posting double-digit revenue and earnings growth for the six-months that ended December.

Warnings from S&P Ratings on Thursday that Australia’s triple-A sovereign rating may be at risk also dented sentiment.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Nikkei rises to 15-year high after strong export data

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Japanese shares hit a fifteen-year high on Thursday following better-than-expected export data, while trade in the rest of Asia was quiet with several markets closed for Lunar New Year.

Markets in China, Hong Kong, South Korea, Taiwan, Singapore, Malaysia and Indonesia are shut for the holiday.

The release of minutes from the Federal Reserve’s recent meeting on Wednesday helped to lift sentiment in Asia. The minutes showed that the central bank will likely delay hiking interest rates to at least the second half of this year.

“The debate around rising rates continues and there is a clear understanding from the board as a whole that raising rates too soon would likely stifle the current growth trajectories…However, some are clearly concerned as waiting too long would likely lead to rampant inflation. The debate was left there and the consensus from the market is the doves are in control at the FOMC,” said Evan Lucas, market strategist at IG, in a note.

Meanwhile, traders also digested good news regarding Greece. The European Central Bank approved a 68 billion euro two-week extension on emergency liquidity for Greek banks, Reuters reported on Wednesday. The assistance comes as Greece tries to negotiate a financing deal with European partners or stick by the terms of its existing international bailout.

Nikkei 0.4 percent higher

Japan’s benchmark Nikkei index rose to its highest level since May of 2000, just after the dot-com bust, above the 18,300 level. Shares extended gains from the previous day’s 1 percent rally after data showed January exports rose 17 percent from a year earlier, well above estimates.

Banks were stronger, with Mizuho, Mitsubishi UFJ and Sumitomo Mitsui Financial all 2 percent higher.

Sony rallied 2.5 percent after announcing that it aims to increase operating profit 25-fold within three years at its strategy meeting on Wednesday.

ASX slips 0.3 percent

Australian shares moved further away from recent seven-year highs as the country’s earnings season continued.

AMP jumped 2 percent after its annual net profit rose 32 percent, while Crown Resorts shot up 8 percent after 2014 second-half normalized profit grew 2.4 percent.

BHP Billiton fell over 1 percent after iron ore prices fell to a near six-year low on Wednesday.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Make-or-break moment for Indian markets coming

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Investors’ unflinching faith in Indian Prime Minister Narendra Modi will be put to the test later this month when the government presents its annual Budget, which strategists say could be an inflection point for the country’s roaring stock market.

The Budget, to be delivered by Finance Minister Arun Jaitley on February 28, is the Modi government’s first full-year Budget since coming into power last May.

With investors keenly focused on the Budget as a gauge to measure the government’s reform resolve, “the upcoming Budget could be the most important one for the stock market after the early 1990s, when India launched economic liberalization,” Ridham Desai, India strategist at Morgan Stanley wrote in a note.

India’s benchmark Sensex was among the world’s best performers last year, advancing around 30 percent, on hopes of a turnaround in India’s economic fortunes under Modi’s leadership.The gains have extended into 2015, with the index up 4 percent year to date.

Budget check list

The market will be tracking three key areas in the Budget: a credible fiscal consolidation path, a shift from subsidies to capital spending and specifics on the government’s structural reform agenda, says Andrew Tilton, chief Asia economist at Goldman Sachs.

“The macro backdrop to the Budget is very favorable. Unlike recent years, both inflation and the current account deficit are no longer major concerns.

Further, the sharp fall in global commodity prices, especially oil, are providing a big helping hand to the government’s finances,” Tilton said.

Economists expect the government to set a fiscal deficit target of 3.6 percent of gross domestic product (GDP) for fiscal year 2015/2016, down from 4.1 percent in the current fiscal year ending March 31.

Read More How big a deal is Modi’s defeat in Delhi?

The lower target will likely be based on a reduction in subsidies as a result of lower commodity prices, said Tilton.

The Reserve Bank of India has stressed fiscal consolidation as a necessary prerequisite for further easing.

The accompanying statement to the RBI’s surprise rate cut last month left the door open for further monetary loosening, but this was contingent on “sustained high quality fiscal consolidation as well as steps to overcome supply constraints and assure availability of key inputs such as power, land, minerals and infrastructure.”

From subsidies to capital spending

Investors will be looking for the government to shift capital spending towards public projects, using the savings from a reduction in subsidies.

“At first glance, this seems at odds with the RBI’s hopes of fiscal consolidation. But given that the RBI is hoping for ‘high quality’ consolidation, a shift from current expenditure to greater public investment mean these factors aren’t mutually exclusive,” Shilan Shah, economist at Capital Economics.

“In particular, greater spending on education, health and infrastructure, which can help to boost long-run growth, will come as welcome news,” he said.

Reform watch

Last but not least, markets will be looking for signs of wide-ranging reforms.

“The Budget provides an opportunity for the government to push its reform agenda forward,” said Tilton of Goldman Sachs.

A roadmap for the Goods and Services Tax (GST), which would help to broaden the tax base and ensure a more stable flow of government revenues, is top on investors’ wish list.

Incentives to boost manufacturing and infrastructure investments, including measures to reduce the cost of doing business and amendments to labor laws, also rank high.

Supplementing this, investors are looking for reforms to boost urbanization, including Budget support for urban infrastructure.

The government’s privatization targets will also be closely watched. “Due to a combination of strike action and bureaucratic constraints, previous privatization plans have a history of missing targets,” said Shah of Capital Economics.

“Looking ahead, the Finance Ministry may actually gain credibility if it were to set more realistic, lower, targets for asset sales next year.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow