Category: Policy

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Policy

Chidu as FM: 5 Implications for the Stock Market

As Chidambaram starts his innings as FM, it would be interesting to speculate on what actions he would take and how it would impact specific stocks and sectors.

His policy actions will be crucial in the runup to the general elections in 2014 and if he does a good job, he may even be a contender for the position of PM post 2014

So here is my take on his actions and implications for the stock market:

1.He will focus on raising revenues via spectrum sale.Most telcos are already bleeding, these auctions will increase their debt burden further.Negative for telcos like Bharti etc

2.He will kickstart the disinvestment process by selling stakes in state owned enterprises such as SAIL,NMDC,Coal India,MMTC.If past history is any indicator, expect these stocks to underperform the market.

3.He will push for RBI to cut rates.Positive for NBFCs and private banks

4.He will announce interest waivers for farmers and weaker sections of society.Negative for PSU banks.

5.He will target business groups aligned with opposing political parties.Negative for Adani,Torrent,Aurobindo Pharma etc

 

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Policy

RBI announces further liberalization for capital account transactions

A huge disappointment for the markets and further proof that our policy makers are in denial.

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Policy

Pranab hangs up on Vodafone

Many investors thought that by deferring GAAR by a year, the finance minister Pranab Mukherjee has “blinked”.

But in his speech to Parliament today, he said the following:

 GAAR I had agreed to defer one year not because of any fear or apprehension. I may be a very small man, very little man but one thing I can assure and I can tell the distinguished members of Parliament that I am not afraid of any consequences.

The last point, which was referred to by Shri Advaniji, is about the operation against black money. My whole argument on the Vodafone was on that point. It is because my point is very simple. I would like to be guided either by the Double Taxation Avoidance Agreement or tax. There cannot be a situation where somebody will make money on an asset located in India and will not pay tax either to India or to the country of its origin by making some arrangements to certain tax haven areas, to certain tax haven locations through a complicated setting up of a series of subsidiaries, and having huge capital gains on the assets located in India.

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Policy

A game changer?

Its lonely being an equity investor in India.

Consider the following facts:

1.The entire mutual fund industry in India had inflows of only 3099 Crores (around 620 M$) for its equity schemes (including ELSS) for the period Feb 2011- Feb 2012 (source AMFI). Is it any wonder that international mutual funds famed for their equity expertise are shutting shop and leaving this country ?

2.Number of demat accounts opened this year is around 10 Lakhs (1 Million).The total number of demat accounts in this country is around 1.98 Crores.That means only 1.6% of the country’s population has a demat account.Tomorrow, if the stock exchanges shut down, 98% of the country will shrug their shoulders and move on !!

3.Plummeting brokerage commissions , cumbersome compliance rules and lackluster equity markets have led to 6500 sub brokers shutting shop.The remaining brokers too seem to be an endangered species.

The Government has finally made an attempt to broad base the equity cult using the Rajiv Gandhi Equity Scheme.

If Indians love one thing, its a good tax break.

In this scheme, there is a 50 per cent tax deduction to first time retail investors with :

  • Annual income of less than Rs 10 lakh
  • Investment up to Rs 50,000 in a year
  • Investment in the top 100 listed entities in BSE and NSE
  • Lock-in period of three years (this may reduce to a year .)

Critics have complained that this scheme entails green investors doing direct investing instead of going thru the mutual fund route.

But if this scheme works, then it can change the face of the Indian equity markets.