Thumbs up for reforms

The markets witnessed a huge rally this weekend which made the markets to close around its one year high. In the week Nifty was up around 2 per cent and Sensex closed 1.60 per cent higher. Nifty and Bank Nifty showed a jump of around 23 per cent and 42 per cent YTD.

UNITED, WE STAND: Chinese Prime Minister Wen Jiabao (right) and EU Council President Herman Van Rompuy (centre) listen to European Commission Chairman Jose Manuel Barroso (left) address an EU-China business summit at the EU headquarters in Brussels. Wen said on September 20 that Beijing would maintain its efforts to help resolve the eurozone debt crisis, after months of investing in European governments’ sovereign bonds. Pic/AFP

In the beginning, the investors were cautiously waiting for the outcome of RBI policy meet for deciding direction for the markets. The RBI Governor left the interest rates unchanged but cut the CRR by 25 basis points which would release R17,000 crore of funds blocked with RBI to the banking systems. This in turn can help the banks to lower the lending rates.

Upping production
The week remained overall positive with the government coming out with large number of reforms supporting the economy despite political opposition. The government is likely to approve the urea investment policy, aimed at attracting an investment of around R45,000 crore to boost urea production in the country. The proposed policy aims to reduce the subsidy on urea. The policy aims at adding production of 7-8 million tonne to country’s existing urea production capacity of 22 million tonne against the annual demand of 30 million tonne.

The government has lowered the customs duty on ‘gold findings’ to 4 per cent from 10 per cent, a development which may promote jewellery exports and which will provide a breather for gems and jewellery exporters. Gold findings are small components such as hooks, clasps, clamps and pins, which are the raw material of the jewellery sector imported to manufacture the finished metal jewellery for export. The import duty on the gold findings has been increasing over the last two years.

Soaring food prices pushed the consumer price inflation to double digits at 10.03 per cent in August against 9.86 per cent in the previous month. In the urban areas, the CPI rose to 10.19 per cent during the month as compared to 10.10 per cent in July. The CPI stood at 9.90 per cent during August from 9.76 per cent in the previous month for the rural areas.

The Finance Minister on Friday slashed the withholding tax liability to 5 per cent on local companies for the overseas borrowing, giving them access to cheaper funds. Currently it is 20 per cent. The tax cut is from July 2012 to June 2015 and is expected to increase foreign inflows. The news is a positive trigger for the huge debt ridden infrastructure and construction companies which can now benefit from cheap overseas funds. This move is likely to benefit companies like L&T, Gammon Infra, JP Associates etc.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd. The author may have a vested interest in investments he has recommended. Feel free to e-mail him at Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

SmarTEST Indians to compete in Taipei
The Taiwan Excellence initiative has declared the winners of its 2012 SmarTEST contest. Celebrity endorser Malaika Arora Khan and Emma Yang, Director, Taipei World Trade Centre handed the first prize of USD 5000 to Gaurav Mittal, a graduate from Delhi. Gaurav will fly to Taipei in October to compete in the final stage of the SmarTEST contest against winners from China, Indonesia and Vietnam. First runner up Akif Khan Yusuf Zai and second runner up Mohsin Ahmed Batla will accompany Gaurav and represent India in the competition.

AND THE AWARD GOES TO…: Emma Yang and Malaika Arora Khan hand over the first prize to winner Gaurav Mittal

The Taiwan Excellence SmarTEST! is an annual campaign organised by the Bureau of Foreign Trade, Ministry of Economic Affairs of Taiwan and implemented by Taiwan External Trade Development Council with the goal of promoting Taiwanese products globally. Over 5,600 youngsters from the country had participated in the contest.  

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