All-round growth beckons

Mar 02, 2015, 08:20 IST | Alex K Mathews

Both the S&P ratings as well as the Economic survey have predicted that there are some fireworks expected for the investors on both global as well as the domestic front

On the domestic front, the markets were cautious in the beginning of last week as the wait for major economic data was on. Higher level profit booking were also seen in the markets. The markets were opened for six days in the last week as Saturday was the Union Budget presentation.

At the stock exchange all eyes were on Parliament as Arun Jaitley presented the Budget. Pics/Pradeep Dhivar
At the stock exchange all eyes were on Parliament as Arun Jaitley presented the Budget. Pics/Pradeep Dhivar

Going forward the market may remain sideways but a decisive move above 9035 can further boost them. Support for the markets lie at 8800 and 8750. Investors with low risk appetite can create bull spread on the Nifty by buying 8950 call options and selling 9300 call options one lot each.

Growth forecast
The global rating agency S&P in the last week revised India’s upward growth forecast to reflect a recent change in the GDP calculation. The rating agency raised the country’s GDP forecast to 7.9 per cent from 6.2 per cent for the year ending March 2016. The reasons cited were rising investments and low oil prices.

The agency also raised its growth forecast for 2016-17 to 8.2 per cent from 6.6 per cent previously. It currently rates India at BBB while lowered the growth forecasts of China and Japan. Meanwhile, the rating agency Moody’s said that the country’s sovereign rating upgrade will depend on the economic reforms and the plans to reduce the fiscal deficit.

For December 2014, the foreign direct investment in India has almost doubled to $ 2.16 billion as compared to $ 1.10 billion in the same month last year. According to the data available from the Department of Industrial policy and promotion, during the April - December period of current fiscal the FDI rose by 27 per cent to $ 21.04 billion against $ 16.56 billion in the same period last fiscal.

Among the sectors telecom received the maximum FDI of $ 2.67 billion in the nine month period, which was followed by services ($ 2.29 billion) and automobile ($ 1.58 billion). In 2013-14, FDI stood at $ 24.29 billion against $ 22.42 billion in 2012-13.

Economic survey
The economic survey, tabled in Parliament on Friday, said the economy is set to grow by 8.1 per cent to 8.5 per cent in 2015-16, up from an estimation of 7.4 per cent in the financial year ending on 31 March and may rose to a double digit pace in a couple of years.

The other major highlights of the survey was to meet India’s medium term fiscal deficit target of 3 per cent of GDP and the government will adhere to fiscal deficit target of 4.1 per cent of GDP in 2014-15. It also pointed out that the inflation shows a declining trend in 2014-15 and lower inflation gives more space for monetary policy easing.

The Union Budget was tabled on Saturday where the government said to see the fiscal deficit at 3.9 per cent of GDP in 2015-16. Also said to meet the fiscal target of 4.1 per cent of GDP and remained committed to meet the medium term fiscal deficit target of 3 per cent of GDP.

The GDP growth was seen between 8 to 8.5 per cent on year on year whereas expects the consumer inflation to remain close to 5 per cent by March, providing more rooms for monetary policy easing.

Infrastructure investment
A proposal was put forward to merge the commodities regulator with SEBI and also plans to implement GST by April, 2016.

Investment in infrastructure will go up by R 700 billion in 2015-16 and also proposed tax free infrastructure bonds for projects in roads, rail and irrigation. The budget also proposed to increase service tax rate to 14 per cent from 12.36 per cent and abolish wealth tax; 2 per cent additional surcharge on super rich.

On the global front, the markets were up on a back of a Greece debt deal agreement. After that the markets were waiting for the FED’s meeting where the Chair told to consider interest increases ‘on a meeting by meeting basis’. On the Chinese front, the flash HSBC/Markit manufacturing PMI data hit a four month high.

In the coming week, in the US markets, data like Markit manufacturing PMI final, construction spending, services PMI, factory orders, balance of trade, non farm payrolls, initial and continuing jobless claims are important. Major economic data for the Japanese markets for this week includes HSBC manufacturing PMI, services PMI, non manufacturing PMI and Balance of trade.

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).

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