Budget 2015


Union Budget 2015-16 Economic Survey: Weak global demand barrier to 8.5% GDP forecast, says StanC

Economic Survey_4

The Economic Survey projected FY16 Gross Domestic Product (GDP) growth in the range of 8.1 – 8.5 under the new time series data, farm growth at 4 percent and said the government is committed to fiscal consolidation through expenditure control which will help reduce fiscal deficit.

Samiran Chakraborty, MD, Head, South Asia Macro Research, Standard Chartered Bank, while analysing the report said the lower end of the estimate is possible but there exists quite a few headwinds. Maybe the survey itself is talking about one risk that is global demand not being there which will affect our export growth. Another risk being that the terms of trade is shifting from agriculture towards more industry, from rural to urban. What kind of demand side impact it is going to have or how to go about the fiscal consolidation process.

So, given these headwinds, going all the way up to 8.5 percent might be difficult. But 8.1 could be an optimistic case. We are working with more in the range of 7.7-7.8 at the moment. But what is also interesting is that if you come to the nominal GDP part of it we have to consider now the fact that the Wholesale Price Index (WPI) will have a much higher share in the GDP deflator. Since the WPI is negative at the moment, you might not get the GDP deflator to be as high as 5.5 percent.


Union Budget 2015-16 India Pre-Update : Economic Survey ahead of Budget

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Prime Minister Narendra Modi’s government forecast GDP growth of over 8 pct y/y in the 2015/16 fiscal year, a key economic report said on Friday.

The survey prepared by the finance ministry’s chief economic adviser Arvind Subramanian on the state of Asia’s third-largest economy was released ahead of Saturday’s federal budget announcement for 2015/16 fiscal year that begins on April 1.

Following are the highlights of the survey:

* 2015/16 GDP growth seen at over 8 pct y/y

* Double digit economic growth trajectory now a possibility

* Govt remains committed to fiscal consolidation

* Inflation shows declining trend in 2014/15

* Overhauling of subsidy regime would pave the way for expenditure rationalisation.


Union Budget 2015-16 India Pre-Update : Expect focus on expenditure; high mkt volatility

Deepak Shenoy, founder of capitalmind.in says it is very difficult to say what will be announced in tomorrow’s Union Budget because so many announcements, pronouncements that have already been made but one needs to be ready for lot of volatility in the market in accordance with the reactions to Budget announcements However, if one were to take a cue from yesterday’s Railway Budget were focus was on higher expenditure then the fiscal deficit of 3.6 percent at gross domestic product (GDP) could be at risk, even though expenditure on infra etc would give higher returns over the long-term.

But in case the government decides to sell more assets, the probability of which is very low then that might excite the market. According to him currently, the market valuations are high compared to fact that we have degrown seven percent in terms of consolidated profits in the last quarter, which is a surprise considering it is a good economy where the new GDP figure showed 7.5% then how are the Nifty companies showing degrowth. In fact he thinks the valuations should be lower.

Budget is really going to be a very reactive situation. There has been so many pronouncements, announcements, prediction that have happened. I can not say that something will happen or something will not.

One of the surprises in the Railway Budget was that the expenditure was substantially higher than I guessed anyone predicted. So we don’t know if this government will take the same route. If it does then obviously the fiscal deficit of 3.6 percent of gross domestic product (GDP) will be addressed and that will change a few things. Even if that spending were in infrastructure or on something that will give us great return in longer-terms, the shorter-term focus has been that the government might or will put their fiscal prudence above some of these infrastructure spending needs.

On the other hand the government might chose to sell some assets or more assets then they did in the past this is a very low probability and that might excite the market. It will be a reactive thing a lot of volatility. Tomorrow markets are open, markets are traditionally open even before 2000 when the Budgets were on weekends. There is no surprise really but we can expect a lot of volatility I would not like to venture a guess which stock would move just now.

The big problem is in pulses. Pulses production was down 10 percent in the summer crop last year, so that means there is low production; there is a 10 percent increase in freight cost for pulses, so that automatically creates a potential for inflation in pulses and this is potentially bad because this is going to affect inflation at least visible inflation from the point of view of the common man in a way. This can affect us about two-three months down the line and that is one of the big concerns. Coal is up about 6.5 percent because they change the grades a bit here and there and increase something by 10 percent and reduce something by 4 percent.

There is transportation of cement and other goods. The fact that freight prices are up 10 percent this year despite falling crude price, falling diesel price for many of these industries going to be negative. It is going to out way some of the benefits of a falling crude price. Having said that it is the only way railways could have funded some of that 100,000 crore that they want to achieve. They have targeted 13 percent increase in freight despite these rate hikes. So I believe that is a huge bet on the economy. I do not know if that is going to happen especially with the freight hikes.

The valuations are at high compared to the fact that we have degrowth of profits, 7 percent in the last quarter just on the Nifty companies consolidated profits. You do not know why this is happening – this is supposed to be good economy, a decent economy, the new gross domestic product (GDP) figure showed 7.5 percent. How the Nifty are companies growing at minus 7 percent and even if you have removed Oil and Natural Gas Corporation ( ONGC ), they still growing at minus 2 percent on a consolidated added up. There are lots of things that are wrong with that figure and we should be at a lower valuation compared to the rest.

You see stocks in the NASDAQ 100, I was seeing presentation yesterday – even Apple at USD 750 billion valuation is just at a very low PE; it is at 11 or 12 PE. We are talking about similar things in Indian private sector banks that have substantially higher PE. We are talking about Indian IT companies at higher PEs even though they have not justified that PEs in the recent past. We are talking about degrowth in a lot of oil and gas stocks as well because of the fall in crude prices, they are still trading high though some of them have fallen.

However, valuations are high. You might just say you expect 20-25 percent earnings growth next year. If the PE was an indication of what profits would be next year than last January, we wouldn’t have been at all time highs we were last January or February. Today we realise that profits have grown minus 7 percent. So market isn’t an indicator of what profits will be in the coming future. It is just about expectation and I believe that at these expectations levels we are easily going to be disappointed.


Union Budget 2015-16 India Suggestion : Watch out for 15 stocks as Jaitley reads out speech

Bulls look super enthusiastic for Arun Jaitley’s Budget FY16 to be presented tomorrow. Just a day before the Budget, the Sensex ended up 473.47 points or 1.6 percent at 29220.12 and the Nifty was up 160.75 points or 1.8 percent at 8844.60. PSU banks lead the upmove while HDFC Bank twins, ICICI Bank and Axis Bank were top gainers in the Sensex.

Among the losers were ITC, GAIL, Wipro and HUL. So, here are 15 stocks to keep an eye on

Housing for all and relaxation on personal taxation slab

Real estate cos: HDIL , Unitech , Puravanakara , smaller real estate players

Tax claity on REITS

REITs may be exempt from DDT/MAT and long-term capital gains exemption for sponsors Stocks: DLF , Prestige , Adani Ports Banks Clarity on holding co structure for govt. banks, Re-capitalization of government banks

Oil & gas

Custom duty hike of 2.5-5 percent expected: Positive for ONGC , OIL ; Negative for OMCs FY16 subsidy figure over Rs 35000 crore: Positive for ONGC, OIL


Excise duty hike up 10 percent factored in Lowering or no increase in 64 mm cigarettes

Titan/ jewellery cos

Cut in gold import duty: Positive for Titan

Power sector

Subsidy, tax exemption for stranded gas assets: Positive for GMR Infra , Lanco Infra , GVK

Renewable sector

Renewable energy focus area, an eye on funding kind of structure like REIT or tax accelerated depreciation.

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